Soft Drinks: Quarterly Statement Q3 2021

September 2021

The Q3 update to global soft drinks forecasts is largely consistent with published baseline (October) 2020 projections, with a small upgrade to our Q2 outlook relative to May 2021. While the rise of COVID-19 variants provides cause for uncertainty, brighter prospects for consumer mobility and on-trade performance have contributed to an improved performance for the industry in recent trading updates.

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Key findings

Q3 soft drinks outlook remains consistent with baseline forecast, although inflation is becoming a concern

Both the 2020/2021 projections and 5-year outlook for the global soft drinks industry published in Q3 are consistent with the initial researched outlook from October/November 2020. Upgrades in the US and several Western European markets offset downgrades in India, Thailand, New Zealand and smaller markets facing renewed pandemic restrictions. Coca-Cola, PepsiCo, Danone and other beverage brand owners report improving away-from-home sales, although commodity price inflation is a growing concern in recent trading updates.

COVID-19 “variants of concern” cloud an otherwise improving short-term outlook for the away-from-home channel

In line with Q2 revisions, the removal or reduction of national and local restrictions on consumer mobility (in the form of enforced closures, capacity restrictions, curfews and other ordinances) will have a direct impact on on-trade volume recovery in the second half of 2021. However, the Delta variant and other COVID-19 “variants of concern” represent a setback that forced authorities in Asia, New Zealand and parts of the US to re-instate controls over the late summer, creating uncertainty in terms of full-year projections.

PepsiCo’s sale of Tropicana juice is the major competitive activity of the quarter

In August 2021, PepsiCo – the second largest soft drinks brand owner by value and volume – announced the sale of its Tropicana fruit juice and Naked juice/smoothie brands to private equity firm PAI Partners. This is a key development for the industry, since Tropicana is the largest global brand in 100% juice and the second largest in global juice overall. The proposed transaction is the largest in a series of sales, divestments and discontinuations that have impacted the industry over the last year, with PepsiCo’s rival Coca-Cola finishing a programme of SKU rationalisation in late 2020.

Introduction

Scope: Soft drinks quarterly updates
Key findings

Q3 Soft Drinks Update

A slight improvement in Q3 forecast, fuelled by North America
Upgrades as tourism flows increase and foodservice comes back online
Returning to growth in 2021, but VOCs may weaken an on-trade rebound
“COVID effect” may boost impulse categories like energy and RTD coffee
Beverages through e-commerce impacting retail and B2B ordering
PepsiCo’s sale of Tropicana headlines competitive activity in Q3
Long-term discussion of key drivers

Q3 Macroeconomic Update

Strong global economic recovery underway
Downside risk factors remain significant
Real GDP annual growth forecasts and revisions from last quarter, AE
Real GDP annual growth forecasts and revisions from last quarter, EMDE

About Our Industry Forecast Model

Euromonitor International and COVID-19: Forecasts and analysis
Timeline: Soft drinks quarterly updates
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