Soft Drinks: Quarterly Statement Q4 2016

Strategy Briefing

About This Report

Nov 2016

For a third consecutive quarter, volume growth prospects in global soft drinks have been downgraded. This is primarily the result of weak GDP growth in the largest developed soft drinks markets. Brazil, Mexico and the US were major areas of volume decline in absolute terms. Nevertheless, Q4 marks a busy quarter of acquisition and consolidation as operators seek to maximize the pockets of opportunity in enhanced water and RTD tea.

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Soft Drinks: Quarterly Statement Q4 2016

GDP GROWTH HIGHLIGHTS

US

Donald Trump’s surprise victory has significantly raised uncertainty levels and worsened the outlook for the US economy. We have downgraded our baseline forecast to 0.4% in 2017 and 0.7% in 2018.

Eurozone

After Donald Trump’s victory in the US presidential election, we have lowered the Eurozone GDP growth forecast to 1% in 2017 and 1.3% in 2018. The outlook for 2016 is almost unchanged.

UK

After the revision in light of the US election results and the newest Brexit-related developments, our baseline forecasts are 0.3% real GDP growth in 2017 and 1.2% in 2018.

Japan

Japan’s economy shows no signs of acceleration so far, with GDP growth hovering close to zero. We have maintained our GDP forecasts unchanged at 0.5% in 2016 and 0.7% in 2017.

China

We have revised our GDP growth forecast for China upwards to 6.7% in 2016 and to 6% in 2017. The effect of improving domestic conditions was cancelled out by the US election’s uncertainty shock.

Brazil

Brazil’s economy is finally starting to show signs of life after several quarters in the doldrums. As a result, we have lifted our GDP forecast to -3.2% in 2016 and 1.0% in 2017.

Russia

The economic downturn in Russia continued to slow. In our baseline, by the end of 2016, real GDP will decrease by around 0.8%. In 2017, we expect real GDP to grow by about 0.9%.

India

The economy of India continues to be a leader among its peer emerging markets. We forecast growth to reach 7.5% in 2016, 7.7% in 2017 and 7.5% in 2018.

Overview

Main stories in Q4
Executive summary
GDP forecasts - revisions over last quarter

Q4 Forecast and Industry Developments

Q4 forecast explained
Weaker growth expected in global soft drinks
Weakness across the largest soft drinks markets
Global CSD giants most exposed to developed market downgrades
What sort of growth strategies are we seeing in this environment?
Slow US GDP growth and uncertainty dims the global outlook
New soda and sugar taxes may also impact US volume growth
Achieving US growth through targeted acquisitions
Premium water brands report Q4 success in Mexico
Premium water brands outperform for Nestlé and Danone
Despite weak GDP growth, consumer trends lift soft drinks in Japan
Consolidation of beverage operations in Japan benefits NPD
Capitalising on volume growth opportunities in India
New taxation and regulation complicate opportunities in India
Threats to the soft drinks industry over 2015-2020

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