World Market for Soft Drinks

Delivery

This report comes in PPT.

Key findings

After two years of sharply increasing retail selling prices, soft drinks volume growth finally dipped in 2023. Long-term, the industry faces a global challenge in balancing volume with profitability.

After the soft drinks industry largely defied expected price elasticities in the first half of 2022, the bill finally came due in 2023, as volumes were flat or declining in several key mature markets. In the long term, brand owners, bottlers and retailers face a growing challenge in balancing a high value, price-premium transactional model of growth in developed markets against the need to maintain and grow per capita volumes globally, in a way that aligns with commitments to sustainability and public health.

Value-seeking consumers are demonstrating new behaviours relative to other downturns, with regional value brands and discounter channels being preferred to private label.

Price inflation in 2022 and the first half of 2023 across the Americas and Europe forced consumers to cut back, but without an immediate surge in private label drinks. Instead, locally produced and regional B-brands have been winners, as major multinational producers raised prices and reduced package mix. Hard discounter chains and warehouse clubs have also capitalised, forcing impulse-orientated categories, like energy drinks and sports drinks, to adjust their available SKUs.

Social media and digital marketing have become central to how new consumers engage with beverage brands, with “digitally native” new products and viral campaigns having an outsized impact.

The rise of Prime sports drink is a recent example of celebrity-backed product innovation in non-alcoholic drinks, with a devoted online fanbase producing strong retail growth, with a fraction of the traditional media spending of established brands. Social media, viral campaigns and gaming are increasingly central to reaching younger demographics. Major brands in carbonates, sports drinks and energy drinks will increase their presence and investment in these media channels to stay relevant.

The soft drinks industry is moving beyond “blurring lines” and has fully embraced flavoured RTDs and co-branded alcoholic drinks. Alcohol is becoming central to global soft drinks strategy.

Emerging from a niche area of “blurring lines”, alcoholic flavoured RTDs and co-branded ventures with spirits and premium mixers form an important part of the growth strategies of major soft drinks companies. The Coca-Cola Company and PepsiCo have made sizable investments in increasing their distribution capacity for alcohol in North America, and have scaled successful launches to global markets with the aim of growing the “hard” side of their drinks portfolio.

Functional drinks, particularly energy and hydration, remain central to growth. Innovation is accelerating across format types as suppliers seek functional wellness platforms.

Energy drinks remains the fastest growing area of non-alcoholic drinks, with a new wave of innovation in advanced hydration beverages. Increasingly, non-RTD formats (powder mixes and tablets) and high electrolyte oral replenishment solutions are taking share from standard sports drinks. Sports nutrition and supplement brands are gaining a foothold within energy-boosting beverages.