Russian soft drinks come in from the cold

- Last updated on GMT

Related tags: Soft drinks, Soft drink

Despite a cold winter and spring, Russia's soft drinks market
continued to grow healthily in 2003, helped primarily by the
booming nectars category, where consumption is now almost eleven
times greater than it was in 1994, according to a new report from
market analysts Canadean.

Although the category is only just over a quarter of the size of market leader carbonates, nectars nonetheless constitute the third most important soft drinks category in Russia, according to Canadean.

Consumption of these drinks increased by over 30 per cent last year alone, while volume sales of mixed fruit and pineapple variants more than doubled. The growth in nectars was largely attributable to the low priced segment which still offers huge potential for future expansion. Furthermore, producers are expected to take advantage of lower production costs by offering consumers even more competitive prices in the future, the report predicts.

But nectars are not the only products set to show strong growth in the coming year, according to Canadean: juice and bottled water are also expected to provide considerable volume growth for the soft drinks category as a whole in 2004.

Juice, which is completely dominated by long-life drinks, also advanced strongly in 2003, although unlike nectars, much of this growth came from the upper-middle priced segment.

"Although the strong local players have advertised heavily, there appears to be very little brand loyalty and consumers seem unclear as to the differences between juices, nectars and still drinks,"​ the report said. "Perhaps the opportunities presented by innovative packaging can help overcome this. Penetration of the smaller conurbations [i.e. cities other than Moscow and St Petersburg] should also be supported by improved distribution and storage."

As for packaged water - Russia's second most important category - the growth is coming almost entirely from still water as it eats into the 80 per cent market share currently held by sparkling varieties. It is the high margins available in the packaged water market which have attracted new entrants, in turn driving up volume sales, but Canadean stressed that per capita consumption is still relatively low. As a result, water consumption is predicted to rise by over 20 per cent in 2004.

Carbonates remain the largest overall category, however, and despite losing ground to nectars, juice and packaged water, it has grown in each of the last four years, the report said. "Carbonates may suffer from an unhealthy image but the wide range of flavours on offer has appealed to Russia's curious consumers. The market is also highly fragmented, particularly towards the lower end where it is populated by thousands of small regional producers. As competition intensifies, the scope for consolidation among these companies is considerable."

But growth in the soft drink market as a whole is likely to be dependant on one thing above all - continued prosperity. Following years of uncertainty, there is now increasing political and economic stability in Russia, with inflation down, income levels up and the retail and agricultural industries developing apace.

As a result of increasing consumer spending, the supermarket network is expanding and producers of nectars, juice and water in particular are keen to take advantage of the opportunities this offers by enhancing their manufacturing capabilities to ensure that demand (both for greater volumes and better products) can be met. As a result, Canadean expects consumption of soft drinks to increase by a very positive 14 per cent during 2004.

Related topics: Markets, Soft Drinks & Water

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