Soft drinks fall with economy, says report

By Lorraine Heller

- Last updated on GMT

Related tags Soft drinks Eastern europe Western europe Europe

The European soft drinks market has been hard hit by the tightening economic environment, and many stakeholders in the industry are losing confidence in the prospects of the sector, according to a new report.

The 2008 third quarter review published by beverage researcher Canadean reports the Western European market crept forward only 1 per cent over last year, which it says is a “symptom of the global economic slowdown”.

Slowing growth rates reflect a “marked deterioration”​ in industry confidence, although a distinct East-West divide indicates a slightly more optimistic outlook in the Eastern European market.

Western Europe

Canadean reported a worsening outlook in every Western European market with the exception of the Netherlands and Norway.

Two major European markets – France and the UK – have entered into a decline. France’s soft drinks market saw sales drop 1 per cent, while the UK saw sales decline by 2 per cent.

“Denmark was the first market to officially go into recession and at -6 per cent nowhere is the soft drinks market shrinking quicker,”​ said Canadean.

Despite these declines, Canadean told that it is important to put the current slowdown into context.

"The Soft Drinks market has achieved substantial growth over a long period of time. Despite the severity of the present economic situation Soft Drinks markets have not collapsed or declined to the extent that some other industries have. The expectation is that the soft drinks industry will recover as, and when, economies recover," it said, adding that it will continue to monitor the situation.

Juices, water, energy drinks

The juice category in Western Europe, which was faced with high juice concentrate prices during much of this year, saw a downturn in summer sales of between 3 and 4 per cent.

Still water has not fared much better. Despite the strong growth that the segment recently enjoyed, Canadean said the still water category “now looks vulnerable as consumers switch back to tap water and growth has slowed to a trickle”.

The group downgraded its still water forecast for West Europe down to 1 per cent this year.

The gloomy outlook is somewhat brightened by the energy drink category, which Canadean said remains “very firmly in the growth stage of its lifecycle”, ​with sales jumping 15 per cent during the quarter.

Eastern Europe

Eastern European beverage markets fared slightly better than their Western European counterparts.

“Consultants in Bulgaria, Serbia and Slovenia even report a mild improvement in confidence levels. East European third quarter soft drinks sales jumped by nearly 2 per cent in quarter three and Canadean anticipates end of year results to register around 3 per cent.,”​ wrote the group.

Growth in Poland and Romania was particularly strong, reaching double-digits in the former market. Canadean said there are “few signals” ​of bleak times in the near future for these two markets.

However, Baltic countries and the influential Russian market did not fare as well.

“In Russia, soaring inflation rates contributed to a 7 per cent fall in soft drinks sales, a situation that was compounded by colder summer temperatures in the same period last year,”​ said Canadean.

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