It highlights 2016 as having been a ‘transformational year’ for the category: while the announcement of the impending soft drinks industry levy created a new challenge for the industry, the year also saw a number of ‘exciting launches, memorable marketing campaigns and engaging brand activations’.
“The last year hasn’t been without its challenges, particularly following the announcement of the forthcoming Soft Drinks Industry Levy, but the soft drinks category has remained one of the most vibrant FMCG sectors in the UK, with innovative companies offering new products and new brands to meet the needs of today’s consumers,” said Paul Graham, GB general manager, Britvic.
“We believe there are still huge opportunities for growth within the category for companies, brands, retailers and operators who innovate and invest in the long-term future of soft drinks.”
Health and wellness remains a key factor for consumers, and the industry is responding with an increased number of low/no calorie launches. Meanwhile, the convenience channel is of rising importance with 6.8% growth for soft drinks predicted.
The convenience channel
The total value of UK soft drink sales reached around £14bn ($17.4bn) last year, notes Britvic in its 2017 Soft Drinks Review.
With busy time-strapped consumers continuing to demand on-the-go options, the value of the UK’s convenience market is predicted to grow 11.7% between 2016 and 2021 to £41.9bn ($52.1bn).
“With 29% now consuming immediately on purchase, the non-stop lifestyle is changing shopper purchasing habits,” says Britvic. “As more consumers look to satisfy their demands for wider occasions through the Convenience channel, soft drinks has an opportunity to grow share of on-the-go sales by meeting more shopper needs.”
Soft drinks are now the third most cited reason among consumers for visiting convenience stores, coming behind milk and tobacco.
“2016 was the fourth consecutive year that soft drinks grew as one of the main reasons to visit a convenience store. With bigger basket sizes, greater spends and more frequent visits, retailers continued to understand and embrace the true sales potential of the soft drinks shopper.”
In fact, soft drinks volume sales in convenience are predicted to grow 6.8% in the period 2016-2021.
“Due to its complexity, Convenience can no longer be considered to be one channel as major multiple retailers continue to focus on convenience expansion and more Foodservice operators increase their presence within traditional stores,” says Britvic. “As an amazingly diverse channel, soft drinks will play a key role in unlocking and delivering growth in Convenience.”
Trend 1: Health and wellness
Top 5 brands by value sales
Red Bull: £157.6
Data: Nielsen Scantrack Total Impulse MAT we 31/12/16.
Health will be high on the agenda for many in 2017 and beyond. Consequently Britvic expects to see more no and low sugar versions of mainstream drinks, as well as soft drinks with added vitality or health credentials.
Britvic classes 70% of its current portfolio as no or low sugar, and says it is ‘well-placed to satisfy consumers, offering them a wide and varied choice for all occasions’.
The UK is to introduce a tax on sugary beverages from April 2018. The levy rate for added sugar drinks with a total sugar content of 5g or more per 100ml will be set at 18 pence per liter; and those with 8g or more per 100ml will be set at 24 pence per liter.
“Long before the announcement of the soft drinks industry levy, manufacturers were already responding to consumers’ increasing interest in health and wellness by offering them no and low sugar variants of their favourite soft drinks,” says Britvic. “However, this must be balanced with maintaining great taste and choice.
“It is too early at this stage to know what the true impact of the Soft Drinks Industry Levy will be but this should be a consideration for retailers, who will need to adapt their range to ensure they are fit for the future.”
Trend 2: Personalization
Consumers have rising expectations when it comes to personalisation and the experience with their drinks, says Britvic.
“In 2016, shoppers became increasingly demanding and more adventurous in what they looked for and expected these personalised choices to be delivered immediately.
“While this has undoubtedly raised expectations across the trade, it also presented an opportunity to differentiate and add value.”
Trend 3: Premiumization
The soft drinks category can learn from the alcoholic beverage category, which has led the way in offering consumers a premium experience, says Britvic.
“There remains a clear opportunity across all channels to capitalize on the increasing number of premium socializing occasions (both in home and out) and to accelerate this upward trajectory to deliver growth into soft drinks. This will be achieved by using premium flavors and ingredients to develop products and brands which consumers are happy to spend a little more on.”