Analysis by Sarah Hardcastle - prepare for a summer awash with advertisng and promotions - prices under pressure - growth forecast at expense of hot drinks and alcohol Everyone in the soft drinks market is keeping their fingers crossed that a long hot summer is on the horizon. If this happens, sales could grow by as much as 5%, according to Britvic Soft Drinks category director Andrew Marsden. "In cash terms, this would mean extra sales in take home of £190m. Consumers would drink an additional 278m litres, another 4.5 litres per head." To make the most of this opportunity, Princes Soft Drinks marketing director Lisa Palillo says stocking the right pack sizes will be crucial. "If, as predicted, we have a hot summer, consumers will not only drink more, they'll switch to larger packs to satisfy their thirst. Pack size will be the key to driving sales this summer." Even if the sun doesn't shine as much as we'd all like, the soft drinks manufacturers are pumping such huge sums into advertising and promotions this year, sales are virtually assured to do better than last year's average performance. Britvic tops the list with a budget of £45m covering all brands, including £15m on Pepsi alone. Not to be outdone, Coca-Cola Enterprises is putting £37m behind its portfolio, a £5m increase over its previous record. Other manufacturers with generous budgets this year include Princes Soft Drinks, Vimto, and AC Barr which has a big campaign breaking this summer for Irn-Bru. Current figures on the market from the Sucralose Soft Drinks Report, published this month by Tate & Lyle Speciality Sweeteners, show that last year was not especially memorable for sales ­ hopes of an exceptional performance were again dashed by a very poor wet summer. Nevertheless, some milestones were reached. Sales rose 5%, valuing the total market, including fruit juice and mineral water, at £8,000m. Volume rose 3% to almost 12,000m litres, with consumption reaching 200 litres a person for the first time. Value climbed faster than volume because, although many prices came under pressure from supermarket competition, premium brands and packs outpaced other products. Apart from the weather, pricing was the second big influence on the market's performance, according to Sucralose report author Richard Hall, chairman of soft drinks consultancy Zenith International. "Pricing found itself pulled in all directions, but eventually changed relatively little. All supermarket groups wanted to cut prices and forced a number of reductions. Suppliers, however, were faced with higher raw material costs such as packaging and dared not give too much. Some promotional budgets were transferred into lower prices, but extra promotions were added in the autumn to recover lost summer volumes," says Hall. The third major influence ­ the strongest and most favourable ­ is consumer pull. Hall says: "All consumer lifestyle trends point in favour of soft drinks and away from milk, hot drinks or alcohol." His view is echoed by Coca-Cola Enterprises marketing director Ian Deste: "Consumers are continuing to drink more soft drinks overall­and they continue to demand even more variety with a focus on health and the desire for functional drinks providing energy, stimulation and re-hydration." The affect of these trends on the market has been a significant boost in sales over the last year in fruit juice, energy drinks and bottled water. In contrast, own label colas have lost out, sparkling water has remained static and smoothies and nutritional beverages have had mixed fortunes so far. Significant landmarks were reached last year by the top 10 brands, says the report. Coca-Cola cruised above 1,500m litres, Robinson's squash and ready to drink range raced beyond 1,000m litres, Pepsi powered past 500m litres and Jucee squashes and drinks jumped over 300m litres into fourth place. Ribena and Schweppes in a variety of forms were not far behind. Irn-Bru and Fanta rose rapidly through the ranks, while Sunny Delight and Tango slipped back. Several other brands also exceeded 100m litres ­ Evian, Kia-Ora, Lilt, Lucozade, Sprite and R Whites. Among the newcomers, the top sellers by volume are still fruit flavoured drinks ­ clear Volvic Touch of Fruit from Danone, Robinsons Fruit Shoot and Juice Up from Britvic, and Smashers from Silver Spring. Other notable new entries include Nescafé Ice. So how are the individual sectors performing? Despite being highly dependent on the weather, carbonates did better than average for the last decade, with volume up 3% to 6,000 million litres and value up nearly 6% to £4,750m at retail prices. Zenith's Hall comments: "The value increase in 2000 was less because of higher prices than because of a change in the balance between premium and value purchasing." Cola remains the top flavour ­ with Coke outselling Pepsi by some 3:1 ­ followed by lemon (led by Schweppes, R Whites and Cresta), and orange, where Fanta, Tango and Orangina continue to lead. Clear sparkling carbonates, which have done rather well in the past few years, now show signs of slowing because of a lack of continuous marketing support. Energy drinks, with their high premium value, accounted for 60% of carbonates value growth in 2000. Low calorie has become an increasingly important selling point in carbonates, with nearly 60% falling under this description, though only 28% are promoted as light or diet. Hall says the most significant development in carbonates has been in packaging where cost is being taken out, and value added. Juice and functional ingredients are also playing a bigger part in the quest for quality and performance. Though carbonates' prospects remain strong, an interesting development is CCE's shift into still drinks with the launch of Alive, PowerAde, and the repositioning of Oasis. CCE's Deste says a large-scale investment in still drinks is being made this year. Pure fruit juice gained 4% to almost 1,000m litres, reaching a retail value of £1,150, says the report. Though long life orange juice in 1 litre cartons is the mainstay, the real growth continues to come from not-from-concentrate juices, led by Tropicana. Organic juice, led by Grove Fresh and Libby's, is developing strongly and functionality is making modest but real progress, with added calcium and vitamins delivering an easy message. After massive volume gains in 1998 and 1999, fruit drinks with less than 100% juice content fell back by 5% in volume to 755m litres, but held their retail value at around £600m. Some of this is attributable to Sunny Delight, which still holds its lead position, but has lost its shine ­ and sales ­ because of adverse criticism of low juice and high sugar content. A new light version was introduced in September but sales have yet to recover their 1999 peak. Sunny Delight's initial success opened the door to other contenders, notably Britvic's Juice Up in June 2000 and CCE's Alive in April. Cranberry, led by Ocean Spray, continues to be an up and coming flavour, succeeding because it has a more adult appeal and has functionality as an important selling point. Iced tea and coffee are struggling, alhough they are popular outside the UK. Dilutables, which have had a patchy five years, repeated their 1999 performance, stabilising at 2,800m litres, realising slightly above £900m at retail prices. Although they are the second largest sector by volume, they are losing market share because they are less convenient than ready to drink alternatives, and children want to move on to more adult brands as they grow up. Robinsons, Jucee and Ribena are in the top five soft drinks, but have had to branch into ready to drink variants to maintain momentum. Low calorie is a major selling point ­ particularly among parents concerned about their children's teeth ­ with 59% marketed as having low or no sugar in 1999. Bottled water did fantastically well, bursting ahead by 16% to nearly 1,400m litres, taking sales towards £600m. The main driver is still water in retail packs used as a tap water replacement, which has causedg a slide in the sparkling variety. Natural mineral and spring water account for over 90% of the market, but non-source brands are becoming more common. It is no coincidence that much of the innovation by the world's two market leaders has been in branding rather than source. Europe saw the largest ever new water roll out when Nestlé Aquarel was introduced in six countries in May 2000, with a UK entry expected this year. The biggest UK launch came in January from Danone Activ with added calcium. {{FOCUS SPECIALS }}

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