Soft drinks have had to weather commodity price hikes and trend changes, but are fighting back with relaunches, collaborations and shifts in marketing strategies, says Nick Hughes
It would be easy to dismiss the soft drink category's 5.6% value growth as purely price-driven [Kantar 52w/e 20 February 2011].
Easy, but not wholly accurate. Yes, there have been attempts to pass on price rises (not all of which have been warmly received by retailers witness Britvic's spat with Sainsbury's this February over a proposed a 10% hike). And yes, the price rises that have been sanctioned on products like Pepsi and Coca-Cola have positively skewed value figures.
But against the backdrop of a 0.5% decrease in volume sales in 2009, the 1.7% volume growth achieved in 2010 by soft drinks suggests the category is successfully adding value, as well as extra pennies, to a bottle of pop. Strong NPD, clever packaging and range rethinks and a greater focus on key growth areas such as energy drinks are all playing their part.
"People immediately jump to the conclusion that it's price that has driven that increase in value sales, but it's not," confirms Craig Smith, vice president, marketing and strategic planning at Coca-Cola Enterprises. "It is much more about the mix of the products, about high-value pack types and high-value segments such as energy, sports and cola growing faster than the category."
Energy and sports drinks in particular have had a storming year Lucozade Sport aside with value sales up 15.9% and 16.5% respectively [Kantar 52 w/e 20 Feb 2011], supporting Red Bull head of category marketing Doug Bairner's view that "consumers are really understanding the functional benefits of the category more and more".
Colas and fruit carbonates have also performed strongly, sales up 5.9% and 11% respectively in value [Kantar], an impressive achievement given the maturity of these sub-categories. Cola sales seem to have been boosted by renewed intensity to the competition between old rivals Coke and Pepsi. While Coca-Cola and Diet Coke remain the clear market leaders, Pepsi Max and Pepsi Cola have enjoyed by far the biggest sales uplifts in the top 10 over the past year (see p53).
With so many sub-sectors thriving, it is no surprise that this is having a positive impact on the convenience sector, where soft drinks traditionally over-trade. On-the-go soft drinks have contributed almost half the growth to the soft drinks category, says Smith. His claims are underlined by Britvic's recent Soft Drinks Report, which showed impulse channels growing at a faster rate than multiple grocery channels for the first time in three years.
One area continuing to cause major headaches for both impulse and multiple retailers, however, is commodity prices. The price of sugar has leapt 60% year-on-year, while the rising price of oil is having a knock-on effect on the cost of PET the favoured packaging format for the majority of soft drinks suppliers (see p72). Combined with the ongoing price volatility in other commodities, such as steel, orange juice and energy, these cost hikes have conspired to push up the unit production cost of some soft drinks by double-digit percentages.
In a trading statement earlier this year, Britvic chief executive Paul Moody spoke of "a rapid and unprecedented uplift in the cost of key raw materials". The escalation in input costs had come after the completion of this year's price negotiation process, he added, so Britvic did not expect to recover in full the additional input costs.
The final comment was particularly pointed as in February, Britvic was involved in a highly publicised standoff with Sainsbury's over price increases, during which it withheld supply of Pepsi. "There was a disagreement with Sainsbury's that has since been resolved," says Britvic customer management director Murray Harris. "Retailers understand cost pressures but they also feel they have a responsibility to their shoppers to keep prices down."
According to a report in the FT, the soft drinks supplier got its way in the end with Sainsbury's "caving in" at least partially to Britvic's demands. But the spat brought into sharp focus the tough negotiations that input cost increases have prompted. Soft drinks suppliers have had no choice but to ask for price rises, says Neil Gibson, head of marketing at Vimto Soft Drinks.
"As commodities have gone up, we've tried to cover some of the costs internally, by becoming more efficient, but inevitably we've had to pass some costs on to the trade and the consumer," he says. "I think if you look at what has happened on pricing, the likes of Coca-Cola and Britvic are in the same position as us and have had to pass it on. At the kind of level of increase we've had, you simply cannot afford to soak all of it up."
The fact that leading brands such as Coca-Cola and Pepsi have pushed though increases has helped smaller players make a stronger case for price rises to retailers, but recovering the full cost has in the main not been possible. "We've got a real margin squeeze on this year," admits Pev Manners, MD of Belvoir Fruit Farms. "We've had some very robust negotiations with our retail customers, but despite that, cost increases are still much higher than price increases right across the board."
Suppliers of exotic flavoured drinks are finding themselves especially exposed to cost fluctuations. Adrian Troy, marketing director of AG Barr, says the recently acquired Rubicon brand has been a new challenge for the company "because we're working with exotic juices and with crops that are by their nature variable in price".
However, he adds, the volume growth in the market is "an encouraging backdrop" to what is happening in the commodities markets. In other words, the risk is worth it. Whether the same could be said of the more mature fruit juice sub-category (see Focus on Juices and Smoothies, 19 March) is another question. The sector may still be the largest by value, but it is also the most vulnerable to commodity volatility and as far as growth goes, it is lagging significantly behind colas and fruit carbonates.
Pepsi Max was the real star of the cola category, increasing value sales by 19.9% to £125m. This has no doubt contributed to the tribulations of Coca Cola's sugar-free variant Coke Zero, which saw its sales slump by 13.5% to £57.5m.
Diet Coke, however, posted strong growth and Smith points to this as evidence that "we needed to work a little harder on the communication and positioning of Coke Zero" in order to differentiate it from the Diet variety. The company hopes its new campaign for Coke Zero, which launched at the start of the year and includes TV, outdoor communications and sampling, will do just this. Smith says the creative is already cutting through well and that sales of Coke Zero are up by 38% in the first nine weeks of 2011.
At the same time as building profile and reaching new consumers, CCE is working to boost consumption among existing fans. Last year, the company published its Open More Business Report, identifying opportunities to make more from soft drinks by applying "new category vision".
One of the opportunities identified was the "with food occasion". CCE is looking at ways to encourage more people to drink Coke during their evening meal at home and also on the go at lunchtime. Last year, the company began cross-selling Coke with selected food brands. In November, for example, Coke linked with Old El Paso to offer a dinner kit and a Coke share-size bottle for £3.
"Coke's food strategy is really interesting at the moment," says Anthony Hopper, MD of Saatchi & Saatchi X. "Coke has always been one of those things that a family might buy as a treat but it might not be a staple on the dining table or for lunch."
Hopper was heavily involved in activating another of CCE's high-profile 2010 campaigns, a cross-merchandising initiative with Diageo's spirits brand and CCE's Schweppes mixers and Coca-Cola variants. The Together for a Better Summer campaign was a big success, he says.
"There was a significant uplift in the number of baskets containing both Diageo spirits and Schweppes mixers together and an uplift of sales on both. It was widely activated by retailers and we were able to get the products cross-merchandised together, which was a big win for us."
Smith reports a 9% growth in mixer and cola value during the promotion, a welcome boost for the Schweppes brand which grew just 1.8% in the full year. He hopes the repetition of the Diageo CCE collaboration this summer will again boost sales, but admits that mixers "doesn't look as strong in relation to the whole category".
Hopper blames the under-performance of mixers on a lack of excitement and innovation. "There hasn't been a lot of news in that category and it's been slightly out of trend for a while especially in take home."
One category that appears to be coming back into fashion is flavoured carbonates. Smith says CCE grew its share with Lilt, Fanta, Sprite and Dr Pepper brands despite cutting ad spend, although it did increase the number of promotions it ran on Fanta, Sprite and Dr Pepper.
Nisa-Today's soft drinks buyer Peter Hindmarsh believes Britvic's decision to switch from 500ml bottles of Pepsi Max, Diet Pepsi, 7UP Free and Tango to 600ml formats at the same price was "one of the best innovations in the category in 2010".
These brands, along with Mountain Dew and Drench, also benefited from Britvic and PepsiCo's Reward Your Thirst promotion, which gives consumers the chance to text a unique on-pack number to see if they have won a prize. The promotion runs until November 2011 and is Britvic and PepsiCo's first ever cross-brand push and the biggest consumer promotion to date for Britvic.
The promotion has to date performed "extremely well" for the on-the-go sector, says Haleem Sadiq, negotiator for the soft drinks category at Bestway and Batleys Wholesale. He is another fan of the bigger formats and mentions Mountain Dew 500ml bottles as having been particularly popular with retailers. Price-marked packs are also doing well, says Sadiq. "More suppliers are going down this route, which is good for retailers and consumers alike."
Last summer saw the arrival of Tesco's own-label Fiery Cola containing a hint of chilli, a brave move in a sector dominated by brands, according to Bryan Roberts, retail insights director at Kantar Retail.
"It's a bit of an uphill struggle for retailers in segments such as cola, tonic and energy drinks, where there are dominant brand leaders and fairly strong brand loyalty," he says. In other segments, there has been a big swing towards own label, he adds, but "even the discounters carry the number one and two brands in cola an indication that own label can only go so far in certain categories".
Indeed, brands account for two-thirds of total sales in the soft drinks category and continue to gain share from own label, so Tesco faces an uphill struggle to generate fiery sales of its Fiery Cola.
Elsewhere in carbonates, AG Barr's Troy says 2010 was a "good solid year" for Irn-Bru, which benefited from a concerted push to drive penetration outside its Scottish heartland, resulting in a 9% growth in sales in England and Wales.
The biggest growth in AG Barr's portfolio, however, came from Rubicon and new energy drink brand Rockstar, sales of which grew 64% last year [Nielsen Total GB MAT to 25 December 2010]. A key factor in this growth is the value for money proposition, something Sadiq says is still a major consideration for consumers and retailers alike.
One brand well placed to benefit from this is Sunkist, relaunched last year. "It's a value proposition," says brand manager James Nichols. "You can buy a crate of Sunkist for about 17p a can, but they can command anywhere between 49p and 69p at the till."
Sunkist has also rethought its formatting and repositioning in a bid to drive sales. The brand upgraded its packaging to bring in "more of a West Coast American surf type appeal" and this month introduced 500ml bottles of its Orange and Summer Fruit variants (rsp: 79p). "The response to the relaunch has been amazing," claims Nichols. "Retailers recognised they could sell a big name brand at a very competitive price and make great profit margins."
Botanical brewer Fentimans has been reformatting, too but in the opposite direction to most of the competition, having introduced a smaller, 275ml single-serving version of its Rose Lemonade, which will now sit alongside the 750ml format launched in 2009.
The new format is the ideal size for a mixer, says Fentimans MD and master brewer Eldon Robson, and the company has produced a list of cocktail recipes featuring their Rose Lemonade.
In another canny marketing move, Ben Shaws, maker of nostalgic drinks such as Dandelion and Burdock and Cream Soda, is marking its 140th anniversary with a series of 'traditional British birthday parties' across the UK in the next few months, featuring sampling opportunities and old-fashioned party games.
Other brands will continue to rely on tried and tested tie ins with big sporting events. CCE's Smith says every brand associated with the World Cup experienced "tremendous growth", adding that total soft drink sales grew 6.2% during the period, with Coke recording a 13.3% increase in value sales.
Like many other brands, Coca-Cola is now looking forward to the London 2012 Olympics. Smith expects its status as official partner to the Games to ensure an even greater uplift in sales than during the World Cup. He is particularly enthusiastic about the prospects of Powerade, which he says will be "dialled up and front of stage during all of our Olympics executions".
Another brand benefiting from a sporting association is Rubicon, whose recent affiliation to cricket (it sponsored Sky Sports' coverage of last year's Twenty20 World Cup as well as coverage of the recent ICC Cricket World Cup) has significantly increased its profile in the UK.
"We invested in the region of £7m in marketing in the past year," says AG Barr marketing director Adrian Troy. "The sponsorship of the Twenty20 World Cup gave the brand a platform on a very high profile, which successfully helped us introduce it to a new swathe of consumers."
Troy believes Rubicon has successfully made the transition from ethnic to mainstream brand and that consumers are now more willing to try exotic juice flavours (see box, right).
Ambient juice brand Princes has also recently increased its range with six new tropical flavours Pomegranate, Passionfruit, Mango, Pineapple & Coconut, Cherry and Blueberry. "With the new range, the aim is to create greater synergy between the pure juice and juice drinks categories, to encourage consumers to buy across both areas," says Graham Breed, marketing director for Princes Soft Drinks.
Yet despite the interest in exotic flavours, fruit juice lagged behind the market in 2010 with just 3.9% value growth and 0.1% volume growth. Troy believes more innovation is needed to stimulate growth. "The ambient juice fixture is in reality one of the most challenging and least exciting segments in-store and I think with Rubicon we've been able to add a bit of colour and energy," he says.
Vimto Soft Drinks intends to do the same with a new range of juices and carbonates rolled out last month in partnership with Reggae Reggae Sauce entrepreneur Levi Roots. "He had a five-year plan to go into other food and drink categories and one of those was soft drinks," says Neil Gibson, head of marketing for Vimto Soft Drinks. "Having looked at fruit juice drinks in ambient, we felt the market was very flat and our retail customers also thought it was a market that nothing was happening in."
The company also brought innovation to its Vimto brand with the launch of Cherry Vimto last spring. Gibson says the SKU went from a standing start to £4m in sales last year, contributing strongly to a 20% increase in Vimto brand value year-on-year. "We hadn't expected it to do so well so soon," he admits. "We expected it to be a slower build."
Gibson believes Vimto has benefited from greater penetration in the south on the back of its national Seriously Mixed Up Fruit campaign, which communicated directly with teenagers rather than mums. "I think now we are a national brand with regional strength. If our non-heartland areas become as big as our heartland we're looking at a £100m-plus brand," he says.
If only some of Vimto's success could rub off on one its major competitors, Oasis, which had a less than stellar year with sales falling 10.2% to £74m. CCE's Smith points out the juice drinks sub-category in general was "less buoyant" than other sectors but claims a new multimillion campaign is set to revitalise the Oasis brand.
A new blackcurrant & apple variant is hitting the shelves this month backed by a major campaign promoting Oasis as a lunchtime drink option that Smith expects to have "massive reach".
Fruit squash [see Focus on Juices & Smoothies, 19 March] comfortably outperformed juice in 2010 growing value by 5.7% and volumes by 3.1%, although Robinsons' latest innovation, Robinsons Double Concentrate, could encourage consumers to buy less in the future. The orange-flavoured Double Concentrate is available in 1.25-litre and 1.75-litre bottles and while the current single concentrate format will be retained in one litre, the two-litre variant is being discontinued.
Britvic's Fruit Shoot H2O range, meanwhile, has been rebranded as Fruit Shoot Hydro to make it more appealing to children. "H2O wasn't cool enough for older kids," says Harris. "The new packaging is much more current."
At the adult end of the fruit squash category, the wheels of change are in motion. Pippa Garlick, a consultant at brand agency Dragon Rouge, says suppliers Bottlegreen and Belvoir "have helped shift the perception of squash as artificial to allow it to appeal to a more discerning and health-conscious consumer".
Recent reports suggest Bottlegreen Drinks' backer Piper Private Equity has put the company up for sale, with an asking price around the £30m mark. What impact a sale will have on the company's ambitious growth plans remains to be seen but MD Simon Speers describes 2010 a year in which sales reached the £25m mark as "an outstanding year" for Bottlegreen.
Among the highlights were the launch of a Strawberry & Elderflower cordial, which Speers says saw huge success over the summer period, while new sparkling pressé flavours and the 'Try Me Hot' concept resulted in elevated sales of Bottlegreen's winter cordial range, including spiced berry, the brand's take on mulled wine.
Bottlegreen's main competitor Belvoir Fruit Farms also reports a strong year, albeit in "tough" circumstances, according to MD Pev Manners. "We did very well in Tesco, Sainsbury's, Waitrose and Ocado although we suffered a delist or two in Asda due to a category narrowing," he says. Belvoir launched a limited-edition cordial to coincide with the Royal wedding and is ramping up its marketing activity this year with a wide-reaching 'Loveliness' campaign, which includes 'a compliment of the day' screensaver and opportunities to win jewellery and spa days.
Another brand increasing its focus on marketing is adult soft drink Shloer. Its Best Served Shared Campaign, which ran throughout 2010, was a huge success in terms of attracting new consumers and increasing frequency of purchase, says head of brand marketing Amanda Grabham. "We are increasing the marketing spend by a third to a record £16m in 2011," she adds.
While colas, energy drinks and flavoured carbonates will have a key role to play in the category's future growth, some relatively new entrants to the market are also making their mark.
Sales of Coca-Cola's Vitamin Water grew 44% by value on the previous year, says CCE's Smith, and the brand is viewed by Coke as important for the development of the soft drinks category.
Meanwhile, in the US market so often the vanguard of food and drink trends coconut water is flavour of the month. Market leader Vita Coco is a £100m-plus brand in the US where it is revered by celebrities including Madonna, Demi Moore and Red Hot Chili Peppers vocalist Anthony Kiedis, all of whom have invested in the brand.
It is already making its mark in the UK with listings in Ocado, Tesco and Holland & Barrett. Vito Coco is currently worth £4.3m in UK sales, and UK distributor Giles Brook says that the focus for 2011 is to take the brand out to consumers through sampling and in-store promotional activity and communicating the nutrition and hydration benefits of the drink, which is made purely from fresh coconut water.
"From a health perspective, previously there's been a lot of focus on what people eat. Now it's about what they drink too," says Brook.
The future for brands like Vitamin Water and Vita Coco, which play up their health benefits, looks pretty rosy, according to Mark Wickens, founder of consultancy Brandhouse. "Health and wellbeing remain a core emotional need, especially for 50+ consumers," says Wickens.
There is plenty of evidence to suggest that drinks manufacturers in general are responding to demand for healthier products (see p61). From the rapid growth in sugar-free variants to the industry-wide move to remove artificial colours and flavours, the soft drinks industry is making its products more permissible to consumers.
But in a climate where commodity price volatility is rapidly becoming the norm, suppliers must pull out all the stops if the soft drinks market is to repeat the successes of 2010. Consumers will continue to expect quality and value for money at the very least.
And as for the next trend, there's no guessing what that might be. Drinks for the over-50s, as Brandhouse's Wickens suggests? You never know.
Focus On Soft Drinks
It would be easy to dismiss the soft drink category's 5.6% value growth as purely price-driven [Kantar 52w/e 20 February 2011].
Easy, but not wholly accurate. Yes, there have been attempts to pass on price rises (not all of which have been warmly received by retailers witness Britvic's spat with Sainsbury's this February over a proposed a 10% hike). And yes, the price rises that have been sanctioned on products like Pepsi and Coca-Cola have positively skewed value figures.
But against the backdrop of a 0.5% decrease in volume sales in 2009, the 1.7% volume growth achieved in 2010 by soft drinks suggests the category is successfully adding value, as well as extra pennies, to a bottle of pop. Strong NPD, clever packaging and range rethinks and a greater focus on key growth areas such as energy drinks are all playing their part.
"People immediately jump to the conclusion that it's price that has driven that increase in value sales, but it's not," confirms Craig Smith, vice president, marketing and strategic planning at Coca-Cola Enterprises. "It is much more about the mix of the products, about high-value pack types and high-value segments such as energy, sports and cola growing faster than the category."
Energy and sports drinks in particular have had a storming year Lucozade Sport aside with value sales up 15.9% and 16.5% respectively [Kantar 52 w/e 20 Feb 2011], supporting Red Bull head of category marketing Doug Bairner's view that "consumers are really understanding the functional benefits of the category more and more".
Colas and fruit carbonates have also performed strongly, sales up 5.9% and 11% respectively in value [Kantar], an impressive achievement given the maturity of these sub-categories. Cola sales seem to have been boosted by renewed intensity to the competition between old rivals Coke and Pepsi. While Coca-Cola and Diet Coke remain the clear market leaders, Pepsi Max and Pepsi Cola have enjoyed by far the biggest sales uplifts in the top 10 over the past year (see p53).
With so many sub-sectors thriving, it is no surprise that this is having a positive impact on the convenience sector, where soft drinks traditionally over-trade. On-the-go soft drinks have contributed almost half the growth to the soft drinks category, says Smith. His claims are underlined by Britvic's recent Soft Drinks Report, which showed impulse channels growing at a faster rate than multiple grocery channels for the first time in three years.
One area continuing to cause major headaches for both impulse and multiple retailers, however, is commodity prices. The price of sugar has leapt 60% year-on-year, while the rising price of oil is having a knock-on effect on the cost of PET the favoured packaging format for the majority of soft drinks suppliers (see p72). Combined with the ongoing price volatility in other commodities, such as steel, orange juice and energy, these cost hikes have conspired to push up the unit production cost of some soft drinks by double-digit percentages.
In a trading statement earlier this year, Britvic chief executive Paul Moody spoke of "a rapid and unprecedented uplift in the cost of key raw materials". The escalation in input costs had come after the completion of this year's price negotiation process, he added, so Britvic did not expect to recover in full the additional input costs.
The final comment was particularly pointed as in February, Britvic was involved in a highly publicised standoff with Sainsbury's over price increases, during which it withheld supply of Pepsi. "There was a disagreement with Sainsbury's that has since been resolved," says Britvic customer management director Murray Harris. "Retailers understand cost pressures but they also feel they have a responsibility to their shoppers to keep prices down."
According to a report in the FT, the soft drinks supplier got its way in the end with Sainsbury's "caving in" at least partially to Britvic's demands. But the spat brought into sharp focus the tough negotiations that input cost increases have prompted. Soft drinks suppliers have had no choice but to ask for price rises, says Neil Gibson, head of marketing at Vimto Soft Drinks.
"As commodities have gone up, we've tried to cover some of the costs internally, by becoming more efficient, but inevitably we've had to pass some costs on to the trade and the consumer," he says. "I think if you look at what has happened on pricing, the likes of Coca-Cola and Britvic are in the same position as us and have had to pass it on. At the kind of level of increase we've had, you simply cannot afford to soak all of it up."
The fact that leading brands such as Coca-Cola and Pepsi have pushed though increases has helped smaller players make a stronger case for price rises to retailers, but recovering the full cost has in the main not been possible. "We've got a real margin squeeze on this year," admits Pev Manners, MD of Belvoir Fruit Farms. "We've had some very robust negotiations with our retail customers, but despite that, cost increases are still much higher than price increases right across the board."
Suppliers of exotic flavoured drinks are finding themselves especially exposed to cost fluctuations. Adrian Troy, marketing director of AG Barr, says the recently acquired Rubicon brand has been a new challenge for the company "because we're working with exotic juices and with crops that are by their nature variable in price".
However, he adds, the volume growth in the market is "an encouraging backdrop" to what is happening in the commodities markets. In other words, the risk is worth it. Whether the same could be said of the more mature fruit juice sub-category (see Focus on Juices and Smoothies, 19 March) is another question. The sector may still be the largest by value, but it is also the most vulnerable to commodity volatility and as far as growth goes, it is lagging significantly behind colas and fruit carbonates.
Pepsi Max was the real star of the cola category, increasing value sales by 19.9% to £125m. This has no doubt contributed to the tribulations of Coca Cola's sugar-free variant Coke Zero, which saw its sales slump by 13.5% to £57.5m.
Diet Coke, however, posted strong growth and Smith points to this as evidence that "we needed to work a little harder on the communication and positioning of Coke Zero" in order to differentiate it from the Diet variety. The company hopes its new campaign for Coke Zero, which launched at the start of the year and includes TV, outdoor communications and sampling, will do just this. Smith says the creative is already cutting through well and that sales of Coke Zero are up by 38% in the first nine weeks of 2011.
At the same time as building profile and reaching new consumers, CCE is working to boost consumption among existing fans. Last year, the company published its Open More Business Report, identifying opportunities to make more from soft drinks by applying "new category vision".
One of the opportunities identified was the "with food occasion". CCE is looking at ways to encourage more people to drink Coke during their evening meal at home and also on the go at lunchtime. Last year, the company began cross-selling Coke with selected food brands. In November, for example, Coke linked with Old El Paso to offer a dinner kit and a Coke share-size bottle for £3.
"Coke's food strategy is really interesting at the moment," says Anthony Hopper, MD of Saatchi & Saatchi X. "Coke has always been one of those things that a family might buy as a treat but it might not be a staple on the dining table or for lunch."
Hopper was heavily involved in activating another of CCE's high-profile 2010 campaigns, a cross-merchandising initiative with Diageo's spirits brand and CCE's Schweppes mixers and Coca-Cola variants. The Together for a Better Summer campaign was a big success, he says.
"There was a significant uplift in the number of baskets containing both Diageo spirits and Schweppes mixers together and an uplift of sales on both. It was widely activated by retailers and we were able to get the products cross-merchandised together, which was a big win for us."
Smith reports a 9% growth in mixer and cola value during the promotion, a welcome boost for the Schweppes brand which grew just 1.8% in the full year. He hopes the repetition of the Diageo CCE collaboration this summer will again boost sales, but admits that mixers "doesn't look as strong in relation to the whole category".
Hopper blames the under-performance of mixers on a lack of excitement and innovation. "There hasn't been a lot of news in that category and it's been slightly out of trend for a while especially in take home."
One category that appears to be coming back into fashion is flavoured carbonates. Smith says CCE grew its share with Lilt, Fanta, Sprite and Dr Pepper brands despite cutting ad spend, although it did increase the number of promotions it ran on Fanta, Sprite and Dr Pepper.
Nisa-Today's soft drinks buyer Peter Hindmarsh believes Britvic's decision to switch from 500ml bottles of Pepsi Max, Diet Pepsi, 7UP Free and Tango to 600ml formats at the same price was "one of the best innovations in the category in 2010".
These brands, along with Mountain Dew and Drench, also benefited from Britvic and PepsiCo's Reward Your Thirst promotion, which gives consumers the chance to text a unique on-pack number to see if they have won a prize. The promotion runs until November 2011 and is Britvic and PepsiCo's first ever cross-brand push and the biggest consumer promotion to date for Britvic.
The promotion has to date performed "extremely well" for the on-the-go sector, says Haleem Sadiq, negotiator for the soft drinks category at Bestway and Batleys Wholesale. He is another fan of the bigger formats and mentions Mountain Dew 500ml bottles as having been particularly popular with retailers. Price-marked packs are also doing well, says Sadiq. "More suppliers are going down this route, which is good for retailers and consumers alike."
Last summer saw the arrival of Tesco's own-label Fiery Cola containing a hint of chilli, a brave move in a sector dominated by brands, according to Bryan Roberts, retail insights director at Kantar Retail.
"It's a bit of an uphill struggle for retailers in segments such as cola, tonic and energy drinks, where there are dominant brand leaders and fairly strong brand loyalty," he says. In other segments, there has been a big swing towards own label, he adds, but "even the discounters carry the number one and two brands in cola an indication that own label can only go so far in certain categories".
Indeed, brands account for two-thirds of total sales in the soft drinks category and continue to gain share from own label, so Tesco faces an uphill struggle to generate fiery sales of its Fiery Cola.
Elsewhere in carbonates, AG Barr's Troy says 2010 was a "good solid year" for Irn-Bru, which benefited from a concerted push to drive penetration outside its Scottish heartland, resulting in a 9% growth in sales in England and Wales.
The biggest growth in AG Barr's portfolio, however, came from Rubicon and new energy drink brand Rockstar, sales of which grew 64% last year [Nielsen Total GB MAT to 25 December 2010]. A key factor in this growth is the value for money proposition, something Sadiq says is still a major consideration for consumers and retailers alike.
One brand well placed to benefit from this is Sunkist, relaunched last year. "It's a value proposition," says brand manager James Nichols. "You can buy a crate of Sunkist for about 17p a can, but they can command anywhere between 49p and 69p at the till."
Sunkist has also rethought its formatting and repositioning in a bid to drive sales. The brand upgraded its packaging to bring in "more of a West Coast American surf type appeal" and this month introduced 500ml bottles of its Orange and Summer Fruit variants (rsp: 79p). "The response to the relaunch has been amazing," claims Nichols. "Retailers recognised they could sell a big name brand at a very competitive price and make great profit margins."
Botanical brewer Fentimans has been reformatting, too but in the opposite direction to most of the competition, having introduced a smaller, 275ml single-serving version of its Rose Lemonade, which will now sit alongside the 750ml format launched in 2009.
The new format is the ideal size for a mixer, says Fentimans MD and master brewer Eldon Robson, and the company has produced a list of cocktail recipes featuring their Rose Lemonade.
In another canny marketing move, Ben Shaws, maker of nostalgic drinks such as Dandelion and Burdock and Cream Soda, is marking its 140th anniversary with a series of 'traditional British birthday parties' across the UK in the next few months, featuring sampling opportunities and old-fashioned party games.
Other brands will continue to rely on tried and tested tie ins with big sporting events. CCE's Smith says every brand associated with the World Cup experienced "tremendous growth", adding that total soft drink sales grew 6.2% during the period, with Coke recording a 13.3% increase in value sales.
Like many other brands, Coca-Cola is now looking forward to the London 2012 Olympics. Smith expects its status as official partner to the Games to ensure an even greater uplift in sales than during the World Cup. He is particularly enthusiastic about the prospects of Powerade, which he says will be "dialled up and front of stage during all of our Olympics executions".
Another brand benefiting from a sporting association is Rubicon, whose recent affiliation to cricket (it sponsored Sky Sports' coverage of last year's Twenty20 World Cup as well as coverage of the recent ICC Cricket World Cup) has significantly increased its profile in the UK.
"We invested in the region of £7m in marketing in the past year," says AG Barr marketing director Adrian Troy. "The sponsorship of the Twenty20 World Cup gave the brand a platform on a very high profile, which successfully helped us introduce it to a new swathe of consumers."
Troy believes Rubicon has successfully made the transition from ethnic to mainstream brand and that consumers are now more willing to try exotic juice flavours (see box, right).
Ambient juice brand Princes has also recently increased its range with six new tropical flavours Pomegranate, Passionfruit, Mango, Pineapple & Coconut, Cherry and Blueberry. "With the new range, the aim is to create greater synergy between the pure juice and juice drinks categories, to encourage consumers to buy across both areas," says Graham Breed, marketing director for Princes Soft Drinks.
Yet despite the interest in exotic flavours, fruit juice lagged behind the market in 2010 with just 3.9% value growth and 0.1% volume growth. Troy believes more innovation is needed to stimulate growth. "The ambient juice fixture is in reality one of the most challenging and least exciting segments in-store and I think with Rubicon we've been able to add a bit of colour and energy," he says.
Vimto Soft Drinks intends to do the same with a new range of juices and carbonates rolled out last month in partnership with Reggae Reggae Sauce entrepreneur Levi Roots. "He had a five-year plan to go into other food and drink categories and one of those was soft drinks," says Neil Gibson, head of marketing for Vimto Soft Drinks. "Having looked at fruit juice drinks in ambient, we felt the market was very flat and our retail customers also thought it was a market that nothing was happening in."
The company also brought innovation to its Vimto brand with the launch of Cherry Vimto last spring. Gibson says the SKU went from a standing start to £4m in sales last year, contributing strongly to a 20% increase in Vimto brand value year-on-year. "We hadn't expected it to do so well so soon," he admits. "We expected it to be a slower build."
Gibson believes Vimto has benefited from greater penetration in the south on the back of its national Seriously Mixed Up Fruit campaign, which communicated directly with teenagers rather than mums. "I think now we are a national brand with regional strength. If our non-heartland areas become as big as our heartland we're looking at a £100m-plus brand," he says.
If only some of Vimto's success could rub off on one its major competitors, Oasis, which had a less than stellar year with sales falling 10.2% to £74m. CCE's Smith points out the juice drinks sub-category in general was "less buoyant" than other sectors but claims a new multimillion campaign is set to revitalise the Oasis brand.
A new blackcurrant & apple variant is hitting the shelves this month backed by a major campaign promoting Oasis as a lunchtime drink option that Smith expects to have "massive reach".
Fruit squash [see Focus on Juices & Smoothies, 19 March] comfortably outperformed juice in 2010 growing value by 5.7% and volumes by 3.1%, although Robinsons' latest innovation, Robinsons Double Concentrate, could encourage consumers to buy less in the future. The orange-flavoured Double Concentrate is available in 1.25-litre and 1.75-litre bottles and while the current single concentrate format will be retained in one litre, the two-litre variant is being discontinued.
Britvic's Fruit Shoot H2O range, meanwhile, has been rebranded as Fruit Shoot Hydro to make it more appealing to children. "H2O wasn't cool enough for older kids," says Harris. "The new packaging is much more current."
At the adult end of the fruit squash category, the wheels of change are in motion. Pippa Garlick, a consultant at brand agency Dragon Rouge, says suppliers Bottlegreen and Belvoir "have helped shift the perception of squash as artificial to allow it to appeal to a more discerning and health-conscious consumer".
Recent reports suggest Bottlegreen Drinks' backer Piper Private Equity has put the company up for sale, with an asking price around the £30m mark. What impact a sale will have on the company's ambitious growth plans remains to be seen but MD Simon Speers describes 2010 a year in which sales reached the £25m mark as "an outstanding year" for Bottlegreen.
Among the highlights were the launch of a Strawberry & Elderflower cordial, which Speers says saw huge success over the summer period, while new sparkling pressé flavours and the 'Try Me Hot' concept resulted in elevated sales of Bottlegreen's winter cordial range, including spiced berry, the brand's take on mulled wine.
Bottlegreen's main competitor Belvoir Fruit Farms also reports a strong year, albeit in "tough" circumstances, according to MD Pev Manners. "We did very well in Tesco, Sainsbury's, Waitrose and Ocado although we suffered a delist or two in Asda due to a category narrowing," he says. Belvoir launched a limited-edition cordial to coincide with the Royal wedding and is ramping up its marketing activity this year with a wide-reaching 'Loveliness' campaign, which includes 'a compliment of the day' screensaver and opportunities to win jewellery and spa days.
Another brand increasing its focus on marketing is adult soft drink Shloer. Its Best Served Shared Campaign, which ran throughout 2010, was a huge success in terms of attracting new consumers and increasing frequency of purchase, says head of brand marketing Amanda Grabham. "We are increasing the marketing spend by a third to a record £16m in 2011," she adds.
While colas, energy drinks and flavoured carbonates will have a key role to play in the category's future growth, some relatively new entrants to the market are also making their mark.
Sales of Coca-Cola's Vitamin Water grew 44% by value on the previous year, says CCE's Smith, and the brand is viewed by Coke as important for the development of the soft drinks category.
Meanwhile, in the US market so often the vanguard of food and drink trends coconut water is flavour of the month. Market leader Vita Coco is a £100m-plus brand in the US where it is revered by celebrities including Madonna, Demi Moore and Red Hot Chili Peppers vocalist Anthony Kiedis, all of whom have invested in the brand.
It is already making its mark in the UK with listings in Ocado, Tesco and Holland & Barrett. Vito Coco is currently worth £4.3m in UK sales, and UK distributor Giles Brook says that the focus for 2011 is to take the brand out to consumers through sampling and in-store promotional activity and communicating the nutrition and hydration benefits of the drink, which is made purely from fresh coconut water.
"From a health perspective, previously there's been a lot of focus on what people eat. Now it's about what they drink too," says Brook.
The future for brands like Vitamin Water and Vita Coco, which play up their health benefits, looks pretty rosy, according to Mark Wickens, founder of consultancy Brandhouse. "Health and wellbeing remain a core emotional need, especially for 50+ consumers," says Wickens.
There is plenty of evidence to suggest that drinks manufacturers in general are responding to demand for healthier products (see p61). From the rapid growth in sugar-free variants to the industry-wide move to remove artificial colours and flavours, the soft drinks industry is making its products more permissible to consumers.
But in a climate where commodity price volatility is rapidly becoming the norm, suppliers must pull out all the stops if the soft drinks market is to repeat the successes of 2010. Consumers will continue to expect quality and value for money at the very least.
And as for the next trend, there's no guessing what that might be. Drinks for the over-50s, as Brandhouse's Wickens suggests? You never know.
Focus On Soft Drinks
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