Over the past 10 to 20 years, the ripples of change in the global soft drinks market have threatened to become tidal waves, with new categories emerging all the time and genuine novelty flooding the shelves, giving consumers more choice than ever before. The shifts have been so great that even the giants of the industry have had to adjust their business models, acquiring their way into entirely new categories while also diversifying their own brands and portfolios.
Consumers seek greater variety, often on impulse
According to consumer research conducted by Innova Market Insights, it is evident that consumer habits are driving the push towards ever greater variety. In general, they are buying more beverages on impulse, using drinks as between-meals snacks and demanding ever more value above and beyond the simple quenching of thirst.
Purchasing rates for soft drinks clearly indicate the shift towards alternatives to core carbonates and juices, with results for seven of the top ten economies showing increased rates of purchase for ‘other’ kinds of soft drinks between 2017 and 2018. It is also evident that consumers are choosing ‘other’ soft drinks more on the basis of taste and novelty, with impulse purchasing also higher in this category than in juices or carbonates. Meanwhile, when drinking occasions were assessed, carbonates showed above-average use at dinner time and juice at breakfast time, but ‘other’ soft drinks showed most strength in the between-meals snacking occasions.
NPD reflects the shift toward new types of drinks
Although juices and carbonates remain the two most active categories within global NPD in soft drinks, growth is much faster in other areas. Iced tea – already a core part of the market in Asia – is continuing to extend its reach in other parts of the world and launch numbers increased at a CAGR of 12% over 2014-2018. The other categories to show best growth in NPD include RTD sports drinks (+26% CAGR), iced coffee (+12%) and ‘other’ soft drinks (+10%), which include such novelties as herbal drinks, jelly drinks and vinegar drinks.
Another aspect of new product development that clearly demonstrates the changing face of the soft drinks market is flavor. Orange, apple, lemon and mango are still the top four flavor choices within NPD, just as they were back in 2014. However, the rise of iced tea and coffee drinks is reflected in the fact that tea flavors ranked fifth in 2018 (up from 10th in 2014), while coffee flavors were in 11th (up from 16th in 2014). At the same time, a review of the fastest growing flavors in the market reveals strength for the likes of matcha tea (+49% CAGR 2013-2018), apple cider vinegar (+21% CAGR) and kombucha (+21% CAGR), all of which are thriving concepts in Japan and other parts of Asia and which are now distinguishing themselves on a more global platform.
All of Innova’s Top Ten Trends impact on the soft drinks market
The growing popularity of Asian beverages in western markets demonstrates the importance of variety to the modern consumer and, as these next generation soft drinks further stretch the category’s boundaries, it is crucial for existing products and brands to find new ways to maintain growth and competitive edge.
‘Hello Hybrids’ is one of Innova’s Top Ten Trends for 2020 and this is an increasingly popular strategy for soft drinks companies looking to add value and novelty to their portfolios. In fact, hybridization
is perhaps nowhere more evident than in the soft drinks arena, with category definitions blurring all the time. For example, Odwalla in the US launched Smoobucha drinks in 2019, combining the twin concepts of a smoothie and a kombucha drink, while energy components are being added widely to more established products to give a new twist, e.g. Coca-Cola Energy, which is now launching worldwide, and Radnor + Energy bottled water, introduced in the UK in 2019.
This is just one of the Top Ten Trends impacting on soft drinks supply, but in fact all ten have at least some relevance to this market at present, with soft drinks remaining one of the most highly innovative and dynamic marketplaces within FMCG.
Big businesses diversify, but must also look to sustainability
The world’s largest soft drinks suppliers are certainly tapping into the diversity of the marketplace, but looking ahead, sustainability is expected to become just as important to their business models as the variety in their portfolios, with consumer pressure starting to hit home when it comes to packaging policies and innovations. While many major soft drinks firms are targeting greater use of recycled plastics, it could be that they will have to go further in the future, with completely compostable and biodegradable packaging choices expected to gain support as the costs come down and eco-conscious strategies become the new normal.
“Soft Drinks: Global Shifts” is a new report from Innova Market Insights, which brings together consumer research, market sizes, company analysis and a review of new product trends and activity to demonstrate just how the picture has been changing and to suggest where the future opportunities can be found.
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