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When looking at the largest soft drinks companies globally, the list looks a little different when comparing sales in value and volume terms. Besides the obvious top two global companies, Coca-Cola and PepsiCo, all of the remaining top 10 players in terms of value sales come from developed markets, with the exception of Tingyi Holdings Corp. Tingyi, which does business almost exclusively in China, ranked eighth in 2011 with a global off-trade value share of 1.9%.
It is likely that the list of the top 10 global soft drinks companies in value terms will remain fairly stable in the future. Kirin Holdings Co Ltd ranked 10th in 2011 with a 1.2% global value share. Kraft, which ranked 11th, trailed Kirin by 0.3 percentage points. The largest value company that does business primarily in developing markets is Uni-President Enterprises Corp, which ranked 15th in 2011 with a 0.6% off-trade value share, about half the off-trade sales of Kirin.
Developed market consumers have the most disposable income to spend on soft drinks and the category is mature in these markets. As such, there is not likely to be much volume growth and so companies are searching for new value-added niches to grow their businesses. This means that the top value companies are likely to see incremental growth. It is unlikely that a new company will crack the top 10 in the near term, although Tingyi may move up from its number eight position.
The common links between Tingyi and Uni-President are that they do most of their business in the rapidly growing Chinese market and both are strong in RTD tea, a relatively large, high value category in China. In fact, Tingyi leads RTD tea in China, while Uni-President ranks second.
In many developing markets there are various rapidly growing categories, but these tend to be lower in value. It is this characteristic that is likely to cause a little more volatility in the global top 10 company list based on off-trade volume. The top four off-trade volume companies in 2011 are all familiar names. Several top 10 volume companies are from developing markets, primarily China, but there is also one Latin American-based player.
Source: Euromonitor International
The most interesting aspect of the top volume companies is the two companies that are not household names and not currently on this list – China Resources Enterprise Co Ltd and Parle Bisleri Ltd.
Both of these companies are focused on developing markets, particularly the bottled water category. China Resources is primarily a regional business in China, focused on beer. Like many Asian breweries, the company also utilises its assets to make some soft drinks. As in many developing markets, in China increasing wealth means consumers can afford higher quality drinking water. While bottled water is a relatively low value soft drinks category, this company is taking advantage of the huge volume opportunity. In the past five years volume sales have increased by 209% and in 2011 it was the 12th largest soft drinks company based on off-trade volume. While value sales have also increased substantially over the past five years, the company remains some way behind the top 10, currently ranking 53rd.
Parle Bisleri shares some similar characteristics with China Resources. For example, its business is focused on a single market which is highly populated and has a rapidly growing economy, with its consumers also increasingly able to afford higher quality drinking water. In this case, however, that market is India. Parle Bisleri is almost exclusively focused on bottled water. This focus has been very successful, with category volume sales rising by 284% over 2006-2011. In 2011, the company ranked 14th in terms of off-trade volume globally, but like China Resources is no threat to the top 10 companies based on value, ranking 58th.
Thus, the list of the largest companies in terms of value is likely to remain relatively stable due to the fact that markets where consumers have more money, ie developed markets, are also the more mature soft drinks markets. Companies that do business in developed markets are likely to concentrate on developing new niches that offer added value but do not tend to generate incremental overall volume. It is unlikely that a new up-and-coming company will be able to enter this type of market.
The story in developing markets may be quite different. In these markets there is tremendous potential for volume growth, driven by demand for better drinking water. Along with large populations and increasing wealth, the stage is set for rapid volume gains. In the near to medium term we are likely to see China Resources and Parle Bisleri become global top 10 volume companies but it may take a long time for these players to crack the top 10 in value.