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For years, liquid concentrates, worth around US$9 billion by retail value in 2014, seemed a neglected small category in the vast soft drinks market, and analysts once wondered if there was any glimpse of life and thought further investments might be questionable. The fact that there is no single brand in liquid concentrates reaching the billion dollar sales mark means the interest of manufacturers is exceedingly lacklustre. However, the economic slowdown or outright recession in some developed markets and new product development seemed to revive the category – the expansion of SodaStream and Kraft’s MiO and the ongoing popularity of Robinsons and Teisseire has put liquid concentrates back in the spotlight again. Some consumers who traded down to liquid concentrates when they were short of cash may well stay within the category, even when their income bounces back. Euromonitor International’s latest data show that the global off-trade volume sales increased by around 3% in 2014, and the category is expected to generate net growth of over US$900 million in 2014-2019. This figure does not seem to offer massive business opportunities compared to juices and energy drinks, but it is still worth looking at where the growth areas are and the state of play of the major companies.
Emerging markets will continue to be the key volume contributors for global liquid concentrates sales, with South Africa, Indonesia and Argentina identified as the main growth drivers in 2014-2019. Currently, Ireland, South Africa, the UK and Denmark have the highest per capita consumption by off-trade volume, and Britvic’s strong number one position in Ireland and the UK underpinned its global leadership with a volume share of around 7.5%. France is forecast to see good volume growth in the developed world, with Britvic controlling 30% of the off-trade volume sales in 2014. After the acquisition of the French brand Teisseire, Britvic might have wanted to consider exploring opportunities in some key emerging markets, but, statistically, Britvic’s shares still mainly stemmed from Europe, so that no meaningful initiatives have, as yet, been undertaken.
Brazil has the world’s largest liquid concentrates value sales, at around US$1 billion in retail terms; however, liquid concentrates is a gradually declining category in the face of growing competition from other beverages. Brazil has a highly fragmented market, with Empresa Brasileira de Bebidas e Alimentos SA holding a 26% off-trade volume share, and the remainder mainly shared among small and medium-sized local players. Thus far, no major multinational players are actively competing in the category. Some consumers are slowly moving away from liquid concentrates and trading up to RTD juices, although low-income consumers may still stay in the category for economic reasons. The Coca-Cola Company is actively pursuing RTD beverages such as juices, and liquid concentrates is less of a priority.
In South Africa, liquid concentrates are seen as being healthier than powder concentrates, with the country seeing double-digit year-on-year volume growth in liquid concentrates over the past few years. Like elsewhere, liquid concentrates is mainly consumed by low-income families as a cheaper alternative to juice and carbonates. More consumers are expected to increase their health consciousness, and this would be expected to influence future product offerings and new product development. More better-for-you products, such as reduced-sugar liquid concentrates, would be expected to be introduced to the market in the next few years. Tiger Brands Ltd, the world’s number two by volume, dominates the South African market, with a spectrum of brands, including Brookes, Cedar, Halls and Oros. Brands such as Brookes and Oros are expected to remain very strong within the category, although they may eventually lose some share to emerging private label products.
Euromonitor International forecasts that France, Canada and the US are set to see good growth in value sales in 2014-2019, although their volume growth may not be as high. The emergence of super liquid concentrates, such as water enhancers, has noticeably refreshed and expanded the category in North America. These products may be a relatively higher value proposition, but involve smaller volumes as they are formulated as highly concentrated products, such as “drops”. Liquid concentrates retail sales in the US amounted to US$464 million in 2014, comparable to the global number one brand Robinsons’ sales of US$446 million. It should be noted that there was a slowdown in new product launches and activities in “drops” in 2014 amid apparent signs of stabilisation. SodaStream, which improved its global ranking significantly over the past few years, also recorded a slower pace of growth compared to the previous year. Nevertheless, the slowdown has not completely discouraged innovation, for example the targeting of various drinking occasions. “Drops” has also spread to other formats, for example Cirkul, the filter and flavour cartridge infusion bottle system, is an interesting innovation.
In 2014, the US “drops” trend seemingly filtered through to the other side of the Atlantic and Robinsons Squash’d was launched for the on-the-go consumption segment in the UK market. In France, Teisseire introduced new packaging with a dosage cap to allow consumers to precisely measure the right quantity.
In brief, liquid concentrates provides some steady revenue and a solid consumer base for a few key players, but it is still a small category and it will remain small in light of competition from other beverages. There might be some value opportunity in “drops”, as consumers are looking to add flavour to their water. However, the opportunity is limited in the face of strong competition from energy drinks and sports drinks and juices. In terms of the competitive landscape, there is no truly global player, with major prominent companies gaining their positions through their strength in certain regions.
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