Discussion: What is the Current State of the Carbonated Drinks Market

Smithers Pira examines the state of the market and the top trends expected to occur in the carbonated soft drinks industry until 2018.

The carbonated soft drinks (CSD) sector is a mature category in the beverages market. In recent years it has gone through multiple changes, and this state of flux is expected to continue in the near future. In this new bulletin, Smithers Pira examines the state of the market and the top trends expected to occur in the carbonated soft drinks industry until 2018.

Who are the main players?

The carbonated soft drinks market continues to be dominated by Coca Cola and PepsiCo, whose globally strong brand values tend to keep less branded and cheaper value offerings at bay. The importance of brand cannot be overstated in this category. One of the reasons for Coca Cola and PepsiCo's enormous success has been the fact that they have built massive brand legacies founded on significant advertising budgets, honing in on the emotional and lifestyle attachments of the product they market.

CSDs have relatively low price points and margins compared to some other consumer goods categories, thus impacting on brand owner's inclination to add additional costs through packaging innovation. The industry is trying to find ways to deliver the product in terms of effective and efficient product delivery that is fit for purpose but in a more cost-effective way from a manufacturing perspective.

Does the industry face any challenges?

Pressure remains on this industry from health lobbyists looking for improvements to drinkers' diets, particularly when it comes to childhood obesity. Consequently, there has been a shift from high-sugar carbonated soft drinks to healthier and often sugar free, diet or inferred health varieties often delivering comparable taste and quality.

The sports drink market has grown significantly in recent times and is a threat to CSD's 'share of throat', particularly when considering the similar target audiences. There has also been a proliferation of functional soft drinks that offer energy solutions and this has become far more sophisticated in terms of flavours, usage and packaging variants. Packaging remains a key weapon in the panoply with special editions and pack variants being a conventional way of helping brands stand out and to build brand values.

What are the main drivers?

The main driver of packaging change is related to reducing costs. If brand owners can identify a particular consumer benefit to attach to a change, then they can base a marketing campaign around it. Packaging is about winning the battle at the point of sale in terms of shelf stand out and the communication of iconic brand values. Most of the industry's effort is centred on this 'moment of truth'.

Sustainability is also on the agenda. Manufacturers need to be responsible and show it is high on their agendas. Consumer choices are not driven by the pack's green credentials. Coca cola is a great example of finding a good balance between sustainability and good design with the plant bottle. They have sacrificed brand equities and the pack is more sustainable than normal PET.

Functional attributes are important in carbonated soft drinks with preservation of quality a key packaging feature. Packaging remains a key weapon in the panoply with special editions and pack variants being a conventional way of helping brands stand out and to build brand values.

Are there opportunities for packaging innovation?

In the coming years to 2018, product innovation will be focused on brand extension that offer flavour derivatives, sugar-free and healthier permutations. Product development is an important area for the industry to create incremental volumes and point of difference. This means plenty of new flavours, new and improved recipes as well as new textures.

Focus will continue on PET bottles for stand out and differentiation. PepsiCo announced in March 2013 that they were launching a new ergonomic bottle shape. The etched, grip-able bottom allows consumers to have a more stimulating, tactile interaction with the bottle itself. The dynamic swirled grip at the base of the bottle is also intended to help consumers hold their favourite drink.

There will be opportunities to create premium products in this sector and take a cue from other beverage markets. The aluminium bottle has been used successfully as a value added enhancer in the beer industry. It plays well on consumer benefits both emotional and perceptual and makes the whole experience seem more refreshing and premium and the perception that the product stays cooler for longer. It is also quite eco-friendly from a sustainability perspective. Reclosable ring pull cans could meet a consumer need for resealable packaging, particularly for higher volume.

To find out more about the carbonated drinks market, take a look at our report, The Brand Owner Trends Report: Consumer Packaging to 2018, which is available to purchase now.

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