Soft drinks are booming, whether drunk by themselves as an alternative to alcohol or used in mixers at home. But the introduction of the ‘sugar tax’ in April is set to make its mark on the sector, Joseph Lee discovers.
Soft drinks sales are worth £1.5bn in Britain, according to market researcher IRI. But they are going to get a big shake-up from the introduction of the soft drinks levy in April 2018.
Under the levy, an extra cost of 18p per litre will be introduced for drinks with 5g of sugar or more per 100ml, rising to 24p per litre for drinks with at least 8g of sugar per 100ml.
“It will mark a big change for the industry,” says Simon Gray, managing director and founder of Boost Drinks. “While some brands will choose (or have already chosen) to revise their recipes, some may increase their prices. It is important for wholesalers and retailers to stay informed of these changes to best advise their customers.”
The move is likely to accelerate a trend of health consciousness among consumers. According to Kantar Worldpanel research, 36% of consumers say they are increasingly concerned about sugar consumption.
But suppliers have anticipated the shift and new low-sugar variants are responsible for some of the biggest sales increases.
Amy Burgess, trade communications controller at Coca-Cola European Partners (CCEP), says the company has introduced 29 new reduced-sugar drinks since 2005 and promises new products for 2018.
Its biggest launch, Coca-Cola Zero Sugar in 2016, helped to expand the category, with 60% of sales being incremental. “For all consumers, choice is key and wholesalers should look to stock a variety of lighter options of their bestselling drinks where possible,” Burgess says.
It is a similar story in energy drinks, where sales of low-calorie versions are up 46%, Burgess notes. “Much of the latest energy product development is focused on low- or zero-sugar variants, helping them to appeal to consumers who are increasingly demanding healthier options within the energy sector,” she adds.
This growth has helped energy drinks capture 31% of the total market, with £455m sales, according to IRI data.
Added sparkle
Health concerns are also fuelling the surge in sales of bottled water, which this year outsold cola in retail for the first time. In 10 years, sales have grown by 52% to 3.2bn litres, Zenith Global figures show, with plain bottled water projected to grow 9% a year.
Matthew Orme, director of Wenlock Spring, predicts there will be an increasing focus on the mineral content of waters in future.
“A growing awareness of the functional and beneficial properties of naturally occurring minerals will become a consideration for buyers choosing spring water,” he says.
Carol Saunders, head of customer marketing at Highland Spring Group, recommends focusing the range on bestselling brands. “There is a high proliferation of brands in the water category,” she says.
Despite the health concerns, familiar fizzy drink favourites are still selling, particularly in on-the-go formats, says Burgess at CCEP. Sales of Fanta are up 4.7%, although its recipe has also been adjusted to cut the sugar by a third and bring it under the sugar levy threshold.
Flavour still drives sales and is behind one of the other major trends – the increasing popularity of premium mixers, as customers look for sophisticated options to add to their craft gins or rums. Mixer sales have grown by 19.4% in the last year.
“Premium mixers have benefitted from the popularity of premium spirits and the consumer trend to try new experiences and flavours,” says Burgess.
That trend is increasingly leading adults to try to create elaborate cocktails at home, rather than heading to a bar.
“Brits are increasingly choosing to stay in when enjoying a tipple, with more than half of drinking occasions taking place in the home,” Burgess says. “Cocktails are enjoyed in bars by more than half of consumers and now people are looking to recreate their favourite drinks without having to leave the house.”
Supplier viewpoints
“Boost’s advice to wholesalers and retailers alike is to stock the right mix of products in their range, and to think about flavours, size formats and sugar-free options, in order to provide an appropriate choice.
“Wholesalers and retailers need to be aware of the April sugar levy – it will mark a big change for the industry. While some brands will choose (or have already chosen) to revise their recipes, some may increase their prices.
“It is important for wholesalers and retailers to stay informed of these changes to best advise their customers.”
Simon Gray, founder and MD, Boost Drinks
“The health and wellness trend will continue to be a key driver of innovation in the soft drinks category next.
“Figures from the Office of National Statistics show 21% of adults in the UK do not drink alcohol at all, and so it is more important than ever to offer a range of great-tasting, premium soft drink alternatives such as Appletiser and Schweppes sparkling juice drinks.
“Adult soft drinks offer consumers taste and refreshment, as well as a sophisticated alternative to alcohol that they are happy to consume when others are drinking beer, wine or cocktails.”
Amy Burgess, trade communications controller, Coca‑Cola European Partners
“Provenance, health and environmental impact will be three drivers of consumers’ buying habits in 2018, and bottled water has a dominant place within this. Wholesalers can capitalise on this market by offering a premium bottled water brand, such as Wenlock Spring, that places environmental concerns at its core and contains naturally occurring minerals.
“Environmental concerns will increasingly drive consumers’ buying decisions, with six out of 10 adults saying they would stop buying bottled water that was harming the source area’s natural resources, according to Mintel. Brand transparency will become increasingly important.”
Matthew Orme, director, Wenlock Spring
Customer Viewpoints
“The first thing we look at with wholesalers is margin. Most independents go for pricemarked packs so the cost price and the selling price are dictated to us, and invariably they are working on 20-22% margin. You cannot do that margin with soft drinks, because they are chilled and it costs you to maintain them. We usually look for a margin of at least 25%.”
Harry Goraya, Nisa Local, Northfleet, Kent
“Reliability versus price is the big issue for us: often you find that you pay a lot more for reliability on delivery dates, which is a struggle. We also need a broad range. We are finding now that we order drinks in but they are changing the stock list abruptly without warning. Some of those drinks have been our biggest sellers, like varieties of colas, things like that.”
Adam Heppenstall, manager, Hepworth’s Deli, Leeds
