Drinks with added health benefits are stealing the spotlight from the saturated cola market, finds a new report, which suggests that manufacturers are starting to look to elixirs and ready-to-drink tea and coffee to regain sales growth.
But while sales of elixirs (soft drinks with nutritional benefits) and RTD iced tea and coffee have exploded in the Japanese market, Europe has been much slower to catch on. Nevertheless, fast growth in diet colas suggests that some European markets could become major consumers of healthy beverages in the future.
The report from market analyst Datamonitor claims that cola's world domination could be coming to an end. While cola sales are still impressive - over 70 billion litres of cola were bought at global retail in 2002, generating revenue of almost €50 billion - growth is certainly slowing. The 1997-2002 period saw global volume growth running at over 2 per cent a year; going forward, this figure is forecast to be below the 2 per cent mark, reveals the report.
And in the USA, which accounts for a third of all cola consumption, annual growth will be less than 1 per cent.
Leading cola brands have for some time been looking east to boost consumption of their products in developing countries such as India and China. However, the biggest push is into alternative soft drinks. In 2002, global sales of non-carbonated soft drinks were 152 billion litres, with volume growth running at almost 9 per cent a year, claims Datamonitor. Much of this is made up of developed categories such as bottled water and juices, but some more exotic drinks are also gaining popularity, reveals the report.
In 2002 the average Japanese person drank 4.8 litres of elixirs; in 1997, the figure was just 2.3 litres. Even more dramatic has been the take-off in South Korea: the average Korean now drinks 3.7 litres of elixirs a year, compared with zero six years ago.
The elixir trend is also starting to take off in the USA. In 2002, elixir consumption rose to 0.9 litres a head, creating a market worth almost €565 million. Sales in this market have risen six-fold since 1997, putting the US market in fifth place globally behind Japan, Korea, Taiwan and Norway in per head consumption terms.
Most of Europe, however, is far behind. Brits drink just 150 millilitres of elixirs, while sales in Germany and France were too low to show up in Datamonitor's survey. Indeed, no southern European country showed any significant sales of elixirs at all.
"There's a widespread trend for consumers to 'self-medicate' with vitamin or bacteria-enhanced foods and drinks," said Datamonitor analyst John Band, the author of the report. "This is true across all developed consumer markets - even those in southern Europe. What varies is how people take in these nutrients. Unlike people in East Asia, Europeans don't feel comfortable with actively 'healthy' soft drinks. They may feel it's a contradiction in terms."
However Band points to consumption of diet colas as evidence that healthier soft drinks are gaining in popularity. Diet colas have shown much faster growth than mainstream colas over the last six years in most developed markets, shows the report. In the USA, diet colas now account for a third of cola sales. The proportion has risen from 14 per cent in 1997 in France to 20 per cent last year, while in the UK diet cola sales overtook regular cola sales in 2001. This continued in 2002, leaving the UK market split almost exactly between diet and regular cola drinks.
Another growth market across nearly all major soft drinks countries has been ready-to-drink packaged iced tea, like Lipton or Snapple, and packaged iced coffee like Starbucks Frappuccino. Japan also leads the way here: the home of 'on the go' culture has a €18 billion RTD tea and coffee market, and the average Japanese drinks 60 litres of RTD tea and coffee a year.
Europe is starting to follow suit, with French annual iced tea consumption rising 65 per cent last year on the 1997 figure and sales in the UK growing by 50 per cent over the last six years, although they were still just 0.08 litres per person in 2002.
"Iced drinks have had niche, local presence for a long time," said Band, "like iced tea in the USA, and ready-to-drink green teas in Asia. But it's only recently that multinationals have pushed them as a serious alternative to carbonates. So far, they've been most successful in countries with fewer preconceived notions about what to do with tea and coffee - but this could change."
This market also offers potential for health ingredients, with green tea increasingly recognised for its health benefits. However iced coffee looks set to take a major share in this sector, with PepsiCo's brand Frappucino soon to enter the UK.
"It will be interesting to see when Frappuccino launches in the UK - if Starbucks can do for UK RTD coffee what it's done for on-trade coffee, the market will change dramatically," added Brand.