Growing demand for soft drinks containing less sugar and calories is reshaping the chiller, with c-store stalwarts facing new challengers
The sun was shining on the soft drinks industry last year. The category was up 18% on 2013 to be worth £11.8bn, according to Nielsen, and c-stores held on to their share (£7.6bn) with value and volume sales up 0.4%.
The convenience sector also experienced stronger value growth than the multiples (2.8%).
Britvic’s Soft Drinks Review 2015 says: “2014 was a year when the grocery and convenience channel held steady and showed its true resilience in the face of shifting consumer purchasing patterns.”
HIM Research & Marketing data backs up this theory. HIM communications director Katie Littler says the percentage of convenience shoppers who buy soft drinks has grown from 13% in 2004 to 22% in 2014.
While warmer weather always helps to hot up soft drink sales, Britvic believes there is another reason for the category’s success: consumer demand for healthier and lower calorie soft drinks. Britvic marketing director Jonathan Gatward explains: “2014 was a convergence of two macro trends - consumers continuing to seek great taste and also seeking a lower-calorie option.”
The government has had an impact. Under increasing pressure to tackle the obesity crisis, it introduced tougher rules on the drinks permitted in schools, limiting the size of fruit juices to 150ml and ruling out sugary fizzy drinks. The manufacturers rushed to please with reformulations and npd in healthier choices for adults as well as kids, backed up by marketing to push the better-for-you message.
Giles Brook, CEO at Vita Coco Europe, believes “the negativity from the press regarding the amount of sugar people consume has had a part to play in the new developments”.
Paul Graham, Britvic GB managing director, adds: “Shaped by multiple consumer trends, such as the increasing focus on the wider health agenda, marketing and legislation, the rise of on-the-go consumption and the demand for added value out of every experience, the soft drinks manufacturers who have been the most successful have adapted their immediate consumption formats and incorporated flavour enhancements, as well as reformatting to provide low or no-calorie variants.”
The extent to which soft drinks manufacturers have reacted to pressures to produce healthier options can be seen at squash brand Robinsons. Last year Robinsons made the decision to produce only no-added sugar variants, effectively removing 6.9 billion calories from the soft drinks category.
Britvic Soft Drinks’ Gatward says: “The scale of activity reflects our commitment to our overall category vision and ensures that our brands continue to satisfy consumers’ ever-changing taste and preferences.”
The manufacturers’ efforts haven’t been lost on retailers. Adam Hogwood of Budgens of Broadstairs, Kent, has noted the number of healthier variants. “This is the first summer that we will be stocking the likes of coconut water, Coke Life and low-calorie Lucozade. Healthier drinks give people the feel-good factor as they’ve changed something unhealthy in their life,” Adam says.
Anish Keshwara of Nisa Local, Whittlesey in Peterborough, was surprised at how many of his customers bought coconut water when he began to stock it last year. “I didn’t think it would appeal to our market, but it sold really well, especially on promotion. I think it is all part of people trying to lead a healthier lifestyle.”
Boost Drinks, which prides itself on being available only to independent retailers, notes that sugar-free sales are growing at a phenomenal rate. “Barriers to further growth had been calories and taste, so Boost invested considerable time and money developing Sugar Free Pink Lemonade,” says Boost Drinks managing director Simon Gray.
Raaj Chandarana of Tara’s News and Brindley Avenue Post Office in High Wycombe has stocked Boost energy drinks since the beginning of 2014: “It’s brilliant that they champion the independents, and their range absolutely flies off the shelves,” he says.
Raj Aggarwal, who owns two Spar stores in Leicestershire, has also observed his customers becoming more health conscious and says “people are beginning to drink more flavoured water variants, such as those from Volvic”.
Volvic has recently released two new variants, available in Sunny Orange and Lemonade, for both immediate consumption and the take-home category. Each drink has 33 calories or less per 100ml.
Raj’s experience that flavoured waters have been one of the winners in the soft drinks category is matched by Maurice Newton, sales and marketing director at CBL Drinks, who says: “The flavoured water section is one of the fastest growing sectors in the soft drinks market.” Britvic’s 2015 Review reports that water-plus grew by 9.5% in value in 2014.
However, it was plain water sales which saw the highest growth within the segment, with value sales climbing by 12.6% to £670m.
Kate Mills of Heath Stores in Horsmonden, Kent, sees her water sales shoot up when the warmer weather kicks in. “We stock Abbey Well water which was ranking as number eight across my entire impulse portfolio back in March.” Raj also notices that his water sales are increasing year on year.
“Water is fuel for the human body,” says Julian Taylor-Green of Spar Lindford, Hampshire. “Once the warmer weather appears, people tend to carry it about with them as water has a longer life than fizzy drinks and doesn’t have to be consumed immediately.”
Coca-Cola Enterprises trade communications manager Dave Turner points out that bottled water is a “real staple in the warm weather for those seeking refreshment and rehydration”.
2014 saw much more of an even split between sales of water for on-the-go consumption and that for take-home, and this has encouraged the launch of Glaceau Smartwater, a distilled water variant with added electrolytes for a clean, crisp taste.
James Logan, commercial director at Refresco Gerber, thinks that water sales could be increasing at the expense of other soft drinks, juices and smoothies, due to people’s concerns about health. The Britvic Report does in fact show smoothies saw a decline in value sales of 1.3% and in volume sales by 3.7% in 2014.
However, traditional soft drinks remain strong, according to both the Britvic Review and retailers, where Coca-Cola and energy drinks are the category’s star performers. Coca-Cola value sales totalled £1.6bn in 2014, although this was a drop on the previous year of 2.5%.
At Julian’s store, PepsiCo’s no-sugar Pepsi Max is the best-selling sugar-free variant, while at Heath Stores Kate’s top-selling soft drink is Bulldog Energy, closely followed by Coke, with Lucozade not far behind.
She adds: “Being near a school, most of our soft drinks customers are children and workmen. I do stock low-calorie variants, although they aren’t selling as well as I’d have hoped.” Bulldog has an rrp of 35p and because of this many of Kate’s customers buy more than one at a time.
Energy drinks saw a strong category growth of 4.6% this year, so Kate’s store may not be the only one to witness a spike in sales. Both Raj and Julian have noticed that their energy drinks sales are continuing to increase. Raj doesn’t stock many low-calorie variants, but it doesn’t seem to affect his sales. And like Kate, Julian’s best-selling soft drink is also an energy drink, although his is Red Bull, retailing at almost triple the price of Bulldog.
Iced tea and coffee
There is one category, however, which outdoes the rest in terms of year-on-year growth; iced tea and coffee has reported the highest growth in both value sales (up 30.7%) and volume (28.5%) for the fifth year running, bringing the total category worth to £68m. Britvic reports the best-sellers in this segment to be Lipton Ice Tea and Starbucks.
Britvic has developed a new raspberry flavour for its Lipton Ice Tea brand. The variant joins the existing variants peach, lemon and mango to complete the current fruity range. In addition to the new flavour, Britvic has also introduced a refreshed bottle format and recipe reducing sugar content by 30%, giving the soft drink less than 100 calories per 500ml.
Iced tea is a hit in Adam’s store, but not the traditional Lipton variant consumers may recognise. He stocks Organic Arizona Iced Tea, an American import available in many different variants, flavoured with a fruit such as peach, pomegranate and even yumberry. “The American tea has the novelty factor, which is why I think it is doing so well compared with the Lipton brand,” he explains.
The taste for tea can also be seen in the increase in the number of drinks containing green, black, white and even lemongrass tea.
Little Miracles, a range of organic soft drinks containing a blend of organic tea, super fruit juice, ginseng and or acai, aims to give a hit of energy without being followed by a subsequent energy crash. It claims to be “developed with consumer health and wellbeing in mind, sweetened with agave, containing less than 90 calories”.
Little Miracles international marketing manager Kate Harding says: “Our drink is aimed at women aged between 18 and 35 to encourage them that it’s okay to consume energy drinks. Many women don’t like drinking from large cans and consuming all the empty calories.”
Although Little Miracles variants contain less than 90 calories, the brand has been experimenting with its ingredients to find a way to give consumers the flavour they know, but with even fewer calories. “From June we will be rolling out a refreshed range of drinks containing 60 calories or less. Little Miracles will never be calorie-free because they contain all natural ingredients,” adds Harding.
Alongside the demand for newer flavours has come a rise in the popularity of premium drinks and flavours. Brands such as Belvoir Fruit Farms, Bottle Green and Fentimans have responded by rebranding or introducing new flavours.
Julian Taylor-Green stocks many of the Fentimans products and says: “It’s very much about trying to drive in alternatives to the core product. They are a great substitute to alcohol in the summer and because they are more premium they have got better margins.”
Bottle Green contains only 29 calories per 100ml, appealing to those who are calorie conscious.
Growth through pricemarks
Pricemarked parks (pmps) are huge drivers in the soft drinks category. According to Nielsen, more than 50% of soft drinks growth is being driven by pmps, with the biggest growth coming from carbonates. Pmps represent an important profit opportunity for retailers, as they clearly indicate value for shoppers, says Adrian Troy, head of marketing at AG Barr.
AG Barr incorporates pmps with an additional multi-buy element across Rubicon, Irn-Bru and Barr brands to encourage additional purchases. This mechanic was originally trialled on Rubicon 1ltr cartons, which were offered with a £1.29 or ‘two for’ £2 flash on pack.
Troy adds: “The pricemarking strategy worked so well AG Barr decided to roll it out on its other formats, the next being Sun Exotica and KA 1ltr cartons.”
In 2014 Lucozade also saw an uplift of up to 70% in unit rate of sales on individual flavoured pmps (Nielsen), which encouraged it to reintroduce its 79p pmps across a wider range of products this year. “Retailers experience great benefits from stocking pmps,” says Georgina Thomas, category director, Lucozade Ribena Suntory. “Some 63% of retailers have claimed they are more likely to stock a new product if it is released in a pmp as well as a non-pricemarked pack (HIM).”
Julian Taylor-Green of Spar in Lindford, Hampshire, is a fan of pmps. He says: “Pmps give us manageable margins, everyday low prices and consistency for the consumers.”
Keep it fresh with flavours
While space may be getting tighter in the soft drinks aisle, Lucozade believes retailers can’t afford to overlook new innovations to maintain shoppers’ interest.
Says category director Georgina Thomas: “NPD is critical to continuing market growth as consumers are always on the lookout for new tastes and flavours.”
Enter Lucozade Grafruitti and Lucozade Sport Mango and Passion Fruit, launched earlier this year. The company says they have been developed after extensive research showed that 81% of people preferred those particular flavours.
Thomas adds: “By listening and responding to consumer trends, such as healthier alternatives and the demand for exotic flavours, Lucozade Energy remains the UK’s number one energy brand (Nielsen).”
The Lucozade brand is currently worth £114.6m, according to Nielsen.
The Big Night In opportunity
If you go big on dine in/Big Night In ranges, then you could be missing a trick if you are not including a non-alcoholic option in your line-up. Shloer brand manager Amanda Grabham says that in the UK 21% of people don’t drink alcohol and its range could be the perfect alternative.
Its sales are being driven by customers looking for affordable treats, Grabham says. “Shloer is a family friendly proposition. It is a non-alcoholic drink with a grown-up appeal. The glass bottle provides a premium look and doesn’t look out of place in a wine glass, especially Shloer Celebration which comes in a corked bottle.”
Fellow SHS brand Bottle Green also fits the bill as “over the past two years consumers have been turning to more sophisticated flavours such as grape, elderflower, pomegranate and a coconut,” Grabham points out. Bottle Green comes in a 750ml sparkling pressé and 500ml cordial bottles. “They are really versatile; people can use them to create theatre in their homemade drinks,” adds Grabham.
“Consumers like a treat over the weekend, so we suggest stocking up the fridges and optimising on impulse purchases by placing bottles next to products such as crisps and dips,” she adds.
Qcumber soft drink
If it is unusual flavours that capture your shoppers’ imaginations then Qcumber, a blend of natural cucumber and spring water, could get heads turning.
Graham Carr-Smith, creator of the Qcumber drink, says: “People are constantly searching for something innovative and a little bit different, and Qcumber delivers on this.”
Carr-Smith says retailers shouldn’t be afraid to try out new products. “Convenience store shoppers want to try new brands and experience new tastes, and Qcumber ticks all the boxes for those who are more health conscious.”
Each 750ml bottle contains about 67 calories per 250ml.
Last year Qcumber added a Qcumber mint variant. “It is a classic English flavour,” adds Carr-Smith, “something our brand is all about encapsulating.”
The drinks are available in 330ml and 750ml glass bottles and 250ml cans.
Children’s soft drinks
Alongside a growing choice of healthier drinks for adults has come a raft of innovation in the children’s soft drinks arena.
Vita Coco Kids aims to reassure parents that it’s good for their little ones, with flavours that appeal to kids: apple & blackcurrant and mango & pineapple. Vita Coco Europe CEO Giles Brook says: “Vita Coco is a healthier and lower-sugar alternative, offering 20% less sugar and 40 calories per 180ml.”
New from Britvic is a peach & mango Fruit Shoot variant, designed to add interest to the current range. Helen Gorman, kids and family brand manager at Britvic Soft Drinks, says: “Our latest product is intended to increase variety within the kids’ soft drinks segment, offering shoppers a new flavour profile from a range which has been loved for more than 10 years.”
Mango also features in Princes’ latest innovation for the Jucee squash brand. It has moved its entire portfolio over to 100% no-added sugar. “Squash offers a cost-effective way to keep families hydrated, showing a stable performance in terms of volume and sales,” says Graham Breed, marketing director for Princes.
Dream Drinks is hoping the use of licensing will attract kids to its Drink and Play fruit juice. Embedded in the front of each bottle is a container which encloses items such as stickers, tattoos or figures.
The drink comes in four flavours: Star Wars apple, Disney Princess strawberry, Disney Planes mixed fruit and Violetta cherry.