Toby Hill assesses the soft drinks category as it prepares to enter the new ‘sugar tax’ era, and picks out the areas in which you can enjoy success and increase your sales.
The soft drinks category has found itself in the eye of the storm in recent years, although not all the turbulence impacting the category has been damaging. On the one hand, trends towards more health-conscious consumption have spurred concerns about the sugar content of traditional soft drinks SKUs. On the other, these same trends have led to a decline in alcohol consumption, with more people looking for a stylish soft drink alternative to their favourite tipple.
All this activity has resulted in a frenzy of innovation, creating fresh challenges for wholesalers looking to stock a balanced range that caters for all these mercurial consumer preferences. Getting this range right is particularly essential as the soft drinks industry levy takes effect from 1 April, and convenience retailers will be seeking to minimise the damage done to a category that – worth £2.2bn – remains among their most profitable. This guide draws on expert advice at all points in the supply chain to help you chart a course through the challenging year ahead.
Sugar tax impact
With the sugar tax crashing into consumers’ wallets, and shoppers voluntarily seeking healthier alternatives, manufacturers have been working furiously to adapt to a tectonic shift in the soft drinks category. For wholesalers, this means there is a tidal wave of NPD to take into account when deciding what to stock.
The biggest names in the category have driven much of this product development. “We have launched 29 drinks since 2005 with no or less sugar,” says Amy Burgess, trade communications manager at Coca-Cola European Partners (CCEP). Among these lines, Coca-Cola Zero Sugar – easily the fastest growing cola brand in the UK – is now available in Cherry and Vanilla flavours. Fanta Zero is growing at over 50%, Lilt Zero at 30% and Dr Pepper Zero at 12%.
Over at Barr, the Irn-Bru brand has weathered a minor Scots uprising against plans to cut its sugar content, and Irn-Bru Xtra is now firmly established among the leading sugar-free soft drinks. Alternatively, Rubicon Light & Fruity provides a SKU with half of the sugar of traditional Rubicon. Barr has also tackled the challenge of making low-sugar energy drinks appeal to their core market of young men, marketing its zero-sugar energy drink under the Rockstar Revolt brand.
Elsewhere in the energy drinks market, Red Bull has expanded its Red Bull Sugarfree range, adding two more can sizes: 355ml and 473ml. By offering the full range, wholesalers can help retailers tailor their offering to their customer base – those situated near a gym, for example, might be keen to stock the largest cans. Red Bull has also brought its Editions range into the sugar-free family, with 250ml cans of Tropical and Orange both now available without sugar.
Other leading brands, such as Lucozade, Ribena and Ocean Spray, are also available in low- or zero-sugar variants. As a result, you will have no problem whatsoever in meeting your customers’ demands for healthier, low-sugar alternatives; the main challenge you will face is getting the balance right between zero-, low- and full-sugar products. Doing this will require some trial and error, and an ongoing process of reviewing sales data and talking to customers in-depot about the consumer trends they have noticed in their businesses.
“Space can be a big challenge for wholesalers as many retailers look to consolidate their range in-store,” says Rich Fisher, category development manager at Red Bull. “We advise wholesalers to stock the most efficient range to drive the greatest value, whilst category space should be aligned with share of sales to maximise sales.”
Richard Duplock, marketing manager at Yazoo, adds: “Consumer confidence after the sugar tax is implemented regarding value-for-money may drop, which is why pricemarked packs (PMPs) are a way to build trust with both retailers and shoppers. Yazoo’s two biggest-selling pack sizes, 400ml and 1l, are both available as PMPs.”
Adventures in taste
While demand for low-sugar drinks is the most obvious shift in consumer tastes, it is really just part of a broader trend towards niche products, as consumers demand new flavours and drinks tailored to their specific preferences.
“Consumer need-states are changing and wholesalers must adapt to deliver the type of drinks that retailers and foodservice customers should be offering,” notes James Logan, commercial director at Refresco. “The expectation has risen – a cola, sandwich and a bag of crisps is no longer enough.”
Refresco has developed a number of products to meet these diversifying needs. “Consumers are seeking out new exotic flavours like lychee, banana and fruit and veg which they believe to be healthy, such as green vegetables and cranberries,” Logan says. Accordingly, new flavours launched under Refresco’s Sunpride brand include lychee, guava and lime; pineapple, guanabana and ginger; mango, passionfruit and rose; banana; and coconut water. All are available in 1l cartons.
Elsewhere, Refresco has added two new variants to its Ocean Spray range, Ocean Spray Wholeberry and Wholeberry Mixed Berry, marketed as retaining the nutrients of the entire cranberry, not solely the juice.
Caribbean flavours are added to the health drinks trend by Grace Foods, whose Say Aloe and Coconut Water bottles contain 100% RDA of vitamin C. The firm has also launched a range of sparkling coconut waters in slimline cans, available in original, apple and lemon flavours.
Britvic has capitalised on trends towards healthier sources of hydration and energy, too, by expanding its Purdey’s brand of multivitamin drinks into a new 250ml can format. “Purdey’s offers a soft drink that appeals to health-conscious consumers looking for a more sustained energy boost from vitamins as opposed to caffeine,” explains Kevin McNair, managing director at Britvic. “The can format will help unlock this potential by addressing barriers to purchase.”
Beyond just juice
The evolution of the soft drinks category beyond cans of carbonate is creating new hybrid products, combining formulas that were previously confined to different sub-categories. Some of these are well-established, such as the combination of Rubicon Light and Fruity with sparkling water to create Rubicon Spring, a flavourful drink with less than 15 calories a bottle. A similar product, Britvic’s Robinsons Refresh’d, was ranked the top soft drinks NPD launch in 2017 according to Nielsen data. It is available in three flavours: Raspberry & Apple, Orange & Lime and Apple & Kiwi.
Refresco’s Logan anticipates that more adventurous combinations will hit the market soon. “As well as a merging of water and juices with more juicy waters, there will be more crossover between milks and juices, giving consumers a protein and calcium boost,” he predicts. “There will also be more carbonated juice drinks as carbonates seek to benefit from the health halo associated with juices.”
One example of this latter development comes from Barr, which recently launched the premium Italian soft drink San Benedetto in the UK. “Soft drinks shoppers are looking for premium, exciting and indulgent products that deliver on taste, and this trend has helped drive 15% growth in high-fruit adult carbonates,” says Adrian Troy, marketing director at Barr. “However, many of these products are high in sugar at a time when consumers are looking to reduce their sugar intake. By contrast, San Benedetto contains only 86 calories per can and less than 5g of sugar per 100ml, while still containing 12% juice.”
Big night in
While demand for low-sugar, healthy and vitamin-packed products is surging, many consumers are still looking to kick back and have a good time. Meeting this demand in the soft drinks category means stocking the right mixers to go with people’s choice of intoxicant, and suppliers have noted trends in consumer preference in this context, too.
“More people are choosing to socialise at home and there is a trend for recreating cocktails and bar-quality drinks at home to bring a sense of occasion to a night in,” notes CCEP’s Burgess.
Social media is also having an impact, pushing people towards the premium end of the mixer market. “People are looking for trendy products they can photograph and share with friends on Facebook or Instagram,” Burgess adds. CCEP is meeting this demand with a re-design of the Schweppes Classic bottle into a skittle shape, similar to the iconic Coca-Cola glass bottle.
For those looking for sugar-free and low-calorie mixers to go with their booze, the Pepsi Max brand encompasses cherry and ginger variants, perfect for cheering up vodka or spicing up rum.
Another key consideration in the soft drinks category is bottled water, a sub-category that continues to go from strength to strength as shoppers seek healthier choices. Between 1995 and 2016, the UK bottled water market grew from just 800m litres a year to a mighty 3.2bn litres, according to statistics from Zenith Global.
Concerns over plastic waste are finally putting something of a brake on this growth. But while the future is a little uncertain, for the time being NPD and innovative marketing strategies continue apace. CCEP has launched sparkling and flavoured variants into its Glaceau Smartwater range, helping drive sales past £40m a year. And Barr is drawing on Britain’s wealth of athletic talent to highlight the health benefits of mineral water, partnering with long distance runner Laura Muir in its latest Strathmore marketing campaign.
“We stock all the low-sugar products but I find most people are still looking for sugar. For example, Lucozade used to be our bestseller, but since they cut down the sugar content, people comment that it does not taste so good. We had one family who used to buy five bottles of Lucozade every day, and they have stopped altogether, and buy full-sugar Coca-Cola products instead.”
Sanmugalingam Pirapakran, S & M Supermarket, London
“Our soft drinks sales are strong across the board. Zero-sugar drinks sell fairly well, but they are still niche, bought by certain customers who are looking to diet. Most of our customers still want the sugar – they might be annoyed by the sugar tax, but it will not stop them buying what they want.”
Chris Herring, Londis Shiphay Post Office, Torquay, Devon
“We sell Frobishers juice to the kids and Fentimans to the adults. We also stock a range of aromatic tonics, like Fever Tree Mediterranean. Originally, we got them to accompany our gin range, but I have noticed people are drinking them on their own. They will have it in a fishbowl glass with a garnish, so they get the experience but without the alcohol.”
Ashley McCarthy, Ye Old Sun Inn, Colton, N Yorks
“We specialise in fresh juices made from fruit and vegetables sourced from a local supplier. People are looking for healthier options so we have products like an ‘antioxidant supreme’ blend of cucumber, strawberries, apple and carrots, priced at £4. We also sell a lot of cans of San Pellegrino.”
Sevinc Erdogan, Dialogue Café, Clapton, E London