What are the current industry drivers?
The biggest driver in the industry in terms of change is the “war on sugar” and the consumers demand to be healthier. A form of sugar tax has already been introduced or being introduced in countries such as France, Ireland, Hungary, Norway and the UK. Further to that, energy drinks are also under more scrutiny and Lithuania became the first country in the world to ban the sale of energy drinks to under 18’s.
For the UK as a case study, there will be two bands – one for total sugar content above 5g per 100 millilitres and a second, higher band for the most sugary drinks with more than 8g per 100 millilitres. Examples of drinks which would currently fall under the higher rate of the sugar tax include full-strength Coca-Cola and Pepsi, Lucozade Energy and Irn-Bru. The lower rate would catch drinks such as Dr Pepper, Fanta, Sprite, Schweppes Indian tonic water and alcohol-free shandy with this cost likely being passed onto consumers.
As a result, companies are looking for different types of solutions which include reformulation where they work on their drinks to try and lower their sugar levels to either avoid this tax, or at least fall under the second tier. Other ways is to work with flavour houses/solution providers who can create a similar sweet taste without using sugar.
Combine this with the increasing competition in this sector as more of the categories blur for example we’ve seen the proliferation of flavoured waters, functional beverages e.g. coconut water, birch water, coldpress juices and the popularity of iced teas and coffees. Consumers are bombarded with choice.
Manufacturers will need to work hard to keep consumers engaged and fight for market share. This applies to Europe but also growth markets around the world from Asia to Africa as beverages companies diversify.
There are also an increasing number of start-up brands that are craving out a niche for themselves such as the adult soft drinks category. Fever Tree is one great example of a successful brand in this space but others include Double Dutch Drinks and Seedlip.
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