Despite the rise of a host of new drink segments, carbonated beverages has held its own as one of the most pivotal products in a convenience retailer’s fridge.
Once the king of the cooler, carbonated beverages must now compete with the likes of functional beverages, energy drinks, iced tea, water, sports drinks, and milks.
While this competition has no doubt had an impact on market share, the continual growth of carbonated beverages within independent grocery and P&C is impressive.
Carbonated soft drinks are the second largest category in the convenience channel, making up approximately one-fifth (20.6 per cent) of sales and delivering $282 million in retail sales in the last year*.
Felicity Needham, Vice President of Sales Away From Home, Coca-Cola Europacific Partners (CCEP) Australia, said that the independent grocery and convenience channels are core channels for soft drinks at CCEP.
“At CCEP, our strategic focus for the petrol and convenience channel for 2022 has centred on accelerating growth within the energy, flavours, and no sugar segments, and we have seen great results across each of these as a result.
“Cola-Cola Classic continues to be the number one soft drinks brand within the petrol and convenience channel, while Coca-Cola No Sugar is the largest no sugar total carbonated soft drinks brand (including colas and flavoured CSDs)*.”
For Asahi Lifestyle Beverages (ALB), the P&C and independent grocery channels are incredibly important to the company’s ongoing success.
“P&C delivers almost 20 per cent of the volume in the on-the-go channel, playing a key role in getting our iconic Australian brands to as many consumers as possible.”
Ben Faulkhead, Category Manager at APCO, said they have observed strong growth in carbonated beverage sales in the YTD, with double-digit growth in units on prior years.
“While we are seeing good growth across full sugar options in the segment, the strongest performers in the sub segment are particularly around low or no sugar varieties with Pepsi Max, up over 30 per cent, and Coke No Sugar, up over 20 per cent, all increasing significantly in unit share.”
Michael Pillon, CEO and co-owner, Famous Soda Co, said that P&C and independent grocery are equally important to the business as they would like all Australians to have access to their sugar free, all natural, better-for-you alternatives.
“Our Famous Pink Lemonade is our best seller, followed closely by Passionfruit and Blood Orange. And we think our new to be launched Tangerine will be up there with these three.”
Needham is also pleased at how CCEP’s flavoured soft drink brands are performing within the P&C channel, being up 9.9 per cent in the latest MAT*.
“Sprite continues to be the number one flavoured soft drink brand (in value) within the P&C channel, with Sprite No Sugar delivering strong growth in particular. Fanta has also experienced accelerated growth over the past year, making it the number one contributor to the value growth in flavoured soft drinks in the last year.”
Changing tastes
The increased consumer demand for a carbonated yet low-sugar or no-sugar beverage has seen companies respond in kind, with Asahi Lifestyle Beverages (ALB) stating that the no-sugar market in Australia is booming.
“We’ve been early movers in providing more options for consumers in that space. Asahi Lifestyle Beverages is leading the way in providing zero-sugar alternatives to some of the most popular brands in our range, including Pepsi Max, Solo, Sunkist, Mountain Dew, and Schweppes.
“We provide a range of no-sugar, reduced-sugar, and regular sugar products to meet the wide range of consumer preferences.”
ALB has more than one-third of the market for non-cola no-sugar CSDs, driven by the growth of zero-sugar versions of classics such as Schweppes Lemonade Zero and Solo Zero.
“Non-cola no-sugar has grown by 86.5 per cent in value in the latest quarter period to 23/10/2022, against the same period last year.
“Cola no-sugar now comprises over half the total value of the cola market. This has been driven by the ongoing success of products such as Pepsi Max and the ever-evolving Pepsi Max Flavours portfolio. Pepsi Max has grown by 19.2 per cent in value in the latest quarter period (to 23/10/2022) against the same period last year. Its continued success will be driven via a strong innovation pipeline with regular flavour rotations that recruit new consumers to the cola category.”
Needham has identified that reducing sugar intake remains a top three priority for shoppers who are looking to improve their diet.
“Half of all shoppers are claiming to be actively reducing their sugar intake and while sugar content is a concern to soft drink buyers (37 per cent), taste is still the most important factor (67 per cent) when making a purchase**.
“Off the back of this trend, we see consumers continuing to turn to no sugar options within the total carbonated soft drinks category. In the cola segment, no sugar has continued to grow year-on-year and now makes up 42 per cent of total cola value within the P&C channel. In flavoured soft drinks, no sugar is up by 72 per cent compared to last year, gaining an additional 4.4pts of value share*.”
Pillon has also noticed the trend of consumers looking for a healthier alternative, which is great for their range, which is entirely sugar-free and 100 per cent natural.
“We have seen the better-for-you space starting to pick up momentum, and in some channels, it is becoming the norm rather than the exception, which we are delighted about.”
Faulkhead said that with APCO being a business that is very customer centric, they believe it is important to put the customer front of mind when making ranging decisions within the category.
“We want to understand what a customer is wanting when they are looking to purchase a carbonated beverage. Is it fulfilling a need such as a morning pick me up, a great combination with a food offer, or a sweet flavour profile without the full sugar intake.”
A drink with purpose
While the move to reduced sugar has been the biggest change Faulkhead has recognised within the market, he said they are also seeing shifts among other sectors of the carbonated beverage category.
“We are also seeing strong results across traditional flavour variants such as Raspberry, Ginger Beer, and Passionfruit. We have also started to see that younger consumers are being driven to trial brands, flavours, and products that haven’t traditionally been available within the Australian market.”
ALB has also recognised the prevalence of consumer’s desires for functional drinks.
“In the P&C channel, energy drinks solve consumers’ need for a pickup, and continue to experience significant growth (mainly though no-sugar offerings). We expect to see more products enter this category, offering a variety of different functional benefits. These functional benefits include proactive health (e.g., gut health, immunity, and clean energy) which will help drive further growth in the category over the coming years.”
Needham said CCEP is also leaning into the functional market with the release of the company’s biggest innovation of the year.
“Sprite Lemon+ and Sprite Lemon+ No Sugar, which offers consumers an extra hit of zesty lemon flavour, sharp fizz, and a kick of caffeine to refresh their minds when they need it most. Consumers are increasingly seeking out beverages with functional ingredients and this product – with its added caffeine – is designed to appeal to those looking for an energy uplift.”
Fridge space
ALB points out that beverages are the third highest shopper mission with the P&C channel and play a key role in driving traffic to stores.
“In the petrol channel, 24 per cent of shoppers’ missions are fuel focused, which presents an opportunity to influence behaviour. Increasing the location of beverages in-store (for example, fast lane fridges where chilled beverages are placed outside the cool room) presents cross-category opportunities that increase basket size and drive average spend.”
Needham said it was crucial for retailers to ensure that soft drinks are allocated sufficient space with the fridges.
“Support shoppers to navigate through the soft drink offer through brand blocking and drive impulsivity at all points of engagement.
“It’s crucial to plan ahead with the field teams to maximise the activation opportunity at key times through the year.”
One of the biggest opportunities for soft drinks within P&C, says Needham, is to maximise events and activations to drive beverage conversion when shoppers are in-store.
“There is also an opportunity to continue to engage shoppers by increasing choice of offers, including providing a range of permissible products and drive excitement through innovation.”
Sources:
* IRI AU Convenience Scan, value, MAT To 23.10.22
**CSIRO Research Scientist Brad Ridoutt, The Conversation Feb 2022 | Mintel GNPS Australia 20-22, CBL Australia 2019, Mintel GNP
This article was written for the December/January issue of C&I Retailing magazine.
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