How To Sell Drinks In Europe

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1 IRI Pulse Report Drinks Welcome to the Pulse Q edition for drinks. We hope you find it useful. Please do not hesitate to contact us if you have any questions or comments at Q IRIworldwide.eu

2 About the Report This drinks report is one of 10 super category reports designed to show high-level comparison and analysis for retail markets across major countries in Europe. This report contains data gathered from around Europe. This market was split into the following categories: 1.) soft drinks, 2.) juices, squashes and syrups, 3.) mineral water, 4.) coffee, 5.) tea and 6.) cocoa. The report highlights key metrics, such as total sales figures, market trends, category shares, and winners and losers for Europe and for individual countries. The data has been sourced from IRI retail databases and Eurostat the statistical branch of administration for the European Commission. The countries included in the report are: France, Germany, Italy, the Netherlands, Spain and the United Kingdom (UK). The market channels used for each country in this report are as follows: Country UK ES DE NL IT FR Channels used Hypermarkets, supermarkets, drugstores and impulse outlets Hypermarkets, supermarkets, hard discounters and drugstores, including the Canary Islands Hypermarkets, supermarkets, hard discounters and drugstores Hypermarkets, supermarkets, hard discounters and drugstores Hypermarkets, supermarkets, small self service, hard discounters and drugstores Hypermarkets and supermarkets For analytical purposes, the data sourced from available retail databases has been consolidated to provide consistent results. However, for some countries it has not been possible to source data pertaining to certain categories. When this has occurred, it has been documented in the Notes section found at the end of the report. 2

3 On the Radar As consumers are becoming more health conscious, mineral water is gaining more popularity due to a shift from products with (artificial) additives. FIFA World Cup is unable to uplift the overall sales which continues to show value decline for the second consecutive year. ECONOMIC FIGURES INFLUENCING CONSUMER BEHAVIOUR POPULATION IN MILLIONS UNEMPLOYMENT (%) AVERAGE 12 MONTHS INFLATION RATES GDP IN MILLIONS ( ) Jan Jan Dec Average 2013 Dec Average France Germany Italy Netherlands Spain United Kingdom Source: Eurostat, December

4 Euros, in millions PULSE REPORT GLOBAL TRENDS TOTAL DRINKS VALUE SALES AND % CHANGE VERSUS PRIOR YEAR +1.0% -0.6% +0.0% +0.0% VALUE SALES IN MILLIONS ( ) Total EU DE FR UK 7 241* IT ES NL % -3.1% *based on an exchange rate of to the pound TOTAL EUROPE -0.4% TOTAL DRINKS VALUE SALES FOR THE LAST SIX QUARTERS 14,000 12,000 10,000 8, UK France Germany 6,000 4,000 2, sep dic mar jun sep dic-14 Italy Netherlands Spain Period Ending 4

5 Euros, in millions Euros, in millions PULSE REPORT Europe CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 20.9% % 20.6% % 5.0% 13.6% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus year ago Soft Drinks Total Sales % vs. YA Juices, Squashes & Syrups KEY TRENDS The FIFA World Cup has not had any major impact on the overall drinks sales, as it continues to show decline in value with the same pace (0.4%) in Europe, for the second consecutive year. Significant decline in Italy led to the overall decline in Europe; irrespective of a healthy growth in the UK, it is unable to offset the decline coming from Italy and France. water is the only category which has seen a positive development, hot drinks (majorly driven by coffee) continues to decline. With positive growth in all measured countries (maximum in the UK and Germany), mineral water is gaining more importance within this category and capturing more value share, mainly from consumers switching away from soft drinks. Europe includes: France, Germany, Italy, the Netherlands, Spain and the United Kingdom 5

6 Europe TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Cocoa Soft Drinks Juices, Squashes & Syrups CATEGORY INSIGHTS water showed positive growth in all the measured countries. Health and wellness concerns resulted in more and frequent consumption of mineral water (mainly still water). Heavy promotions and intense price war in some countries helped grow this category. Biggest shareholder, soft drinks market weakened as Germany, Italy and Spain posted maximum decline for this category, mainly led by lower consumption and diminishing promotions. Germany witnessed other segments, like Fassbrause, gaining share from this category. Countries where it grew were mainly supported by innovation and favorable warmer weathers. Spain saw innovation from Coca Cola Life (with Stevia) and 7Up Mojito which helped category sales. With consumers shifting towards more healthier and natural drinks, like mineral water, coffee sales dropped in all the measured countries except Germany and the UK. The growth in these two countries is solely driven by premium priced coffee pods while volume declined. This growth, however, was not enough to compensate for the losses from other segments like roast & ground and instant coffee. In countries like the Netherlands, most of the sales are still in the online channel. Europe includes: France, Germany, Italy, the Netherlands, Spain and the United Kingdom 6

7 Euros, in millions Euros, in millions PULSE REPORT France CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 23.3% % % % 2.6% 4.8% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago Soft Drinks Juices, Squashes & Syrups KEY TRENDS In the French drinks market, value and volume trends are starkly different, thanks to a price war between retailers. The price war increased during Favorable spring and autumn weather offset the very bad summer, except on tea and coffee. Soft drinks have returned to positive growth in both volume and value, particularly colas. water is seeing volume grow, while values sales are on the decline, due to price war and low price growth (Cristaline) Strong performance of Sodastream and mainstream syrup are supporting growth within the syrups sector. Total Sales % vs. YA 7

8 France TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Soft Drinks Cocoa Juices, Squashes & Syrups CATEGORY INSIGHTS Private label is declining on all the categories this year, as with all fast moving consumer goods (FMCG). Juice are always declining, mainly due to private label and lower price juices. This is the 3 rd year of decline. In mineral water, promotional activity is on the decline, but price wars are intense. The Cristaline brand is demonstrating growth, thanks to its low price positioning. Coca-Cola brands are now increasing in volume and value (except Coca-Cola light). Coca- Cola Life (with Stevia) was launched in December with good first results. 7up Mojito is the best innovation in soft drinks in Syrup is just flat in 2014 due to the very bad summer. The soda machine trend growth compensates the decline of simple syrup. The private label has lost a lot of volume. A new segment appeared in June with Ouiz, a concentrated syrup brand, another brand (Mix and Go from Teisseire) arrived in October. It s a new way to drink: the concept is to flavor water wherever you are, with a little bottle of syrup. In the coffee market, pods continue to grow well, while other coffees are facing decline. Pods and green teas are driving growth within the tea sector. 8

9 Euros, in millions Euros, in millions PULSE REPORT Germany CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 22.8% % 21.1% % 1.0% 4.0% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago KEY TRENDS The overall value sales performance of drinks was stagnant, whereas volume declined by 1.7%; this is driven by decline in promotion. water has shown the maximum growth and has increased its value share by 0.6 points While national brands grew, it could not offset the decline in private label across all the categories leading to the overall dip in the drinks category. Soft Drinks Juices, Squashes & Syrups Positive development in other channels is unable to overcome the heavy decline in hard discounters leading to the total decline. water and coffee are the two growing categories, while decline in soft drinks and juices, squashes & syrups are bringing the dip in sales. Total Sales % vs. YA 9

10 Germany TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Cocoa Juices, Squashes & Syrups Soft Drinks CATEGORY INSIGHTS water continues to demonstrate positive development, driven by still water and water with little CO². Both segments are showing significant growth in hypermarkets; in contrast, hard discounters are pulling down the growth. Growth in coffee is mainly driven by coffee pods (within roasted coffee), which again is driven by high prices rather than volume. However, roast & ground (decline driven by promotion) and cappuccino/instant milk (driven by both normal and promotion) coffee declined heavily. Decline in soft drinks is mainly driven by hard discounters due to heavy decline in promotions. Spritzer, water with add-ons and cola are the major declining sectors. The decline for cola is due to disposable plastic bottles. Energy drinks is the strongest growing segment in Germany, which is growing across both private label and branded sectors (mainly Red Bull and Rockstar). Fassbrause is the other segment showing potential and bringing the growth for soft drinks. Decline in private label within hard discounters is bringing down the sales for juices, squashes & syrups, while national brands are showing positive growth. Syrup, chilled fruit juices and smoothie are showing growth, still unable to offset the significant decline in fruit juices and drinks, leading to the overall decline. Driven by promotions, black tea is showing positive growth whereas, fruit, herbal and medicinal teas are bringing down the sales for the entire tea category. It is one of the category which is showing growth in hard discounters while declining in all other channels. For cocoa, both private label and national brands are showing decline. Lidl is the only channel where it is showing positive development, which is mainly promotional driven. 10

11 Euros, in millions Euros, in millions PULSE REPORT Italy CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 28% % 31% 846 1% 4% 14% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago Soft Drinks Total Sales % vs. YA Juices, Squashes & Syrups KEY TRENDS Italian GDP is negative for the third year. Growth will not restart quickly: FMCG trend is still negative both in volume and value, and promotional pressure is growing in a relevant way. The decline of sales is spread across all the sectors, mainly for beverage but also for household and toiletry. One third of the decrease depends on real cuts of occasional consumptions. There is a clear worsening trend from both reduction of purchasing and trading down ( ) and real cuts (2013); so categories and brands that are not strictly necessary for consumers show worse performances. Lower temperature in July-August-September negatively impacted the beverage category trend: higher temperature in the beginning of the year and in the last quarter didn t offset beverage volume and value sales decline. Beverage is the only sector were a limited inflation is visible. Overall categories showed in the last year a drop in sales with the only exception for water (+0.4% trend versus year 2013) and tea (+0.9%). 11

12 Italy TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Cocoa Juices, Squashes & Syrups Soft Drinks CATEGORY INSIGHTS In Year 2014 some themes continue to influence category trends: Weakness of consumer demand due to the economic crisis; Increase of inflation rate, particularly driven by price increase of several raw material (e.g. petrol that impacts the cost of transport and packaging [e.g. PET]) Retailers transferring rising cost of inputs to the shelf prices In Italy, price and a strong wellness positioning are supporting growth of the still water segment which, in turn, is supporting the overall mineral water category. Buying on promotion and substitutions are prevalent trading down behaviours. The CSD (Carbonated Soft Drinks) sector experienced remarkable decline during the past quarter. Many segments (colas, orangeades, lemon lime, tonic, chinotti) recorded strong negative trends despite World Cup Soccer events and associated promotional activity. The pod segment both in the coffee and tea market is an increasing phenomena: in 2013 and in 2014 it showed a double digit trend despite the super premium price positioning. 12

13 Euros, in millions Euros, in millions PULSE REPORT The Netherlands CATEGORY SHARE OF VALUE CATEGORY VALUE SALES % 33% 633 8% 1% 5% 7% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago KEY TRENDS Total drinks is declining in the Netherlands, in value (0.1%) and volume (2.7%). Price increases and lower promotional pressure have impacted volume negatively. Hot and cold drink sectors saw volume decline due to price increases. Promotional pressure for cold drinks declined, while promotional pressure for hot drinks was stable. Despite Aldi s introduction of Coca-Cola into their assortment, one of the first national brands at Aldi, hard discount supermarkets share did not increase. In fact, it was the same as in Soft Drinks Juices, Squashes & Syrups Total Sales % vs. YA 13

14 The Netherlands TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Soft Drinks Juices, Squashes & Syrups 0.87 Cocoa CATEGORY INSIGHTS Top winners are soft drinks and mineral waters. Growth of soft drinks is price driven, while mineral waters also grows in volume. Growth in syrups & squashes, which is driving the drinks sector in the Netherlands. This category keeps winning share of throat at the expense of other drinks, likely due to its appeal to more price conscious shoppers in economical tough times and healthier image. Although sales within sport and energy drinks slightly increases within supermarkets, volumes are flowing towards grey channels, such as Action and Op=Op Voordeelshop. All hot drinks (coffee, chocolate and tea) are declining in volume. Although premium coffee formats (cups and beans) are still winning share, this trend is not big enough to bring value growth to the whole category. The pod sector is growing, supported by the introduction of the Velours brand (that is available exclusively at Albert Heijn) and further private label introductions in other banners. Although pod sales are increasing, most of the sales are still in the online channel. The total tea category is declining. Only green tea is growing, but does not bring the volume and value to the total category. The biggest brand, Pickwick, saw volume dales decline 7.5%. Lipton continues to grow due to high promotion pressure and the introduction of new flavours. Private label volumes are also declining with 6.2%. 14

15 Euros, in millions Euros, in millions PULSE REPORT Spain CATEGORY SHARE OF VALUE CATEGORY VALUE SALES % 49% 18% % 5% 7% Soft Drinks Cocoa Juices, Squashes & Syrups TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago KEY TRENDS During 2014, soft drinks sales decreased in the Spanish marketplace. Colas and still drinks declined, which affects to the whole categories. Categories with a low market weight have reduced price compared to a year ago. Indian tonic, smoothies and coffee pods are experiencing volume growth in the Spanish market during water increased volume and value sales due to manufacturers brands Soft Drinks Cocoa Total Sales % vs. YA 15

16 Spain TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Juices, Squashes & Syrups Cocoa Soft Drinks CATEGORY INSIGHTS In soft drinks Coca-Cola Co, Pepsi Co and Orangina Schweppes sales decreased from a year ago, exerting downward pressure on the soft drinks sector overall. Meanwhile, Indian tonic, iced tea, sports drinks, fruit carbs, energy drinks and fresh drinks increased their sales from last year, as a result or new premium products and brands that have been launched recently. Sales in Indian tonic have gone up steadily (15.0% volume) thanks to the gin and tonic market. Major manufacturers (Coca-Cola Co, PepsiCo and Orangina Schweppes) continue with their innovation in that segment. Sales within the cola sector fell during last year, largely due to declines of Coca-Cola brand products (regular and light). New rebranding will take by Coca-Cola Co during growth was strong during last year, supported by double digit growth of coffee pods (17.7% versus year ago last year). Private label contributes with their innovation in this segment (29.8% in volume versus year ago). Don Simon (JGC) continued their aggressive reduction price campaign not only in the fresh segment but also in other categories as Cava - Spanish local champagne and wines. water without gas continues to experience strong growth due to manufacturers brands (Bezoya, FoontVella). New large formats have established over the past year (private label in supermarket channel). 16

17 Euros, in millions Euros, in millions PULSE REPORT The United Kingdom CATEGORY SHARE OF VALUE CATEGORY VALUE SALES % 16% 14% % 8% 8% Soft Drinks Juices, Squashes & Syrups Cocoa TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change versus a year ago Soft Drinks Juices, Squashes & Syrups KEY TRENDS Soft drinks, the biggest segment has seen growth rate slow down compared to mineral water segment due to price pressure from discounters, in-store promotions and greater focus on healthier lifestyles. continues to see declines (7.7%) as the growth in fruit, herbal and green is not enough to offset the losses in black tea. is seeing growth (0.9) as consumers continue to trade up to the more premium instant coffees and pods. water has seen strong value gains (12.4%). s natural and healthier positioning, convenience of use when on the go, are driving demand for the category. Price inflation has also helped boost value sales. Total Sales % vs. YA 17

18 The United Kingdom TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES Soft Drinks Cocoa Juices, Squashes & Syrups CATEGORY INSIGHTS It s very interesting times in the UK Retail market as discounters continue to thrive at the expense of the traditional Grocers. In response to this, the grocers are learning lessons from the discounters and looking to reduce ranges in order to maximize profitability of store space. Therefore the competition for space is shooting up as manufacturers fight to keep all their sku s (stock keeping unit) on shelf above competitors. In hot drinks volume is in strong decline as younger consumers shun traditional black tea and instant coffees in favour of bottled water and soft drinks. However hot drinks has seen value remain stable as consumers also switch into more premium sectors of fruit & herbal teas, super premium coffees and coffee pods. In soft drinks - the weather remains a significant factor in UK drinks sales. With a warmer Q mineral waters benefitted the most from the favorable weather pattern. Total water category growth is being driven by plain still water. Among branded players, Evian, Buxton and Pure Life are key brands that are leading the growth within this segment. Segment growth is being driven by increased consumption of water, shoppers buying into the category more frequently, and price inflation. Increasing health awareness, well publicised sugar swap campaign, warmer Q4, launch of new products (e.g. Coke s Smart ) supported by heavy media spend are likely to have resulted in plain water growth. Whilst smaller in comparison, sparkling segments within both plain and flavoured water subcategories, are growing ahead of overall mineral water category. Sparkling segment growth is being driven by premium international brand San Pellegrino both in plain and flavoured segments. Local plain sparkling brand, Buxton Sparkling is also winning through range expansion and high levels of promotions. 18

19 Final Notes Notes on category definitions for countries Due to the diverse products found in individual countries across this market it was necessary to consolidate the available data into the categories in this report. In some cases, it was not possible to align products across all 6 countries. Those exceptions are listed below: Soft drinks The UK data in this report does not contain iced tea and other tea based beverages and the other countries do not. Juices, squashes & syrups The German data in this report includes smoothies and refrigerated fruit juice and the other countries do not. water The French data in this report includes flavoured mineral water whereas the other countries do not. The Italian data in this report includes flavoured sports drinks whereas the other countries do not. 19

20 Resources To gain insight into opportunities across specific categories, segments, channels or retailers, contact your IRI client service representative regarding custom analyses leveraging the following resources: InfoScan Census is a syndicated retail tracking service that enables manufacturers and retailers to acquire industry insights used to make better business decisions. InfoScan Census utilises the data that IRI collects from grocery, drug, and mass merchandise retailers to provide the most comprehensive and accurate syndicated data offering in the FMCG sector. With access to accurate, granular detail by category, geography, measure, and time period, clients have the tools needed to develop marketing and sales strategies based on product performance, distribution and promotion responsiveness. All data about drinks comes from InfoScan Census. IRI Consulting provides strategic insights and advice leveraging a variety of data sources, predictive analytics, enabling technologies, and business analyses to help FMCG manufacturers and retailers address significant sales and marketing issues effectively. FOR MORE INFORMATION Please contact Björn Steinbach, IRI at Bjoern.Steinbach@IRIworldwide.com or +49 (0) with questions or comments about this report. About IRI. IRI is a leader in delivering powerful market and shopper information, predictive analysis and the foresight that leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and overthe-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses across sales and marketing. Move your business forward at IRIworldwide.eu Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA, Tel +44 (0) Copyright 2015 Information Resources, Inc. (IRI). All rights reserved. IRI, the IRI logo and the names of IRI products and services referenced herein are either trademarks or registered trademarks of IRI. All other trademarks are the property of their respective owners. 20