We closely monitor consumer and market trends impacting the soft drinks category. Some trends are fleeting yet others will shape the future. From making sustainable choices through to aspirational experiences, we delve into these trends to understand how Britvic can lead the way in responding to emerging consumer demands.
Consumer disposable income is squeezed as inflation bites.
What's happening?
- Inflation was already high coming out of COVID-19 and the Russian invasion of Ukraine has only exacerbated the issues, pushing fuel and energy costs higher still.
- As well as the direct impact on consumers, fuel and energy are used by every supplier of every product – so the indirect impact will continue to be felt at least into 2023.
The impact
- While soft drinks have historically proved resilient during times of economic hardship, these levels of inflation are unprecedented and are prompting significant price rises across the sector.
- There is early evidence that many consumers are adjusting their behaviour by limiting shopping budgets and changing their habits.1 Discounters are accelerating with Aldi overtaking Morrisons to become the UK’s #4 supermarket. It is likely that spend on going out will decrease, impacting out-of-home consumption.
How we are responding
- We are adjusting our promotional programmes and driving efficiencies where possible so we can optimise returns and minimise costs to protect business profitability, while continuing to offer great value to our shoppers.
- Energy saving has become a necessity to contain spiralling costs so we have re-prioritised our capital spend towards multiple energy saving projects across our business. We also have many other cost saving initiatives in progress to contain the impact wherever possible.
- We will continue to invest in our brands as consumers tend to turn to trusted family favourites when under economic pressure.
1. dunnhumby Shopper Thoughts Research – UK, June 2022, page 3.
Sustainability expectations continue to rise
What's happening?
- Record summer temperatures have underlined the reality and immediacy of climate change. All businesses need to play their part in reducing humanity’s impact on the planet.
- Drought conditions have increased public consciousness of water scarcity, as well as drawing further attention to carbon reduction and minimising waste in all its forms.
The impact
- Consumers are increasingly aware of companies’ sustainability credentials, though evidence suggests the majority of consumers are not yet prepared to pay higher prices for more sustainable products and services.2
- As all companies seek to improve their environmental footprint, competition for resources is increasing, which can also drive up costs and impact the feasibility of achieving targets in the current climate.
How we are responding
- We continue to reduce packaging and packaging weight where we can, while also reducing our reliance on PET plastic for our bottles. We are examining sustainable alternatives to glass and plastic packaging where we can, while also looking beyond the bottle to increase the proportion of our hospitality and workplace business that is delivered via dispense.
- We have focused on upgrading our boilers at key sites with more energy efficient and lower carbon options. Our Brazil factories run on biomass, increasingly sourced from our own fruit waste products. The Executive team has recently approved an innovative solution to reduce carbon emissions at our Beckton site in Great Britain using a heat recovery system. This system will decarbonise 70% of the site’s heat demand by shifting its heat source away from fossil fuels.
- Water stewardship goes well beyond reducing the amount of water we use in own operations. We are trialling two projects with The Rivers Trust to replenish water into the catchments of our Leeds and Beckton manufacturing sites.
2. Kantar Eco Segments, September 2022, page 24.
Growth in soft drinks continues to be driven by providing healthier consumer choices and on-the-go hydration.
What's happening?
- We believe health remains important for consumers, with increased focus on fitness and wellbeing amid continued concerns for defence and immunity following the pandemic.3
The impact
- Products which contain fewer calories through low or no sugar, and/or active health ingredients continue to drive growth in soft drinks.4
- 96% of our 2022 innovation launches being low or no calorie drinks.
How we are responding
- We continue to make, market and sell soft drinks that offer consumer choice, including healthier choices – both fewer in calories (sugar content) and with the addition of vitamins or other health benefits.
- Where possible, we always promote the healthier option across our soft drinks portfolio, in line with our Healthier People ethos and our marketing code.
- We have fortified products across our portfolio with vitamins to give added functional benefits to our drinks. This year, we launched Robinsons Benefit Drops in four flavours with added vitamins B and C and zinc. In Ireland, we added vitamin D to the full MiWadi range as well as fortifying the Club Loaded range with vitamin B.
- Our new product development focuses on delivering great tasting drinks, that are better for you. This year alone Tango launched two new products to the market, Tango Berry Peachy and Apple, both sugar free, ensuring we
meet the needs of health-conscious consumers.
3. Kantar Consumer and Market Trends Great Britain 2022 Update, page 8.
4. Kantar Consumer and Market Trends Great Britain 2022 Update, page 51.
Consumers are looking for higher quality, better ingredients with authentic provenance, which is driving increasing demand for premium products. The trend is being fuelled by an ageing population combined with rising global wealth and disposable income, prompting consumer demand for sophisticated propositions and new, tailored experiences. Adult soft drinks are a growing opportunity for manufacturers, representing a premium, attractive alternative for everyday consumption and on special occasions. This is coupled with a movement towards lower alcohol, alcohol-free and premium soft drinks.
What's happening?
- Despite a cost of living crisis, some consumers continue to signal their desire for premium products that contain higher quality quality ingredients and offer authentic provenance.
- The COVID-19 induced increase in at-home socialising occasions has stabilised and grown, driving the premiumisation trend in the home.
- The secular decline in overall alcohol consumption continues, with each generation drinking less than the one before.
The impact
- We believe the rise of at-home enjoyment occasions and the shift towards quality, daily treats over high spend events such as foreign holidays are likely to continue in the medium term. Within this context, soft drinks are a relatively affordable treat when disposable income is under pressure.
• A consistent trend towards alternatives to alcohol for adults, connected to the desire to live more holistically healthy lives while still maintaining a premium experience. This is manifesting in both no and low alcohol versions of alcoholic drinks and continued growth in premium soft drinks.
How we're responding:
- Britvic continues to offer premium alternatives to mainstream categories, notably with London Essence tonics and sodas and Mathieu Teisseire’s premium syrups.
- London Essence Freshly Infused offers a range of premium tonics on dispense. The eye catching installation uses patented micro-dosing technology to deliver freshly infused botanical tonics. Built-in technology then provides additional benefit by delivering data straight to us in real time.
Pandemic-induced shopping habits appear to have stabilised at higher levels
What’s happening?
- From January 2020 to March 2022, the volume of groceries purchased online grew 104%. Total volumes of soft drinks online grew 113%5 with Britvic outperforming the sector with 121% growth.
- While still strong, volume growth in online purchases has slowed. In financial year 2022, Britvic’s participation (% of sales online versus offline) dropped back to 17.2% (-1.1ppts) due to the removal of COVID-19 restrictions. This slowdown was experienced across the online sector, with the total volume of groceries purchased online down 1.1% year on year to 12.4% of all grocery shopping, and the percentage of soft drinks purchased online down 2% year on year to 16% (excluding bottled water).
- Value has remained strong. In financial year 2022, the retail sales value for groceries purchased online was £182.1 million, up 1.2% year on year.
The impact
- Shopping is now more balanced across different store types, both physical and digital, requiring true omni-channel presence to access growth.
How we are responding
- We’re working with customers to create mutual value. This year, we ranked number one for e-commerce among FMCG Impulse & Package manufacturers, in the Advantage Group Survey which measures customer feedback from UK retailers, wholesalers and suppliers.
• We’re building partnerships to capitalise on growing consumer convenience missions. These include restaurant orders and delivery convenience (e.g. ASDA via Uber Eats).
• To tap into the growing market, 7UP partnered with Uber Eats with an on-pack promotion offering prizes such as Uber Eats vouchers and 50% off a grocery shop.
5. Mintel, Online Grocery Retailing UK 2022, page 9
