The Australian soft drink market is dominated by giants such as Asahi Holdings which owns the Schweppes brand, PepsiCo, a subsidiary of Frito-Lay Australia, and Australia's largest beverage company, bottler Coca-Cola Amatil (CCA).
The industry is expanding as innovative young companies jump on the bandwagon, but according to Roy Morgan Research, Coca Cola remains the undisputed leader among Australians and New Zealanders aged 14 plus.
Moreover, the five most popular soft drinks in Australia are cola flavoured, and three of those are Coca-Cola brands: Coca Cola, which is consumed by 19 per cent in an average seven days; Coca Cola Zero in second spot at 8 per cent and Diet Coke in fourth spot at 5 per cent.
The other cola brand in the Top Five is Pepsi Max, which was in third spot, and is drunk by 7 per cent, with Schweppes Lemonade coming in fifth with 4 per cent.
Yet despite their popularity, aggressive pricing and changing consumer trends have restrained growth in the sector, according to IBISWorld.
Moreover, packaged water is expected to overtake global carbonates consumption to reach over 233 billion litres this year, according to Canadean, while carbonates are expected to grow at a slower pace to around 227 billion litres.
Local bottler, Coca Cola Amatil (CCA), Australia’s third largest food and beverage company according to the Food & Drink Business Top 100 report, saw its profit slide by around 25 per cent to $375 million for the year to December.
CCA chief executive Alison Watkins said the beverage landscape has been evolving over the past five years with increased competition from existing players, greater penetration of value and private label products, a shift toward ‘better for you’ products and the continued consolidation of the customer base in both grocery and national accounts.
“As a business we've been slow to adapt to these changes in market conditions and shifting consumer trends,” she said.
It’s not all doom and gloom, however. Watkins has predicted a return to mid single-digit growth in earnings per share over the next few years.
Also, globally, Coca Cola Co. recently reported its first quarterly sales gain since 2012 after it increased its prices to compensate for sluggish demand.
Kara Ordway, a senior market analyst at www.cityindex.com.au, says that Coca Cola has faced some difficult times as consumer tastes change and a stagnant domestic market.
“However the renewed focus on pricing strategy and cutting costs has helped the company ride out such turbulence, boosting revenue by 1.3 per cent to $10.7 billion,” Ordway says.
The current environment, including the strong dollar, is still challenging, according to Ordway, so patience will be required to see the full effect of the company’s initiatives and strategies.
KEY OPPORTUNITIES
According to Geoff Parker, CEO of the Australian Beverages Council, despite the negative publicity around of soft drinks as contributor to obesity, they actually comprise a small portion of the total diet, and the ongoing challenge for the industry is to promote soft drinks in that context – to be consumed in moderation with lots of physical activity.
There are still innovation opportunities in the soft drink category according to Parker.
“There are some subsets of the category, such as energy drinks, which are performing better than others, and are still seeing strong single-digit growth.”
Parker also points to the introduction of stevia as an opportunity – and possibly the key opportunity – moving forward.
