Performance in Europe’s commercial beverage sector during the first quarter of the year was “poor”, despite warmer-than-average weather curtailing the general downward trend in the market, according to the latest research from Canadean.
Both Western and Eastern Europe recorded flat performance against the same period last year, Canadean said, with the strongest growth witnessed across the RTD coffee, energy drink and sports drink categories. Packaged water and RTD tea also grew in both the East and West.
But mixed performance in categories such as dairy drinks and cider, where 18% growth in Eastern Europe was counteracted by a 2% decline in the west, undermined most signs of potential. Alcoholic drinks other than beer and cider fell the furthest in the east, down around 6%.
Despite the results, confidence in the sector is rising, Canadean said.
There are signs that some of the major European beverage markets are in more reassuring territory, with improving GDP growth projections, falling unemployment levels, and low interest rates raising consumer confidence and making for a more favourable spending environment.
This is contrast to Eastern Europe, where continuing economic and political upheaval in Russia and Ukraine has served to depress the regional average growth in beverage consumption. Turkey’s muted performance also contributed, as its economy and important tourism sector suffered from fresh violence.
Against this backdrop, the first quarter saw increasingly aggressive pricing and promotion tactics, including sustained special offers and multi-pack promotions by the branded players in many markets, according to Canadean’s product development manager.
“This dampened opportunities for private label,” said Antonella Reda, “but it was noticeable that brand loyalty was weakest in categories with a more commodity image such as packaged water and juice, or where the presence of discounters such as Lidl and Aldi is strong and they are offering branded products.”
Warmer weather was bad news for hot coffee and tea, but good news for their RTD equivalents.
Packaged water was the key driver of European soft drinks in quarter one, supported by the favourable weather and growing propensity for healthy hydration. Hot drinks were in danger of being depressed by the warmer temperatures, but the rising profile of hot coffee on the back of the coffee shop boom helped to sustain sales. Dairy drinks saw contrasting results across the two regions, with the decline in white milk in West Europe, despite very low farm gate prices, disguising gains in flavoured milk and drinking yogurt, driven by increasing innovation.
Reda said: “Dairy producers are looking to compensate for falling white milk consumption by tapping into the trend to convenience and added value products.” In East Europe, the heaviest contraction was seen in other alcoholic drinks, attributable to the swingeing tax increases on spirits in Russia and the Ukraine.
Canadean expects the year’s commercial beverage consumption in East and West Europe to remain on a par with 2015. Soft drinks and, in Western Europe, beer, will be the main providers of incremental volume, buoyed by the European Championship and Olympics. Promotional activities focused on these events by the major soft drinks and beer producers are already being witnessed, both in advertising and on packs.
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