UK’s soft drinks industry ‘seeing a seismic shift in behaviour’

The soft drinks industry is experiencing a seismic shift the likes of which it has never experienced before, according to a UK beverage industry insider.

Clark McIlroy, managing director of Red Star Brands, told the UK Bottled Water Conference that the shift was “thanks to emerging trends originating in the US.”

“The change follows consumers’ re-definition of health,” McIlroy said. “Once meaning ‘diet or ‘lite’ with a real focus on calories, health has now evolved to mean ‘healthful’ – more about the fuel going into your body than the absence of ingredients being left out.

“This is being played out in the beverage category with a decline not just in full-sugar CSDs and juices, but also in brands that call out ‘diet’ or ‘slim’. In contrast, brands associated with water or water-plus are leading the charge in the US and the UK.”

The watershed moment happened when the water category overtook cola for the first time in 2017, and the trend continues. Data captured at the end of January 2018 showed 1.31 billion units of water against a declining 1.26 billion units of cola, adding an additional £61 million to the soft drinks category in the last 52 weeks. Water-plus is driving 44% of this growth, commanding higher price points, outperforming plain water and increasing its share of the market.

However, “consumers haven’t suddenly fallen in love with water,” McIlroy said; “they’re simply running away from the less healthy alternatives they are used to.”

The market disruption in the UK is caused by the move from ‘healthier’ diet drinks to ‘healthful’ beverages with added protein, antioxidants, and vitamins. Water is a key driver of value and volume growth as consumers are making more considered drink choices.

“American brands Sparkling Ice and Bai are well placed to meet this new consumer demand,” McIlroy said. “Not only are they low in sugar and calories, but they resonate with the smart-age millennial. In the last 52 weeks, six key water brands represent 33% of all NPD volume, of which Sparkling Ice and Bai are two major players.

It is already seeing positive returns from Bai, having launched the product in the UK last year.

“The world is changing rapidly,” McIlroy continued, “and health will remain an over-arching driver of that, through a lens of healthfulness rather than an absence of ingredients. We believe that water will continue to be the main growth driver within soft drinks, maintaining its current trajectory ahead of cola. In the UK, water and water-plus will play a key role for consumers who seek healthy hydration and will continue to dominate innovation trends in bottled water.

“People want more targeted functionality when it comes to their bottled water and retailers need to diversify and invest strategically to keep up with demand. The UK retailers that are currently outperforming the market are those that have embraced this change by backing the right innovation, being bold in challenging traditional chillers and reducing space for declining heritage brands.”