All grown up

As an industry with seemingly unstoppable success rates, the soft drinks sector is hard to beat. Despite huge year-on-year growth, this is an area which still manages to launch new triumphs and has apparently endless scope for innovation. It's a healthy, vibrant sector every bit as fizzy as the latest cola drink and the best, it seems, may be yet to come.

"It's a very exciting industry to be working in," says Richard Langley of the British Soft Drinks Association. "There are always new companies coming in, which are driven by consumer demand. As consumer taste is very diverse - and is becoming more so - we never know what we're going to see next."

Already we've seen fizzy drinks producers target everything from the young leisure category to health-conscious adults. So what trends look set to shape today's drinks industry? Perhaps, unsurprisingly, health is still a big player. And whether it's fortifying drinks with added vitamins, providing a useful portion of the recommended 'five-a-day' or simply hydrating, with no calorific disadvantage, consumers are looking for a value-added bonus.

"There are three big areas at the moment, and they tend to link into health concerns," says Langley. "First you have premium fruit juices, then energy and sports drinks and, finally, bottled water. The interesting thing about the sector is that people are looking for something extra from products. You might have a refreshing drink with a great taste, but manufacturers should be looking to give that bit more to appeal to consumers."

According to Langley, consumer health focus has provided several useful marketing angles for the soft drinks sector. "If you look at drinks like Innocent smoothies, they're doing something more for the consumer - they're delivering one or more of their five recommended portions. Then you have sports drinks fortified with vitamins, so they're doing something extra too. With bottled water it's more a case that they're not doing the things other drinks are doing in terms of calories and additives. That's their selling point."

Fears for carbonated soft-drink sales may have also been undeserved. As sales of 'healthy' soft drinks climbed last year, sales of carbonated beverages took a dip, prompting industry insiders to predict a more serious loss of market share to come.

But, according to the Britvic Soft Drinks Report 2007, carbonated drink sales increased in every major western European market, with the exception of the UK. And while the carbonated soft drinks sector slipped 6% in the UK, fizzy beverages still sold more than any other category and soft drink sales in total were up by a healthy 7%.

So although healthy non-carbonated drinks may be enjoying increased consumer popularity, it is the sector as a whole that can afford to celebrate.

Where manufacturers might be missing a trick though, is in the adult soft drinks market. Products aimed specifically at adults have been trickling on to the market for at least the last decade. But the scope for non-alcoholic drinks in bars and pubs means that this is still seen as an under-exploited category with plenty of room for growth.

"Since Mintel's last report on adult soft drinks, this sector remains one of the fastest-growing of the soft drinks market," confirms a spokesman for Mintel. "It has experienced growth of 84% in volume terms and 118% in value since 2000.

"Although flavoured water remains the largest sector in volume terms, the market is being driven by a preference among consumers for healthier drinks with a higher juice content, a desire to consume a wider range of flavours, and a willingness to pay more for soft drinks. In addition, on-trade sales are benefiting from changing attitudes to alcohol consumption."

Drinks such as J2O, which are packaged to imitate their alcoholic counterparts, have paved the way for similarly marketed beverages, and the bar-friendly adult soft drink promises big returns. While J2O concentrates on well-known 'exotic' fruits, such as mango and melon, newer products coming on to the market tend to combine more obviously 'grown-up' flavours, such as elderflower, with a higher price tag.

Bottlegreen Drinks Company, for example, has broken into the market with cordials that range from elderflower to lemongrass and ginger, blueberry, cranberry, and blackcurrant. The focus on less-sweet cordial-style products has allowed them to appeal to upmarket bars at a higher price range.

Healthy options

But here is where the market overlaps because, as Mintel points out, the appeal of adult soft drinks is hard to separate from the appeal of healthier products in general. The huge success of Innocent Drinks' smoothies has shown that there is a large potential market for products that use whole fruit rather than fruit concentrate, and this opening has only just begun to be exploited.

Apart from bottled water, the big news on the healthy soft drinks market is the 'superfoods' tag, which has been put to good effect in numerous new products. RJA Foods' 'super juice' Pomegreat, for example, was launched to capitalise on the now widespread acceptance of pomegranate as a superfood.

Meanwhile, Love Smoothies has taken the category one stage further by marketing freshly prepared smoothies, sold in frozen pouches. "I think an increasing number of consumers are looking at bottled smoothies and realising that, to achieve an extended shelf life, they have to be pasteurised, which means boiling at 60°C," says md Richard Canterbury. "Obviously when you boil anything you lose a lot of the flavour and the goodness, which is why some smoothies can only claim to give one of your five-a-day."

In comparison, Love Smoothies' products deliver two and a half of the recommended five-a-day, and also incorporate a number of superfoods of the moment, such as açai berry and green tea.

The company also sells Über boost sachets of ingredients such as immune system-boosting echinacea to add to their smoothies. "Consumers are becoming more health conscious and while they might not want to go to the effort of eating several pieces of fruit, a fresh smoothie is a very convenient way to do this," says Canterbury.

Fizz and functionality

Healthy additions to drinks may be one thing, but the soft drinks sector has also seen a surge in products that claim a functionality beyond hydration, taste, and even nutritional benefits.

Hot from Asia is the trend for 'smart' drinks, that boost brain power, either through the addition of omega-3s or other vitamins such as B6.

Other products aim to boost areas such as joint health, or lower cholesterol. Coca-Cola Enterprises, for example, is in the process of launching a line of Minute Maid juices fortified with Glucosamine HCI, which is thought to keep joints healthy.

Fruit and soya blends also look set to become a popular way to combine the health benefits of soya with appealing fruity flavours.

But the carbonates sector is a long way from giving up its stalwart markets. Although healthy drinks and those aimed at adults are undoubtedly an attractive growth-sector, the appeal of soft drinks in fun, vibrant colours is far from going flat. And while companies such as Innocent are targeting children's lunchboxes, carbonate big hitters such as Britvic are developing highly innovative strategies to retain their appeal to youngsters.

In the pipeline is technology to 'turbo fizz' a carbonated soft drink. This places a dial on the outside of cans that allows consumers to choose the level of effervescence they want from the drink inside.

"Enjoyment is still the overriding reason for buying soft drinks," says a spokesman from Britvic, who refused to comment on the technology being developed to provide this novel development. "I think there will be lots of opportunities for new technology in the soft drinks market over the next five years."

The message is that while there is enormous growth potential in the adult and healthy soft drinks sectors, the industry stalwarts for carbonated drinks are far from acknowledging a decline.

Coca-Cola and Britvic enjoyed a combined 37% of the £5.8bn UK take home market for soft drinks last year. And the conglomerates between them snared 78% of the £2.3bn on-trade market. With this kind of revenue, Coca-Cola and Britvic are more than able to keep themselves abreast of industry trends, as well as setting a few new ones themselves.

So while we may be drinking considerably more smoothies and vitamin enriched drinks by 2010, fizzy pop could easily enjoy another century of popularity. FM