Raising the bar

Rain or shine, soft drinks can offer incremental profits for pubs and restaurants if they make the right choices. Sheila Eggleston reports.

While 2008 was widely reported as being a tough year, 2009 has been cited as being even tougher for everyone. But a subtle feeling of optimism seems to be emanating from the soft drinks industry that hasn't been dampened by the unpredictability of our weather.

Rivals Britvic, Coca-Cola Enterprises (CCE) and Pepsico have launched reports on the soft drinks sector that provide an insight into its future and pinpoints the opportunities that are up for grabs.

Britvic says it anticipates 2010 will be another challenging year, but that over the past six months there has been an uplift in consumer confidence. This is borne out by the latest Consumer Confidence Index released by market researcher Nielsen and the British Retail Consortium. The results in November 2009 showed that confidence has risen to its highest level for 18 months.

In Britvic's 2010 Report the soft drinks giant highlights the resilience of the UK soft drinks market in 2009 with sales up 2% increasing the category to £8.5bn [Nielsen MAT December 26 2009]. Among the heroes is the cola sub-category, which retained its lead position to take a 22% share of the market, while other strong performers were glucose and stimulant drinks, squash, non fruit and fruit carbonates, juice drinks and water plus. Plain water sales remained fl at, it says, suggesting that consumers are reluctant to buy what is readily available from the tap at home.

One significant factor was that the licensed channel did better than the grocery retailers. Sales rose 3% to £2.4bn, turning around the 4% decline in 2008 to put soft drinks at number two behind beer in the channel's performance table. The company says that in a difficult year for the on trade, which saw increased competition from supermarket meals and drink deals, this performance was significant. The winners were the staples – cola, lemonade, flavoured carbonates and squash.

Britvic's own performance has been positive and profitable, growing by 6% in value in both take home and on premise channels, and in volume it grew by 5% in the on premise channel and 2% in take home.

Its super brand in pubs and restaurants has been Pepsi, which it says overtook Coke to become the best selling cola in the on premise channel with sales up 10% to £475m. Other successes have been R Whites lemonade up 7% to £209m, mixers up 7% to £75m, and pure juice mixers and squashes/cordials both up by 6% to £54m and £68m respectively.

Last year pubs and workplace catering stood out in the growth stakes. Britvic says pubs attracted more customers, especially families and mixed groups, and these family friendly establishments increased the market for soft drinks – which may help to explain the category's resilience. With this in mind brands like Robinson's Fruit Shoot grew by 9% to £14m within the on premise channel, supported by activity such as the new Fruit Shoot magazine designed to entertain kids and increase the time families spent in outlets. Fast food outlets and cafés also performed well, with sales rising 10% to £30m.

Obviously this year, all eyes are on the World Cup and the opportunities that can be grasped with a bit of savvy. Britvic says it presents a real opportunity for foodservice operators. During the five week World Cup period in 2006, it says soft drinks sales shot up by 14%, so outlets should be prepared to cater for the potential uplift in demand come June this year.

GlaxoSmithKline (GSK) has already got behind the event as sponsor of the England national football team and the official sports drink sponsor of ITV's exclusive 2010 World Cup coverage with Lucozade Sport.

Its campaign – Fuelling England's Roar – will be supported by a £15m marketing package aimed at driving sales during the summer.

CCE has invested heavily in research to fuel its growth in the soft drinks sector. Its report entitled: Open More Business, is the result of a £2m research programme over the last three years to understand how consumers buy soft drinks, and how to tap into these trends to accelerate growth across the £11.4bn soft drinks category, which includes on premise soft drink sales of £3.9bn [Nielsen: 52 weeks to November 2009].

Managing director Simon Baldry says: "This research will drive our leadership of the category as we work with our customers to help them unlock the £1.4bn growth opportunity we have identified. It's the same as soft drinks shoppers buying one extra soft drink every fortnight.

"In Great Britain our per capita soft drinks consumption is currently behind countries like Ireland, Belgium and Norway, so we know there is strong potential for growth here."

Its hit list is divided into three main groups – future consumption, on the go, and on premise. Pubs, licensed bars and clubs fi t into the latter. There are 76,000 of them in this country [Nielsen total on premise 2009], which generate more than £20bn from all food and beverages consumed on site and soft drinks account for more than 10% of this turnover.

Juices and smoothies continue to satisfy consumer demand for healthier options. Tropicana claims chilled juice is currently worth almost £1bn.

This year it is livening up its range with the addition of Tropicana extra juicy bits which contains 50% more pulp than original and three new orange plus flavours; orange and passionfruit, orange and lime, and orange and watermelon.

Princes Soft Drinks says it's important for caterers to get the core drinks mix right and not underestimate the importance of having brands that consumers see as worth paying for.

Marketing director Graham Breed adds that the weather will also be an important factor, so it is vital when stocking soft drinks to take it into account.

"For example carbonates are fi rst to fl y off the shelves when the weather is hot and thirst quenchers like bottled water are also a safe bet. "If you rotate drinks promotions – making fruit juice prominent at the start of the year when people are on a health kick, and bringing carbonates and water to the fore when the weather heats up – you won't lose consumers' interest and will keep them satisfied all year round."

Britons' love of smoothies hasn't dimmed and, according to First Choice Coffee, when mixed in front of customers, they are perceived as higher value than bottled cold drinks, allowing operators to charge more.

"A mango smoothie can generate a profit of £1.40 per cup – a gross profit margin of almost 70%. Selling 80 drinks a day will generate more than £650 in pure profit a week," says managing director Elaine Higginson, adding that any size of operator can tap into this profit potential.

When it comes to soft drink innovation, there has been no let up. Britvic and Pepsico have launched what they claim is the biggest pack innovation the market has seen in more than 15 years.

Britvic plans to launch new 600ml PET bottles across its carbonates range that will offer consumers a bigger bottle and better value for money, providing foodservice operators with a great profi t opportunity.

The new format will be available across the no and low sugar variants of Britvic's leading carbonates range including Pepsi Max, Diet Pepsi, 7Up Free, and Tango, replacing the current 500ml no and low sugar range.

Senior brand manager for Pepsi, Noel Clarke, says that the 600ml format is set to become a must stock for outlets.

Britvic has also launched a limited edition cold effect can of Tango, which uses temperature sensitive ink to reveal jokes when the cans are chilled.

Aimed at youngsters looking for something edgy, these will be available in a value added 24 for 20 case.

CCE, which recently took on the UK sales and distribution of Ocean Spray's juice drinks range, says Ocean Spray is the leading cranberry juice with 66% value share.

Brand development controller Caroline Philiponnet-Bethell believes offering it as a mixer will be the biggest opportunity going forward.

"Cranberry is a popular choice for women and research shows that one in four people have drunk cranberry juice with alcohol – 84% with vodka. It is also a key ingredient in cocktails."

This year the brand has been given a makeover. New one litre packs are taller, slimmer and have a new cap that improves pouring. A new 250ml can for a single serve has also been introduced. Ocean Spray has also launched blueberry and blueberry light juice variants in one litre packs.

Building on the success of its strawberry Ribena, GSK has launched raspberry Ribena in a 500ml bottle and 288ml carton.

Brand manager Lucinda West says: "NPD is a key driver for growth in the soft drinks category and the launch of raspberry Ribena looks set to generate huge excitement with consumers and strong sales."

The company has also launched Lucozade Sport Lite – a low calorie sports drink in lemon and lime and summer berries flavours.

CCE is also supporting the energy drinks it distributes. These include its own Relentless, plus Monster – a brand worth £1.3bn in the US.

According to Stuart Agates, head of energy drinks at CCE, Relentless is very much a British brand and about commitment to sport, while Monster is "in your face, global, loud and fun". He believes energy drinks will give CCE opportunities to move forward.

These brands are hot on the heels of brand leader Red Bull, which could turn into a battle royal. Red Bull trade communications manager Tom Smith says: "Evidence that Red Bull is the number one energy drink brand can be found in any sales figures but from a customer point of view, it's the one they ask for.

"They don't ask for an energy drink and vodka, they ask for a Red Bull and vodka. If a brand becomes the benchmark of a category by being called by a customer, it's the one they see as the category signpost and so making sure Red Bull is in the back bar fridge is a must.

"Who wouldn't want to maximize their energy drinks sales with the number one brand?

"Red Bull is the second best selling brand in the back bar fridge after Britvic J20 but can your customers see it? In the same way you'd have your top selling spirits on show, get your top selling soft drinks visible in chillers – seeing certain brands will prompt people to buy them, and you want them to be the ones that will make you the most cash.

"Around 63% of visitors will end up at the bar and will buy what they see; 14% of Red Bull sales come from consumers seeing it in the fridge when at the bar."

According to Red Bull, with a 92% share of the category in pubs and bars, its product is "giving wings to customers and profits".