Carbonated soft drink volume growth to remain slow next year

Posted by Isobel Drake on 17th December 2008

Revised forecasts predict volume growth of between 1 and 2% for the global carbonates category despite the worsening economic climate.

The deterioration in financial conditions has inevitably prompted Canadean to downgrade their earlier projections by around 1% and the global beverage experts now expect the market to reach 208 billion litres by the end of this year, a figure that equates to 31 litres per year for every global consumer. 2009 will see a similar growth rate to 2008, before the green shoots of recovery are expected to become evident in 2010 with a slight acceleration in growth to a little over 2%.

In the more developed parts of the world, within the volume performance the consequences of recession are more evident. Canadean consultants report that consumers are switching to own label products and, where present, there has been an upturn in footfall in hard discounters. The high cost of oil during this quarter pushed up petrol prices and it appears the carbonates sales in garage forecourts slowed accordingly, impacting on the overall convenience channel. These factors, along with the depressed on-premise sales triggered by stay at home consumers have meant that the effect of the downturn is more pronounced in value terms than volume.

It is higher oil prices that have contributed to the buoyant showing of MENA (Middle East & North Africa), which with Asia are both expected to see an 8% expansion of the carbonates category this year. The relative buoyancy of the Chinese economy in the first half of this year has been a factor in the 12% jump in China and ultimately the overall Asian performance. With the rest of Africa these regions will be the main driver behind the global growth.

With a quarter of worldwide volumes, declining sales in North America have pulled down the global carbonates category; if North America is excluded, the global carbonates growth rate would double. Currently carbonates are not performing well in their spiritual home. 2008 will see North America lose its crown as the biggest market for carbonates to Central and South America but Americans remain by far the biggest per capita consumers of carbonates in the world and as a region will have drunk more than 130 litres a year more than the average global consumer.

Central and South America may be set to become the main market for carbonates but along with East Europe, Canadean have had to reduce their projected growth rate by as much as 2.5%. Both Asia and West Europe have had their prediction for 2008 amended downwards but at 1% the correction has been less dramatic.

The carbonate category remains the giant of the global soft drinks sector; almost 4 in every 10 litres of soft drinks consumed around the world is a carbonated soft drink. Even before the revisions to the forecast, the category was showing some signs of maturity in many developed parts of the world but this will be more than compensated for by the developing countries. Stakeholders in the category look better placed than most to ride the economic storm.

PepsiCo CEO Indra Nooyi has recently reported that the drag in the US had been causing great concern for the company – and the industry – but remains hopeful that the imminent introduction of stevia soft drinks (pending approval from the food and beverage regulators in the US) could boost the fledgling sector. “If we got back to flat on CSDs (carbonated soft drinks), oh my God, it’s heaven,” Ms Nooyi told reporters at a recent Beverage Digest conference, according to the Associated Press. “If it continues like this, I think there’s hope the category will get new life.”