The changing times of the soft drink industry

The soft drinks industry in the past decade has undergone a major shift. Carbonated drinks segment faces stiff competition from functional drinks and fruit juices segment. Big companies like Coca Cola and PepsiCo, who have major market share in carbonated drinks do not enjoy the same share in the fast growing segments. Hence they will have to adapt to this change in order to dominate the industry. They will have to resort to various strategies like local sourcing, contract farming etc. in order to gain market share in the entire soft drinks segments. Introduction The global soft drink industry has been rapidly growing over the decade. It was worth $307.2 billion in 2004 and is currently worth $650 billion and is expected to grow at a 4% (CAGR) till 2018. The soft drink industry comprises of carbonated drinks, fruit juices and concentrates, bottled water, ready-to-drink beverages, and functional drinks. Soft drinks do not usually contain alcohol; though technically can have up to 0.5% alcohol content. They are generally made on a still or carbonated water base with added flavors and sweeteners, and sometimes fruit juices or caffeine. Dating back to 2004 the consumption pattern in soft drink industry was dominated by carbonated drinks which occupied 47% share. US was the major consumer in terms of volume as well as value. But times have been changing in the soft drink industry, by the year 2014 the industry trends shifted and the carbonated drinks hold a mere 37% market share in the soft drinks industry, while the consumption of bottled water, fruit juices, RTD beverages and functional drinks (which includes sports and nutraceutical drinks) have increased. The below chart summarizes the change over the past decade. Countries like China, Brazil and Mexico are fast-closing the gap with strong sustained growth. While global volume expansion has remained steady for several years, value growth accelerated in 2014, due to an improving outlook for key markets like Brazil. At a regional level, Asia Pacific and Middle East North Africa (MENA) were the leaders in terms of volume expansion, by 6.9% and 8.7%, respectively, in 2014. Going forward, these two regions will continue to drive overall volume growth.   Author:Vaishali Ramesh