Are the days of full-sugar cola numbered?

Last week, AG Barr CEO Robert White said that for the first time the water category has overtaken cola to become the largest single category in the soft drinks market by volume. Days after, the latest Britvic Soft Drinks Report showed that cola sales were down for the first time in 2014 as consumers looked to water. However, this does not mean the end of cola – instead, it underlines changing consumer attitudes amid growing health and sugar concerns.

Sales of cola in grocery and convenience dropped by 0.2% to £1.6bn in 2014 according to the Britvic Report, while volume dropped by 1.6%, the first time the market leader has seen a decline.

Meanwhile, sales of water were up 12.6% to £671m, making the segment the second fastest growing of all soft drinks in 2014.

Speaking on the consumer shift from cola to water last week, findings that were born out of Nielsen research commissioned by AG Barr, the company’s CEO Robert White said: “You might see cola for sale in every single outlet. That does not necessarily mean everyone is drinking it.”

AG Barr saw sales success due to 20% growth of its Strathmore water brand last year, according to the report.

However, Jonathan Gatward, GB marketing director for Britvic, told Marketing Week it’s too early to speculate on long-term declines of cola.

“When you look at the absolute scale of cola, it’s by far the biggest sector of the category,” he said. “This is just a reflection of the long-term trend towards healthier drinks.”

Indeed cola remained the largest category despite its decline, largely thanks to Britvic and PepsiCo’s Pepsi Max no-sugar variant, the leading FMCG performer with £26.9m of sales growth year on year to 2014.

Pepsi Max’s success amid a period of cola decline suggests that all interest in the cola category has not been lost.

“People’s choices within the category undoubtedly have moved towards lower or no sugar variants, and I expect that to continue,” Gatward said.

Howard Telford, senior industry analyst for beverages at Euromonitor, also told Marketing Week: “I think it’s too soon to declare the ‘end of cola’ – per capita consumption in the UK remains relatively high – but this category is facing a couple of real challenges.”

Jenny Zegler, global food and drink analyst for Mintel, agreed.

“Carbonated soft drink sales are in decline, but they are not due to disappear in the UK or elsewhere any time soon,” she said. “Instead, the declines are reflective of consumers’ recognition that moderation is the key to health in many cases.”

Zegler added that despite this, fizzy drinks are not the only answer, with Mintel research showing that 32% of UK adults who are cutting back on soft drinks are worried about the impacts of artificial sweeteners.

Telford added that in order to maintain their sales momentum, brands such as Pepsi Max must address this issue.

“Low-calorie brands must continue to convince consumers that their products are safe, healthy alternative options, maintaining consumer trust in terms of sweetener blends and ingredients,” he said.

Key facts from the Britvic Soft Drinks Report

  • The overall soft drinks category saw sales growth across both grocery and convenience (0.4% in value sales to £7.6bn) and on premise sectors (3.6% to £4.2bn) in 2014. However, volume in grocery and convenience dropped by 0.4% and rose by 0.5% on premise.
  • Cold hot drinks (iced coffees and teas) was the fastest growing soft drinks segment for the fifth year running, growing by 30.7% to £68m and volume by 28.5%.
  • Pepsi saw value sales growth for the brand of 8.8% over the year while sales of Coca-Cola dropped by 2.5%.
  • While Coca-Cola Enterprises held its position as market leading distributor, its value and volume declined 1.1% and 0.5% respectively despite the launch of its low-calorie variant Coca-Cola Life in 2014.
  • Glucose and energy drinks also saw sales growth of 4.6% driven by sales of Lucozade and Red Bull.
  • Growth of water and energy drinks also overtook cola in on premise, though cola did grow by 2.8%.