UK Markets open in 27 mins

Global Beverage Market

Alex De Angelis

The global beverage market has been forecast to increase at a compound annual growth rate (CAGR) of 4.6% over the next five years, to reach a market value of $1,347 billion by 2017. The global beverage industry's rising product demand, not much affected by the currents of global recession, bears testimony to its unyielding growth throughout.

Until recently, the beverages market was divided simply between alcoholic and non-alcoholic beverages. As consumers' tastes grew more sophisticated and demand surged for a variety of beverage options catering to lifestyle changes and health concerns, the beverages industry has responded with a dizzying array of options to choose from.

The industry consists of the total revenues generated through the sale of soft drinks, beers, ciders, flavoured alcoholic beverages (FABs), spirits, and wines. Products manufactured by the beverage industry include: bottled water, juice, sparkling and still drinks, syrups, nectars, ready-to-drink and regular teas and coffees, dairy drinks, energy drinks, sports drinks, fruit powders, and alcoholic drinks such as beer, wine, cider and spirits.

The industry experienced a CAGR of 2.3% for the period spanning 2007-2016. Industry consumption volumes increased with a CAGR of 2.4% between 2006 and 2010, to reach a total of 717,040.5 million litres in 2011.

The market is flooded with innovative products which lead to the global beverage industry's highly competitive nature. Customer loyalty is vital to the industry's growth and to achieve and retain it; companies constantly strive towards manufacturing high-quality products.

Some of the expected industry growth propellers are urbanisation, expansion in middle class population, and increase in double income family. All companies are keen on getting a share of market profit which has driven them to develop new strategies such as aggressive advertisement and maintaining efficient distribution channel maintenance to earn more profits.

The soft drinks industry will continue to straddle two different worlds: the mature developed markets where growth has stagnated and developing markets where previously high growth rates have slowed, but still offer the greatest upside. Bottled water will continue to lead the soft drinks sector in volume terms, with a projected growth rate of 5.4% over the coming year. Ready-to-drink tea and Asian specialty drinks will be the fastest-growing soft drink segments with projected growth rates in 2013 of 9% and 14%, respectively.

Global energy drink consumption surged by 14% in 2011 to 4.8 billion litres, adding over 1.5 billion litres since 2007. Average growth over the past five years has been 10% a year. Value has risen even more sharply, by an average 13% a year, to €26,500 million or $37,000 million in 2011. Leading brands include Red Bull, Monster and Burn.

The world beer market, which includes flavoured alcoholic drinks and cider, generated sales worth more than $585 billion in 2010. Market growth is expected to remain steady at a yearly rate of around 1.5% through 2015, bringing market value close to $630 billion by 2015.

The global market for spirits expanded more than 3% in 2010 to reach almost $263 billion. It is predicted the market will exceed $306 billion in 2015, a near 17% increase over five years. In 2010, the spirits market expanded 2% to exceed 19 billion litres. It is expected to reach over 21 billion litres in 2015, an 11% increase in the five-year period. Whiskey leads the spirits market, representing almost 27% of the overall market.

It's been the best of times and the worst of times for the beverage market. It has weathered many headwinds, including volatility in the supply chain with higher input costs for key commodities, with sugar prices rising 150% since 2008, corn prices climbing 85%, and coffee prices increasing 42% since June 2010.

Packaging and distribution costs have also skyrocketed, with oil prices up 150% since January 2009 and aluminium costs up 25% since January 2010. Juice pricing has also sent shockwaves through the beverage industry over the past year, and we will continue to see volatility in input costs for the near term.

One of the biggest overarching trends in the global beverage market is that consumers are trading traditional carbonated soft drinks for "better for you" alternatives amid rising concerns over obesity. The wellness movement is fuelling growth in ready-to-drink teas and waters, and as consumers seek more enhanced products with functional benefits, beverage companies are responding by increasing their use of fortifications such as vitamins, minerals, caffeine and antioxidants. Global beverage players also are meeting new consumer demands by introducing a tier of low- and mid-calorie beverages.

Current economic environment remains gloomy in western markets and Eurozone countries are having a particularly turbulent ride. The signs so far indicate more difficult times ahead for the global economy and on-going challenges for the beverages industry.

Key industry players:

The Coca-Cola Company:

Coca-Cola is a leading manufacturer, distributor, and marketer of soft drink concentrates and syrups. It owns or licenses more than 500 brands across all categories of soft drinks, and the company is headquartered in Atlanta, Georgia.

Until 2010, Coca-Cola sold its syrups and concentrates to a number of contracted independent bottlers that would produce, bottle, and distribute the final product. In February 2010, Coca-Cola bought out the remaining interests in Coca-Cola enterprises, the main contracted bottler, giving the Coca-Cola Company control over 90% of the North American volume.

PepsiCo, Inc:

PepsiCo is one of the largest food and beverage companies in the world. Its products include a variety of salty, sweet, and grain-based snacks as well as Csds and non-Csds. the company is responsible for the manufacturing, marketing, and sales of these goods. It has 18 brands in its portfolio and is headquartered in New York.

PepsiCo is divided into three business units: PepsiCo Americas foods (PAf), PepsiCo Americas Beverages (PAB), and PepsiCo international (Pi). These three business units are further divided into six reportable segments: frito-Lay North America (fLnA); Quaker foods north America (QfnA); the Latin American food and snack businesses (LAf); PAB; europe; and Asia, Middle east, and Africa (AMeA).

Diageo Plc:

Diageo is a British multinational alcoholic beverages company headquartered in London, United Kingdom. It is the world's largest producer of spirits and a major producer of beer and wine.

Diageo's brands include Smirnoff (the world's best-selling vodka), Johnnie Walker (the world's best-selling Scotch whisky), Baileys (the world's best-selling liqueur) and Guinness (the world's best-selling stout). It is also the exclusive international distributor of José Cuervo (the world's best-selling tequila) and owns 34% of Moët Hennessy, which owns brands including Moët & Chandon, Veuve Clicquot and Hennessy. It sells its products in over 180 countries and has offices in around 80 countries.

Diageo has its primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalisation of approximately £34.5 billion as of 23 December 2011, making it the 12th-largest company on the London Stock Exchange. It has a secondary listing on the New York Stock Exchange.

Dr Pepper Snapple Group:

The Dr Pepper snapple Group is a leading integrated brand owner, bottler, and distributor of soft drinks in the United States, Canada, and Mexico. The company has 15 brands and is headquartered in Plano, Texas.

Nearly half of the company's annual US volume is distributed by its company-owned bottling and distribution network. The remainder is driven through third-party/licensed bottlers and distributors, including those in both the Coca-Cola and PepsiCo bottling systems, as well as independent bottlers, brokers, and distributors.27 in 2009, 72% of dr Pepper snapple total volumes were distributed through the former Coca- Cola and PepsiCo bottling partners (these bottling partners were recently acquired by the Coca-Cola Company and PepsiCo inc., respectively). Pepsi Bottling Group, inc. (PBG) and Coca-Cola enterprises, inc. (CCe) were the two largest customers of dr Pepper snapple's Beverage Concentrate segment, and constituted 25% and 23%, respectively, of net sales during 2009.

For more information on the global beverage market, see the latest research: Global Beverage Market

Follow us on Twitter @CandMResearch