The carbonated soft-drinks industry is huge: forecast to generate revenues of £4.45bn in 2011, even the downturn has not dented its size. On the contrary, in fact - many factors of the recession have worked in its favour.
For those cutting back on alcohol, soft drinks are a likely replacement, while for those cutting back on expenditure, carbonates can also fit the bill as a cheap indulgence.
It has not been an entirely smooth ride, however. Cheap supermarket pricing means it is increasingly a commoditised sector needing huge volumes to bring in profits. This has made it difficult for companies looking for ways of exploiting and capitalising on their brand equity.
At the beginning of the year, Britvic and Sainsbury's were reported to be in a spat over a price increase the drinks company wanted to impose for Pepsi. It led briefly to low stocks of the drink in Sainsbury's stores before it is said to have conceded to the hike.
The brand battle between Pepsi and Coca-Cola is one of the longest-lasting in any market. Coca-Cola, one of the best-known brands in any sector, dominates with three-and-a-half times the take-home value sales of Pepsi. Its constant high level of investment in marketing means it enjoys an almost unprecedented level of brand awareness.
However, while Coca-Cola dominates the retail sector, in the on-premise channel, Britvic's distribution network has ensured Pepsi has caught up with it.
Across the category, the discrepancy between take-home and the on-trade - 88% of volume sales are off-trade, of which 80% are through the major multiples - has pushed prices down, considerably below the rate of inflation; carbonates remain cheap relative to other goods. Nonetheless, as pubs become more food-oriented and non-alcoholic options are sought by more people in that environment, there should be room for carbonates manufacturers to capitalise on this trend.
Yet the on-trade is struggling in this climate. In its 'Soft Drinks Report 2011', Britvic said: 'Overall it was a bleak year for on-premise, with 50 pub closures a week. This was partly offset by 21 openings per week, but around half of these were cafes/wine bars.'
As with practically every other grocery sector, carbonates have been hit by the rising cost of raw materials. Sugar prices in particular have affected this sector, with an especially big increase in 2010.
Although Mintel's tracker research suggests consumers are less concerned about health in the recession, low-calorie drinks now have higher penetration than standard (52% compared with 51%, according to Toluna). Their take-home sales rose 21% between 2008 and 2010 and total sales now top £1bn. However, low-calorie colas are more popular, as low-calorie fruit-flavoured carbonates have only 26% penetration compared with 32% for standard fruit-flavoured fizzy drinks.
Women account for the lion's share of the core low-calorie market by some margin, which is why brands have looked to introduce versions to appeal to men. Pepsi Max has been a strong performer, appealing to 20- to 40-year-old men.
One area in which manufacturers can look to increase sales is the on-the-go market. While 87% of people drink carbonates at home, only 28% buy them to drink on the go, according to TGI - a figure that may surprise many, given the ease with which they can be purchased and consumed.
Despite the companies involved and the potential revenue, there is limited innovation in this sector. For all the numerous fruit flavours that could be offered, cola and lemonade dominate carbonates. The main exceptions to this are at the premium end of the market where Bottlegreen, Belvoir and Shloer offer more exotic flavours.
Perhaps one of the biggest threats to traditional carbonates is energy drinks, which target 18- to 24-year-old men. Their extra functionality means they can command higher prices, which could be a lesson for carbonates manufacturers looking to decommoditise their products.
Mintel predicts that volume sales will increase by 8% over the next five years. Value sales are expected to rise by 15% by 2016 to £5.1bn. However, this equates to a fairly static market when inflation is taken into account, suggesting that margins will continue to be squeezed.
This article was first published on marketingmagazine.co.uk