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Drinks Market Review 2008
Key Note Publications Ltd, Feb 2008, Pages: 182
The market for all types of drink purchased by UK consumers was worth an estimated £54.13bn in 2007. This figure includes purchases through both retail channels: the take-home market (e.g. grocers and off-licences) and the catering market (pubs, restaurants, etc.).
The broadest division in the market is between alcoholic drinks (worth an estimated £41.6bn in 2007), soft drinks (£9.83bn) and hot drinks (£2.7bn). Within these broad categories, drinks that are currently increasing their share include wine, cider, vodka, bottled water, fruit juice and premium coffee, while those in decline include most `dark' beers and spirits, fortified wines, ready-to-drink (RTD) spirits and sweet carbonated soft drinks.
Drinks account for an estimated 6.5% of all consumer expenditure, but this share is in decline (down from 7% in 2003), despite the media's focus on `binge drinking' and the huge displays of packaged drinks in supermarkets. Price competition is extremely keen for drinks, so even if the volume of sales grows, the market's value does not necessarily increase.
Intense competition for market share is evident not only in pricing but also in advertising. The industry spends more than £300m per year on advertising, with multi-million-pound campaigns for international brands such as Coca-Cola, Magners Irish Cider, Nescafé, Tropicana and Red Bull, as well as UK-owned brands such as Guinness, Carling, Lucozade and Ribena. Most of these brands are long-established, formidable competitors, but Magners cider (drunk `over ice') illustrates the volatility of the market and the tendency — unique to the UK in international terms — for drinks to come and go with fashion. Launched across the UK as recently as 2005, Magners has become a major brand and stimulated the cider sector into one of its cyclical revivals.
In addition to fashion, health is a major driver of the market, although the trend is sometimes exaggerated and stems more from eye-catching, competitive innovation than from proven consumer demand. Low-sugar and no-sugar products are well established across soft drinks and hot beverages. An interesting development in the beer sector was the high-profile launch, in 2006 and 2007, of lower-alcohol lagers such as Carling C2 (2% alcohol by volume [ABV]) and Beck's Vier (4% ABV).
The future holds the prospect of fairly slow value growth for the UK drinks market, meaning that suppliers will need to develop ever-larger economies of scale. The problem for the multinationals is that many drinks segments are already dominated by a handful of brands and governments are stepping in to prevent monopolies from developing. As a generalisation, demand for drinks will continue to depend on a range of factors, including health, marketing, product innovation and fashion, but also by more prosaic factors such as convenience and the state of the weather.
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