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Fruit Juices & Health Drinks Market Report 2010
Key Note Publications Ltd, July 2010
The UK market for fruit juices and health drinks increased in value by 15% in over the 2005 to 2009 review period, to £2.98bn in 2009. Although the rate of growth fell sharply in 2008 and remained low in 2009, reflecting the impact of the recession, it remained positive. However, the increase is partly attributable to rising prices, as supplies have passed on the increased costs of commodities such as juice and packaging.
In volume terms, the market has been declining, as the `credit crunch' and the recession caused consumers to abandon non-essential purchases or to trade down to cheaper soft drinks. In addition, soft drinks in general have been affected by poor summer weather in recent years, which has not encouraged the sale of cold drinks. Rising prices also caused many hard-pressed consumers to reduce their purchases of fruit juices, turning to lower-cost alternatives such as juice drinks. However, consumption of energy drinks continued to increase, with sales being driven by continued heavyweight promotional activity and the fact that young adults are the main purchasers.
Very large multinational firms, such as Coca Cola and PepsiCo, dominate the soft drinks industry and they are able to invest heavily in new product development (NPD) and advertising and promotional activity. The sums needed to compete against these companies represent considerable barriers to entry, but smaller companies have been able to emerge by specialising in niche areas. Even so, the small companies that have been successful have often been taken over by the big players. Examples include Innocent, the pioneer of smoothies, in which Coca Cola obtained a majority stake in April 2010.
The large grocery multiples increased their domination of the market in 2008 and 2009, as consumers increasingly focused on value own brands. Impulse sales through newsagents and other outlets came under further pressure during both years, as consumers exercised greater caution with their spending and poor summer weather did nothing to encourage impulse purchases. In turn, the decline in impulse sales undoubtedly served to boost those in the multiples.
The authors anticipate that the market will experience relatively low growth between 2010 and 2014, with year-on-year growth being unlikely to reach the levels achieved prior to the `credit crunch' and the recession. Indeed, the market is forecast to show a slight drop in value in 2010, as the new Government unveils its austerity measures and fearful consumers rein in their spending. However, the market should return to growth in 2011, as the economic situation improves, with year-on-year growth expanding thereafter. Unfortunately, this will be partly driven by higher juice prices, as the authors anticipate that global supply and demand imbalances will be exacerbated by growing demand for juice in emerging markets. Premium products will remain under pressure as consumers focus on value counterparts, whereas the health drinks sector should benefit from being influenced more by fashion than economic factors.
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