FDBusiness.com

Canadean estimates beverage consumption in Western Europe to increase by 0.2% in 2015, as lower inflation in key markets will lead to consumers spending more of their disposal income on refreshment.

According to Canadean’s latest Quarterly Beverage Tracker, the final quarter of 2014 brought some welcome news to the West European beverage industry, with full year consumption only declining by a marginal 0.3% due to mild winter weather. Beer saw the first uplift for some years with an increase of nearly 1%, while the rate of decline for soft drinks was less than half a percent. Canadean predicts that overall beverage consumption in West Europe will rise by 0.2% in 2015 – the best performance since 2011.

Antonella Reda, analyst at Canadean, says: “This could be an indication that low inflation is encouraging consumer to spend more on non-essential purchases. While the uncertain political situation in Russia could have an impact on Western European consumption, and we cannot rule out the risk of deflation, the 2015 outlook for the beverage industry appears to be more optimistic.”

Canadean predicts energy drinks and iced and ready-to-drink (RTD) coffee drinks to again take on the lead in growth terms, up by around 5% each. New iced/rtd coffee entrants and innovation in the ‘natural energy’ segment, such as Scheckters Organic Energy Drink, are expected to help drive this growth. Packaged water will also grow by an additional 600-700 million litres in 2015, supported by the increasing consumer awareness of health and hydration.

In the alcoholic drinks market, Canadean forecasts that beer will sustain its 2014 recovery, recording a small 0.3% growth this year. The Spanish on-trade market will notably contribute to this increase, as the lowering of prices to pre-crisis (2008) levels and special offers are successfully boosting demand for beer. Cider’s star will continue to rise in 2015 with growth of around 1%, driven by distribution expansion, line extensions and strong investment in branding by both brewers and traditional cider producers.

The outlook for carbonates is less optimistic, as the category is adapting to a ‘new normal’ of contraction, while juice is now also falling victim to the sugar debate, with 2015 sales expected to drop by around 165 million litres. Similarly, dairy drinks are likely to forfeit around 150 million litres despite falling prices.

Antonella Reda adds: “Value rather than volume growth is increasingly how producers and retailers measure the market dynamic. Investment in niche categories which are in tune with lifestyle trends and offer attractive profit margins, such as functional waters and premium pressed juices, will play an important role in the development of the beverage industry in the coming years.”