Health and Wellness the Greatest Threat to Carbonates in the Americas

CURRENT STATE OF THE CARBONATES MARKET IN
NORTH AND SOUTH AMERICA
JULY 2015

NORTH AND LATIN AMERICANS ARE
AMONGST THE MAIN CARBONATES
CONSUMERS GLOBALLY
PERFORMANCE OF THE CARBONATES
MARKET COUNTRY BY COUNTRY

© Euromonitor International
3
North and Latin Americans are amongst
the largest carbonates consumers in the
world with eight countries in the region
amongst the top 15 per capita carbonate
consumer countries.
 Latin America consumed the most
carbonates globally in 2014 (56 billion
litres) followed by North America (52
billion litres) and Asia Pacific (36 billion
litres).
North and Latin Americans are amongst the main carbonates
consumers globally
Top 15 carbonate countries by total volume
consumption (2014)
Country
Per capita
consumption of
carbonates (lts)
Argentina 155
USA 154
Chile 141
Mexico 137
Uruguay 113
Belgium 109
Germany 98
Norway 98
Saudi Arabia 89
Bolivia 89
Australia 87
New Zealand 86
Canada 85
Brazil 81
Ireland 81

4
North
America
Latin America
-6
-4
-2
0
2
4
6
00to01
02to03
04to05
06to07
08to09
10to11
12to13
14to15
TotalVolumeYOYGrowth
Carbonate volume growth 2000-2015
During the last five years, North America
has seen a -7.6% decline in carbonates
consumption while Latin America has seen
a 7.6% increase.
The Latin American market is facing
challenges but at the same time offers
opportunities for companies to enter the
soft drinks market with innovative
products, improved logistics and powerful
marketing campaigns.
When compared to other soft drinks,
carbonates is one of the more mature
categories with opportunities remaining in
healthy positioning, innovative packaging,
new ingredients and flavours.
The carbonates market is seeing varied growth and decline across
the Americas in 2015

6
Performance of the market varies country
by country, but a common theme emerges:
consumers increasing interest in the health
and wellness trend is driving reductions in
carbonate sales.
Middle and higher income segments are
more prone to perusing health and wellness
products
What is going on specifically in each
country? In the following slides we present
the current state of the market by country,
starting with the worst 2014 percentage
growth market to the best performing.
Health and Wellness the greatest menace for carbonates

7
CANADA
-3.81% Consumption of carbonates in Canada continues to decline, with diet products taking
a bigger dip in sales compared to standard carbonates as consumers are increasingly concerned
over sweeteners in low calorie carbonates. While stevia has been on the agenda, it is yet to make an
impact on the market. The only category with a good positive growth is ginger ale, reportedly due to
its healthier and more natural image.

8
*On-trade: Distribution through bars, clubs, restaurants and other stores that offer services for out of home consumption
*Off-trade: Establishments that sell goods for home consumption, such as supermarkets, small grocers, discounters among other channels
UNITED STATES
-1.67% Carbonates once again witnessed disappointing volume sales in 2013 and 2014. This was
largely related to the declines in low calorie carbonates, which saw deep volume declines over the last 5 years
as consumers migrated away from the category. Some of this can be attributed to an increased consumer
desire to cut out artificial sweeteners as these are viewed as poor tasting and bad for a person’s health. In
addition, however, many consumers have become more interested in premium carbonates that use cane
sugar and minimise the number of artificial ingredients used, since these are considered to be worthwhile
indulgences. There has also been an increased interest in carbonated bottled water, which is viewed as much
healthier than low calorie carbonates as they typically contain very few ingredients, which generally tend to be
natural.

9
VENEZUELA
0.20% Carbonates are the preferred drink of Venezuelans, holding 59% of total soft drinks volume
sales in 2014. The performance of carbonates was adversely impacted by a severe contraction of the
population´s purchasing power which forced Venezuelans to reduce the frequency of purchase and migrate
towards home-made beverages. In 2012, a juice price regulation was approved thus creating a huge incentive
towards the purchase of juice to the detriment of carbonates. Before the implementation of the Law of Costs
and Fair Prices (Ley de Costos y Precios Justos) in March 2012, the unit price of carbonates was 30% lower
than that of nectars. In 2014, they had virtually the same unit price. The slowdown in consumption of
carbonates is not attributable to health concerns with consumers showing no signs of switching from regular to
low calorie beverages. Public policies favouring the purchase of juice and bottled water are responsible for the
fall in per capita consumption.

10
0.41% In Colombia, carbonates have reached a period of stagnation. In 2014, growth in volume
and current value terms was negligible. Carbonate consumption is supported mainly by middle-low and
low income consumers. The decline in Colombian poverty, which increased the size and purchasing
power of low-income consumers, has counterbalanced high income consumers’ migration toward
categories considered healthier such as juice, bottled water or RTD tea. This trend has allowed lower-
cost firms such as Ajegroup to gain ground and has forced leaders Femsa and Postobon SA to keep their
prices low in order to remain competitive.
COLOMBIA

11
0.47% Carbonates performance is growing slowly. The performance of diet products is only
marginally better than full-flavour cola carbonates and the trend is expected to get stronger in the next
five years underpinned by health and wellness trends. Consumers are also switching to more naturally
perceived soft drinks, such as juice and flavoured water. As international brands dominate the market,
they have the resources to expand their portfolio into new categories.
URUGUAY

12
0.49% Cola carbonates had weak performance in Mexico in 2014 due to the implementation of a new tax on
sugary drinks. The tax has resulted in an adjustment of consumption behaviour among consumers. A few
consumers are switching to low calorie carbonates and more consumers are switching to flavoured waters or RTD
teas which are perceived as healthier and are very trendy at the moment. Others are simply curbing volume
consumption, purchasing 2 instead of 3 litre presentations, for example. This comes to the detriment of brands that
have lower unit prices and are known for their large presentations, such as Big Cola and Red Cola. Non-cola
carbonates are struggling even more than cola carbonates, as they are most popular amongst children whose
habits are changing more rapidly.
MEXICO

13
0.65% Consumers in the country have been switching from carbonates to other categories that are
considered healthier, such as juices and bottled water. Although the per capita consumption of carbonates
in Peru is still low compared to other countries, the carbonated market has reached maturity and has
already begun to decline. Reduced sugar carbonates have not been successful as a healthier option in the
country, because they are not considered healthy. Peruvians convey a negative perception of artificial
sweeteners, and most are considered unhealthy.
PERU

14
1.05% Carbonates have been struggling to grow due to health concerns in Brazil, an issue
causing consumers to migrate to other categories perceived as healthier, such as juices, RTD tea and
bottled water. Accounting for more than 60% of soft drinks market (total volume) in 2014, carbonate
companies have been attempting to revert the stagnation scenario, investing in value-added products
and marketing actions. Product highlights include Brasil Kirin and the creation of Fibz, a cola and
guaraná carbonated drink with added fiber, and their initiative to revamp “Tubaínas,” a regional low-cost
carbonate that has emerged as a cool and retro product, carrying new labels and collectible packaging.
BRAZIL

15
1.06% Low calorie carbonates are not growing in accordance with the expectations of leading
manufacturers, such as Coca-Cola Zero. The pursuit of a healthy lifestyle and the rejection of certain cola
carbonates ingredients (phosphoric acid) are making non-cola carbonates outperform other categories
while consumers keep pushing manufacturers to opt for more refreshing and natural perceived products
such as functional RTD tea or bottled water. In the mid term, economic alternatives keep taking share
away from major brands thanks to their aggressive low pricing strategies and attractive promotions.
COSTA RICA

16
1.23% Argentina carbonates consumption continues to expand in per capita terms. Due to the economic
crisis, there is evidence that for the first time ever, carbonates, driven by value-priced unit prices, are growing at
a faster pace than flavoured water options. Due to this, low calorie carbonates continue to perform well driven by
the successful entry of Coca-Cola Life, and buoyed by aggressive price positioning of local b-brands. It’s
important to state that Coca-Cola Life, sweetened with Stevia, is driven by diet and natural ingredient health
factors. Cola carbonates consistently have more than 60% of the market and will continue gaining ground to all
non-cola flavours with the exception of the lemon flavour boom, which has posted the strongest growth driven by
more than ten local players.
ARGENTINA

17
1.53% In Chile, the increasingly growing health and wellness trend has changed consumer
behaviour. Several consumer segments, particularly young, educated and more affluent professionals,
have been increasing their awareness regarding excessive consumption of carbonated drinks, due to the
high sugar content of these products. Issues like obesity, diabetes and better appearance have become
very important to this consumer segment, and following this trend, categories like juice, RTD tea and
particularly flavoured bottled water have increased sales. These products offer a good balance between
taste and low calorie/sugar content. On the other hand, these products in actuality are often not healthier
or contain less sugar than a carbonated drink, but are perceived and appear to be more “natural” for the
consumer. This is unlike carbonates which are increasingly perceived as sugared water with added
colorants and flavour.
CHILE

18
GUATEMALA
1.82% In Guatemala, carbonates still account for 35% of total volume sales of soft drinks. The
recent trend towards consumption of what is perceived as healthier choices has left carbonate volume
sales to slowly lose ground during the last five years. Products such as RTD tea, which was introduced
as an exclusive product at higher prices, has become increasingly affordable and largely available.
Carbonates in Guatemala have also been affected in terms of value, with economy options becoming
more popular versus traditional brands. Industry sources agree that although there is substitution,
carbonates are far from becoming completely replaced, especially given the high importance they
currently have in the market.

19
ECUADOR
2.51% More consumers are purchasing healthier carbonates, which is why “light” options are becoming
more popular. This trend, which is mainly seen amongst middle-high and higher-income groups, is expanding
towards lower income groups due to the government’s efforts to improve eating habits. Low calorie cola
carbonates increased by 5% in off-trade* current value terms in 2014, because they are considered less
harmful and therefore better than standard versions due to their low or zero sugar content.

20
3.02% Carbonates growth has declined in the past year due to consumer awareness of health
issues related to the consumption of high sugar drinks. In the Dominican Republic, this global trend is not
as intense as in other more developed countries due to the fact that more than half of the population is
considered low income and cannot afford healthier drink alternatives. Low calorie carbonate consumption
has increased amongst the higher income segment but still shows a declining trend. The higher income
consumers have more awareness of health issues and can make decisions that are not based on income
restraint. Non-cola carbonates are popular amongst Dominican people, especially children.
DOMINICAN REPUBLIC

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5.39% Health and wellness trends are emerging in the country; however, there is still great demand
for carbonates. Cola companies are trying to respond to this trend by supporting their low sugar/low calorie
brands through additional distribution. In addition, non-cola carbonates post healthy rates of growth and are
increasing their availability through the on-trade* channel in 2014. Moreover, consumers are alternating
between different types of soft drinks following their perception of what is healthy and what is not. Some
consider juice a healthier product but do not always take into account artificial ingredients or levels of sugar.
BOLIVIA

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Health and Wellness the Greatest Threat to Carbonates in the Americas

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Health and Wellness the Greatest Threat to Carbonates in the Americas