Non-alcoholic Beverages: The Market - US - April 2008

Table of Contents

• Scope and Themes
• What you need to know
• Definition
• Data sources
• Sales data
• Abbreviations and terms
• Abbreviations
• Terms
• Executive Summary
• Market at a glance
• Diverse market with internal competition
• Segment performance
• Health concerns drive consumer preferences
• Demographic influences have mixed implications for the future growth
• Acquisitions and distribution agreements benefit large and small companies
• Crowded energy drink images begin to blend
• Innovation blends the best qualities of two existing products
• Increase in digital media targets younger adults
• Cultivating a healthy image for soda, juice, and enhanced waters
• Market Size and Forecast
• Key points
• Beverages with functional and pro-health positioning will drive future growth
• Continued price volatility in fruit juice and milk would inhibit the total market growth
• Hispanics and blacks to drive growth
  • Figure 1: Total U.S. sales and forecast of non-alcoholic beverages, at current prices, 2002-12
  • Figure 2: Total U.S. sales and forecast of non-alcoholic beverages, at inflation-adjusted prices, 2002-12
• Competitive Context
• Key points
• Continued competition from within will stall future market growth
• Alliances and acquisitions set stage for growth
• The market would continue to face pricing pressures in fruit juice and milk, impairing the future growth
• Segment Performance
• Key points
• Consumers move away from soda to healthier and functional non-carbonated beverages
  • Figure 3: U.S. sales and forecast of non-alcoholic beverages, at current prices, by segment, 2002-12
• Top three segment experiences declining demand; bottled water, RTD tea, sports drinks, and energy drinks to grow in future
  • Figure 4: U.S. sales of non-alcoholic beverages, by segment, 2005 and 2007
  • Figure 5: U.S. volume sales of non-alcoholic beverages at FDMx*, by segment, 2005 and 2007
• Segment Performance--Milk
• Key points
• Future milk sales likely to be flat, price volatility to continue due to price increase in gasoline and corn
• Growth opportunities through functional, organic and hormone-free milk
• Single-serve milk presents growth opportunities beyond traditional channels
  • Figure 6: U.S. sales and forecast of milk, 2002-12
• Segment Performance--Carbonated Drinks
• Key points
• Mature segment; growth opportunities among niche consumer groups
• Diet soda unable to attract consumers due to the fear of health risks and aftertaste; attracting men to diet soda could spur growth
  • Figure 7: U.S. sales and forecast of carbonated drinks, 2002-12
• Segment Performance--Juice and Juice Drinks
• Key points
• Juice not considered a healthy beverage; connect recent research with 100% juices to create pro-health positioning
• Create value-added perception
• Continued pricing pressure would challenge the future growth
  • Figure 8: U.S. sales and forecast of juice and juice drinks, 2002-12
• Segment Performance--Bottled Water
• Key points
• Enhanced water grows sales
• Bottled water backlash; communicate brand' s pro-environment strategy
  • Figure 9: U.S. sales and forecast of bottled water, 2002-12
• Segment Performance--Sports and Energy Drinks
• Key points
• Energy drinks enjoy growth through their infancy status
• Declining consumer interest in sports drinks; fierce competition with enhanced water may challenge future growth
  • Figure 10: U.S. sales and forecast of sports and energy drinks, 2002-12
• Segment Performance--Coffee and RTD Coffee
• Key points
• Coffee renaissance grows sales
• RTD coffee would continue to grow
• Increased competition threatens sales
  • Figure 11: U.S. sales and forecast of coffee, 2002-12
• Segment Performance--Tea and RTD Tea
• Key points
• Tea' s health benefits team up with convenience
• Hybrid teas offer even more benefits/options
  • Figure 12: U.S. sales and forecast of tea, 2002-12
• Retail Channels
• Key points
• Supermarkets lose market share to mass and other channel
• Proliferation of energy drinks at convenience stores has built traffic in this channel
  • Figure 13: U.S. sales of non-alcoholic beverages, by retail channel, 2005 and 2007
• Retail Channels--Supermarkets
• Key points
• Increasing single-serve packaging in the total product mix can help drive growth in this channel
• Supermarkets grow on multipacks and premium juices
  • Figure 14: U.S. sales of non-alcoholic beverages at supermarkets, 2002-07
• Retail Channels--Mass and Other Channels
• Key points
• Wal-Mart PL targets branded CSDs
• C-store develops own energy drink
  • Figure 15: U.S. sales of non-alcoholic beverages at mass and other channels*, 2002-07
• Market Drivers
• Health concerns drive consumer preferences
  • Figure 16: Percentage of population who are overweight or obese, 20-74 years of age, 1988-2004
  • Figure 17: Reasons for drinking less regular soda today than a year ago, February 2007
  • Figure 18: U.S. per capita consumption of carbonated soft drinks, bottled water, and sports drinks, 2001-06
• Schools contribute to children' s available beverage choices
  • Figure 19: Prevalence of obesity among children aged 6-19, by age, 1971-2002
  • Figure 20: Incidence of soda and RTD NCB consumption among children aged 6-11, 2002-06
• Government and media drive consumers toward NCBs
• Teens and young adults migrate to energy drinks
  • Figure 21: Incidence of drinking energy drinks--adults, 2002-06
  • Figure 22: Incidence of drinking energy drinks--adults and teens, January-October 2006
  • Figure 23: Incidence of drinking RTD NCBs in the past seven days, by age, January-October 2006
  • Figure 24: U.S. population of teens and young adults aged 12-24, by age, 2003-13
• Blacks and Hispanics drive growth of energy, sports, and juice drinks
  • Figure 25: Population, by race and Hispanic origin, 2003-13
• Leading Companies
• Key points
• Major carbonated drinks companies would find growth in expanding non-carbonated beverage portfolio
• Price-sensitive consumers would continue to drive growth in private labels
  • Figure 26: FDMx sales of leading non-alcoholic beverage companies, 2006 and 2007
• Brand Share--Carbonated Drinks
• Key points
• Non-cola flavors and Hispanic tastes
• Coke Zero sales climb, but not all "zeros" succeed
• Diet colas growing among men
• Manufacturer and brand shares
  • Figure 27: FDMx brand sales of regular carbonated drinks in the U.S., 2006 and 2007
  • Figure 28: FDM brand sales of diet/reduced calorie carbonated drinks in the U.S., 2006 and 2007
• Brand Share--Milk
• Key points
• Private label as a tool for supermarket chains
• Milk brands that offer extra fare best
• Manufacturer and brand shares
  • Figure 29: FDMx brand sales of milk in the U.S., 2006 and 2007
• Brand Share--Juice and Juice Drinks
• Key points
• All natural, no-sugar-added favored positioning
• Refrigerated blends of fruit juice expand orange juice
• Functional juices grow
• Getting fruits and vegetables in one juice; a future growth-driving innovation
• Private label remains significant challenge
• Manufacturer and brand shares
  • Figure 30: FDMx brand sales of juice and juice drinks in the U.S., 2006 and 2007
• Brand Share--Bottled Water
• Key points
• Vitaminwater changes market
• Nestlé still tops, stands on plain water
• Manufacturer and brand shares
  • Figure 31: FDMx brand sales of convenience/PET bottled water in the U.S., 2006 and 2007
• Brand Share--Coffee
• Key points
• Traditional ground coffee suppliers still leaders
• Refrigerated RTD coffee grows
• Cappuccino/iced coffee continues growth and new entrants follow
• Manufacturer and brand shares
  • Figure 32: FDMx brand sales of coffee in the U.S., 2006 and 2007
• Brand Share--Sports/Energy Drinks
• Key points
• Energy drinks taking over sports and energy drinks aisle
• Expanded distribution benefits suppliers of energy drinks
• Coca-Cola and Pepsi have little success as teens look for edgy drinks
• Gatorade looks to expand sports drinks off the court
• Manufacturer and brand shares
  • Figure 33: FDMx brand sales of sports/energy drinks in the U.S., 2006 and 2007
• Brand Share--Tea
• Key points
• RTD tea builds on healthy beverage trend
• AriZona slips against new products from Lipton and Nestea
• Small suppliers with added-value products grow well
• Manufacturer and brand shares
  • Figure 34: FDMx brand sales of tea in the U.S., 2006 and 2007
• Brand Qualities
• Energy drinks brands incorporate multi-dimensional differentiation platform to retain consumer interest
• Innovation and Innovators
• New product trends
  • Figure 35: Trends in numbers of new product introductions in the non-alcoholic beverage market, 2003-08*
• Innovations by segment
• Carbonated beverages
• Juice and juice drinks
• Milk
• Coffee/RTD coffee
• Tea
• Bottled water
• Sports/energy drinks
• Other innovative trends
• Advertising and Promotion
• Overview
• Ad dollars flow to diet soft drinks and sports drinks
  • Figure 36: Media spending and lead agencies for selected non-alcoholic beverages, 2005 and 2006
• Increase in digital media targets younger adults
• Sports drink becomes "lifestyle beverage"
• Carbonated soft drinks
  • Figure 37: 7-Up television ad, 2007
  • Figure 38: Diet 7-Up television ad, 2007
  • Figure 39: Diet Coke Plus television ad, 2007
  • Figure 40: Diet Coke Plus television ad #2, 2007
  • Figure 41: Coca-Cola television ad, 2007
  • Figure 42: Diet Coke television ad, 2007
  • Figure 43: Diet Pepsi Max television ad, 2007
• Juice and juice drinks
  • Figure 44: Florida orange juice television ad #1, 2007
  • Figure 45: Florida orange juice television ad #2, 2007
  • Figure 46: Juicy Juice television ad, 2007
  • Figure 47: Nestlé Juicy Juice television ad, 2007
  • Figure 48: Ocean Spray television ad, 2007
  • Figure 49: Ocean Spray diet television ad, 2007
  • Figure 50: Sunsweet television ad, 2007
  • Figure 51: Sunny Delight television ad, 2007
  • Figure 52: V8 V-Fusion television ad, 2007
• Bottled water
  • Figure 53: Aquapod television ad, 2007
  • Figure 54: Fruit2O television ad, 2007
  • Figure 55: Propel television ad, 2007
• Energy drinks
  • Figure 56: Joint Juice television ad, 2007
  • Figure 57: Extreme Energy television ad, 2007
• Tea
  • Figure 58: Snapple television ad, 2007
• Appendix: Acquisition and Alliances
• Acquisitions
• Alliances
• Appendix: Studies on Fruit Juice
• Studies linking negative influence of drinking fruit juice for children
• Studies linking fruit juice with positive health benefits
• Appendix: Innovation and Innovators
• Hybridization of drinks
• Superfruits beyond pomegranate in many drink types
• Functional claims expand
• Appendix: Trade Associations