Overview of the Soft Drink Market

The soft drink market in France

A soft drink is a beverage composed with a mix of water or carbonated water, sweetener – sugar, high-fructose corn syrup, fruit juice, and sugar substitutes – and a flavouring agent.  It is a non-alcoholic beverage: “soft” drink by opposition to “hard” drink, an alcoholic beverage.  It includes carbonated soft drinks, water, juices, bottle teas and more recently energy drinks.

A market valued at 2.3 bio Euros

Due to the recent crisis that affected French purchasing power, French consumption is cutting down. The Engel law asserting that the more wages are low the more important is the budget rate dedicated to the food industry is applied in the food-processing industry in France. Moreover, the implementation in 2012 of the sugar tax in France, in order to foster non-sugar drinks consumption caused soft drink industrials to increase their prices. Not to mention that the rise in raw material makes the tensions between retailers and industrials getting worse.

According to Nielson, d’après fabricants, the sales volume of soft drinks has cut down to 2.4% between January and May 2013. However, the soft drinks market variations with a value of 2.3 bio Euros, impact brands differently.

The competition in the soft drink market is getting bigger over the years

Indeed, from January to June 2013, the leader Coca-Cola steps back to 1.5 point with 53.4% of market shares; Orangina-Schweppes, second in the position ranking gains ground with 1 point to 17.6% as well as Pepsi, with 0.7 point to 6.3%. Cf. Appendix 1&2

Even if Coca-Cola is far ahead its competitors, other brands are gaining ground and hope to catch up with the Atlanta brand over the years. As a consequence, brands are developing their overall strategies and put the premium in marketing strategies using advertisements, internet buzz, or even increase their spending in Corporate Social Responsibility in order to give a sustainable aspect to their products.  

Industry analysis 

Industry analysis

-        Sources:

www.lsa-conso.fr
www.lefigaro.fr
wikipedia.org

By Sparkling Kiwi!

The PESTEL analysis

The PESTEL is an interesting tool allowing to develop strategies based on the external environment that companies are dealing with in the present but also in the future. It is a good analysis to remain competitive in the fast moving consumer goods market. Thus, this article is a PESTEL concerning the soft drink market where Orangina and Fanta are constantly evolving in.

Political factors

Negative factors: consumers protection

The National Program Nutrition Health (PNNS) fights against junk food and promote health ways of consumption. Moreover, the new sugar tax was applied in January 2012. Both lead to rising cost in the market in order to fight against the consumption of sugary drinks. 

The French National Assembly has voted a new law in March 2013 that is currently applied in French FOT FOD, about an alignment with the metropolitan on overseas sugar product content and on their expiry dates. Local industrials have now less flexibility in the production process in accordance with the NPNH program and the SRSA requirements (explained below). This may link to rising costs in the production process of local industrials. 

Positive factors: protection of industrials

The soft drink market in France is under the control of the SRSA- Syndicat National des Boissons Rafraîchissantes. Its goal is to promote the variety of BRSA – Boissons Rafraîchissantes Sans Alchool, highlighting the image and the quality of the products in the market. Not only the SNBR puts in place initiatives related to public health stakes but also defend the general, economical and social interest of industrials towards the State and its institutions. The production process in under control and have to meet the law requirements. It ensures the best production process to guarantee the best quality of the products.

Economic Factors

Negative factors: the economical growth

The Great Recession of 2008-2010 is the consequence of a slowdown in the overall consumption. The French soft drink market is affected by the crisis. The rise in prices of raw material leads brands to increase the price of its products. The soft drink market sales in volume have cut down by 2.4% between January and May 2013. Those economical factors affect brands differently and cause market shares losses for some brands and increases for other. The competition is growing.

Societal Factors

Negative factors: healthier trends of consumption

French people are small consumers of sodas and tend to develop healthier lifestyles. People from 21 years start paying more attention to their nutrition. This is why industrials develop their product ranges and put the exergue on diet products to face the increasing interest in developing healthier lifestyles from this age. Thus, adults aged between 21 to 34 years old drink around 145.6g of sodas per day compared to adults from 35 years old and more who drink only 29.8g of sodas per day (Cf. Appendix 3). They tend to drink Coca-Cola Light or Zero instead of drinking beers or other beverages.

Positive factors: adaptation to healthier trends in consumption

In order to adapt their products to healthier way of consumption, companies have to use natural products and limit chemic ingredients in their production process. A new product appeared on the market: Stevia, a sweetener and sugar substitute that can also reduce people health risks due to high sugar content and fat ingredients in the food and beverage markets. This natural product is becoming increasingly used in those markets and will have an increasing importance in the creation of eatable and drinkable products. It will lead to changes in the production process of those markets.

Appendix 1 – French drinks consumption in g/day

Technological Factors

Negative factors: Sodastream machines

Sodastream machines are about to revolutionize the beverage market and create a new trend in consumer’s beverages habits of consumption. Indeed, this new water tap allows mixing different kind of flavors both for alcoholic and non-alcoholic beverages. This machine will have such an impact in the beverage market that all players will have to review their overall strategies: not only about the marketing and distribution strategies but also about the production process. Every players of this market will have to adapt their product to the do-it-yourself trend.

Positive factors: The NTICs

The development of the NTICs has an impact in advertisement on TV, Internet and via the use of Medias. Brands put the premium on marketing in order to make their product more attractive, funnier and healthier, depending on the marketing strategy of the brand. This is the case of Fanta and Orangina that used to define a specific budget for inbound and outbound marketing to attract their targets. The use of neuromarketing is also a new way to adapt their marketing strategies at the most to the consumer’s needs.

Legislation Factors

Negative factors: The sugar tax

The implementation of a new tax, the sugar tax aims to increase the fight against sugary drinks consumption. It incites French consumers to drink cheaper drinks and healthier products without sugar. Industrials are facing an increasing competition in the soft drink market due to rising costs to face this new law which incite them to develop healthier products.

By Sparkling Kiwi!

Sources: 
www.mangerbouger.fr
www.boissonsrafraichissantes.com
www.xerfi.com
www.lsa-conso.fr
www.lsa-conso.fr
www.lsa-conso.fr

An oligopolistic market!

The key players

Coca-Cola – The undefeated universal brand, whose name is given to the whole group, Coca-Cola keeps its position of leader in the market with 48.8% of market shares in 2012. Since May 2013, the brand has launched the campaign “share a Coca-Cola” in France. Henceforth, fans can personalize the bottle with the 150 most used names in France. However, due to an increase of discount colas competition and production process rising costs, the product Coca-Cola records a decrease of 1.4% of its market shares in 2013. Nothing really crucial as the brand is far ahead its competitors.

 

A focus on our favourite brands…

Orangina, which iconic bottle is the brand emblem in the world takes part of Orangina-Schweppes. The 17.6% of market shares brings the group to the second position. Orangina only represents 4.1% of the soft drink market and is at the fourth position in France.

Fanta, the “fantastich” drink is at the sixth position in France. With 2.2% of the market shares, the brand has a constant diversification strategy, as shown by the last product launches – Fanta Still, Fanta Agrumes, Fanta Bulles. Being part of the Coca-Cola Company, the brand represents only 2.2% of the market shares out of 48.4% of the entire group.

By Sparkling Kiwi!

Sources:
www.lsa-conso.fr
www.lefigaro.fr
www.lefigaro.fr
www.rayon-boissons.com

The fundamentals of the Soft Drink market

The soft drink market fundamentals

The non-alcoholic beverages market is composed of bottled water to dairy products, passing through hot drinks, such as tea and coffee, and soft drinks – Carbonate Soft Drinks (CSD), Non-Carbonated Soft Drinks (NCSD), Ready-to-drink (RTD) teas, sport drinks, energy drinks and juices.

The soft drink market is composed of carbonated and non-carbonated drinks.

Carbonated drinks: the selling of carbonated drinks represents 78% of the Soft Drink Market

-         - Colas: Coca-Cola, Pepsi-cola…

-         - Fruit drinks: Orangina, Fanta

-         - Tea drinks: Liptonic

-         - Lemonade : Sprite, Seven-up

-         - Tonics/ Bitters: Schweppes

-         - Energizing drinks: burn, Redbull

-         - Flavoured water drinks: Schweppes Lemon

-         - Sparking water: Badoit, Perrier

Non-Carbonated drinks: the selling of non-carbonated drinks represents 22% of the soft drink market

-         - Fruit drinks: Oasis, Fanta Still, Minute Maid

-         - Tea drinks: Lipton Ice Tea

-         - Sport drinks: powerade

-         - Milk and fruit juices: Danao

-         - Vitamin drinks: Vitaminwater

-         - Water: Evian

Appendix 1 – Distribution of soft drink sales per type of drinks

Source SRNB, 2008

The target market

The soft drink industry mainly segments its market using age and gender tools.

Appendix 2 – Main customers of the soft drink industry by product

            

According to Xerfi Global research on the Soft Drink market, we can break down the aged-based segmentation in three categories. First, brands target young people between 12-29 years old in order to create an early brand loyalty that will go on until its adulthood and more. Secondly, young adults aged from 20 to 24 years old, generally consumers since their childhood. Thirdly, adults aged from 25 to 35 years with a main focus on diet products, such as Diet coke or Fanta Orange Zero. Here, the gender segment is important to apply its marketing strategy. For instance, Coca-Cola has launched Coca-Cola Light for women and Coca-Cola Zero for men.

The distribution process: from retailers to direct consumers

We can notice that the distribution process of beverage companies is divided between retailers and direct consumers.

There are 3 main retailers: Cf. Appendix 3

-        -  MLSS – Supermarket, Hypermarket and other medium and large size surfaces

-        -  Café, hostels, restaurants, bakeries, gas station, cinemas…

-        -  Hard discount

Indeed, soft drink companies’ direct way of selling product take place through vending machines. However, the direct distribution channel only represents a few part of the French market.  The majority of bottled soft drinks is distributed via retailers.

Appendix 3 – Distribution of soft drink sales according to the selling point

By Sparkling Kiwi!

Sources:
www.xerfi.com
www.lsa-conso.fr
www.lsa-conso.fr
www.lsa-conso.fr
www.boissonsrafraichissantes.com

A brief introduction

Hi there,

Fanta and Orangina are both brands from the Carbonate Soft drinks industry and part of leader companies in the Soft Drinks market. To start this fruity experience, we are going to introduce you the French Soft Drink market!