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14 Mar 18

The soft drinks industry is experiencing a seismic shift, the like of which it has never experienced before, thanks to emerging trends originating in the US. Our MD Clark McIlroy talked all things Water and Water+ at Zenith’s UK Bottled Water Conference (15 March 2018).

The change follows consumers’ re-definition of ‘health’. Once meaning ‘diet or ‘lite’ with a real focus on calories, health has now evolved to mean ‘healthful’ – more about the fuel going into your body than the absence of ingredients being left out.

This is being played out in the beverage category with a decline not just in full sugar CSDs and juices, but also in brands that call out ‘diet’ or ‘slim’.  In contrast, brands associated with Water or Water+ are leading the charge in the US and the UK.

The watershed moment happened when the Water category overtook Cola for the first time in 2017, and the trend continues.  Data captured at the end of January 2018 showed 1.31 billion units of Water against a declining 1.26 billion units of Cola* – adding an additional £61 million to the Soft Drinks category in the last 52 weeks. Water+ is driving 44% of this growth, commanding higher price points, outperforming Plain Water and increasing its share of the market. Consumers haven’t suddenly fallen in love with water, they’re simply running away from the less healthy alternatives they are used to.

At a time when the biggest companies are focussed on renovating their major brands by reducing or removing sugar, we have been busy identifying some of the truly innovative brands that have succeeded in the US.

The market disruption in the UK is caused by the move from ‘healthier’ diet drinks to ‘healthful’ beverages with added protein, antioxidants, and vitamins.

Water is a key driver of value and volume growth as consumers are making more considered drink choices. American brands Sparkling Ice and Bai are well placed to meet this new consumer demand. Not only are they low in sugar and calories, but they resonate with the smart age millennial. In the last 52 weeks, six key Water brands represent 33% of all NPD volume, of which Sparkling Ice and Bai are two major players**.

Launched in 2017, Bai is already the second largest Functional Water brand in the UK High Street channel. It has benefitted from the complacency of innovation in the market, which has miscalculated consumer’s heightened awareness of health and wellness. Customers have turned away from sugar-laden beverages and are seeking out fresh, new brands. Bai encapsulates what modern consumers want: it’s a fun, five calorie per serving drink, packed with antioxidants from the coffeefruit, sweetened from natural sources and free from artificial preservatives, without being labelled as ‘diet’ or ‘light’. It’s targeted at those looking for a smart-age beverage, not just a new-age beverage.

Even more brands will follow the likes of Bai and Sparkling Ice, looking to master the art of low sugar and maximum flavour, offering a lifestyle-led drink with no compromises.  In the last two years, there have been 290 new brand launches. However, according to McIlroy not all innovation is equal, as only 25 of these brands, which include Bai and Sparkling Ice, have delivered 90% of NPD volume in the latest year.

The world is changing rapidly, and health will remain an over-arching driver of that, through a lens of healthfulness rather than an absence of ingredients.

We believe that Water will continue to be the main growth driver within Soft Drinks, maintaining its current trajectory ahead of Cola. In the UK, Water and Water+ will play a key role for consumers who seek healthy hydration and will continue to dominate innovation trends in bottled water.

People want more targeted functionality when it comes to their bottled water and retailers need to diversify and invest strategically to keep up with demand. The UK retailers that are currently outperforming the market are those that have embraced this change by backing the right innovation, being bold in challenging traditional chillers and reducing space for declining heritage brands.

To speak with our team of experts about the latest industry trends, please get in touch:

*according to IRI Marketplace Data on 28 January 2018
** NPD Volume based on new brand or sub-brand launches in the latest two years according to IRI Marketplace Data to 28 January 2018. This will not include additional flavours from existing brands.

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