At a time when some of the biggest companies are focused on renovating their traditional carb brands by reducing or removing sugar, our MD Clark McIlroy lifts the lid on how innovators can have a material impact on the soft drinks category at Zenith’s UK Soft Drinks Conference (3 May 2018).
The sugar tax has been responsible for a soft drinks revolution in the UK and while some of the renovators have struggled, there has been a tangible opportunity for the innovators. In the last two years following the announcement of the sugar tax levy, there have been 247 new brand launches in the UK.
The market disruption in the UK is caused by the move from full sugar, traditional Diet and Juice Drinks to ‘healthful’ beverages with added functionality driving strong growth in Water, Smoothies and Shakes. Water, which has overtaken Cola for the first time in its history -*1.32 billion units of Water sold against a declining 1.26 billion units of Cola in the latest year – is a key driver of value and volume growth as consumers are making more considered drink choices.
Customers have turned away from sugar-laden beverages and are seeking out fresh, new brands like Bai and Sparkling Ice. Both brands launched in the UK within the last two years and have mastered the art of low sugar and maximum flavour, offering a lifestyle-led drink with no compromises.
The secret of successful innovation can be encapsulated in five simple headings:
- Don’t compromise on taste
- Have a strong brand proposition
- Support the brand financially
- Ensure the opportunity is truly scalable
- Don’t just appeal to those inside the M25 if you want real growth and success
First and foremost, the product must taste good – many consumers will try a new product once, but if it fails the taste test they won’t buy it again.
Secondly, and perhaps obviously, the brand must have a strong proposition to deliver cut-through and ideally satisfy an un-met consumer need; either functionally, or for a consumption occasion.
Given there have been almost 250 new beverage launches in the last two years alone, it clearly requires investment to deliver cut-through. This applies both inside and outside of the store. There is no substitute for creating outstanding visibility in trade and reinforcing with heavyweight sampling, not to mention outdoor advertising, PR and social media. Simply putting the product on the shelf and hoping it works has been a rock that many brands have perished on.
A huge number of new launches have never made it past the specialist stores inside the M25. Naturally, it can be wise to prove the concept with an affluent early-adopter cohort in London but to achieve true scale the brand needs to have just as much relevance in towns and cities throughout the country.
In terms of themes for future innovation, health will continue to dominate the NPD pipeline – particularly with an emphasis on ‘healthful’ ingredients; increasingly consumers can expect to see sustainability coming to the fore, manifesting itself in new packaging innovation to reduce or remove plastic, and don’t be surprised if premiumisation becomes more important too.
As downward pressures are exerted on everyday pricing, it’s beholden on suppliers to bring creative solutions to help counter-balance value in the category. The soft drinks industry is changing faster than ever but as retailers and suppliers we need to embrace the change, and those who back the winners will build an exciting and profitable future.
*IRI Marketplace Data to 25th February 2018
** NPD Volume based on new brand or sub-brand launches in the latest two years according to IRI Marketplace Data to 25th February 2018. This will not include additional flavours from existing brands.
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