Soft Drinks - Consumer Attitudes - UK - March 2006

TABLE OF CONTENTS

• Introduction and Abbreviations
• Definitions
• CarbonatesJuice and juice drinks
• Bottled water
• Sports drinks
• Energy and stimulant drinks
• Smoothies
• Consumer research
• ACORN
• Advertising data
• Abbreviations
• Executive Summary
• Health is a prime driver of demand
• Premiumisation is a common factor
• Overall growth is slowing
• NPD also reflects concern for health
• Adspend shifts away from carbonates
• Avoidance of alcohol accounts for growing number of consumers
• Demographic trends favour further segmentation
• Market Drivers
• Five a day
• Prevalence of obesity has risen
  • Figure 1: Incidence of being overweight orobese among men and women, by age group, 1994 and 2003
• Slimming trend has influenced choice
  • Figure 2: Adults who are trying to slim,by gender, 1998-2005
  • Figure 3: Frequency of dieting, 2004
• Levels of exercise also rising
  • Figure 4: Key health and fitness clubmember statistics, 2000-05
• Government White Paper on Health -- November 2004
• The prevalence of alcohol consumption is in overall decline
  • Figure 5: Trends in alcohol consumption,by gender and age, 2002-04
• Drink/driving
• Lunchtime drinking becoming increasingly frowned upon
• Rising incomes have facilitated greater consumption
  • Figure 6: Trends in consumer expenditureand PDI, 2000-05
• Increased segmentation by age
  • Figure 7: UK population, by age, 2000 and2005
• Rising demand for organics
  • Figure 8: UK retail value sales of organicnon-alcoholic drinks*, 2000-05
• Market Size and Trends
• Value sales outperform volume sales
  • Figure 9: UK volume sales of soft drinks,2000-05
  • Figure 10: UK value sales of soft drinks,at current and constant prices, 2000-05
  • Figure 11: UK volume sales of soft drinks,by sector, 2000-05
  • Figure 12: UK value sales of soft drinks,by sector, 2000-05
• Per capita consumption up
  • Figure 13: Annual UK per capita volumeconsumption of soft drinks, by type, 2000-05
• Market Segmentation
• Carbonates
  • Figure 14: UK volume sales of carbonates,2000-05
  • Figure 15: UK value sales of carbonates,at current and constant prices, 2000-05
• Retail consumers switching to healthier alternatives
• On-trade demand more resilient
• New flavours have met with mixed response
• Could carbonates play the natural card?
• No/low-sugar sales have grown
  • Figure 16: UK sales of carbonates, diet vsregular, 2000-05
• Juice and juice drinks
  • Figure 17: UK volume sales of fruit juiceand juice drinks, 2000-05
  • Figure 18: UK value sales of juice andjuice drinks, at current and constant prices, 2000-05
• Mixed fortunes of pure fruit juice
  • Figure 19: UK volume sales of pure fruitjuice, 2000-05
  • Figure 20: UK value sales of pure fruitjuice, at current and constant prices, 2000-05
• Weak on-trade sales have hampered growth
• Consumers paying more for premium and functional juices
• On-trade sales set to recover
• Juice drinks register healthy growth
  • Figure 21: UK volume sales of juicedrinks, 2000-05
  • Figure 22: UK value sales of juice drinks,at current and constant prices, 2000-05
• Juice drinks generally seen as healthy alternative to carbonates
• No/low-sugar segment targeted for further growth
• Greater consumption by adults contributing to rising sales
• Bottled water
  • Figure 23: UK volume sales of bottledwater, 2000-05
  • Figure 24: UK value sales of bottledwater, at current and constant prices, 2000-05
• Water at the centre of a healthier lifestyle
  • Figure 25: UK volume sales of bottledwater, by type, 2003 and 2005
  • Figure 26: UK volume sales of bottledwater, by carbonation, 2003 and 2005
• Emergence of children's sector
• Functional has been a focus for NPD
• Water proves attractive to brand licensees
• Sports drinks
  • Figure 27: UK volume sales of sportsdrinks*, 2000-05
  • Figure 28: UK value sales of sportsdrinks*, at current and constant prices, 2000-05
  • Figure 29: UK value sales of sportsdrinks, by type, 2001-05
• Isotonic driving sports drinks category
• Energy and stimulant drinks
  • Figure 30: UK volume sales of energy andstimulant drinks, 2000-05
  • Figure 31: UK value sales of energy andstimulant drinks, at current and constant prices, 2000-05
• Functions begin to overlap as offer diversifies
• Greater availability has facilitated growth
• Smoothies
  • Figure 32: UK volume sales of smoothies*,2000-05
  • Figure 33: UK value sales of smoothies*,at current and constant prices, 2000-05
• Health and convenience drive demand
• Own-label share increases
• NPD expected to encourage further growth
• Distribution
  • Figure 34: UK volume sales of soft drinks,by distribution channel, 2000-05
• Carbonates
  • Figure 35: UK volume sales of carbonates,by distribution channel, 2000-05
• Juice and juice drinks
  • Figure 36: UK volume sales of fruit juiceand juice drinks, by distribution channel, 2000-05
• Bottled water
  • Figure 37: UK volume sales of bottledwater, by distribution channel, 2000-05
• Sports drinks
  • Figure 38: UK volume sales of sportsdrinks, by distribution channel, 2000-05
• Energy and stimulant drinks
  • Figure 39: UK volume sales of energy andstimulant drinks, by distribution channel, 2000-05
• Smoothies
  • Figure 40: UK volume sales of smoothies,by distribution channel, 2000-05
  • Figure 41: UK volume sales of soft drinks,by distribution channel, 2005
• The Supply Structure
• Companies and brands
  • Figure 42: Market presence of leadingbranded manufacturers in UK soft drinks sales, 2005
• Coca-Cola Great Britain & Ireland
• Carbonates
• Juice and juice drinks
• Other brands
• PepsiCo Intl Ltd
• Britvic Soft Drinks Ltd
• Juice drinks
• Dilutables
• Carbonates
• Bottled water
• Energy drinks
• Sports drinks
• Danone
• GlaxoSmithKline Nutritional Healthcare
• AG Barr Plc
• Unilever UK Ltd
• Nestlé
• Campbell Grocery Products Ltd
• Gerber Foods Intl
• Sunny Delight Beverages Co
• Highland Spring Ltd
• Innocent Ltd
• New Product Development
• No/low-sugar
• Extended range of flavours and ingredients
• Limited editions
• More natural image
• Sub-segmentation by age
• Functionality
• Rebranding
• Still taking preference over fizzy
• Packaging
• Forecast
• Advertising and Promotion
• Main media expenditure on soft drinks has declined
  • Figure 43: Main monitored advertsiers inthe soft drinks category, 2000-05
• Juice and juice drinks gain the most
  • Figure 44: Main monitored advertisers inthe soft drinks category, 2004 and 2005
• CCE brands dominate expenditure
• The Consumer
• European comparison of product use
  • Figure 45: Consumption of soft drinks, bycountry, 2005
• Trends in product use by type -- winners and losers
  • Figure 46: Trends in penetration of softdrinks, by type, 2001-05
  • Figure 47: Trends in penetration of colacarbonates, by type, 2001-05
  • Figure 48: Trends in penetration ofnon-cola carbonates, by type, 2001-05
  • Figure 49: Trends in penetration ofnon-cola carbonates, by flavour, 2001-05
  • Figure 50: Trends in penetration ofbottled mineral water, by type, 2001-05
• WH20 drinks what
  • Figure 51: Penetration of soft drinks, bytype, by gender, 2005
  • Figure 52: Top three preferred softdrinks, by age, 2005
• Penetration and frequency of use
• Cola carbonates
• Non-cola carbonates
• Bottled mineral water
• Flavoured water
• Fruit and vegetable juice
• The Consumer -- Detailed Demographics
• Carbonates
  • Figure 53: Penetration and frequency ofdrinking cola carbonates, by gender, age, household income, workingstatus, region, presence of children and household size, 2005
  • Figure 54: Penetration and frequency ofdrinking non-cola carbonates, by gender, age, household income, workingstatus, region, presence of children and household size, 2005
• Bottled water
  • Figure 55: Penetration and frequency ofdrinking bottled mineral water, by gender, age, household income,working status, region, presence of children and household size, 2005
  • Figure 56: Penetration and frequency ofdrinking flavoured water, by gender, age, household income, workingstatus, region, presence of children and household size, 2005
• Fruit and vegetable juice
  • Figure 57: Penetration and frequency ofdrinking fruit and vegetable juice, by gender, age, household income,working status, region, presence of children and household size, 2005
• Consumption of soft drinks
• Bottled mineral water
• Health is a prime driver of heavy usage
• Ready-to-drink fruit and vegetable juice
  • Figure 59: Usage of ready-to-drink fruitand vegetable juice, 2002-05
• Concentrated growth through distribution
• Fruit squashes and cordials
  • Figure 60: Usage of fruit squashes andcordials, 2002-05
• Declining health for squash and cordialsColas
  • Figure 61: Usage of colas, 2002-05
• Cola consumers are cutting downFigure 62: Agreement with selectedlifestyle statements, by usage of colas, 2005
• Cola drinkers have negative health image of themselvesNon-cola carbonates
  • Figure 63: Usage of non-cola fizzy softdrinks, 2002-05
  • Figure 64: Agreement with selectedlifestyle statements, by usage of non-cola fizzy soft drinks, 2005
• Could carbonates become healthier?
• Appeal of energy drinks on the wane?
  • Figure 65: Usage of energy drinks, 2002-05
  • Figure 66: Agreement with selectedlifestyle statements, by usage of energy drinks, 2005
• Users of energy drinks like to have a good time
• Brands vs own-label
  • Figure 67: Consumption of branded andsupermarket own-label soft drinks, 2005
• Brands continue to hold sway
• Prospects
• Implications of demographic trends
• Expenditure set to rise
• Health and wellbeing will remain important
• Alcohol consumption set to follow downward trend
• On-trade sales will continue to drive growth
• Forecast
• Going soft
  • Figure 83: Forecast of UK volume sales ofsoft drinks, 2005-10
• Heading for over 14 billion litres
• Wellbeing drinking
• New sectors expand fastest
• Changes among the big three
• Reaching £14 billion
  • Figure 84: Forecast of UK value sales ofsoft drinks, at current prices, Sterling, 2005-10
• Value adding counters increasingly competitive market
• Sectors at different stages of the price cycle
• Second-largest European market
  • Figure 85: Forecast of UK value sales ofsoft drinks, at current prices, in euros, 2005-10