Confidence in Europe's commercial beverage market rising

29 June 2016 by Katherine Price

Despite a disappointing first quarter for Europe's commercial beverage market, confidence in the sector is rising according to market research firm Canadean.

An early Easter was anticipated to boost European beverage sales in the first quarter of 2016. However, consumption was curtailed by the warmer than average weather which swept across the region over the period.

According to the company's latest quarterly beverage tracker, both west and east Europe recorded flat performances against the corresponding quarter of 2015.

But there are signs that some of the major European beverage markets are in more reassuring territory, with improving GDP growth projections, falling unemployment levels and low interest rates raising consumer confidence and making for a more favourable spending environment.

In eastern Europe, the ongoing economic and political upheaval in Russia and the Ukraine has served to depress the regional average growth in beverage consumption, with Turkey's muted performance also contributing as its economy and important tourism sector suffer from the latest violence. The heaviest contraction was seen in alcoholic drinks in eastern Europe, attributable to the tax increases on spirits in Russia and the Ukraine.

Against this backdrop, the quarter saw increasingly aggressive pricing and promotional tactics, including sustained special offers and multi-pack promotions by the branded players in many markets.

Packaged water was the key driver of European soft drinks in quarter one, supported by the favourable weather and growing propensity for healthy hydration. Hot drinks were in danger of being depressed by the warmer temperatures, but the rising profile of hot coffee on the back of the coffee shop boom helped to sustain sales.

Antonella Reda, product development manager at Canadean, said: "This dampened opportunities for private labels, but it was noticeable that brand loyalty was weakest in categories with a more commodity image such as packaged water and juice, or where the presence of discounters such as Lidl and Aldi is strong and they are offering branded products."

Dairy drinks saw contrasting results across the two regions, with the decline in white milk in western Europe, despite very low farm gate prices, disguising gains in flavoured milk and drinking yogurt driven by increasing innovation.

Reda added: "Dairy producers are looking to compensate for falling white milk consumption by tapping into the trend for convenience and added value products."

Looking forward, Canadean expects 2016 commercial beverage consumption in eastern and western Europe to remain on a par with 2015. Soft drinks and, in western Europe, beer, will be the main providers of incremental volume, buoyed by the European football championships and the Olympics. Promotional activities focused on these events by the major soft drinks and beer producers are already being witnessed, both in advertising and on packs.

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