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Changing Consumer Tastes: Seeking Regional Opportunities in an Evolving Beverages Market

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This presentation will examine the changing face of the soft drinks industry across developed and emerging markets, as volume growth has become extremely difficult in high-income developed markets, while emerging markets require substantial investment to sustain the strong performance seen over recent years. A more stable, but low growth environment for soft drinks is making targeted new product innovation more important than ever. Brand owners must capitalise on high value emerging categories that buck the flat trend to stay responsive and ahead of consumer trends in beverages.
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  • 1. © Euromonitor International 1 AUSDRINKS ASIA PACIFIC REGIONAL BEVERAGES SUMMIT 2016 CHANGING CONSUMER TASTES; SEEKING REGIONAL OPPORTUNITIES IN AN EVOLVING BEVERAGES MARKET MARCH 2016, SYDNEY
  • 2. © Euromonitor International 2 REGIONAL SNAPSHOT NATURAL, HEALTH & WELLNESS FORTIFIED / FUNCTIONAL EXPORT OPPORTUNITIES IN ASIA
  • 3. © Euromonitor International 3Global soft drinks growth entering steady state  Global soft drinks total volume grows by 3% during 2015. Global soft drinks consumption growth continues to surpass that of any other drinks industry. With a significant portion of this growth coming from often extremely low-priced bottled water, the need for sustained, profitable growth remains acute. REGIONAL SNAPSHOT
  • 4. © Euromonitor International 4Asia Pacific accounts for a larger share of throat REGIONAL SNAPSHOT
  • 5. © Euromonitor International 5Leading geographies in Asia Pacific REGIONAL SNAPSHOT
  • 6. © Euromonitor International 6Leading soft drink categories in Asia Pacific & Australasia REGIONAL SNAPSHOT
  • 7. © Euromonitor International 7 REGIONAL SNAPSHOT NATURAL, HEALTH & WELLNESS FORTIFIED / FUNCTIONAL EXPORT OPPORTUNITIES IN ASIA
  • 8. © Euromonitor International 8Natural, health & wellness trends & growth drivers What are the major growth drivers for natural and health and wellness? Authenticity Back to basics (traditional ingredients) Awareness of allergies / food intolerances Provenance Increasing access to information through technology Prevalence of lifestyle diseases (obesity, diabetes etc) NATURAL, HEALTH & WELLNESS
  • 9. © Euromonitor International 9What is “natural”?  No strict definition of natural  Naturally Healthy Beverages naturally contain a substance that improves health and wellbeing beyond the product’s pure calorific value.  Naturally Healthy Beverages are usually a healthier alternative such as 100% fruit/vegetable juice, Superfruit juice (including cranberry juice), natural mineral water, spring water, RTD green tea, RTD oolong tea. NATURAL, HEALTH & WELLNESS
  • 10. © Euromonitor International 10What is “better-for-you”?  Better-for-you products refer to products where the amount of a substance considered to be less healthy (e.g. sugar, caffeine or fat) has been actively reduced or removed during production.  The “less healthy” element forms part of the positioning and/or marketing of the product.  Better-for-you includes reduced sugar, reduced caffeine and reduced fat. NATURAL, HEALTH & WELLNESS
  • 11. © Euromonitor International 11Health & wellness soft drinks in 2015 – regional variance NATURAL, HEALTH & WELLNESS Asia Pacific (2015, million litres) BFY Soft Drinks FF Soft Drinks NH Soft Drinks Organic Soft Drinks
  • 12. © Euromonitor International 12Asia Pacific challenges Western European dominance NATURAL, HEALTH & WELLNESS  In Asia Pacific, NH soft drinks accounts for the largest volume share (71%) of health & wellness soft drinks. This is compared with organic soft drinks, better-for-you soft drinks and fortified/functional soft drinks.
  • 13. © Euromonitor International 13Bottled water and RTD tea feature heavily in NH soft drinks NATURAL, HEALTH & WELLNESS
  • 14. © Euromonitor International 14RTD Green Tea NATURAL, HEALTH & WELLNESS Ichi Ocha RTD green tea product from Indofood Asahi launched in 2014. Made from Ichiban tea. Increasing number of Japanese restaurants in Indonesia have boosted the popularity of “Ocha”, Japanese green tea. Indonesia Source: http://www.indofood.com/product/beverage Real Leaf Slim RTD green tea product by Swire Coca-Cola Taiwan Ltd. This is a fortified extension to an existing successful brand of Japanese style RTD tea. The tea claims to improve digestive health. Taiwan Source: 7net (www.7net.com.tw Everyday Morning Healthy Double Fibre RTD green tea by Vitalon Foods Corp launched in 2015. Fortified with chicory fibre, positioned for digestive health. Taiwan Source: http://www.everymorning.com.tw
  • 15. © Euromonitor International 15Bottled water  Asia Pacific bottled water total volume sales grew by 10% CAGR between 2010 and 2015 to reach 87 billion litres.  Asia Pacific accounts for more than double the size of North American bottled water sales in 2015.  China drives growth in Asia Pacific, representing 48% of Asia Pacific volume sales in 2015.  Water safety issues boost sales in China as consumers trade up to premium products. NATURAL, HEALTH & WELLNESS
  • 16. © Euromonitor International 16UK Chancellor signals sugar tax Mexico  Mx$1/litre tax implemented in 2014 for all drinks with added sugar content. Legislators are currently considering reducing this by 50% for beverages that fall below the 5g of sugar per 100 ml threshold. United Kingdom  Levy to be imposed on soft drinks with more than 5g of sugar per 100ml. Higher rate for drinks with more than 8g per 100ml. Fruit juice and milk-based drinks are exempt. Philippines  Proposed tax of approximately $0.22/litre to be levied on carbonates, energy drinks and other beverages containing added sugar. NATURAL, HEALTH & WELLNESS What about fruit juice and milk-based drinks? Is the sugar tax expected to have a negative impact on soft drink consumption?
  • 17. © Euromonitor International 17 REGIONAL SNAPSHOT NATURAL, HEALTH & WELLNESS FORTIFIED / FUNCTIONAL EXPORT OPPORTUNITIES IN ASIA
  • 18. © Euromonitor International 18What is fortified/functional? When identifying fortified/functional products, we focus on products to which health ingredients (typically those with health claims) have been added. Fortified/functional beverages provide health benefits beyond their nutritional value and/or the level of added ingredients wouldn’t normally be found in that product. The product must have been actively fortified/enhanced during production and the health benefit needs to form part of positioning/marketing of the product. FORTIFIED / FUNCTIONAL
  • 19. © Euromonitor International 19Fortified/functional trends & growth drivers FORTIFIED / FUNCTIONAL “hectic consumer lifestyles” “energy boosting” “endurance” “overworked consumers” “general wellbeing” “immune support” “limits fat absorption from food” “weight management” “digestive health” “bone health” “fortified with fibre” “calcium” “vitamins” “L-carnitine”
  • 20. © Euromonitor International 20Major FF soft drink categories (by volume) FORTIFIED / FUNCTIONAL 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% China Indonesia India Japan New Zealand Australia South Korea Philippines Thailand FF Soft Drinks by Category (2015, volume terms) FF Sports Drinks FF Energy Drinks FF RTD Tea FF RTD Coffee FF Fruit/Vegetable Juice FF Liquid Concentrates FF Carbonates FF Bottled Water FF Asian Speciality Drinks
  • 21. © Euromonitor International 21Major FF soft drink categories (by value) FORTIFIED / FUNCTIONAL 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% China Indonesia India Japan New Zealand Australia South Korea Philippines Thailand FF Soft Drinks by Category (2015, value terms) FF Sports Drinks FF RTD Tea FF RTD Coffee FF Fruit/Vegetable Juice FF Energy Drinks FF Concentrates FF Carbonates FF Bottled Water FF Asian Speciality Drinks
  • 22. © Euromonitor International 22China accounts for almost 2/3 of FF volume sales FORTIFIED / FUNCTIONAL
  • 23. © Euromonitor International 23Regulation Japan - FOSHU  Previously, strict pharmaceutical law in Japan prevented medical claims on product packaging.  MHLW introduced Food for Specified Health Uses (FOSHU) in 1991.  Manufacturers required to gain FOSHU (Foods for Specified Health Use) approval by the Ministry when they wish to claim health benefits on product packaging.  Applications must include scientific documentation demonstrating the medical or nutritional basis for a health claim.  Costly and timely burden for manufacturers to register products as FOSHU. FORTIFIED / FUNCTIONAL FOSHU logo
  • 24. © Euromonitor International 24China drives growth in FF energy drinks FORTIFIED / FUNCTIONAL
  • 25. © Euromonitor International 25FF energy drinks challenges FF flavoured milk drinks FORTIFIED / FUNCTIONAL
  • 26. © Euromonitor International 26 REGIONAL SNAPSHOT NATURAL, HEALTH & WELLNESS FORTIFIED / FUNCTIONAL EXPORT OPPORTUNITIES IN ASIA
  • 27. © Euromonitor International 27Opportunities in Asia for Australasian businesses  Asia Pacific, particularly China’s growing appetite for high quality products represents an enormous opportunity for Australasian businesses.  Key areas within the soft drinks space highlighted today include bottled water and fortified/functional soft drinks.  Australasian businesses to capitalise on “clean”, “green” positioning as a selling point for bottled water sales in China.  Fortified/functional drinks may also offer a growth opportunity for Australasian businesses  FF energy drinks key to unlocking value  Positioning in Asia Pacific countries may be quite different to the positioning used at home  Regulation in emerging markets EXPORT OPPORTUNITIES IN ASIA
  • 28. © Euromonitor International 28Online sales in China, the rise and rise of Alibaba  Online sales in China grew by 53% in 2015 to reach US$293 billion, of which food and drink sales accounted for 7%. Online sales conducted via mobiles (i.e. smartphones) and tablets accounted for 51% of online sales in China during 2015.  February 2014 saw the launch of Tmall Global, a cross-border platform and an extension of Alibaba Group’s B2C Tmall.com business in China.  As of August 2015, around 5,400 overseas brands from 25 countries and regions had opened stores on Tmall Global which is used by a growing number of brands from the US, Germany, Australia, South Korea, Japan, Taiwan and Hong Kong as a stepping-stone into China.  Australia Post partnered with Alibaba in 2014, allowing Australian businesses to use their Australian business licenses and ship their products directly from Australia to China. EXPORT OPPORTUNITIES IN ASIA
  • 29. © Euromonitor International 29SUMMARY Future opportunities & threats for soft drinks in Asia EXPORT OPPORTUNITIES IN ASIA + -
  • 30. © Euromonitor International 30 THANK YOU FOR LISTENING Erika Sirimanne www.euromonitor.com
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