“There can be no doubt that BRIC markets have delivered tremendous growth opportunities for beverage companies over the past decade," the report notes. "However, beverage companies must now adapt to slower growth in BRIC markets by implementing new strategies to reach consumers more efficiently.”
In the report, the bank’s Food & Agribusiness Research team says that demand from BRIC markets, which has long driven global beverage growth, is moderating, leaving global beverage companies with the need to find new market opportunities and growth strategies for the future. Beverage companies will need to adapt to this new landscape by pushing strategies for mature markets where consumer demand is slowly recovering.
“Brazil, Russia, India and China have led the largest economic transformation in modern history, changed global commodity markets and created an entirely new ‘middle class,’” states Rabobank analyst Ross Colbert. “Growth in the BRIC markets is now slowing and beverages companies must seek sustainable growth ‘beyond the BRIC road.’ The global beverages industry remains highly competitive and success can be achieved in markets smaller than those of BRICs. Strategic initiatives such as direct-to-consumer selling, co-manufacturing and developing more efficient distribution platforms can help mitigate the impact of softer volumes in BRIC markets.”
Despite anticipated slower growth among BRIC beverage markets generally, there is still a positive growth outlook in some subsector markets. In China, while fine wine consumption is on the decline, consumers have sought out lower-priced wines to maintain an overall positive outlook. 2014 will also see the effect of the upcoming World Cup manifest itself in growth volumes of carbonated soft drinks (CSDs) and beer in host country Brazil. Coca-Cola, for example, has made a massive investment in the immediate consumption channel that will help sustain growth in 2014 and beyond.
An overview across global beverage markets is outlined in the subsector summaries, below.
• BRIC countries have accounted for 85% of absolute beer volume growth in liters in the last five years. For 2014, expectations for BRICs are more subdued with expected growth of 3.8% in 2014 compared to 3% globally. India offers the greatest potential for long-term volume increases amongst BRICs.
• In wine, BRIC economies have presented a welcome boost to consumer demand in a period when developed markets faced severe headwinds.
• For western spirits companies, BRIC markets will continue to present important opportunities in 2014, albeit in the context of government policies. Excessive spirits consumption controls will continue to disrupt the general spirits category in Russia, and the campaign against corruption in China, launched in the fourth quarter of 2013, has been having a negative impact on high-end spirits consumption.
• Growth of soft drinks will continue to move to lower priced, emerging markets meaning volume growth will continue to exceed value growth.
• Facing significant headwind in developed markets, Brazil will continue to be the leading driver for global growth of CSDs over the next three years.
• Fruit juice volume is expected to grow by 3% in 2014. This growth is dominated by BRICs, which together account for almost 60% of the total increase in liters.
• Bottled water will continue to lead soft drinks volume growth globally, delivering over 55% of what is projected.
Coffee and Tea
• The oversupply of global coffee that characterized 2013 is forecast to last well into 2014, with the expected bumper crop of 60 million bags from Brazil. With the outlook for lower prices, demand for coffee is expected to remain strong in the year ahead.
• Instant coffee is also expected to drive value and volume growth in 2014 in developed markets, such as Russia, which is already seeing an overall premiumization trend across beverages.
• The global tea marketplace remains highly fragmented and therefore provides ample room for large tea companies to expand across international markets in 2014. This is especially so for China, which is forecast to account for half of global tea growth through 2017.
Colbert concluded, “There can be no doubt that BRIC markets have delivered tremendous growth opportunities for beverage companies over the past decade. However, beverage companies must now adapt to slower growth in BRIC markets by implementing new strategies to reach consumers more efficiently.”