Convergence ‘megatrend’ will marry soft drinks to dairy in 2012, Rabobank

By Ben Bouckley

- Last updated on GMT

Related tags Soft drinks Pasteurization Pepsico

A runaway sales success for Coke in China, Super Milky Pulpy Juice (milk powder, whey protein, juice, coconut flakes) is the firm’s latest $1bn brand
A runaway sales success for Coke in China, Super Milky Pulpy Juice (milk powder, whey protein, juice, coconut flakes) is the firm’s latest $1bn brand
Consumer demand for health and wellness beverages worldwide is leading to greater convergence between soft drinks and dairy beverages, according to Rabobank.

In the new report, ‘Best of Times, Worst of Times: Global Beverage Outlook 2012’, the food and agribusiness bank’s authors wrote:“The world’s thirst for protein drinks, prebiotics and other functional drinks has led to a burst in new product creations.

“The convergence between soft drinks and dairy beverages continues to attract global beverage companies such as Coca-Cola, PepsiCo, Suntory and Danone.”

The analysts noted that, in 2010/11, PepsiCo acquired Russia’s leading juice company Lebedyansky and its top dairy player Wimm-Bill-Dann, and had also entered a joint venture (JV) with Saudi Arabia’s Almarai Dairy.

In addition, PepsiCo acquired Beyti (an Egyptian juice and dairy concern) and signed another JV with German dairy player Müller to exploit the US market.

“Coca-Cola’s announced goal of doubling its revenues by 2020 provides further impetus to also explore newer segments such as hot drinks, dairy and soy-based beverages,”​ Rabobank’s analysts wrote.

“Given the size and scope of these new initiatives, we are likely to see the increasing convergence of soft drinks and dairy beverages around the world in 2012.”

PepsiCo sees potential

Rabobank’s predictions tally with recent comments made by PepsiCo’s general manager for global nutrition, Sam Lteif, speaking at the International Dairy Foods Association (IDFA) annual forum event last month.

Lteif told delegates that dairy had “tremendous potential”​ within PepsiCo’s global growth strategy, and suited the nutritional needs of all consumer groups.

In their outlook report, Rabobank’s analysts picked out ‘segment convergence’ as a key “megatrend”​ accelerating across all segments, beyond major soft drinks players alone moving into dairy.

Beer distributors were also acquiring wine and spirits distributors, while breweries were buying soft drinks brands, they noted, where convergence increased scale and created supply chain efficiencies.

Nonetheless, the convergence trend was visible to differing extents throughout the world, the authors wrote.

“Convergence between beer and spirits distribution in the US has just begun, as US beer distributors are starting to look beyond a stagnant beer market for new growth opportunities,”​ they said.

“In China, convergence between soft drinks and dairy segments is already well advanced. For example, it has already helped Super Milky Pulpy Juice to become Coke’s latest $1bn brand.”

Fastest growing categories

Elsewhere, ‘juice drinks’ and ‘nectars’ were the fastest growing categories within the fruit juices segment, Rabobank said, predicting a rise in global consumption of 3.5bn litres in 2012 to 70bn litres this year, with China, Russia and India spurring growth.

For 2012, the analysts predicted that fruit juices and nectars would see 9% and 4% growth respectively, but that orange and apple farmers were unlikely to benefit much, given that most growth was occurring in products with a sub 25% juice content.

Consumers were also hankering after more exotic fruit juice flavours, Rabobank said, while other product innovations combined juices with other beverage categories, in new nods towards the convergence trend.

“The emergence of smoothies is a good example. The benefits of this category combine different consumer trends in one drink,”​ the analysts wrote.

“At the moment, smoothies still have a small market share within the overall fruit juice category, but in most countries growth rates are significantly higher than for juice drinks overall.”

Other emergent formats included fruit juices mixed with carbonated soft drinks and fruit drinks with sports and energy drinks, the analysts added.

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