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Europe Q2 beverage sales suffer as adverse weather exacerbates impact of macroeconomic challenges

01 October 2013

The cold start to 2013 seeped into quarter two, with many key markets across the region experiencing historically low average temperatures for the time of year. Severe flooding in Germany and parts of central Europe further undermined quarterly consumption – especially in the important on-premise sector. Whilst East Europe suffered only a minor contraction in commercial beverage sales, in West Europe the rate of decline accelerated on quarter one.

Europe Q2 beverage sales suffer as adverse weather exacerbates impact of macroeconomic challenges

In addition to the weather impact, the ongoing macroeconomic challenges in the eurozone were clearly attributable. It is, however, important to note that Q2-13 lacked the Easter stimulus of Q2-12, and the boost provided by the European Football championships in June last year to soft drinks and beer.

With recovery in many key economies continuing to be fragile and austerity measures, particularly in southern Europe still rife, consumer spending remained weak during the quarter. Fears of redundancy and soaring youth unemployment rates in markets such as Spain (now running at 56%), curtailed consumption and led to shifts in consumption patterns. Tax hikes and VAT increases, which served to push up beverage prices in some markets, also played a role in curbing demand. Across the region the impact of record high sugar prices can also be seen to be putting pressure on soft drinks prices. Sugar prices in the EU have peaked this year at €738/ton – an all-time high.

Against this backdrop, the beverage market continued to see a high level of marketing and pricing activity, as retailers and producers sought to find a balance between consumer spending constraints and the need to sustain margins.

Aggressive price promotions were witnessed, particularly by the multinationals, with extensive multipack and ‘buy one, get one free’ offers in supermarkets and hypermarkets to compete better with Private Label. In Germany and France the expanding brand coverage of the discounters saw branded soft drinks prices pushed down to virtually the level of Private Label.

Looking forward, whilst Q3 has been more auspicious for the European beverage market with soaring summer temperatures in many key soft and beer consumption markets, and a more optimistic economic outlook for markets such as Germany, France and most recently the UK, whether H2 will be able to recoup the losses of H1 looks unlikely.

This information is based on findings from the latest Canadean Quarterly Beverage Tracker report published in August 2013.

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