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Headwinds Persist for the Beverage Industry in 2013

17 June 2013

Headwinds Persist for the Beverage Industry in 2013, but Beverage Producers and Retailers Adapting to a ‘New Normal’

QBT1-13 Press Release_Jun13

The first quarter of 2013 saw little respite from the challenges of 2012 for the European beverage industry. Increasingly tough austerity measures, price hikes and soaring unemployment rates all continued to take their toll on beverage sales. Even an early Easter provided little stimulus, as an extended period of well below average temperatures in many key markets curtailed consumption levels. Canadean’s recently published Quarterly Beverage Tracker reports that West Europe commercial beverage sales declined by nearly 1% with all countries registering a flat to negative performance. East Europe, whilst flat overall undermined by sharp contraction in beer, saw continued buoyancy in results from Turkey and Poland.

With recovery in the eurozone still seemingly remote, branded producers and retailers alike are adapting their strategies to a ‘new normal’ of economic challenges and emerging duality in consumer trends.

While many consumers have become increasingly value for money-oriented in their buying decisions and opting to trade down, there is also a propensity for trading up for indulgent/treat purchases for home consumption. Even in some of the most cash-strapped markets for example consumers may on occasion indulge in a more expensive bottle of wine to drink at home rather than go out. This scenario has, of course, its counter trends.

For branded producers discounting and promotions have become the norm in a bid to capture sales; a scenario which is inevitably narrowing the price differential with Private Label offerings. Retailers, meanwhile, are not only increasingly pushing the boundaries of their own label development to cover a range of low cost to premium products, but also continually reviewing and delisting lower selling branded product to make shelf space for their own alternatives.

Continued economic fragility, the risk of recession in Russia, political unrest in key regional markets such as Turkey, the threat of taxation on soft drinks in many markets and raw material price hikes, remain the most influential factors in the prospects for the European commercial beverage industry in 2013. Many recent corporate announcements all point to the challenges ahead, with companies working to turn around the trends by adapting and finding new routes to growth and value enhancement.

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