Marked divergence in East and West Europe commercial beverage performance, as West Europe ends 2012 on another quarterly low
28 February 2013
After a welcome upturn in some key beverage categories in Q3, there was little festive cheer for West Europe in the final quarter of 2012. Overall quarterly commercial beverage volumes dropped by nearly 1% on the corresponding quarter of 2011. East Europe fared better, posting a third consecutive quarter of growth; albeit low.
The economic volatility plaguing the euro zone, combined with swingeing tax and VAT increases and spiraling commodity costs continued to take a heavy toll on confidence levels. Canadean’s quarter four mood monitor highlights strongly the pervading uncertainty in industry sentiment. In West Europe 60% of markets registered uncertainty, and in East Europe two-thirds. Only Russia, Germany, Norway and Italy indicated any rise in confidence. Meanwhile, eye-wateringly high levels of unemployment amongst the 15-30 age bracket in many key markets continues to impact heavily on soft drinks and beer consumption levels in particular.
With consumer budgets increasingly tightening, retailer Private Label lines are reaping the benefit. In the final quarter of 2012, Canadean’s beverage consultants reported that in all but two West European markets, France (where major brand owners lowered their packaged water prices to fuel retail sales) and Switzerland (where Migros is the traditional retail power house), Private Label was performing either in line with or outperforming branded product. In East Europe, twelve out of eighteen markets - in contrast to eight out of eighteen a year ago - reported Private Label performance either in line with or outperforming branded product; a reflection of the growing foot print of the modern retail format in East Europe.
Canadean’s provisional estimates for 2012 suggest that of the overall commercial volume decline in West Europe, soft drinks was responsible for three-quarters. This is in marked contrast to East Europe, where soft drinks was the key contributor to the total incremental volume.
Interestingly, the overall commercial beverage decline in West Europe in 2012 is on a par with that in 2008; the year that the collapse of Lehmann Brothers triggered the onset of the global financial crisis. Within West Europe provisional estimates indicate no sizeable growth in any market in 2012; all registering either flat or negative performance. The picture in East Europe appears less bleak, buoyed by the triumvirate of Russia, Turkey and Poland.
With no clear end in sight to the eurozone’s problems, 2013 heralded in with another raft of tax and VAT increases, political instability in some major markets and further hikes in commodity costs on the horizon, the trading environment for 2013 looks likely to be as troubled as that in 2012.
Chart - East & West Europe: Commercial Beverage Performance, 2012P v 2011 (% Change)
Source : Canadean