On-premise market

A year of two halves

Up to the end of June, soft drinks were performing exceptionally well compared with the same period last year. But in the second half the only sub-category that managed to grow sales at all was cola, driven by a strong performance from Pepsi.

Over the year as a whole, cola increased its market leadership. Its 42% value share was more than double that of lemonade, the other major sub-category, which maintained its 19% share. Apart from cola, the strongest value growth came from juice drinks and bottled water – both up 2%. Squash achieved modest growth (up 1%) but the other sub-categories – mixers, fruit juice, energy drinks and other flavoured carbonates – all lost ground. Flavoured carbonates bore the brunt, with sales falling 13%.

The initial effect of the smoking ban was difficult to gauge, given that it coincided with the adverse impact of the poor summer. Longer term, it may well have a positive effect: as pubs and restaurants become smoke-free, they become more family-friendly – and an increase in family occasions is good news for soft drinks. A Nielsen survey in October 2007 showed that 45% of British consumers are more likely to visit pubs now they are smoke free, while only 9% expect to visit less.

Analysis of channel performance shows that managed and leased/tenanted pubs grew soft drinks sales 3% and 4% respectively. This suggests that pubs with the resources to invest in post-ban strategies, such as increased food offerings and more outside heating/shelters, have been better able to maintain growth.

In the second half we saw new patterns emerging in on-premise sales. Sales were down overall, but there were winners and losers. Cola and lemonade continued to be the on-premise staples, but bottled water and juice drinks showed the biggest gains. This reflects the better-for-you trend and – as both are often consumed with food – the increased opportunity for pubs to attract diners since the ban. The growing importance of drinks to go with food may also have influenced the decline in energy drinks, which are more associated with drinking occasions.