When Just Drinks published the 2020 annual soft drink review last December, many countries around the world were on the verge of imposing new lockdowns after a year of forced isolation. Twelve months later, and the retrospective is terribly similar, the only difference being the names of the newly arrived COVID variants. Delta, Gamma, Omicron – like a wag on twitter put it recently, this is not how we wanted to learn the Greek alphabet.
In soft drinks, however, this year has not been a repeat of 2020. The shock of the arrival of COVID has given way to acceptance of the situation, and in turn to fewer business decisions. responsive. Longer-term plans to deal with changes in consumer behavior linked to coronaviruses have emerged and companies have rediscovered their confidence in the future, as well as in growing their revenue. Trends that accelerated last year, such as functional drinks, have become more mainstream, and what were once just nods to sustainable practices have become staples of corporate policy. business.
All is not rosy, of course. Inflation and supply chain challenges threaten immediate growth. Over the next year, these issues could metastasize into long-term issues that fundamentally change business models. 2021 may be remembered as the year these problems started.
In 2020, many beverage brand owners struggled to stock up on cans. This year, however, the problem has become a global puzzle. Metal packaging companies spent the second half of 2021 announcing new aluminum can factories to address shortages, but with these facilities not expected to go live for at least a year, operations managers have been left further and further away to meet the requirements. Monster Beverage Corp, for example, cited new co-packaging deals in India and China as they fell short of demand. Co-CEO Hilton Schlosberg called the shortages “heartbreaking” as he mourned the extra sales he could have made if the shelves had been stocked.
Behind the shortages has been an almost unprecedented rise in the cost of aluminum which has seen metal packaging giant Ball Corp take a US $ 30 million hit from inflation in North America. only.
It wasn’t just aluminum that was creating headaches for soft drink companies. The shortage of truck drivers and bottlenecks in some of the world’s major ports were lengthening delays and making forward planning a nightmare. In September, the co-founder of London-based soft drink maker Nix & Kix told Just Drinks: âFrom an operational standpoint, this has been by far the most difficult year I have ever seen.
Coca-Cola Co CEO James Quincey said supply chain issues were “a bit like a mole hit – things are popping up.” As a sign of the seriousness of the transportation problems, Coca-Cola was forced to haul heavy equipment on old-fashioned bulk carriers as space on container ships evaporated. For anyone hoping for relief, Quincey has had bad news: He expects the supply chain chaos of 2021 to spill over into next year.
Towards the second half of the year, and with inflation on the rise, management of the major players started talking about price increases. In May, Coca-Cola HBC CEO Zoran Bogdanovic told Just Drinks that price hikes were underway. In addition, he said, consumers displayed a âlive and spendâ attitude that would make higher purchase costs more digestible for them. As the year progressed, however, and everyone shifted higher input costs onto consumers, this prospect of freewheeling began to be questioned. If inflation continues next year, consumers’ patience will be strained, straining efforts to premiumize soft drinks.
- Out with the old, with the new
The fuzzy lines in the non-alcoholic beverage category became even more blurry in 2021 as companies expanded into new segments in search of growth. Coca-Cola, viewed for years as conservative in its innovation, proved to be atypically adventurous as it continued the global roll-out of Topo Chico hard seltzer water, this time in markets like China and Canada. Then, in November, the group made the largest single-brand spend in its history with the $ 5.6 billion purchase of BodyArmor sports drink.
It is divestments, however, that have proven to be more illustrative of the direction soft drinks are taking. PepsiCo has stepped away from control of North American juice brands Tropicana, Naked and others, a sign that cold chain drinks were no longer a priority, especially those with high sugar content. Rising fruit prices may also have played a role in PepsiCo’s decision.
As brand owners rushed to stock up on aluminum for cans, other metals were increasingly present inside the drinks themselves. Magnesium and zinc were two of the ingredients behind a new wave of functional drinks, some of which came from traditional players.
PepsiCo’s Propel Immune Support was packed with zinc, while Constellation Brands invested in a hop-flavored sparkling water containing a blend of L-theanine and ashwagandha. Another PepsiCo launch, SoulBoost, reflected the kind of focus on healthy mind and body typical of the new style of functional drinks.
A producer of magnesium-packaged water told Just Drinks that some of the launches stemmed from a desire by big companies to gamble in the CBD drinks arena but bypass regulatory hurdles related to cannabis and hemp.
These obstacles don’t seem to be going away any time soon. The soft drink industry has long waited for clarification on cannabis and hemp drinks, but the procrastination and increased confusion in 2021 means understanding is still a long way off. Meanwhile, a corresponding movement towards the legalization of cannabis around the world continues. Even the top US senators are behind the efforts to make it happen.
“We are literally changing the way the world drinks” – Just Drinks addresses Adult Soft Drinks Association CEO Marco Salazar