By Dan Bolton
Hot summers and rising affluence made carbonated soft drinks the main driver for revenue in the Asia/Pacific region until recently. Now younger consumers “prefer healthier alternatives," such as 100% natural juice and tea in a market that currently consumes 2 billion liters annually, a number expected to increase to 3 billion liters per year by the end of 2027.
“This change in behavior is opening up opportunities for native and D2C brands to penetrate the market,” according to PipeCandy market research analyst Vijaya Sripada.
In volume, the Asia/Pacific (APAC) region "reigns supreme," according to a report by PipeCandy, with India and Chinese markets driving growth in the non-alcoholic beverage category. The most promising of these new products offer functional benefits, organic ingredients, and unconventional flavors.
Worldwide, the (non-alcoholic/liquid refreshment) market is valued at $1.68 trillion in 2020, rising to $1.89 trillion in 2023, according to PipeCandy. Carbonated soda (CSD) accounts for $201 billion in Asian sales, generating an average $90 per person per year in revenue according to a pre-pandemic estimate reported by PipeCandy. Statista market research values the Asian market at $297 billion, estimating the CSD segment at $177 billion. Revenue per capita from all non-alcoholic beverages averages $67.50 per person, according to Statista, which counts only bottled water, soft drinks, RTD tea, and juices and excludes hot drinks.
According to Fredonia Focus Reports, the CSD market in the US shrank at a 1.6% combined annual rate during the period 2012-2017. CSD was the main driver for revenue Asia for decades. But in recent times, consumption of CSD has declined as young consumers prefer healthier alternatives. The decline is pronounced in the US, where subcategories such as RTD coffee and tea, premium juices, enhanced waters, and probiotic drinks have eroded CSD’s market for the past 25 years.
Rising prices sustain the industry, but the long decline is expected to continue, falling nearly 1% per year through 2023, according to Soft Drinks: United States. In response, Coca-Cola, the world’s largest beverage company, announced this summer it will realign is offerings into the following verticals: Coca-Cola, Sparkling Flavors, Hydration, Sports, Coffee and Tea, Nutrition, Juice, Milk, and plant and emerging categories.
In contrast, growth rates projected for tea are significant despite pandemic-related setbacks in out-of-home consumption. Globally beverage sales in foodservice account for $2 of every $5 spent on non-alcoholic drinks.
In its October 2020 Tea Forecast, the Economist Intelligence Unit (EIU) notes that “tea consumption has been growing steadily in recent years, driven mainly by China, which accounts for nearly 40% of world tea consumption and is drinking ever greater quantities of green tea.”
"Black tea consumption will continue to rise, driven in particular by its increasing popularity in China, but the pace of growth will be outstripped by that of green tea, fruit tea, herbal tea, rooibos, purple tea, and high-quality organic tea, reflecting their greater reported health benefits and heavy marketing," according to EIU.
“Iced tea and other ready-to-drink tea beverages account for a small share of the market, but have seen rapid growth in sales in recent years—notably in the US, but also in traditional markets such as China, albeit from a low base,” according to EIU.
“However, given that these varieties are disproportionately consumed in the out-of-home sector, demand will weaken sharply in 2020 as the coronavirus spreads, before recovering only partially in 2021, and more firmly in 2022,” according to EIU.
Report Linker predicts foodservice sales will recover with rising demand for mobile foodservice boosting growth. According to Report Linker, sales will grow to $266 billion during 2020-2024, progressing at 4%. Research and Markets project the beverage market will grow 4.6% annually, increasing globally to $1.074 trillion in sales by the end of 2024.
E-commerce beverage sales will grow from $14.9 billion globally in 2019 to about $22.4 billion in 2020, according to Research and Markets. Statista estimates that 4% of total consumer spending on food, drinks, and tobacco products will be attributable to online retail in 2020.