Today, people’s aspiration for healthy living has been getting increasingly apparent in their habits and preferences. Along with sporting activities, consumers have been paying more and more attention to foods and drinks they choose. The focus on healthiness and nutritional value of beverages is becoming an integral aspect by all major players in the global food market. Eastern Europe is no exception – similar trends have been changing its beverage market, and its development potential is far from being reached.
In 2017, the retail market for non-alcoholic beverages in Eastern Europe demonstrated growth by 1.6% in physical terms. These results were primarily achieved through growing sales of bottled water. Said category increased by 3.5% in physical terms, and was only topped by sports and energy drinks in terms of dynamics. This mainly has to do with consumers desiring to eat healthy and the overall increasing awareness of product nutritional value. It should be noted that development of the bottled water market in a number of Eastern European countries is stimulated by low tap water quality.
On average, in 2017 residents of the Eastern European region drank 52 liters of bottled water per capita, 50% of the volume having been generated by Russia and Poland. Per capita consumption in the latter is already above average – namely 88 liters, whereas Russia’s potential for market development is not yet exhausted: in 2017, on average, Russians only consumed 36 liters of bottled water per capita.
Conventionally speaking, ‘health improvement’ is being observed within the category itself – consumers tend to opt for still water. For instance, the share of still water consumption in Eastern Europe has been increasing steadily, and today is amounts to 49%.
Russia is contributing to the picture: historically, large volumes of carbonated water in the country were caused by consumers perceiving it as a product with additional value. Changing consumer preferences, determined by increasing awareness of products as well as the desire for naturalness and healthy living, contribute to growth in the share of non-carbonated water in the Russian market – 54% in 2017 compared with 2012, when the indicator equaled 49%.
The modern consumer pays particular attention to beverages with such properties as functionality, healthy additives and ease of consumption. Market players react to said interest accordingly, by expanding their ranges with goods such as fruit infused water or sports and functional drinks as well as by modifying packaging to suit single-serving consumption.
Consumers’ enthusiasm in terms of active lifestyle contributes to an overall increase in the number of sports clubs. In turn, the rise of their popularity and accessibility contributes to growth in numbers of consumers interested in specialized foods and drinks.
In 2017, the category of sports drinks demonstrated the highest dynamics among all soft drink varieties – 16% in physical terms. This was not only due to the low base across the countries of Eastern Europe, but also due to the visible trend towards promotion of goods meeting certain demand (contribution to beauty and active lifestyle; additional vitamins). Information on products being accessible and consumers expressing increased interest in what they purchase help lower the barrier for consumers entering this formerly new market.
Bright prospects are awaiting the market for beverages with lowered sugar content as well. Concerned about excess sugar intake, obesity and empty calories, consumers in Eastern Europe end up reconsidering their preferences. The trend towards a decline in sugar consumption has a negative effect on sales of all traditional lemonades*, juices and iced tea. All these categories demonstrated a reduction in physical terms in 2017.
Growing demand for ‘light’ lemonades is to be highlighted. In 2017, retail sales of cola flavored lemonades marked as ‘light’ demonstrated growth by 2.4% in physical terms, which was due to the aforementioned trend as well as decent indicators of regular cola.
Beverage manufacturers’ tendency to lower sugar content is not only caused by consumers’ behavior, but also by attempts of the former to follow the market leaders. International giants such as Coca-Cola and PepsiCo are determined to follow the ‘healthy wave’ and intend to reduce sugar content in their products in the foreseeable future. The ‘anti-sugar’ campaign even involves political decisions in a number of Eastern European countries. In 2011, Hungary introduced sugar taxes, and for now it is the only country in Eastern Europe that joined said initiative. Similar measures by authorities are expected in 2019 in Estonia, and are remaining at the stage of discussion in Lithuania.
In 2017, growth in the retail market for soft drinks with reduced sugar content equaled 4% in volume terms, which was 2.5 times higher than growth in the market for soft drinks as a whole. Despite the healthy dynamics, the market for beverages with lowered sugar content is still in its infancy in terms of average per capita consumption, compared with the state of things in Western Europe. Hungary is currently at the cutting edge in terms of consumption of said products among Eastern European countries – in 2017, the average Hungarian consumer drank more than 14 liters of low-sugar beverages. For comparison, average per capita consumption of said beverages in Russia amounted to slightly more than a liter, whereas in Ukraine this indicator did not reach half a liter in the past year.
Increasing interest in healthy living had an impact even on such a seemingly unhealthy segment as ‘alcoholic beverages’. Along with the annual shrinking of the alcohol market, strengthening in positions of non-alcoholic beer can be observed in Eastern Europe. In 2016, retail sales of non-alcoholic beer demonstrated growth at 8.6% in physical terms, whereas the market for other alcoholic beverages declined by 1.7%.
Rapid growth of the non-alcoholic beer market was contributed to by a synergy of several factors: the ban on advertising of alcoholic beverages and forced promotion of non-alcoholic alternatives of the same name as a result; growing understanding of the importance of social responsibility; and, obviously, the ‘healthy trend’. It should be noted that consumers’ attitude toward non-alcoholic beer has been changing as well. While in the past it used to be perceived as a low-grade product, today it is regarded as a healthy, quality – and thus winning – alternative to regular beer with alcohol content.
Every year, new players and brands enter the non-alcoholic beer niche. This fact alone can serve as an indicator that the segment has potential for the near future. The shares of non-alcoholic beer in the beer markets of most Eastern European countries fluctuate within the 1–3% range in volume terms – Slovenia is currently the only exception with the share of 4%. Despite the expected rapid growth in the foreseeable future, the ‘healthy category’ will likely remain a niche solution rather than a widespread alternative to regular beer.
Consumers getting involved in healthy lifestyle trends in the foreseeable future will be affecting the market for beverages with healthy positioning. Consumers’ desire for health and wellness as well as a good appearance will fuel sales of bottled water. Said category will strengthen its leadership among soft drinks in Eastern Europe, and its aggregated average growth will reach 3.5% in the next 5 years. Sports drinks and functional water will be reaching maximum growth values, although they will not surpass their ‘big brothers’.
Consumers will be increasingly interested in and aware of what they eat and drink; this will contribute to development of innovative solutions in the food and drinks industry. More and more often, hybrid products will emerge, combining drinks and light snacks. Residents of large towns and cities will aspire to naturalness and quality of products consumed like never before, opening up new niches for development for players in the market.
* The category includes all lemonades with the exception of cola flavored lemonades.