With almost 50 countries housing approximately 750 million people in an area of around 10.5 million square kilometers, Europe is the second-smallest continent after Australia. A melting pot of many different cultures, it goes without saying that beverage preferences – among many other things – often vary. In the following interview with KHS competence Emily Neill, CEO of Canadean, and Kevin Baker, account director for Canadean, talk about which areas this affects, which general trends are cur­rently discernible, the forecast development of the respective beverage segments and packaging variants, whether the issue of sustainability will continue to grow in importance for the beverage industry – and much more.

KHS competence: In your opinion, what chiefly distinguishes the European beverage market from the other beverage markets worldwide?

Emily Neill: At Canadean we see Europe as being part of the Old World, just like North America and Australasia. Here, many consumer habits have become well established and product growth rates are often only minimal. This also applies to beverages. For instance, for soft drinks in Europe we’re reckoning on an average annual plus of around 1% up to 2019. Considering that the forecast global growth rate is 4% and growth in Asia and in Africa and the Middle East is expected to be almost 8% or around 6%, that’s not much. Another significant factor is that in Europe we have an older population than in the New World and here tradition often plays a particularly important role when it comes to the beverages we drink. 

“In Europe both generic brands and premium products are increasingly gaining in significance.”

“Probably the biggest trend in all countries of Europe is the one for healthy products.”

Are the markets in Eastern and Western Europe just as traditional as one another?

Neill: Traditional markets play a less significant role in Eastern Europe. This is due to that fact that brand policy was not practiced before the fall of the Iron Curtain. However, there are some beverages here from the old days which have had a surprising amount of success. One good example of this is Poland’s traditional Tyskie beer.

What other differences do you see between the beverage markets in Eastern and Western Europe and where are there similarities?

Neill: In both markets we can see that generic brands on the one hand and premium products on the other are increasingly gaining in significance, with the middle segment the clear loser. As far as soft drinks are concerned, in both Eastern and Western Europe iced coffee/ready-to-drink coffee beverages and energy drinks are the two clearest growth categories at the moment. In Eastern Europe sports drinks, iced tea/ready-to-drink teas, fruit juice beverages and bottled water are also on the rise. In Western Europe we’re also seeing a plus in syrups. Where these two markets move in completely opposite directions, however, is with regard to juices, nectars and fruit juice beverages, for instance. Whereas juices are more popular in Western Europe, the east prefers nectars and fruit juice beverages, with powdered fruit also often purchased here. This behavior is probably partly due to Eastern Europeans generally being more economical when it comes to the beverages they buy. For example, Eastern Europe realizes 8% of the worldwide sales volume of non-alcoholic beverages and Western Europe 16%. In figures, Eastern Europe’s share is 6%, with the west accounting for 21%.

It’s also interesting to note that sparkling, low-calorie soft drinks are treated completely differently in the two halves of Europe. While the majority of Eastern Europeans spurn the synthetically produced sweeteners usually found in these beverages, Western Europeans primarily appreciate the reduction in calories. The result is that low-calorie soft drinks are permanently growing in Western Europe and currently hold an approximately 25% share of the market in the soft drinks segment. In Eastern Europe the same statistic is just 3%. However, through natural sweeteners like stevia I see a great way of enhancing the popularity of low-calorie beverages in Eastern Europe as well.

The markets of Western Europe are also well ahead of those in the east of Europe when it comes to the consumption of bottled water. Italy, Spain, France, Portugal, Germany and Switzerland are all traditional water countries yet further growth here is unlikely. This isn’t the case in Eastern Europe, however, where growth in this segment is being driven by the fact that bottled water is an affordable, healthy hydration option.

Kevin Baker: If we look at the markets for beer in Eastern and Western Europe, habits have become very similar. It’s extremely interesting to note that there’s a growing interest in wine in what used to be typical beer countries and that classic wine-drinking countries are now discovering beer for themselves. In Italy, Spain, Portugal and Greece, for instance, I think there’s still plenty of room for improvement in the per capita consumption of beer. At the moment it’s the economic situation in Southern Europe which is probably responsible for the rather slow development in the consumption of beer here. As far as spirits are concerned, I’m seeing a further drop in sales in Western Europe but a growing trend in many countries of Eastern Europe in comparison. The exceptions are countries like Poland and Russia, where various legal and fiscal hurdles are now in place. In general, we’re reckoning on ’white’ spirits, such as vodka, tequila and gin, growing at the expense of ’dark’ spirits like whiskey and brandy.

For a long time the countries of Eastern Europe were also seen as growth markets for beer. Do you see potential here for the future?

Baker: Yes, we do. Certain Eastern European markets could definitely experience further growth in beer sales if the economic situation improves. It’s often also legal restrictions which are responsible for a drop in beer consumption here. Fiscal restrictions in Russia and a ban on the sale of beer at kiosks, a distribution channel through which about 30% of all beer is sold here, have caused a massive downturn. Discussions are currently being held here as to whether beer should still be allowed to be marketed in big PET bottles. As large PET containers are very popular in Russia especially, this would put another real damp­ener on the country’s beer consumption. All told, I think that little will change in the ranking of Europe’s beer-drinking countries, both now and in the future. The Czech Republic, Bulgaria, Austria, Estonia and Poland will probably also be the top five consumers per head in the next few years.

What’s the situation like for soft drinks, wine and spirits?

Neill: Pretty similar in all three segments. As already mentioned, the European market is rather traditional, even if we reckon on there being slight shifts here and there. For instance, with soft drinks we’re assuming that the various countries’ market share in Europe’s consumption of soft drinks will change only slightly by 2020. Germany and France will remain on top and we estimate that Russia will replace Italy in third place. Turkey is moving up on Poland and going from eighth to seventh place. Romania, currently ninth, is overtaking Belgium, the Netherlands and Ukraine.

Despite the chiefly traditional structures, are there any trends the European beverage market should adopt in the future?

Neill: Probably the biggest trend in all countries of Europe and across all beverage segments is the one for healthy products. Coconut water mixed with fruit juice and elderberry/tea or even ginger beverages are all proving popular with consumers, satisfying the desire for a healthy diet, wellness, naturalness and quality. Those beverage variants listed also suggest another trend, namely for innovation. Large beverage companies and small start-ups are all thought capable of innovation – as long as it harmonizes with the brand. And innovation doesn’t just mean trying out new beverage recipes and reviving nostalgic products but can also refer to the packaging. Simply swapping the classic PET bottle for a contoured one can already make a difference. We also shouldn’t forget that in the future the consumer will attach more and more importance to having the right product for his or her particular mode of consumption. This could help boost pouches in handbag format, for example. At a business meeting people envisage emptying a concentrate from a pouch into a glass and diluting this with water for an instant, healthy, tasty beverage; this is what consumers are already wishing for – and will probably want even more in the future.

Baker: As far as alcoholic beverages are concerned, the current health trend means that there’s a strong move towards products with a low alcohol content which can taste sweet. Both shandy and cider are profiting from this, for instance. Another trend noticeable in all beverage categories is the desire for premium products. People are identifying themselves more and more with brands and are being increasingly judged by others according to which brand they choose. At the same time this makes it more and more important for the beverage industry to create experiences and stories surrounding their product. In doing so, they mustn’t forget to always act sustainably an

Neill: The social media especially are making companies ever more transparent and any failures or mishaps are beamed round the world in a few seconds. The positive aspect of this form of communication is, however, that information can be passed on incredibly quickly, allowing products to be experienced in very different ways that were previously not possible.

Words like “experience factor", “premium product” and “innovation” fit in with the concept behind many craft breweries. Are they therefore up to the minute?

Baker: They certainly are! Craft breweries are willing to experiment and often have their own individual concept; they market products which are fun to drink and fun to produce and frequently introduce surprising beer creations to market. Originally a North American phenomenon, craft breweries can now be found on all continents. They’re even well established in Europe but will probably not grow as fast here as in the USA, I think. This is because here in Europe we already traditionally have lots of different specialty beers. Before the advent of the craft brewery this wasn’t the case in the USA. I think that the share of what are known as craft beers on the European beer market will level out at about 5% in the long term.

“As far as alcoholic beverages are concerned, the current health trend entails a strong move towards products with a low alcohol content which can taste sweet.”

Neill: Craft breweries give consumers a sense of exclusiveness, authenticity and regionalism. Looking at the wider picture for a minute, they basically have the same image as small chocolate shops, traditional cheese dairies or farmers’ markets. By the way, there are more and more soft drinks producers who adopt a similar strategy springing up, with Innocent Drinks and True Fruits two good examples here.

Baker: In the spirits industry, too, there’s a growing trend for small batches of exclusive products and for specialized, small distilleries with a history that has consumers fascinated.

Let’s talk about packaging now. What trends do you see here?

Neill: As far as beverage packaging goes, the PET bottle will experience the strongest growth worldwide. We estimate an annual plus of around 6% for PET, with just about 3% for the glass bottle and the can. Internationally and within Europe soft drinks are the main force driving the growth of plastic bottles. For wine and spirits these lightweights are more or less exclusively used for outdoor events. The traditional glass receptacle is otherwise the packaging of choice. We forecast that this will remain so in the next few years, too. With beer we’re reckoning on the plastic bottle also being popular in the future in Europe – chiefly in Eastern Europe – while in the west it won’t see a growing acceptance. The can will remain a convenience packaging in all beverage segments – which can also be a form of status symbol. One example of this is drinking hip energy drinks out of the can. Glass packaging is also being increasingly seen as a form of premium packaging, especially as it’s primarily used in restaurants and bars.

Do you see a trend towards even lighter PET bottles in the future?

Neill: Definitely. Lightweighting is becoming more and more important. Not just because this cuts production costs but also for reasons of sustainability.

If you could give the European beverage industry a recommendation for a successful future in just one sentence, what would it be?

Neill: Watch how trends develop and stay as innovative as your market allows, otherwise you may be overrun by your competitors faster than you’d like.

Many thanks for this interview.*

* The interview was chaired by Friederike Arndt