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KEY NOTE FRUIT JUICES AND HEALTH DRINKS : September 2002

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This report covers: fruit drinks, juice drinks, health drinks, soft drinks, smoothies, organics, Ribena, Red Bull, Solstis, Tooth Kind, Lucozade, Sunsweet, cranberry, prune, guala, lipovitan, Oasis, Um Bongo, Ocean Spray, Red Devil, Robinsons, Santa Cruz, Shloer, Juice Up, Calypso

Companies covered include: Britvic Soft Drinks, Cirio Del Monte Foods International, Coca-Cola Enterprises, Cott Beverages, Gerber Foods Soft Drinks, Princes Soft Drinks, Tropicana United Kingdom, Frucor Beverages, Valensina, Cott Corporation, Nantucket Allserve, GlaxoSmithKline, AG Barr, Calypso Soft Drinks, Merrydown, Nichols, Proctor & Gamble, Red Bull Company,

EXECUTIVE SUMMARY

Retail sales of fruit juices, fruit drinks and health drinks were valued at £1.88bn in 2001, having grown by 4.2 percent since the previous year. Household penetration is high and consumers are increasingly prosperous and able to indulge in non-essential but affordable pleasures. In times of economic downturn, they may choose cheaper lines but are unlikely to stop buying soft drinks altogether. In fact, non-alcoholic drinks are one of the most important grocery categories in the UK. Adults today have grown up with strong brands of soft drinks and continue to drink them as they get older, whereby they become introduced to their own families. The range of products is vast and the industry generates at least 50 new brands per year, as well as various brand extensions that all require considerable investment. Brand awareness and loyalty is strong with such names as, for example, Robinsons and Tropicana. However, consumers are also willing to try new products.

Consumer demand for convenience is a driving force and the industry has introduced different types and sizes of packaging to suit modern lifestyles - such as for drinking 'on the go' and to reflect the increase in the number of single households. The quest for convenience also explains the growth of ready-to-drink variants at the expense of more traditional cordials. Another driving force is health. Pure fruit juice including organic or low-sugar variants, as well as drinks containing added vitamins and minerals, are all seeing increased demand as consumers turn away from sugary drinks with additives. Sunny Delight, which was initially so successful, has been lambasted in the media for its content. This has brought some disrepute into the fruit drink sector, but is benefiting fruit juices ( e.g. Tropicana has continued to increase sales with successful innovations, such as its new Tropics flavours and its addition of calcium and vitamins).

Although there are strong brands in fruit juices and juice drinks, own label is also prominent. The introduction of supermarket economy lines has done little for value sales and has, arguably, damaged consumer perceptions through commodification. Even in branded lines, discounting is a feature with large price promotions such as 'buy one, get one free'. With prices under such pressure, increasing sales value relies on persuading consumers to opt for premium products, such as fruit smoothies. The energy and sports drinks subsector is a continuing growth area, although the introduction of many new variants is likely to put a similar competitive constraint on prices. One of the principal threats to the soft drinks market is the growing popularity of bottled water, particularly of still and functional water, as health-conscious consumers turn away from processed products and embrace the hydrating and detoxifying benefits of water.

Key Note anticipates annual growth of around 3 percent in the immediate future but, of course, the most important and unknown quantity is the weather. A cool and wet summer does not necessarily deflate demand but a long, hot one certainly stimulates it. This is particularly important to the impulse market, from which other outlets stand to win back some market share from the grocery multiples that currently dominate distribution of soft drinks.

TABLE OF CONTENTS

Executive Summary
1. Market Definition
report coverage	2
MARKET SECTORS	2
Fruit Juice	2
Fruit Drinks	2
Health Drinks	3
MARKET TRENDS	3
Packaging	3
Individual Servings	3
Healthy Options	3
Market Position	4
The UK	4
Overseas	4
2. Market Size
the total market	5
By Volume	5
Table 1: Juices and Juice Drinks by UK Manufacturers’ Sales by Volume (millions of litres), 1995-1999	5
By Value	5
Table 2: The UK Market for Fruit Juice, Juice Drinks and Health Drinks by Value at Current Prices (£m at rsp), 1997-2001	6
MARKET SECTORS	6
Fruit Juice	6
Fruit Drinks	6
Table 3: The UK Fruit Juice and Juice Drinks Market by Value at Current Prices (£m at rsp and percent), 2000 and 2001	7
Health Drinks	7
Table 4: The UK Health Drinks Market by Value at Current Prices (£m at rsp), 2000 and 2001	7
Overseas Trade	8
Table 5: UK Imports of Fruit Juices (£000), Year to December 2001	8
Imports and Exports	8
3. Industry Background	9
RECENT HISTORY	9
Number Of Companies	10
Table 6: UK Enterprises Engaged in the Manufacture of Fruit and Vegetable Juice and of Mineral Water and Soft Drinks by Turnover Size (£000), 2002	10
Employment	10
Table 7: UK Enterprises Engaged in the Manufacture of Fruit and Vegetable Juice and of Mineral Water and Soft Drinks by Employment Size (number of employees), 2002	11
REGIONAL VARIATIONS IN THE MARKETPLACE	11
DISTRIBUTION	12
HOW ROBUST IS THE MARKET?	12
LEGISLATION	13
key TRADE ASSOCIATIONS	14
British Soft Drinks Association	14
Association of the Industry of Juices and Nectars from Fruits and Vegetables of the European Union	14
Food Business Forum	14
4. Competitor Analysis
THE MARKETPLACE	15
market leaders	15
Britvic Soft Drinks Ltd	15
Cirio Del Monte Foods Europe Ltd	16
Coca-Cola Enterprises Ltd	17
Cott Beverages Ltd	17
Gerber Foods Soft Drinks Ltd	18
GlaxoSmithKline PLC	18
Princes Soft Drinks Ltd	19
OTHER COMPANIES	19
AG Barr PLC	19
Calypso Soft Drinks Ltd	19
Merrydown PLC	19
Nichols PLC	20
Procter & Gamble Ltd	20
Red Bull Company Ltd	20
Tropicana United Kingdom Ltd	20
LEADING BRANDS	21
Table 8: Top Ten Leading UK Soft Drinks Brands by Value (brand, supplier and £m), 2001	21
Own-Label Brands	21
OUTSIDE SUPPLIERS	22
Raw Materials	22
Processing and Packaging	22
Marketing and Distribution	22
Environmental Concerns	22
Advertising and Promotion	23
Still Fruit Drinks and Health Drinks	23
Table 9: Main Media Advertising Expenditure on Still Fruit Drinks and Health Drinks (£000), Years to June 2001 and 2002	23
Still Fruit Drinks	23
Table 10: Main Media Advertising Expenditure on Still Fruit Drinks (£000), Years to June 2001 and 2002	24
Health Drinks	25
Table 11: Main Media Advertising Expenditure on Health Drinks (£000), Years to June 2001 and 2002	25
Recent Promotions	25
J20	25
Sunny Delight	25
Powerade	26
Tropicana	26
Advertising Standards Authority Adjudications	26
Britvic Soft Drinks	26
Gerber Soft Drinks	26
Shark	26
In-Store Promotions	26
5. Strengths, Weaknesses, Opportunities and Threats
STRENGTHS	27
WEAKNESSES	27
OPPORTUNITIES	28
THREATS	28
6. Buying Behaviour
HOUSEHOLD EXPENDITURE AND CONSUMPTION	30
The National Food Survey	30
Table 12: Consumption and Expenditure on Soft Drinks in the Home, Excluding Fruit Juice (millilitres and pence), 1990, 1999 and 2000	30
Family Expenditure Survey	31
Table 13: Average Weekly Household Expenditure on Total Food and Non-Alcoholic Drink and on Fruit Juice, Squash and Bottled Water by Gross Income Decile Group (£, percent and £), 2000/2001	32
The Expenditure and Food Survey	32
consumer penetration	33
Frequency of Consumption	33
Table 14: Users and Non-Users of Ready-To-Drink Fruit and Vegetable Juices by Sex ( percent), 2002	33
Heavy and Medium Usage	33
Table 15: Heavy Users of Ready-To-Drink Fruit and Vegetable Juices by Sex (index=100), 1990, 1995, 2001 and 2002	33
Table 16: Heavy and Medium Users of Fruit and Vegetable Juice by Age and Socio-Economic Group ( percent), 2002	34
Light and Non-Users	35
Table 17: Light and Non-Users of Fruit and Vegetable Juice by Age and Socio-Economic Group ( percent), 2002	35
7. Current Issues
CLOSURES, MERGERS AND ACQUISITIONS	36
Natural Fruit & Beverage Company	36
Britvic	36
NEW PRODUCTS	36
Re:Juice	36
Tropicana Smoothies	36
Ace Refresh	36
Fruit Break and Fruit Shoot	37
Ant	37
MATTERS AFFECTING THE INDUSTRY	37
Sweeteners	37
Healthy Choices	38
8. The Global Market
Introduction	39
GLOBAL NEWS	39
Frucor Beverages Ltd	39
Valensina	39
Cott Corporation	40
Nantucket Allserve	40
9. Forecasts
introduction	41
future trends	41
Table 18: UK Population Projections (000), 2002 and 2007	41
Growth Areas	42
New Product Development	42
Future Corporate Activity	42
Forecasts 2002 to 2006	43
Table 19: The Forecast UK Market for Fruit Juices, Juice Drinks and Health Drinks by Value at Current Prices (£m at rsp), 2002-2006	43
10. Company Profiles
Britvic Soft Drinks Ltd	45
Cirio Del Monte Foods International Ltd	47
Coca-Cola Enterprises Ltd	49
Cott Beverages Ltd	51
Gerber Foods Soft Drinks Ltd	53
Princes Ltd	55
Tropicana United Kingdom Ltd	57
11. Further Sources
Associations	59
Publications	60
Directories	60
General Sources	61
Bonnier Information Sources	61
Government Publications	63
Other Sources	64

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Last updated by Amanda Porteous February 2004