The global nonalcoholic beverage market size was valued at USD 967.3 billion in 2016. The market is anticipated to grow at an estimated CAGR of 5.8% from 2017 to 2025 owing to factors such as rising disposable income, population growth, and changing lifestyle. Increasing concerns regarding obesity and health awareness are expected to trigger the growth of functional beverage and bottled water product segment, while at the same time limit the demand for carbonated drinks.
The nonalcoholic beverage industry is regulated by various international and national regulatory authorities across the globe. Companies in this industry heavily use resources such as water and electricity, which are considered to be scarce.
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Government policies along with the rising societal awareness toward environment & energy conservation have resulted in more stringent emission and environment protection policies. The Clean Water Act, The Clean Air Act, and The Resource Conservation and Recovery Act are several comprehensive regulatory frameworks in food and beverage market that are intended for environment and energy conservation.
Growing concern toward obesity and other health problems is reshaping the global nonalcoholic beverage industry. The demand for functional beverages, such as relaxation drinks, energy drinks, and ready to drink coffees and teas, is gaining popularity owing to their low-calorie contents.
Growing consumption of energy drinks due to hectic schedule, urbanization, and rising health concerns are expected to drive market growth. According to the data published by Department of Economic and Social Affairs, U.S., in 2012, approximately 1.5 million people of the world population were added to the urban population every week. Roughly 60% of the global population will reside in urban areas by 2022, which is projected to drive the industry growth.
Growing population and disposable income along with rising number of value-oriented smart consumers are developing the overall industry. Increasing consumption of takeaway products due to busy lifestyle coupled with rapid urbanization is expanding the market. Asia Pacific followed by Middle East & Africa are anticipated to register a significant growth over the forecast period owing to the presence of emerging economies, high disposable income, and various untapped markets.
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Company market shares
Latest trends & dynamics
The functional beverage is expected to emerge as the fastest growing product segment over the forecast period. The growth is attributed to the rise of smart consumers that are more value oriented and concerned toward health. Key companies have well-established marketing intelligence department responsible for capturing the experience of valuable and critical customers at each point of customer encounter with company’s products and services. Most of the companies have also started the development of their good-for-you healthy and functional beverage line by shifting from nutritive sweeteners to non-nutritive sweeteners.
The carbonated soft drink emerged as the most prominent product segment within this industry in 2016 and represented over one-third of the global demand. Change in consumer preference owing to an increase in awareness toward healthy and green products is pushing the industry toward developing herbal products. Manufacturers are focusing on developing beverages made from plant-based protein such as grain, soy, almond to cater the demanding customers.
Growth in smart consumers who are more health conscious and value-oriented is pushing the industry toward changing the focus from carbonated soft drinks to functional beverages. Fruit beverages segment is the second-largest segment owing to unique healthy properties and substitutes to carbonated soft drinks. Bottled water is projected to witness the second-fastest growth rate due to the rising awareness of the quality of tap water.
Distribution Channel Insights
Nonalcoholic beverage sales majorly depend on the ability of the industry player to bring diverse food products to the market and distribute them through a highly efficient distribution channel such as large-scale supermarkets or retailers such as Safeway, Walmart, and Carrefour. A significant factor contributing to the industry growth has been an increase in distribution channels and their reach in urban as well as rural areas.
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Nonalcoholic beverages are sold through a wide variety of distribution channels. These products have been increasingly supplied through hypermarkets, supermarkets, and convenience stores globally, displaying a strong presence of nonalcoholic products across the region. The food service providers, hotels, and restaurants are expected to be essential channels for propelling the industry growth globally. Supermarket and convenience stores emerged as the most significant distribution channel for nonalcoholic beverage products in 2016, and it is anticipated to progress with the fastest growth rate over the forecast period.
Food services and drinking places, which include takeaway outlets, fast-food joints, bars, and full-service restaurants, is the another primary distribution channel. The demand from this channel is projected to increase over the forecast period, and the segment is anticipated to witness significant growth rate over the forecast period.
Advancements in recycling and beverage manufacturing technology coupled with rising disposable income and standard of living are expected to foster the growth of this industry. The increase in demand with consideration of enormous population in developing nations, such as India and China, is creating a favorable market for increased production with high growth potential.
Asia Pacific emerged as the fastest growing region in nonalcoholic beverage industry owing to the presence of various untapped markets, huge population, and increasing disposable income. The region led by emerging economies, such as China, India, Thailand, and Malaysia, has a competitive advantage over other areas on account of availability of low-cost labor and raw materials. Increasing demand for various nonalcoholic beverages from these regions is expected to drive the global market. Make in India, 100% FDI in food, and One Belt One Road Initiative are attracting new entrants to establish their production & distribution facilities in Asia Pacific.
Growing production of beverages and investments in packaging technology are projected to enhance demand for various types of products across the world. Massive investments in development and blending of nonalcoholic drinks in North America are anticipated to surge preference for these beverage products.
North America accounted for the largest market for this industry in 2016 owing to the presence of developed economies and early adoption of soda products. The region, led by the U.S., is home to many globally renowned beverage manufacturers such as PepsiCo and Coca-Cola. Growing obesity problem in the U.S. and Mexico and taxes on sugar products imposed by the government are acting as restraints for CSDs and as drivers for products made by low-calorie non-nutritive sweeteners.
Product differentiation is a crucial factor in this industry, which is driving the research and innovation activities. Rapidly changing technology coupled with demanding customers results in pressure for product augmentation and new product development. Companies are spending heavily on research for developing new products to meet standards and regulations imposed across the regions. Product line stretching and extension has been a significant factor in achieving success in this industry.
In case of consumer goods, switching cost for the customers is meager, which means companies need to engage their customers through valued offerings with efforts to develop customer experience by creating more customer-centric organizational culture. Apart from a quality product, promotion is one of the crucial processes in improving brand recognition. Companies operating in this market are heavily spending on promotional activities, trying to create a unique brand image that provides a competitive edge over others.
Manufacturers are engaged in forwarding integration to increase their participation in the value chain. Combination of processes from inbound logistics to after-sales services is expected to become a new trend in this market. This is projected to lead to better quality and less costly final products, which will ensure optimum performance and provide maximum lifetime value.
Some of the companies engaged in the expansion of this industry include PepsiCo, Inc., The Coca-Cola Company, Nestle S.A., Dr. Pepper Snapple Group, Inc., The Kraft Heinz Company, Reed’s, Inc., Appalachian Brewing Co., Jones Soda Co., and Molson Coors Brewing Company.
Many key players, such as PepsiCo and The Coca-Cola Company, are promoting the e-commerce channel owing to the development of technology and adoption of smartphones. The direct and e-commerce sales channels are projected to provide more stability to companies by offering them alternative ways to market their products.
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