October 7, 2008

Health Focus Raises Interest

By Bainbridge, Jane

Squash and cordial manufacturers are tapping into healthy-eating trends in their fight for share against rival softdrink. By Jane Bainbridge Today's children may find it hard to believe, but when their grandparents were young Ribena was the height of luxury. Parents now indulge their offspring with smoothies, fresh juices and bottled water, but only a generation earlier, tap water flavoured by a dash of syrupy squash was considered a treat for kids.

Cordials and squash - the former defined as typically being diluted one part concentrate to eight parts water, compared with the letter's one part concentrate to four parts water - have struggled against an ever-greater choice of rival soft drinks, including mineral water and fruit juice, many of them perceived as healthier. The weather also has a big impact on the sector; last year's wet summer held sales back.

In 2007, sales of dilutables excluding ready-to-drink juice drinks reached a value of Pounds 435m, according to Mintel. While volumes have grown 3% since 2003, in value terms, sales fell 6% over the period. This drop is a consequence of deflationary price pressures; as retailers have cut the price of own-label squash, the leading brands have had to do the same. This restricts the market's value, but also means this category has a price advantage over rival soft drinks.

For the environmentally-conscious, squashes and cordials have a smaller carbon footprint, as their dilution means a bottle lasts longer than RTDs or carbonates; and as manufacturers adapt their formulations to exclude artificial colours and flavours, healthconscious consumers might be more willing to try them. The products also enjoy flexibility in dilution strength.

At the premium end of the market, cordials, with their emphasis on natural ingredients, are achieving significant growth. In the past five years this subsector has grown 50% to Pounds 12m. It remains a niche part of the market, accounting for only 3% of its value, but this is an encouraging performance.

A key development has been the rise in demand for products with no added sugar, which account for almost 70% of volume sales. Research suggesting a link between some food colourings and hyperactivity has made parents more vigilant about these ingredients, but while more consumers are avoiding squash containing artificial colours and flavours, they seem happy to put up with artificial sweeteners as a way of reducing their sugar intake.

'There have been a variety of flavour innovations as trusted brands have launched more exotic ranges, such as Ribena's Raspberry & Pomegranate, capitalising on consumer interest in antioxidant- rich superfruits,' says Charmaine Holmes, senior analystbeverages at Zenith International.

GlaxoSmithKline's Ribena remains synonymous with blackcurrant squash, but has added variants including Really Light Blueberry in line with the trend for more berry flavours. It also updated its bottle design last year.

Britvic's Robinsons brand dominates the sector, however, having gained share through NPD and marketing support. Mainly family- oriented, with brands such as Fruit & Barley and High Juice, it is committed to avoiding artificial colours and flavours.

Rocks Organic is a premium squash and cordial brand positioned as a natural option, containing no artificial sweeteners, flavours, colours or preservatives. Once opened, the products will last for only a few weeks in the fridge.

Bottlegreen, a premium cordial brand, has flavours such as Elderflower and Ginger & Lemongrass. Following a management buyout last year it has added children's cordial Bottlegreen Junior, aimed at four- to 12-year-olds, which is free from preservatives and artificial additives and colours. Flavour variants include Brill Blackcurrant & Apple and Oh So Orange & Mango.

There is room for sector growth, as household penetration is 63%, with over-55s the lowest users. Cordials should benefit as the population becomes older and more affluent; a fall in the number of under-14s will have the opposite effect on squash.

By 2013, Mintel predicts the sector will be worth Pounds 416m. This drop, of 17% in real terms, will result from a fall in volume and value in the squash market. Cordials will increase by 58% at current prices, but its smaller share means this will not boost the sector as a whole.

Robinsons bigger share than own-label

Ribena sales worth Pounds 49m in 2007

Copyright Haymarket Business Publications Ltd. Sep 3, 2008

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