July 07, 2015

HW drinks to outpace growth of softdrinks industry

Quoting a market research by Euromonitor, an article from the Malaya newspaper said health and wellness (HW) drinks (including fruit and energy drinks) sales will grow by 18.8% to P85b from 2014 to 2019. This will be faster than the projected 16.1% growth for the entire softdrinks industry.

Carbonated drinks sales meanwhile are seen to expand to P96b by 2019 from P91b in 2014. Among the factors contributing to the faster growth of HW drinks are the growing health-consciousness among Filipino consumers and increasing regulation affecting the industry especially carbonated drinks. Various bills are now pending in Congress which provide for higher tax on softdrinks and prohibiting drinks with high sugar and low fruit juice content.

Our take: Aside from shifting consumer preferences and increasing regulations, we believe that the aggressive expansion of retail and convenience store operators have contributed to the growth of the softdrinks market given that this has brought these products closer to the consumer.

Local manufacturers of carbonated drinks like Pepsi Cola Bottlers Phils Inc (PIP) have been preparing for growing demand for HW drinks by diversifying their product lines to include more non-carbonated drinks. PIP, for instance, has been growing its non-carbonated drink sales through its Gatorade and Tropicana Twister brands. This move has also enabled the company to lessen the impact of any wild swings in sugar price on their costs.

LT Group Inc (LTG) meanwhile should benefit from the expected stronger demand for health and energy drinks given the popularity of its Cobra energy drink. Based on the Malaya article, Cobra leads in the energy drink market in terms of sale and is the second biggest HW product with a 12.4% market share (next only to Tang’s 12.7%). – WealthSec