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2021 was certainly a challenging year for the soft drinks industry. Last year we had to deal with an accumulation of factors that forced the industry to "put out fires" in very many places at the same time. Long-term consumer trends, new legal regulations, high inflation on the raw materials and services market and the pandemic situation overlapped. As a result, many beverage categories suffered badly, with volume declines of up to 20%.
For many years we have been observing a progressive change in consumer behaviours. Consumers are increasingly health- and environment-conscious. They increasingly make choices based on the principle 'you are what you drink'. This is hitting hard on segments that are perceived as less health-promoting, such as the carbonated beverage market, which, let's not forget, is the largest segment of the non-alcoholic beverage market. Naturally, changing consumer expectations allow for the creation of new niches for natural functional beverages, which, for example, support the diet, make it easier to fall asleep, improve the functioning of the digestive system, reduce stress or improve mood. However, the emerging niches are not yet able to compensate for the declines observed in the large "traditional" categories.
In 2021, the introduction of the sugar tax was a major blow to the market. This levy hit several beverage categories, contributing to price increases and simultaneous decreases in sales volumes in carbonated drinks, flavoured waters or iced teas. Let us also remember that this is not the end of legislative challenges for the industry. On the horizon is the Extended Producer Responsibility, which will also significantly increase operating costs along the entire value chain.
The rapid price inflation of raw materials and services has not helped the industry either. The costs of basic raw materials, such as fruit concentrates and packaging, as well as electricity, transport and labour costs have skyrocketed, in some cases by tens to hundreds of percent.
These have all been superimposed on the effects of the COVID-19 pandemic. In 2021 they were already less noticeable than the year before, but the industry had not yet fully recovered from the lock-down periods, a deactivated or severely restricted on-trade channel, dramatically changed consumer habits resulting, for example, from reduced mobility or far fewer impulse buying occasions.
Despite the challenges posed to the soft drinks industry by 2021 and others yet to come in the following months, the drinks market is certainly still a promising one. Consumption of non-alcoholic beverages in Poland is still quite lower than, for example, in our neighbouring countries in the west, new market niches are emerging and growing rapidly. And, of course, many beverage producers have been very quick to draw conclusions from the painful lessons of the past 12 or even 24 months. Interesting product innovations are appearing on the market, a change in packaging mix to smaller sizes is observed, investments are being made in automation and production costs streamlining.
I invite you to read and look at the soft drinks market through the eyes of producers and PwC experts.
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