U.S. beverage industry lost US$11.8B in retail sales to the recession of 2008-2009, BMC estimates; most of impact was on liquid refreshment beverages, with bottled water segment seeing a nearly 6% sales drop
July 2, 2010
Liquid refreshment beverage categories especially hard hit
The U.S. beverage industry lost the equivalent of almost $12 billion in retail sales to the recession of 2008 and 2009, a new report from Beverage Marketing estimates. Most beverage categories underperformed original projections that the company calculated prior to the downturn, as outlined in the newly released study The U.S. Beverage Industry Confronts Economic Challenges.
The United States entered into a recession in December 2007 and by most accounts it ended in July 2009. The souring of the economy for these 20 months affected all sectors, beverages included. The negative impact can be observed in the differences between predicted and actual retail sales.
Most beverage categories had 2009 retail sales that were less than those first projected by Beverage Marketing in spring 2008. Overall retail sales grew by 2.0% in 2009. They were projected to grow by 3.3%. This resulted in a shortfall of $5.9 billion in 2009. An identical shortfall occurred in 2008. With 2008 and 2009 in aggregate, the industry lost an estimated $11.8 billion in sales due to the weakened economy. Most of the impact was on liquid refreshment beverages, which lost an estimated $11.0 billion in retail sales in the last two years. For instance, the formerly vigorous bottled water segment, previously on track for continued growth, saw retail sales decline by nearly 6% in 2009, and category off–shoot value–added water decreased even more precipitously. Of all the liquid refreshment beverage segments, sports beverages suffered the harshest setback, with retail sales contracting by nearly 16% in 2009.
Consumers in some cases traded down to less expensive products and in many categories private label has grown. Bottled water has seen a reduction in price per case. Even private label waters lowered their price in the last two years. Not surprisingly, high–end imported waters are struggling. In the carbonated soft drink and fruit beverage categories, companies have remained relatively firm in their pricing despite volume contractions. Put simply, higher commodity costs means companies often must choose between volume and profit. Most opted for the latter, including Coke and Pepsi, who sought to avoid the rampant discounting of carbonated soft drinks that occurred in supermarkets in the 1990s. Private label is growing in no small part due to the improvements in the packaging and formulation of private label products over the past two decades. As a result, premium beverages like imported beer, high–end wine, enhanced water, sports and energy drinks have been hurt the most by the economic downturn.
New York City–based Beverage Marketing Corporation is the leading research, consulting and financial services firm dedicated to the global beverage industry. The U.S. Beverage Industry Confronts Economic Challenges is part of its Focus Reports series of concise reports on emerging beverage segments or on topics of particular interest to the beverage industry.