Carbonates Industry In Algeria

TRENDS

• There was a growing consumer focus on health during the review period, with this linked to a rising incidence of diabetes in Algeria. Diabetes is estimated by the WHO to affect almost 10% of the population, with a rising incidence leading to growing demand for soft drinks. There was also growing awareness of the impact of sugary carbonate consumption on oral health, particularly among children. This trend had a mixed impact on carbonates. Low calorie carbonates benefited from consumers seeking to reduce their own and their children’s sugar consumption. Regular carbonates however suffered from constrained growth as a result of this rising health awareness.

• Carbonates saw a good 4% total volume growth in 2010 over the previous year. However, this represented a marked softening in growth in comparison to the review period CAGR of 8%. This was due to the impact of the economic downturn, which resulted in many consumers seeking to reduce their expenditure towards the end of the review period. Consequently, while carbonates saw 14% annual total volume growth in the first years of the review period growth slowed towards the end of the review period.

• In addition, growth rates slowed for carbonates towards the end of the review period due to rising competition from other soft drinks. This was linked to rising health-consciousness, with many consumers seeking to switch to soft drinks with a healthier or more natural positioning. This resulted in fruit/vegetable juice and bottled water both gaining total volume share from carbonates at the end of the review period.

• Low calorie cola carbonates saw the fastest total volume growth in 2010 over the previous year at 6%. This product category benefited from the launch of Coca-Cola Zero during the second semester of 2009. Sales also benefited from rising consumer interest in low calorie products due to growing dietary concerns.

• The growth seen for low calorie cola carbonates was part of a strong growth for low calorie carbonates as a whole, with launch of Sprite Zero in 2009 further expanding the range of low calorie carbonates on offer. Within cola carbonates, low calorie variants gained a third of a percentage point in 2010 in total volume terms over the previous year, accounting for a strong 24% share. These products also gained a significant share for the first time in lemonade/lime thanks to the launch of Sprite Zero, rising to account for 15% of total volume sales in 2010. Low calorie variants also gained almost a percentage point share in “other” non-cola carbonates from 2009, accounting for 17% total volume share in 2010. This was largely thanks to Hamoud Boualem launching Slim Strawberry in the year.

• Current value unit prices significantly increased in 2010, rising by 6% over the previous year. This was mainly due to high inflation, with constant value unit price growing by less than 1% in the year. However, unit price growth was also linked to increases in the cost of production. In order to boost sales despite these price increases, most major producers offered attractive price discounts just before the fasting month of Ramadan in 2010. They thus sought to encourage sales during a time when households’ expenses tend to double.

• The off-trade dominates overall sales in volume terms, accounting for 85% of total volume sales in 2010. This is chiefly due to a considerably lower price in this channel in comparison to on-trade prices. The off-trade further gained volume share marginally from the on-trade in 2010 over the previous year. This was due to the impact of the economic downturn, which resulted in many consumers seeking to economise and thus cutting back on their spending on consumer foodservice and also on impulse purchases of carbonates.

• The off-trade also benefited from the ongoing expansion of supermarkets/hypermarkets’ outlet volume towards the end of the review period. This offered consumers a wider choice of products and also enabled consumers to purchase carbonates in larger pack sizes with a lower unit price. Thanks to outlet volume expansion and affordable pricing, supermarkets/hypermarkets gained three percentage points in off-trade volume share in 2010 over the previous year to account for 35% share.

• On-trade sales benefited from the ongoing expansion of cafés and restaurants in the country and increasing consumer interest in eating out, particularly in large cities. While the economic downturn dampened growth in on-trade sales, these trends maintained growth towards the end of the review period.

• Fountain sales are not present in Algeria. Even in fast food outlets, consumers are only offered a choice of metal beverage cans or glass or plastic bottles.

• Carbonates is purchased by all consumer groups in Algeria. However, teenagers and young adults are the most significant consumer groups, both men and women. Low calorie carbonates’ main consumers are meanwhile women, particularly mid- and high-income women. These consumers are generally more concerned with health and dietary issues than other groups.

COMPETITIVE LANDSCAPE

• Coca-Cola is the clear leader of carbonates in GBO terms, accounting for 39% off-trade value share. This is thanks to Coca-Cola’s two Algerian franchises. Fruital Coca-Cola and Groupe Castel Algerie each accounted for over 19% of off-trade value sales in 2010. Coca-Cola benefits from its wide range, dominating cola carbonates with 62% off-trade value share in 2010 and ranking second in non-cola carbonates with a strong 30% share.

• Coca-Cola and its franchises regularly launch promotional campaigns in order to enhance its sales and their distribution covers the entire country, not just large cities. These companies also launched two major low calorie carbonate brands in 2009: Coca-Cola Zero and Sprite Zero. The company thus strengthened its presence in fast-growing low calorie carbonates. This resulted in Fruital Coca-Cola and Groupe Castel seeing the strongest off-trade value growth in 2010 over the previous year, with each rising by almost a percentage point in share.

• In NBO terms, the leading player in carbonates is Hamoud Boualem, with almost 24% off-trade value share in 2010. This company benefits from its longstanding presence in Algeria, having been founded in 1978. The company also benefits from its affordable prices, with the company thus having a stronger off-trade volume share in overall carbonates of over 25%.

• Most brands present in Algerian carbonates are domestically manufactured. However, of the seven significant players present in this area, four are representatives of international companies. Coca-Cola is represented by second- and third-ranked Fruital Coca-Cola and Groupe Castel. PepsiCo is represented by ABC Atlas Bottling Corp, while Suntory is represented by CFP Orangina. Global brands such as Coca-Cola, Pepsi and 7-Up benefit from stronger marketing and promotional support. However, lower prices ensured that domestic brands remained significant at the end of the review period, with the top three brands being Hamoud Boualem’s Hamoud and Selecto and Ibrahim & Fils’ Ifri at the end of the review period.

• Hamoud Boualem offered the most significant new launch of 2010 with Slim Strawberry launched in March of the year. There was growing interest in strawberry flavoured carbonates towards the end of the review period, with Fanta Strawberry for example being the best performer within the Fanta range in Algeria towards the end of the review period. There is also a relative lack of competition in strawberry carbonates in comparison to cola carbonates, with only two brands Coca-Cola’s Fanta Strawberry and PepsiCo’s Mirinda Strawberry being present. Hamoud Boualem’s entry was strongly promoted, with the company sponsoring two national football players participating in the African Cup of Nations and the FIFA World Cup. The company also invested in intensive TV advertisements in the run up to Ramadan in August and September 2010.

• Mid-priced brands lead sales of carbonates. Only one premium brand is present: Coca-Cola’s Schweppes. However, demand for Schweppes remains low and it is sold mainly via on-trade channels. Economy brands are meanwhile mainly produced by regional manufacturers and sold in rural areas where purchasing power is low. Economy brands have little presence in Algeria’s larger cities, where over 75% of off-trade value sales stemmed from the three leading companies in 2010.

PROSPECTS

• There is expected to be a growing focus on health during the forecast period, both among consumers and among the leading players in carbonates. Companies are expected to develop health-positioned marketing for low calorie carbonates, rather than simply focusing on price and advertising in order to support growth. Players will thus seek to compete more effectively with soft drinks with a healthier positioning, such as fruit/vegetable juice and bottled water.

• However, carbonates is expected to continue to suffer as a result of consumers’ rising health-awareness during the forecast period, with total volume growth being outpaced by that of both bottled water and fruit/vegetable juice. Consumers will increasingly seek to reduce sugar consumption, both for themselves and for their children. There will also be a growing focus on natural products. These trends will inevitably result in a shift from carbonates to fruit/vegetable juice and bottled water.

• Carbonates is expected to see 4% total volume CAGR over the forecast period, with this representing a marked downturn from the 8% total volume CAGR seen during the review period. This will be due to rising consumer health-consciousness. The difference will be even more pronounced in constant value terms, with a review period constant value CAGR of 12% dropping to a forecast period constant value CAGR of 5%. This will occur as the leading players maintain volume growth by keeping unit prices stable. Manufacturers are expected to keep price increases to a minimum due to tougher competition from fruit/vegetable juice and bottled water. Consequently, carbonates is expected to see less than 4% constant value unit price growth for the forecast period as a whole.

• Low calorie cola carbonates is expected to see the strongest growth during the forecast period, with a total volume CAGR of 6% during the forecast period. Strong growth will reflect growing interest in low calorie carbonates as a whole, with these products also likely to drive sales growth in lemonade/lime and “other” non-cola carbonates during the forecast period. Growth will be underpinned by the health and wellness trend, particularly among female consumers, but also by strong new product development in this area towards the end of the review period. Further new launches are also likely to be introduced during the forecast period as players seek to capitalise on dynamism in low calorie carbonates.

The new products launched in 2009 and 2010 focused on low calorie carbonates, including Coca-Cola’s Coca-Cola Zero and Sprite Zero and Hamoud Boualem’s Slim Strawberry. These products are expected to see a good performance at the start of the forecast period thanks to growing interest in low calorie carbonates and could well boost their manufacturers’ shares.

Source:    Euromonitor International