Despite a challenging market environment, the soft drinks industry growth is the result of high consumer demand for beverages at home, combined with higher retail sales due to the removal of COVID-19 restrictions. The country also experienced higher levels of inflation, leading to increasing soft drinks prices, resulting in consumers shifting to more affordable soft drinks offerings across most categories, ultimately driving growth in private labels.
The Sugar Tax has seen considerable success as a revenue stream, due to the extensive use of sugar in a large proportion of soft drink categories and brands. Moreover, initial studies have indicated that the tax has had an impact on the overall consumption of sugary beverages, with consumer drinking less sugary beverages on average, since its implementation. As a result, this has had a positive impact on the health of South Africans, including their risk to non-communicable diseases, such as diabetes and heart disease, which have been associated with a high sugar intake.
It is likely that a revised sugar tax will be implemented in coming years. When this occurs, soft drink manufacturers will need to either increase their prices to retain their desired margins, or reformulate their ingredient contents to have lower level of sugars at the risk of consumers no longer enjoying the brand's flavour profile. Naturally, this may also cause a portion of consumers to shift over to sugar free soft drinks, who no longer see the point of buying sugary soft drinks if the flavour is no longer what they desire.
Affordable, but quality soft drinks will increase their proportion of the overall market. This will likely occur across most soft drink categories, ranging from bottled water to energy drinks. A prime example of this can be found in bottled water, with Quellé seeing considerable consumer demand, based on its competitive price point while still providing a quality tasting product. The same can be said for energy drink brands, such as Monster energy or Switch, which offer extensive flavour ranges, accommodating for a range of consumer flavour preferences compared to more premium energy drink brands, such as RedBull.