EUROMONITOR- Sports and Energy Drinks in the Philippines

Sports and Energy Drinks in the Philippines Category Briefing | 11 Apr 2011

HEADLINES      

Total volume sales of functional drinks reach 89.6 million litres after a 30% increase in 2010 Business process outsourcing and the health and wellness trend facilitate growth in 2010 Energy drinks sees the strongest performance, growing by 50% in total volume terms in 2010 Unit prices of functional drinks continue to decline in 2010 PepsiCo International Inc continues to dominate functional drinks in 2010 Functional drinks is projected to see a total volume CAGR of 13% over the forecast period

TRENDS 

Functional drinks benefited from the continued increase in the number of business process



outsourcing offices, as well as the health and wellness trend in 2010. Demand for energy drinksimproved, since more Filipinos needed an energy boost to keep them alert during their unconventional working hours. In addition, a switch to healthier lifestyles amongst consumers resulted in higher consumption of sports drinks, as they exercised and participated in sporting activities on a more regular basis. Functional drinks experienced 30% total volume growth in 2010; five percentage points faster



growth than in 2009. This robust performance can be attributed to the higher penetration ofenergy drinks in both the off-trade and on-trade channels, as well as the growing number ofsports enthusiasts due to the health and wellness trend. Energy drinks recorded 50% total volume growth in 2010 significantly stronger growth



than sportsdrinks. This vibrant growth can be attributed to increasing product awareness, mainly due to heavy advertising of Asia Brewery’s Cobra brand, a broader consumer base because of the availability of low-priced brands, as well as better penetration in both the off-trade and on-trade channels. Unit prices of functional drinks continued to decline in 2010. The growing preference for low-



pricedenergy drinks such as Cobra, Sting, Samurai and Xplode facilitated the downwards price movement, as price remained an important factor in consumers’ purchasing decision. The availability of energy and sports drinks in returnable glass bottles also contributed to the decline in unit price, as these are cheaper than their PET bottle and metal can counterparts. In 2010 sports drinks registered a 20% increase in total volume sales. This improved demand can



be attributed to more Filipinos including sport and exercise into their regular activities, as they adopt healthier lifestyles. Running, cycling and triathlon competitions, such as Cobra 70.3 Ironman Philippines, Men’s Health Urbanathlon and Milo Marathon, amongst others, became more visible. The off-trade channel continued to account for the bulk of total volume sales in functional drinks,



with a 99% share and recording 30% growth in 2010. This strong growth can be attributed to the aggressive expansion of chained supermarkets/hypermarkets and convenience stores, and the increasing presence of these products in sari-sari stores due to the availability of returnable glass bottles for several energy and sports drink brands. On-trade volume sales remained small, contributing only 1% to total volume sales of



functionaldrinks in 2010. Nevertheless, the channel registered robust volume growth of 23% in 2010. This strong growth can be attributed to improved penetration due to the availability of some energyand sports drinks brands in returnable glass bottles, including Cobra, Samurai, Sting and Gatorade. This strategy enabled manufacturers to offer their products in carinderias, which are common eating establishments amongst the Filipino masses. Non-carbonated functional drinks, mostly standard brands such as Gatorade and Red Bull, continued



to dominate the Philippine market in 2010. However, demand for carbonated variants is growing at a rapid pace, due to the strong following for economy energy drinks, namely Cobra, Sting and Xplode. In sports drinks, 100 Plus is the most visible carbonated product. The main market for energy drinks in the Philippines is shift workers such as truck, taxi and bus drivers, and call centre employees who are in need of an energy boost due to their unusual and constantly changing working hours. On the other hand, the key consumers of sports drinks are athletes and sports enthusiasts who need to rehydrate their fluids during or after training, competition or any strenuous sporting activities. These functional drinks are commonly consumed on a per need basis.

COMPETITIVE LANDSCAPE

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PepsiCo International Inc continued to dominate functional drinks with an off-trade value share of



68% in 2010. This strong performance can be attributed to the company’s presence in both categories of functional drinks, as Gatorade dominates sports drinks, and Sting is one of the fastest growing players in energy drinks. Its decision to offer returnable glass bottles in 2009 proved successful in deepening its penetration and improving its share in 2010. Taisho Pharmaceutical experienced the biggest fall in off-trade value share, declining by nearly five



percentage points in 2010. Weaker sales can be attributed to the prominence of economy brands, which are five times cheaper than Lipovitan. Furthermore, locally-produced energy drinkshad far better off-trade and on-trade distribution, as brands such as Cobra, Sting and Samurai are available even in sari-sari stores and carinderias, whilst Lipovitan is mainly sold in supermarkets/hypermarkets, convenience stores and drugstores. Multinationals continued to dominate functional drinks in 2010, accounting for a 78% share of off-

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trade value sales. The strong presence of international companies can be attributed to first-mover advantage, as they introduced sports and energy drinks to Filipinos. Nevertheless, local manufacturers are aggressively improving their shares by using a low-pricing strategy to attract the lower-income group. Universal Robina Corp entered energy drinks in the last quarter of 2009 through the introduction of



Xplode. The new low-priced product is different from existing brands, as it is the first to offer flavours: Atomic Orange, Lemon Blaze and Flaming Cola. Although Xplode is positioned as anenergy drink, it is also positioned to compete with carbonates, given the resemblance of its flavours to the taste of cola and noncola carbonates. Cobra remained the most visible tri-media advertiser in functional drinks. In 2010, Asia Brewery



continued its title sponsorship for the biggest triathlon event in the country – Cobra 70.3 Ironman Philippines. Gatorade was also a sponsor, but on a smaller scale. By contrast, Universal Robina Corp commissioned wrestling superstar Dave Batista to promote its Xplode brand in its 2010 advertising campaign. In energy drinks, sales of standard and premium products continued to slow down due to the growing popularity of economy brands such as Cobra, Sting and Samurai, which held a combined share of 68% of off-trade value sales in 2010. The trend is different in sports drinks, as standard brand Gatorade has almost monopolised the category, with a 94% share of off-trade value sales. Private label functional drinks were non-existent in the Philippines until the end of 2010.

PROSPECTS 

Functional drinks is expected to continue to post vibrant growth in terms of volume and value sales



over the forecast period. Stronger demand for these products is anticipated due to the projected increase in business process outsourcing offices across the country, and the expectation that the health and wellness trend will continue over the forecast period. Functional drinks is expected to see a total volume CAGR of 13% over the forecast period; a



significant reduction in growth compared with the CAGR of 24% in the review period. The slowdown in growth can be attributed to higher penetration, brought about by the wide availability and strong distribution of locally-produced economy brands. The perception that sports and energy drinks are unhealthy beverages is one of the anticipated



threats to growth over the forecast period. Growing health-consciousness amongst Filipinos is expected to take its toll on demand for functional drinks, as these consumers either minimise their consumption or switch to other non-alcoholic drinks options which can provide similar benefits. Energy drinks is projected to see a total volume CAGR of 16% in the forecast period, which is a



stronger performance in comparison with sports drinks. High demand for energy drinks is expected to come from shift workers, particularly those in business process outsourcing, due to their unconventional and constantly changing work hours. Nevertheless, sports drinks is also anticipated to record a robust total volume CAGR of 11%, as a result of the health and wellness trend. Unit prices of functional drinks are expected to decline over the forecast period. This can be attributed to the anticipated further increase in demand for locally-produced economy brands, particularly in energy drinks, and the improvement in market penetration of returnable glass bottles, which are cheaper than their PET bottle counterparts, between 2011 and 2015.

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Xplode energy drink is expected to see success over the forecast period. This new product is

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anticipated to capture some share from both other energy drinks and carbonates, as the taste of its three variants highly resembles cola and non-cola carbonates. Given the similar pricing, it is anticipated that some regular consumers of carbonates will switch to Xplode, especially those in need of an energy boost, due to the added value offered. Product differentiation is expected to be the main focus of manufacturers in the forecast period, due to strong competition within the category. Companies are expected to launch more innovative products to specifically set them apart from other players. Concentrated and more potent functional drinks are possible developments between 2011 and 2015.

CATEGORY DATA

Table 1 Still vs Carbonated Functional Drinks % Off-trade Volume 2006-2010 % volume 2006 2007 2008 Still Carbonated TOTAL

2009

2010

100.0

100.0

100.0

100.0

100.0

0.0

0.0

0.0

0.0

0.0

100.0

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews

Table 2 Off-trade Sales of Sports and Energy Drinks by Category: Volume 2005-2010 Million litres 2005 2006 2007 2008 2009

2010

Energy Drinks

4.3

5.1

11.0

15.9

22.2

33.3

Sports Drinks

26.7

30.5

34.8

39.3

46.4

55.6

Sports and Energy Drinks

30.9

35.6

45.7

55.1

68.6

88.9

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 3 Off-trade Sales of Sports and Energy Drinks by Category: Value 2005-2010 Ps million 2005 2006 2007 2008 2009 Energy Drinks

2010

900.1

1,071.1

1,387.1

1,574.4

1,684.6

1,794.1

Sports Drinks

1,724.9

2,026.8

2,351.1

2,703.7

3,082.3

3,852.8

Sports and Energy Drinks

2,625.0

3,097.9

3,738.2

4,278.1

4,766.8

5,646.9

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 4 Off-trade Sales of Sports and Energy Drinks by Category: % Volume Growth 2005-2010 % volume growth 2009/10 2005-10 CAGR 2005/10 TOTAL Energy Drinks

50.0

50.7

677.0

Sports Drinks

20.0

15.8

108.7

% volume growth Sports and Energy Drinks

2009/10

2005-10 CAGR

2005/10 TOTAL

29.7

23.5

187.4

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 5 Off-trade Sales of Sports and Energy Drinks by Category: % Value Growth 2005-2010 % current value growth 2009/10 2005-10 CAGR 2005/10 TOTAL Energy Drinks

6.5

14.8

99.3

Sports Drinks

25.0

17.4

123.4

Sports and Energy Drinks

18.5

16.6

115.1

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 6 Company Shares of Sports and Energy Drinks by Off-trade Volume 2006-2010 % off-trade volume 2006 2007 2008 2009 PepsiCo International Inc

2010

67.1

71.1

67.8

66.1

63.0

-

10.6

17.2

21.9

27.1

Coca-Cola Export Corp, The

1.7

0.8

0.5

1.6

2.5

TC Pharmaceutical Industry Co Ltd

6.2

5.5

4.1

2.6

1.4

Dong-A Pharma Phils Inc

0.7

0.7

0.8

0.8

0.8

Taisho Pharmaceutical (Philippines) Inc

4.9

4.1

3.2

1.8

0.7

-

0.1

0.7

0.7

0.7

United Laboratories Inc

0.9

0.6

0.5

0.2

0.2

Osotspa Co Ltd

0.0

-

-

-

-

-

-

-

-

-

18.5

6.6

5.2

4.3

3.6

100.0

100.0

100.0

100.0

100.0

Asia Brewery Inc

Otsuka (Philippines) Pharmaceuticals Inc

Quaker Oats Asia Inc Others Total

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 7 Brand Shares of Sports and Energy Drinks by Off-trade Volume 2007-2010 % off-trade volume Company 2007 2008

2009

2010

Gatorade

PepsiCo International Inc

69.2

64.5

61.9

57.7

Cobra

Asia Brewery Inc

10.0

15.8

20.7

26.0

Sting

PepsiCo International Inc

1.9

3.3

4.3

5.2

Samurai

Coca-Cola Export Corp, The

-

-

1.0

1.9

Red Bull

TC Pharmaceutical Industry Co Ltd

5.5

4.1

2.6

1.4

100 Plus

Asia Brewery Inc

0.6

1.4

1.2

1.1

Bacchus

Dong-A Pharma Phils Inc

0.7

0.8

0.8

0.8

Cillit

Taisho Pharmaceutical (Philippines) Inc

4.1

3.2

1.8

0.7

Pocari Sweat

Otsuka (Philippines) Pharmaceuticals Inc

0.1

0.7

0.7

0.7

% off-trade volume

Company

2007

2008

2009

2010

Powerade

Coca-Cola Export Corp, The

0.8

0.5

0.6

0.6

Revicon I-on

United Laboratories Inc

0.6

0.5

0.2

0.2

Shark

Osotspa Co Ltd

-

-

-

-

Gatorade

Quaker Oats Asia Inc

-

-

-

-

Others

Others

Total

Total

6.6

5.2

4.3

3.6

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 8 Company Shares of Sports and Energy Drinks by Off-trade Value 2006-2010 % off-trade value rsp 2006 2007 2008 2009 PepsiCo International Inc

2010

53.0

59.5

60.7

63.3

68.1

-

5.5

9.7

13.8

17.5

TC Pharmaceutical Industry Co Ltd

14.1

13.6

10.6

8.0

4.0

Taisho Pharmaceutical (Philippines) Inc

14.6

12.9

11.0

6.9

2.3

Dong-A Pharma Phils Inc

1.4

1.7

1.8

1.9

1.8

Coca-Cola Export Corp, The

1.0

0.5

0.3

1.0

1.6

-

0.1

0.5

0.6

0.7

United Laboratories Inc

1.4

1.0

0.8

0.5

0.4

Osotspa Co Ltd

0.0

-

-

-

-

-

-

-

-

-

Asia Brewery Inc

Otsuka (Philippines) Pharmaceuticals Inc

Quaker Oats Asia Inc Others Total

14.6

5.3

4.5

4.1

3.6

100.0

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 9 Brand Shares of Sports and Energy Drinks by Off-trade Value 2007-2010 % off-trade value rsp Company 2007 2008 Gatorade

PepsiCo International Inc

Cobra

Asia Brewery Inc

Red Bull

TC Pharmaceutical Industry Co Ltd

Sting

PepsiCo International Inc

Cillit

Taisho Pharmaceutical (Philippines) Inc

Bacchus

Dong-A Pharma Phils Inc

Samurai

Coca-Cola Export Corp, The

100 Plus Pocari Sweat

2009

2010

58.5

58.8

60.5

64.4

5.2

8.9

13.0

16.8

13.6

10.6

8.0

4.0

1.0

1.9

2.8

3.7

12.9

11.0

6.9

2.3

1.7

1.8

1.9

1.8

-

-

0.5

1.0

Asia Brewery Inc

0.3

0.8

0.7

0.7

Otsuka (Philippines) Pharmaceuticals Inc

0.1

0.5

0.6

0.7

Powerade

Coca-Cola Export Corp, The

0.5

0.3

0.5

0.5

Revicon I-on

United Laboratories Inc

1.0

0.8

0.5

0.4

Shark

Osotspa Co Ltd

-

-

-

-

Gatorade

Quaker Oats Asia Inc

-

-

-

-

Others

Others

5.3

4.5

4.1

3.6

% off-trade value rsp

Company

2007

2008

2009

2010

Total

Total

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 10 Forecast Off-trade Sales of Sports and Energy Drinks by Category: Volume 2010-2015 Million litres 2010 2011 2012 2013 2014 2015 Energy Drinks

33.3

43.3

52.0

59.8

65.7

71.0

Sports Drinks

55.6

66.2

74.8

81.5

87.2

92.5

Sports and Energy Drinks

88.9

109.5

126.8

141.3

153.0

163.5

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 11 Forecast Off-trade Sales of Sports and Energy Drinks by Category: Value 2010-2015 Ps million 2010 2011 2012 2013 2014 2015 Energy Drinks

1,794.1

2,278.5

2,711.4

3,172.3

3,648.1

4,085.9

Sports Drinks

3,852.8

4,546.3

5,001.0

5,251.0

5,408.6

5,462.6

Sports and Energy Drinks

5,646.9

6,824.8

7,712.3

8,423.3

9,056.7

9,548.6

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 12 Forecast Off-trade Sales of Sports and Energy Drinks by Category: % Volume Growth 2010-2015 % volume growth 2014/15 2010-15 CAGR 2010/15 TOTAL Energy Drinks

8.0

16.3

113.1

Sports Drinks

6.0

10.7

66.2

Sports and Energy Drinks

6.9

12.9

83.8

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 13 Forecast Off-trade Sales of Sports and Energy Drinks by Category: % Value Growth 2010-2015 % constant value growth 2010-15 CAGR 2010/15 TOTAL Energy Drinks

17.9

127.7

Sports Drinks

7.2

41.8

11.1

69.1

Sports and Energy Drinks

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources