Economy, price gains hit beverage market, help private label

The economy took a toll on the beverage industry in the third quarter of 2008, according to scanner data reviewed by Morgan Stanley Analyst Bill Pecoriello.

Pecoriello said volumes declined as post-Labor Day price hikes made their way to consumers’ wallets. CSD volumes fell by 7.8 percent as the average price increased by 6.8 percent. Sports drinks suffered a small volume decline of 0.7 percent while prices went up 2.5 percent, and bottled water slipped down one percent – standing in stark contrast to its 14 percent growth rate of one year ago. This one cannot be tied to higher prices, as on-shelf water prices declined by 7.4 percent.

The “big three” beverage companies traded market share as volumes shrank, with no clear winner, but private label brands saw their position rise.

Private label beverages picked up a 1.6 percent share gain on the overall beverage market on the strength of smaller price increases than their name-brand rivals. The bulk of private label’s gains (52 percent), Pecoriello said, came from bottled water, a realm that the big beverage companies have been moving out of. However, private label also drew 28 percent of its gain from CSDs.