Total drinks industry merger and acquisition (M&A) deals in Q2 2019 worth $2.11bn were announced globally, according to GlobalData, a leading data and analytics company.

The value marked an increase of 74.6 % over the previous quarter and a drop of 44.1 % when compared with the last four-quarter average, which stood at $3.78bn.

Comparing deals value in different regions of the globe, North America held the top position, with total announced deals in the period worth $2.01bn. At the country level, the US topped the list in terms of deal value at $2bn.

In terms of volumes, Europe emerged as the top region for drinks industry M&A deals globally, followed by North America and then Asia-Pacific.

The top country in terms of M&A deals activity in Q2 2019 was the US with 18 deals, followed by the UK with seven and Spain with four.

At the end of Q2 2019, drinks M&A deals worth $3.32bn were announced globally, marking a decrease of 87.2% year on year.

Drinks industry M&A deals in Q2 2019: Top deals

The top five drinks industry M&A deals accounted for 98.2% of the overall value during Q2 2019.

The combined value of the top five drinks industry M&A deals stood at $2.08bn, against the overall value of $2.11bn recorded for the quarter. The top announced drinks industry M&A deal tracked by GlobalData in Q2 2019 was E. & J. Gallo Winery’s $1.7bn asset transaction with Constellation Brands.

In second place was the $300m acquisition of Dogfish Head Brewery by The Boston Beer and in third place was Cafento Coffee Factory S.L’s $33.58m acquisition of Java Republic.

The $21.62m asset transaction with McLeod Russel India by Luxmi TeaLimited and Lalique Group’s asset transaction with The Glenturret for $20.39m held fourth and fifth positions, respectively.

GlobalData’s Q4-2018 Quarterly Beverage Forecast reported a remarkable 6 % volume increase in consumption for UK Squash and Syrups in 2018*, the first time the category has seen growth since 2011.

Roisin Vulcheva, UK & Ireland Research Manager for Consumer at GlobalData, says, “This was an impressive result, particularly as Squash and Syrups have experienced several years of consecutive decline. The strong performance was driven by an array of factors including good weather, growth in adult soft drinks and new product development. Throughout 2018, there was a raft of premium launches helping Squash and Syrups to stage a turnaround and inject value growth back into the category.”

Throughout the year, growth was positive across all quarters, however summer was the key period of trading for the category, with the UK recording one of the hottest summers on record which helped to boost consumption.

Britvic was also instrumental in driving growth throughout the year. It invested heavily in Squash and Syrups, expanding its offering to appeal to a more mature demographic, in what is typically a category largely geared towards children. Britvic launched several new products targeted towards the adult segment under its Robinsons brand in 2018.

Interestingly, still ready-to-drink drinks, which include brands such as Capri Sun and Robinsons Fruit Shoot that also cater to the children’s demographic, declined by 10 % in volume terms for the year*, largely impacted by concerns around sugar and artificial sweeteners.

Vulcheva concludes, “Clearly the introduction of new flavours, packaging and more premium propositions helped to drive growth in the category which was further boosted by a hot summer. Looking ahead to 2019, the Squash and Syrups category is one to watch as it ticks the box in relation to several current key trends in the UK soft drinks market. More innovation is expected from branded players throughout 2019, with private label brands expected to emulate the efforts of branded players.”

*UK Quarterly Beverage Forecast Q4-18

The PET bottle has emerged as the preferred packaging for drinks among Japanese millennials due to its ease of use and eco-friendly nature. Against this backdrop, beverage giant Suntory Beverage & Food Limited (SBF) is looking to capitalize on the growing popularity of this packaging format to drive ready-to-drink (RTD) coffee sales amid a shrinking RTD market in Japan, says GlobalData, a leading data and analytics company.

According to the company’s report: Success Case Study: Suntory Craft Boss – Craft-style ready-to-drink coffee resonates with Japan’s Millennials, Japan is the largest RTD coffee market in the world, selling 3,574 million liters in 2017. However, the market volume growth in Japan has been slow in recent years and is expected to decline at a compound annual growth rate of -0.89 % between 2017 and 2022. On the other hand, GlobalData’s Market Analyzer reveals that the percentage of sales of PET bottled RTD tea & coffee has increased by 2.81 % from 6,659.30 million liters in 2017 to 6,851.58 million liters in 2018.

Suntory launched Craft Boss, a new range of RTD coffee under the Suntory Boss brand, in April 2017. The Craft Boss range is sold in PET bottles rather than metal cans to offer new consumption experience to millennial consumers.

Shagun Sachdeva, Consumer Insights Analyst at GlobalData, says: “The company’s move to launch craft-style coffee drinks in a PET bottle format is part of strategic product positioning to tap new consumer groups, particularly millennials. This clearly demonstrates that it has understood the importance of innovation in terms of appeal and packaging format, in line with the demographic changes in Japan.”

Craft Boss PET bottled coffee series crossed 27 million cases in 2018. It was the biggest driver of Boss coffee sales, which crossed 100 million cases last year. The success of this series helped Suntory compensate decline in other products, with a very strong growth of 8 million cases in 2018 compared to the previous year.

Sachdeva concludes: “Suntory is one of the first major manufacturers to react to the slow market growth of RTD coffee in Japan. The company has quickly identified the market gap and is catering to the evolving demands of the white-collar millennials to take advantage of the appealing market segment. Simply put, the company used incremental innovation and customer-centric strategy to gain a clear, competitive edge over rivals.”

The craft beer boom, which is primarily driven by younger consumers, is having spill-over effects on other industries, including the coffee sector. Within the sector, cold-brew coffee is gaining popularity. However, given its unique taste profile and perceived health benefits, opportunities exist for cold-brew producers to appeal to young as well as older age group consumers, finds leading data and analytics company GlobalData.

Since the brewing process does not require heat, the resulting cold-brew coffee drink has a smoother taste which often reduces the need for creamers, sugar or sweeteners. As a result, several consumers perceive cold-brew coffee to be a healthier alternative to traditional coffee.

GlobalData found that health and fitness is a high priority for younger consumers, hence the potential health benefits of cold-brew coffee are likely to be a key motivator for purchase among this cohort. This reflects in its 2017 Q4 global consumer survey, which shows that 21 % of consumers are interested and already purchasing beverages with cold-brew claims, while a further 27 % are interested but not yet actively buying such products.

Matthew Perry, Consumer Analyst at GlobalData, explains: “A number of consumers are now looking for more premium and indulgent soft drinks which demonstrate quality, authenticity and artisanal production methods. The fact that cold-brew coffee has been around for hundreds of years may heighten the appeal of the beverage among younger consumers driving the craft movement.”

In particular, younger consumers aged between 18 and 34 are more interested in cold-brew, with 28 % globally interested and actively buying such beverages, reveals the survey. This is 11 percentage points higher than those aged 35 and over.

Perry concludes: “Given the popularity of cold-brew among younger age groups, producers may wish to target these consumers with their offerings. However, it is important to understand that while the unique processing methods and sensory aspect of cold-brew may encourage younger consumers to experiment with the beverage, cold-brew coffee’s smoother, less acidic taste may resonate with older consumers who may prefer milder flavors and products which require less sugar.”