Soft Drink Manufacturing in Australia Industry Report

Going soft: Rising health consciousness will
slow revenue growth over the next five years

This report was provided to
RMIT Library (211848891)
by IBISWorld on 14 September 2016 in accordance with their licence agreement with IBISWorld
IBISWorld Industry Report C1211a
Soft Drink Manufacturing

in Australia
June 2016
Tommy Wu
2 About this Industry
18 Competitive Landscape
Industry Definition
18 Market Share Concentration
Main Activities
18 Key Success Factors
Similar Industries
18 Cost Structure Benchmarks
Additional Resources
20 Basis of Competition
30 Jargon & Glossary
21 Barriers to Entry
3 Industry at a Glance
21 Industry Globalisation
4 Industry Performance
23 Major Companies
Executive Summary
23 Coca-Cola Amatil Limited
Key External Drivers
24 Asahi Holdings (Australia) Pty Ltd
Current Performance
Industry Outlook
26 Operating Conditions
Industry Life Cycle
26 Capital Intensity
27 Technology & Systems
11 Products & Markets
27 Revenue Volatility
11 Supply Chains
28 Regulation & Policy
11 Products & Services
28 Industry Assistance
12 Demand Determinants
13 Major Markets
29 Key Statistics
14 International Trade
29 Industry Data
16 Business Locations
29 Annual Change
29 Key Ratios
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Soft Drink Manufacturing in Australia June 2016
About this Industry

Industry Definition
Industry firms primarily produce canned

or bottled soft drinks (carbonated and
non-carbonated), sport drinks and
Main Activities
The primary activities of this industry are
energy drinks. The industry does not

include the production of bottled water,
fruit juice drinks or fruit drinks.
Carbonated soft drink production

Syrup production
Energy drink production
Sports drink production
Flavoured mineral water production
Ice production
The major products and services in this industry are

Cola-flavoured CSDs
Energy drinks
Mixers
Other flavoured CSDs
Sports drinks
Similar Industries
C1131 Milk and Cream Processing in Australia

Establishments in this industry grade, filter and chill fresh liquid whole milk and cream, and manufacture,
bottle or carton pasteurised liquid milk, cream, cultured buttermilk and yoghurt.
C1140 Fruit and Vegetable Processing in Australia
Businesses in this industry manufacture canned, bottled, preserved, quick frozen or dried (except sun-dried)
fruit and vegetable products.
C1213 Spirit Manufacturing in Australia
Companies in this industry purchase ingredients that are fermented and distilled to produce spirit beverages.
C1211b Bottled Water Manufacturing in Australia
Firms in this industry manufacture or bottle purified water, spring water and functional water.
C1211c Fruit Juice Drink Manufacturing in Australia
Manufacturers in this industry process, blend and package their own fruit juice drink products for the
consumer market.
Additional Resources
For additional information on this industry

www.australianbeverages.org
Australian Beverages Council
www.abs.gov.au
Australian Bureau of Statistics
www.foodstandards.gov.au
Food Standards Australia New Zealand
Provided to: RMIT Library (211848891) | 14 September 2016
Industry at a Glance
Soft Drink Manufacturing in 2015-16
Key Statistics
Snapshot
Revenue
Annual Growth 11-16
Annual Growth 16-21
Profit
Exports
Businesses
$4.4bn
2.4%
0.9%
$729.0m $23.9m 78
Demand from supermarkets and grocery

stores
Revenue vs. employment growth
Asahi Holdings
(Australia) Pty Ltd
24.9%
% change
Coca-Cola Amatil
Limited 53.8%
% change
Market Share
2
0
-2
-4
Year 08
2
0
-2
10
12
14
Revenue
16
18
20
-4
Year
22
09
11
13
15
17
19
21
Employment
SOURCE: WWW.IBISWORLD.COM.AU
p. 23
Establishments
10.3%
Demand from
supermarkets and
grocery stores
3.6% 0.8%
TAS
NT
WA
32.9%
Health consciousness
NSW
11.1%
Demand from fast

food services
SA
Real household
disposable income
World price of sugar
20.1%
VIC
21.2%
p. 4
QLD
Industry Structure
Life Cycle Stage

Revenue Volatility
Capital Intensity
Mature
Low
Medium
SOURCE:
SOURCE:
Regulation Level
Medium
Technology Change
Medium
Barriers to Entry
Industry Assistance
Low
Industry Globalisation
Concentration Level
High
Competition Level
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 29
High
Medium
High
Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
A weak retail environment and changing

consumer trends have characterised the
Soft Drink Manufacturing industry over
the past five years, limiting substantial
revenue growth. Despite these threats,
the growing popularity of higher value
sports and energy drinks, and an
increasing focus on diet ranges have
supported industry growth. As a result,
industry revenue is forecast to increase at
an annualised 2.4% over the five years
through 2015-16. This includes projected
growth of 2.2% in the current year, to
reach $4.4 billion.
Over the past five years, domestic and
global economic uncertainty has led to
soft retail conditions and weak consumer
sentiment, causing consumers to cut back
on spending. This has reduced soft-drink
consumption, as these products are
typically considered discretionary
beverages. In an effort to attract
consumers back to industry products,
manufacturers have undertaken
aggressive discounting strategies,
particularly among cola varieties, and
sacrificed margins in an attempt to
maintain volumes. Changing social
trends have also affected demand for soft
drinks, with more health-conscious
consumers moving away from beverages
with high sugar content. This has

prompted a shift to low- and zero-sugar
options across many product segments.
Functional beverages have also grown in
popularity as a result of changing
consumer trends. Longer working hours
and more active lifestyles have
contributed to increased demand for
products in this segment, with both
energy and sports beverages recording
strong growth over the past five years.
Industry conditions are forecast to be
subdued over the next five years, with
revenue forecast to grow at an annualised
0.9% over the five years through 2020-21,
to reach $4.6 billion. The expansion of
private-label offerings and rising health
awareness are likely to weigh on any
significant growth in industry revenue as
consumers either shift to lower value
products or alternative beverages.
However, the rising popularity of higher
value energy and sports drinks is likely to
provide growth. Competition is
anticipated to remain high in the industry,
resulting in continued discounting and
price competition among producers. This
is projected to drive further cost-saving
initiatives and improvements in
operational efficiency as industry
operators attempt to bolster profitability.
Demand from supermarkets

and grocery stores
Most of the industrys output is sold to
supermarkets and other grocery retailers
as households usually purchase
beverages through these channels. These
retailers are therefore the most important
source of sales for industry operators.
Greater demand from supermarkets and
grocery stores typically leads to increased
revenue for the industry. Demand from
supermarkets and grocery stores is
projected to rise in 2015-16, providing an
opportunity for industry participants.
issues and lifestyle choices. An increase

in health consciousness tends to
negatively affect demand for soft drinks
due to high sugar content. Health
consciousness is expected to rise 201516, posing a threat to the industry.
Health consciousness indicates
consumer attitudes towards health
Demand from fast food services

Fast food services are key buyers of
softdrinks and other beverages made
bythe industry, and are an important
link between manufacturers and
consumers. An increase in the
consumption of fast food, which is
usually packaged with soft drinks, tends
to increase demand for soft drinks.
Demand from fast food services is
forecast to increase in 2015-16.

continued
Real household disposable income

Changes in real household disposable
income influence demand for soft drinks.
An increase in disposable income enables
more spending on items such as soft
drinks and other beverages, positively
affecting industry revenue. Real
household disposable income is expected
to increase in 2015-16.
World price of sugar
Sugar is a primary ingredient in many soft
drinks. A rise in sugar prices increases

manufacturers input costs and lowers
profit margins. Companies can pass on
these increased costs to consumers, but
higher prices typically lead to lower
demand for industry products. However,
price rises on the major players products
do not usually lower demand substantially
due to strong brand loyalty. Overall, a rise
in sugar prices typically leads to greater
revenue for the industry. Global sugar
prices are forecast to decline in 2015-16.
Demand from supermarkets and grocery

stores
8
120
115
Index
% change
2
0
105
-2
-4
Year
110
09
11
13
15
17
19
21
100
Year 08
10
12
14
16
18
20
22
Current
Performance
Revenue growth in the Soft Drink

Manufacturing industry has been steady
over the past five years, despite a weak
retail environment and rising health
awareness. Strong competition and
aggressive pricing strategies by major
players have curbed any significant
growth. However, these trends have been
offset by the increasing popularity of
higher value sports and energy drinks,

and manufacturers focus on healthier,
low- and zero-sugar drink options.
Industry revenue is projected to grow at
through 2015-16. Similar growth is also
projected for the current year, with
revenue forecast to increase by 2.2% to
reach $4.4 billion.
Trading landscape
Industry sales volumes have remained

steady over the past five years. The
increasing popularity of energy and
sports drinks, and product discounting
for increased volumes have provided
support for revenue despite a weak
trading environment. Growing demand
for functional beverages has led to the
introduction of new brands and the heavy
marketing of major labels, such as
Mother and Monster, both of which are

now owned by Coca-Cola Amatil (CCA).
Low- and zero-sugar beverages have also
contributed to revenue growth, with
varieties such as Diet Coke and Coke Zero
adding to CCAs cola sales.
While functional beverages and
healthier options have given the industry
a boost, a weak retail environment has
constrained growth since 2012-13. The
Trading landscape
continued
industry is expected to record steady

growth in 2015-16 as subdued retail
conditions continue to affect sales.
Consumer and business uncertainty has
also affected the industry over the past
five years, further adding to the difficult
trading environment. Soft drinks are a
discretionary beverage for most
consumers, with weak consumer
sentiment typically affecting sales.
CCA has reported increased companywide sales volumes as a result of growth
in foreign markets, but have recorded
slight declines in domestic volumes.
Fierce competition between major
players has hurt the industrys
performance. These firms have

implemented aggressive pricing
strategies, exacerbating competition,
particularly since Asahi entered the
industry in 2009. This has curbed
revenue growth and profit margins over
the past five years. Private-label products
have also placed pressure on larger
operators, with supermarkets dedicating
more shelf space to these cheaper items.
Consequently, consumers have slowly
shifted to less expensive alternatives,
putting downward pressure on industry
revenue. As a result, industry operators
have focused on increasing operational
efficiency and boosting profit.
Profitability
Industry operators have faced significant

pressure to maintain profit margins.
Profit has been negatively affected by
weak price growth for finished beverages
and fluctuations in input costs, such as
increased expenses for new bottling
technologies. However, cost-saving
initiatives have stabilised the bottom line
for major players and helped bolster
profitability. Industry firms have
attempted to cut costs by streamlining
operations and automating production
processes. As a result, employment has
fallen while establishments have
remained largely unchanged.
Cost pressures across the industry
have hampered efforts to boost profit
margins. Sugar prices have remained
high by historical standards, despite
declining over the past five years.
Advertising and packaging costs have

also increased as weaker retail conditions
and strong competition have driven
beverage producers to invest more in
these areas. Significant competition has
fuelled heavy discounting among the
major players, with price competition
putting pressure on profit margins. This
discounting has been particularly
pronounced among cola varieties, with
Coca-Cola and Pepsi fighting for market
share. A move towards more eco-friendly
plastic and other packaging materials has
also increased costs for industry
operators. While these factors have
compounded pressure on profit, an
industry-wide focus on operating
efficiency and growth in higher margin
products have allowed players to lift
profit margins.
The industry has been contending with a

traditionally unhealthy image over the
past five years as consumers have
progressively moved towards healthier
diets. Industry products, particularly
carbonated soft drinks (CSD), are often
associated with high sugar content,
which has prompted major players to
heavily market low- and zero-sugar lines.
The latest low-sugar product is CocaCola Life, which was launched in April
2015 and has 30.0% less sugar than

traditional Coca-Cola. Asahi has also
been promoting its healthier Pepsi and
Schweppes options. The increased focus
on healthier CSDs has helped industry
players retain health-oriented
consumers, although some substitution
has occurred, with bottled water uptake
growing strongly. Changing consumer
lifestyles have also supported growth in
functional beverages, with energy and
continued
sports drinks becoming increasingly

significant sources of revenue over the
past five years. Manufacturers of these
products have also expanded their
ranges of low-sugar options, with all
major energy drink brands now
providing at least one sugar-free option.

Energy drinks also contribute to the
growing imports in the industry, with
Red Bull and V accounting for a
significant portion of imports from
Austria and New Zealand.
Japanese ownership
Significant M&A activity has occurred in

the industry over the past decade, mainly
led by Japanese food and beverage
companies. A protracted period of weak
growth has constrained the Japanese
economy, and the countrys beverages
market is highly saturated with low
margins. As a result, companies such as
Asahi, Kirin and Suntory have turned to
Australia as a comparatively undeveloped
and unsaturated market for higher

value-added products. Asahi has been
particularly active, purchasing Cadburys
Australian beverage segment in 2009 and
becoming a part of P&N Beverages in
2011. Asahis entry has spurred industry
innovation as the Japanese beverage
giant introduced some products and
packages prevalent in its more mature
home market.
Industry
Outlook
The Soft Drink Manufacturing industry

is projected to record slower growth over
the next five years. Industry
performance is likely to face pressure as
supermarkets expand private-label
offerings and heavy competition
restrains price growth. However,
ongoing marketing initiatives and
product innovation is expected to
provide some support for industry
revenue. Profit margins are anticipated
to rise as the industry settles after a
period of strong acquisition activity.
Industry revenue is forecast to grow at
through 2020-21, to reach $4.6 billion.
Despite declining soft drink
consumption, carbonated beverages are
likely to benefit from earlier investment
in marketing and innovation, with energy
and sports drinks sales likely to continue
growing robustly. Demand for convenient
and functional beverages, such as
Vitaminwater, Monster and Mother, is
likely to assist growth over the next five
years. Increasingly active lifestyles are
expected to support this trend as
consumers look to energy drinks for
caffeine. However, the energy drinks
segment faces strong competition from
imports, with brands such as Red Bull
and V accounting for a large share of
Industry revenue
8
% change
6
4
2
0
-2
-4
Year 08
10
12
14
16
18
20
22
domestic demand.
Convenience stores and supermarkets
are likely to remain the main markets for
industry sales, with a more positive
economic outlook encouraging consumer
loyalty to branded products. However,
large supermarkets are anticipated to
dedicate more shelf space to private-label
ranges. In response, branded soft drink
producers are likely to increase spending
on marketing activities and product
innovation. This is likely to be most
pronounced for major players as CCAs
strategic review in 2014 made
strengthening brand equity a focus point
for the company.
Profitability
Sales of higher margin products such as

energy and sports drinks are likely to
boost industry profitability, which is
forecast to rise over the next five years.
Despite this, profit margins are expected
to face pressure from strong price
competition and rising input costs. Price
competition will likely continue as
private-label and branded products
compete for shelf space, especially in
supermarkets. However, the industry
will continue to automate manufacturing
processes and adopt new technologies,
helping operators to manage their wage
costs and reducing the operators
reliance on manual labour. The
slowdown in M&A activity is likely to
help stabilise the industry as firms
consolidate Australian operations to
bolster profitability. Establishment and
employment numbers are both expected
to rise only slightly as firms continue to
incorporate previous acquisitions into
existing operations.
Private-label soft drink producers
generally earn lower gross margins, but
can remain profitable as advertising and
marketing spending is not as significant.
These manufacturers are also assured
shelf space and stable demand from
major retailers. The rapid growth of Aldi
supermarkets is projected to support
private labels as 95.0% of its products fall
into this category. Despite these
advantages and lower selling expenses,
private-label products are anticipated to
become less profitable for manufacturers
as they face difficulties with large
retailers aggressively renegotiating
contract terms. Private-label products
also heavily rely on price as a competitive
advantage, so significant price increases
in these products are unlikely. High
brand loyalty in the industry means that
a large price saving is needed to change
consumers brand preferences.
Product innovation
Over the next five years, innovation in

beverage lines is expected to rise.
Significant acquisitions are unlikely due
to competition concerns, leading to
larger players focusing on organic
growth and new products. This is likely
to increase spending on advertising and
marketing for new products to gain
market share. Smaller producers are
anticipated to continue supplying small
segments with specialist or premium
products. A wider range of healthier
beverages is expected to be introduced
to the market due to concerns regarding
the use of artificial colourings,
flavourings and preservatives. The major
players are likely to be most active in
offering these products as their
operational scope allows them to
capitalise on demand for healthier
products. The growing popularity of diet

varieties among cola products and
energy drinks is likely to also continue
providing support for the industry.
Over the past decade, Japanese food
and beverage producers have become
heavily involved in the Australian
market. An ageing population and weak
economic growth in their home markets
have led to companies such as Asahi and
Suntory acquiring Australian businesses.
The Japanese food and beverage market
is more mature than Australias, has a far
stronger emphasis on convenience,
shorter product cycles, and wide varieties
of flavours, products and packaging
forms. These companies are likely to
replicate these strategies in Australia,
with many new products expected to
enter the market over the next five years.
Life Cycle Stage
The industry is highly concentrated,

with two companies holding over
three quarters of the market
Technological change is focused
on operating efficiencies
% Growth in share of economy
Growth in industry value added is roughly

in line with the overall economy
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Mature Industry

Revenue grows at same pace as economy
Company numbers stabilise; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalisation of low margin products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Soft Drink
Manufacturing
Sugar Manufacturing
Supermarkets and Grocery Stores

Soft Drink and Pre-Packaged Food Wholesaling
Milk and Cream Processing
Fruit and Vegetable Processing
-5
Decline
Shrinking economic
importance
-10
-10
-5
10
15
20
% Growth in number of establishments

10
Industry Life Cycle

This
industry
is M
ature
The Soft Drinks Manufacturing industry is

currently in the mature phase of its life
cycle. Industry value added, which
measures the industrys contribution to
the economy, is forecast to grow at an
annualised 2.5% over the 10 years through
2020-21. This represents a slight
underperformance of overall GDP, which
is projected to rise at an annualised 2.6%
over the 10-year period. However, the
performance of some segments has
outperformed the industry as a whole.
These include energy drinks and diet lines,
which have performed particularly well.
The high level of concentration among
soft drink manufacturers is indicative of
its mature life cycle phase. Acquisition
activity has been high over the past
decade, and has led to over three quarters
of the industry being concentrated within
two major players. The number of
establishments in the industry has been

relatively stable, while technological
changes have focused on operating
efficiency. Given competition is high
within the industry, firms are streamlining
operations and increasingly automating
manufacturing and distribution processes
in an effort to maintain or increase
company profitability.
Growth in the industry has come
mainly through niche product segments,
in the form of energy and sports drinks.
While these new products compete
primarily with other varieties of soft
drink, caffeine-based energy drinks have
benefited from the popularity of coffee,
acting as an alternative for consumers.
Healthier options have also provided a
source of growth over the past five years,
with most firms introducing low- or
zero-sugar versions of existing products.
11
Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

F3609
Soft Drink and Pre-Packaged Food Wholesaling in Australia

Soft drink wholesalers are an important source of demand for industry products.
G4111
Supermarkets and Grocery Stores in Australia

Supermarkets and grocery stores are the major downstream market for soft drink retailing in
Australia.
G4112
Convenience Stores in Australia

Convenience stores are a major buyer of soft drink.
KEY SELLING INDUSTRIES
Products & Services
C1140
Fruit and Vegetable Processing in Australia

Some cordials and soft drinks contain real fruit. Hence, these manufacturers require fruit
extracts as an input into the production process.
C1181
Sugar Manufacturing in Australia

Sugar is a key ingredient required to make soft drinks, cordial and syrup products.
C2239
Metal Drum, Can and Bin Manufacturing in Australia

Soft drinks are often packaged in aluminium cans.
The industry is predominantly made up

of carbonated soft drinks (CSDs), with
cola-based beverages comprising the
largest portion. It also includes other
beverages such as sports and energy
drinks, which have become increasingly
popular over the past five years.
Cola-flavoured CSDs
Cola-flavoured CSDs make up the largest
industry product segment. This segment
includes traditional cola and diet cola
CSDs, and additional flavours such as
vanilla cola and lime cola. Over the past
five years, rising health awareness has
increased the range of low-sugar and diet
cola varieties, with consumers moving
away from traditional cola. In 2012,
Asahi introduced Pepsi Next, with 30.0%
less sugar and sweetened with stevia.
Coca-Cola Amatil also released a similar
product called Coca-Cola Life in April
2015. This segment has remained stable
as a proportion of industry revenue. Cola
CSDs have maintained strong sales
despite weaker economic conditions as
consumers have turned to familiar
brands, trading down from high-value
fruit juice drinks and smoothies. Privatelabel CSDs are increasingly prevalent, but
Coca-Cola remains the highest selling
brand in this product segment.

Other flavoured CSDs account for the
second-largest portion of industry
revenue. This segment consists of various
soft drink flavours, including lemonade,
orange, cherry, lime, blackcurrant, apple,
pineapple, grapefruit, tropical and other
mixed-fruit flavours. Lemonade-flavoured
beverages lead the segment, followed by
orange-flavoured CSDs. Private-label
products are common in this segment as
brand loyalty is less significant. The
growing popularity of functional
beverages, combined with the resilience
of cola sales, has slightly reduced this
segments share of revenue over the past
five years. However, the introduction of
healthier, low- and zero-sugar options has
supported sales to an extent.
Sports drinks
Sports drinks include a range of isotonic,
hypotonic and hypertonic drinks
containing varying amounts of salt and
sugar. These beverages claim to enhance
physical performance prior to, during
and after physical activity by replacing
electrolytes and minerals lost during
exercise. The two largest brands in this
segment, Gatorade and Powerade, are
distributed by Asahi and Coca-Cola,
respectively. The sports drink segments
12
Products & Markets
Products & Services

continued
share of revenue has grown over the past

five years. This increase has been driven
by sponsorships of major sporting
leagues and events, increased
promotional activities and growing
acceptance of the product outside sports
and fitness activities.
Energy drinks
Energy drinks make up a small but
growing proportion of industry revenue.
These are glucose-based beverages that
claim to boost energy and usually contain
a combination of caffeine, guarana,
taurine, ginseng, and other herbs and
vitamins. Energy drink sales have grown
significantly over the past five years and
the segment is forecast to continue
growing as consumers on-the-go
lifestyles bolster demand. Red Bull is the
most popular brand in this segment,
while V, Monster and Mother provide
strong sources of competition. Over the
past five years, these major brands have
introduced many low- and zero-sugar

alternatives in this segment to improve
their health credentials.
Mixers
Mixers make up the smallest share of
industry revenue. This segment includes
drinks used to dilute alcoholic beverages,
such as soda water and tonic water.
Asahi, through the Schweppes brand,
dominates the mixers market. This
segment has decreased as a share of
revenue over the past five years due to
growth in other product segments.
Other beverages
Other beverages include a range of
carbonated drinks such as ginger beer and
non-alcoholic cider. Companies operating
in this segment also produce chocolate,
vanilla and caramel syrups, which account
for a small proportion of industry revenue.
This product segment has remained stable
over the past five years.
Products and services segmentation (2015-16)
6.1% 4.2%
Mixers
7.5%
Other
Energy drinks
7.8%
Sports drinks
50.8%
Cola-flavoured CSDs
23.6%
Total $4.4bn
Demand
Determinants
Branding and price largely drive demand

for industry products. Soft drinks, while
affordable to most consumers, are not a
necessity. As a result, disposable
incomes typically affect consumer
demand and spending on industry
products. Soft drink prices also find
some support through taxation, as
non-alcoholic beverages are exempt from
taxes. While price is likely to affect the

amount of money spent on soft drinks,
strong branding can significantly alter
the way money is spent. Many
consumers are highly brand loyal,
particularly in the cola-flavoured CSD
and energy drink segments. As a result,
these consumers are likely to pay more
for their preferred product.
13
Products & Markets
Demand
Determinants
continued
Consumers are becoming increasingly

concerned with healthy eating and
drinking. Increased media and public
interest in the nutritional value of food
and beverages has had a mixed effect on
the industry. Although sugar-based soft
drinks have been under pressure,
opportunities for innovation have arisen.
New products have been developed to
appeal to health-conscious consumers,
including low-calorie and zero-sugar soft
drinks, and functional beverages such as
Vitaminwater. More natural beverages,
such as soft drinks with added fruit juice,
have also gained popularity. Increasing
concerns about alcohol consumption
have encouraged non-alcoholic beverage
consumption, further bolstering demand
for the industry.
The industry has benefited from

consumers increasingly active lifestyles.
Soft drink sales (especially energy and
sports drinks) have profited from
changing lifestyle trends, with people
trying to accomplish more in a day and
having less time for rest. This trend has
led to rapid growth in convenience
purchases. Changing lifestyles have
resulted in fewer formal family meals and
increased consumer preferences for
convenient snacks and take-away meals.
High consumption of take-away food
generally results in higher soft drink
consumption due to the meal packages
that fast-food restaurants offer. Soft
drink sales also tend to increase in
warmer months and in periods of
unusually hot weather.
Major Markets
Major markets for the Soft Drink

Manufacturing industry primarily
consist of wholesalers and retailers.
Supermarkets and other retailers have
grown as a share of industry due to the
increasing prevalence of wholesale
bypass. Conversely, the wholesale sector
of the industry has fallen as a share of
revenue. The growing popularity of
private-label brands has also
contributed to composition of markets,
with supermarkets negotiating the
supply of private-label products directly
with manufacturers.
information systems, which have allowed

for a more streamlined and easier
ordering process for retailers.
Supermarkets
This market is the largest source of
industry sales and has grown over the
past five years. Woolworths, Coles and
other large grocery stores are increasingly
bypassing wholesalers and seeking large
supply contracts with manufacturers.
Their scope and size provide significant
bargaining power when negotiating
placement and shelf space with
manufacturers. Over the past five years,
sales to supermarkets have grown
substantially as a share of industry
revenue at the expense of wholesalers.
These direct sales have been increasing
as manufacturers have adopted improved
Specialty soft drink wholesalers

Specialty soft drink wholesalers represent
a large market for the industry. These
operators generally onsell to retail trade
companies, including convenience stores,
sports stadiums, cinemas, service stations
and other retail outlets. Pubs, bars and
nightclubs are also important
downstream retail clients for wholesalers
as they purchase post-mix syrups, mixers,
and bottled and canned soft drinks.
Specialty wholesalers have decreased as a
share of industry revenue over the past
five years as more retailers have been
dealing directly with manufacturers.
Grocery wholesalers
Grocery wholesalers account for a
significant share of industry revenue.
The majority of demand from this
market comes from smaller
supermarket chains or independent
supermarket operators as larger chains
deal directly with manufacturers. Over
the past five years, supermarkets and
manufacturers have been bypassing
wholesalers in the supply chain. As a
14
Products & Markets
Major Markets
continued
result, the grocery wholesalers market

has fallen as a share of revenue over this
period. This trend is likely to continue
over the next five years as wholesale
bypass becomes more prevalent.
Other markets
Manufacturers of all sizes have
increasingly attempted to bypass
wholesalers, leading to more sales
directly to retailers. Adoption of online

ordering systems has aided this trend,
making it easier for retailers to purchase
directly from manufacturers. Smaller
industry firms are also more likely to
have private-label contracts with retailers
rather than selling directly to the public.
As a result, this segment has increased as
a share of industry revenue over the past
five years.
Major market segmentation (2015-16)
12.3%
Other markets
12.6%
Grocery wholesalers
56.8%
Supermarkets
18.3%
Specialty soft drink

wholesalers
Total $4.4bn
Level & Trend

xports in the
E
industry are L ow

and D
ecreasing
Imports
in the
industry are
Mediumand
Increasing
International trade in the Soft Drink

Manufacturing industry is relatively low.
Trade occurs predominantly in the form
of beverage bases, which is converted
into soft drinks through further
processing domestically. The low valueto-weight ratio associated with soft
drinks contributes to the low level of
international trade for industry products.
Exports
Exports account for a negligible portion
of industry revenue, largely due to the
low value-to-weight nature of industry
products. The main destination for
industry exports is the Asia-Pacific
region, although the United States is also
a prominent destination. New Zealand is
the most significant export market,
followed by the United States, China and
Nauru. The major players, Coca-Cola
Amatil and Asahi, both own facilities in
Industry trade balance

200
0
$ million
International Trade
-200
-400
-600
-800
-1000
Year 08
Exports
10
12
14
Imports
16
18
20
22
Balance
various parts of the Asia-Pacific region,

which reduces the regions reliance on
exports from Australia. Over the past five
years, exports have declined largely due
to a strong Australian dollar for the
majority of the period.
15
Products & Markets
International Trade
continued
Imports
Imports account for a moderate proportion
of domestic demand. A majority of imports
are from Singapore, while other significant
sources include New Zealand, the United
States, and Austria. Singapore is a
prominent source of imports due to the
presence of the Coca-Cola concentrate
production facility and the manufacturing
of other soft drinks. Frucor, owned by
Exports To...
Japanese firm Suntory, produces

beverages in New Zealand and distributes
them in Australia, accounting for most of
the imports from that country. Red Bull
energy drink also makes up a large
proportion of imports from Austria. Over
the past five years, imports have increased
as a share of domestic demand, supported
by the growing demand for imported
energy drinks.
Imports From...
7.1%
4.9%
Austria
United States
4.5% 4.3%
Nauru
China
10.3%
New Zealand
12.0%
United States
23.8%
Other
52.4%
26.8%
Other
Year: 2015-16
53.9%
New Zealand
Total $23.9m
Singapore
Total $668.9m
SOURCE: ABS
SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA
16
Products & Markets

Business Locations 2015-16
NT
0.8
QLD
21.2
WA
10.3
SA
11.1
NSW
32.9
ACT
0.0
VIC
20.1
Establishments (%)
TAS
Cold Zone (<10)
3.6
<25
<50
Hot Zone (<100)
Not applicable
17
Products & Markets
Distribution of establishments vs. population

40
30
20
10
WA
VIC
TAS
SA
QLD
NT
NSW
0
ACT
The Soft Drink Manufacturing industry is

concentrated in the eastern states, close
to the major population centres. This is
largely due to the low value-to-weight
ratio of industry products, with operators
preferring to locate themselves in close
proximity to end consumers for
distributional purposes. New South
Wales is the most popular location,
followed by Queensland and Victoria.
South Australia and Western Australia
then account for the next largest shares
of industry establishments, with South
Australia production supported by its
location between major trade lines.
Tasmania and the Northern Territory
represent significantly lower shares of
establishments due to their relatively low
population base.
The distribution of establishments has
remained steady over the past five years,
with many plants and facilities located on
the east coast. Despite representing a
significant share of establishments,
Victorias share of total establishments has
fallen over the past five years due to higher
investment in facilities across New South
Wales. Shifts in the distribution of industry
Percentage
Business Locations
Establishments
Population
establishments have largely been a result

of companies closing down smaller plants
and relocating production to larger
facilities. This has been demonstrated by
Coca-Cola Amatils three-year plan for
saving $100.0 million, which has led to the
closure of their Bayswater manufacturing
plant in Victoria.
18
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalisation
Market Share
Concentration
Level
Concentration
in
this industry is H
igh
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
A high market share concentration

characterises the Soft Drink
Manufacturing industry. The two largest
players, Coca-Cola Amatil and Asahi
Holdings (Australia), make up over
three-quarters of the industry,
accounting for an estimated 78.7% of
industry revenue. No other players hold
over 5% of industry revenue. The
emergence of Asahi over the past five
years has boosted industry
concentration as the company had
previously acquired brands including
Schweppes. In 2010, Asahi agreed to an
acquisition of P&N Beverages in a
$360.0 million deal. However, the deal
was blocked by the ACCC due to
competitive concerns in the industry.
Had the sale proceeded, industry
concentration would have increased
further. A revised deal was eventually

approved in 2011, where P&Ns soft
drink and juice assets were divested to
Tru Blu Beverages, which became the
third-largest player in the industry.
The growing popularity of private
labels is expected to reduce industry
concentration slightly over the next five
years. Larger retailers generally source
private-label products from firms outside
the major manufacturers. As private
labels grow, the industry is expected to
become marginally less concentrated.
The growth of Aldi supermarkets is also
expected to fuel private-label growth as
95.0% of its product range is private
label. While concentration is projected to
decline slowly, it is likely to remain high
due to the dominance of the Coca-Cola,
Pepsi and Schweppes brands.
Control of distribution arrangements

Marketing and distribution must be
carefully managed to reduce costs
andmaximise product reach for soft
drink manufacturers.
Attractive product presentation

Presentation (including packaging)
contributes significantly to the appeal of
the industrys products, leading to
increased sales.
Supply contracts in place for key inputs

Cost minimising arrangements for raw
materials, such as supply contracts for
sugar and other inputs, are necessary in
managing production costs.
Marketing of differentiated products

Product innovation and differentiation
(including packaging) helps effectively
market soft drinks and other beverages.
Economies of scope
Economies of scope allow firms to
produce a wider range of products at
lower per-unit costs.
Cost Structure
Benchmarks
The cost structure of industry operators

differ depending on their size. Larger
industry operators benefit from
economies of scale and scope. Given that
the Soft Drink Manufacturing industry is
essentially a Coca-Cola Amatil and Asahi
duopoly, the industrys cost structure
largely follows these two companies.
Profit
Industry profitability is strong and high
Economies of scale
Economies of scale are important for a
low-value product as high volumes must
be produced and sold to achieve a
reasonable profit.
compared with other industries in the

sector. Sales of functional beverages, such
as energy and sports drinks, have boosted
profit margins. However, profitability has
also faced downward pressure over the
past five years due to rising input costs, a
lack of pricing growth and increased
competition from private-label products.
Asahis aggressive expansion has further
exacerbated this trend, leading to several
unprofitable years for the company.
19
However, efforts to improve operating

efficiency across the industry have
supported profit. Profit margins have
increased slightly over the past five years.
Competition from private labels, heavy
discounting and aggressive negotiation by
large retailers have offset organic growth,
greater sales of higher margin products
and declining wage costs.
from record highs following the global

financial crisis. Packaging costs also
make up a substantial part of purchases
and have increased over the past five
years. Growing environmental concerns
about plastic bottles have prompted soft
drink producers to switch to higher
priced and more environmentally
friendly packaging.
Purchases
Purchases represent the largest expense
for the industry and include raw
materials such as sweeteners, syrup
concentrates, carbon dioxide, cans, glass
and plastic bottles, and other packaging
materials. These costs have increased as a
proportion of revenue over the past five
years. The cost of syrup concentrates is
significant as they are often patented and
imported from foreign suppliers that
charge high prices, even to affiliated
companies. Sugar costs are also
significant for industry operators. The
price of sugar has fluctuated substantially
over the past five years, falling sharply
Wages
Wages also make up a significant cost
for the industry, in line with other food
and beverage producers. These costs
have decreased over the past five years
as the industry has become more
capital-intensive. Manufacturers have
increased automation in the production
process and in warehousing activities to
reduce operating costs. The rising trend
of mechanisation and automation will
continue to reduce industry operators
reliance on manual labour and help
them manage their wage costs,
particularly across manufacturing and
distribution networks.
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2015-16)
100
1.8
80
Percentage of revenue
Cost Structure
Benchmarks
continued
8.0
3.2
8.1
14.6
60
3.8
Industry Costs
(2015-16)
16.7
1.2
3.0
9.4
2.0
9.9
n Profit
n Rent
n Utilities
n Depreciation
n Other
n Wages
n Purchases
40
60.5
57.8
20
0
20
Cost Structure
Benchmarks
continued
Depreciation
Depreciation represents a significant cost
for the industry. The manufacturing
process is capital-intensive, with largescale machinery involved in most areas of
production and distribution.
Depreciation has risen as a proportion of
revenue over the past five years, in line
with increased capital investment and
greater process automation.
Other
Other costs include general
administration, selling, warehousing and
distribution, and advertising expenses.
Warehousing and distribution expenses
are a significant part of industry revenue,
with operators incurring large
warehousing and distribution expenses
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Highand the trend
is I ncreasing
An increasingly high level of competition

characterises the Soft Drink
Manufacturing industry. Two industry
heavyweights, Coca-Cola Amatil and
Asahi, dominate the industry, with
smaller manufacturers servicing niche
markets and private labels. While
external competition is also significant, it
is limited by the diversified nature of the
industrys major players.
Internal
Internal competition is high for the
industry and brand names, in particular,
are extremely important. Brand equity
has been the most important point of
differentiation for the industrys top
players and this has driven substantial
advertising expenditure in the industry.
Flavour also plays an important role,
with licenses limiting access to some
recipes. Well-known brands and licensed
flavours allow manufacturers to charge
premium prices. While substitution does
occur, consumers are generally willing to
pay a higher price for Coca-Cola and
Pepsi brands than for private labels.
Competition among these brands and
heavy discounting has been increasing in
the industry, as firms have been seeking
greater market share.
due to extensive distributions networks.

Most industry operators sell directly to
retailers and other large buyers.
Advertising expenses are also a
substantial part of industry revenue.
Promotional costs include the cost of
providing fridges or post-mix equipment
to retailers, hospitality establishments
and other in-store promotions.
Advertising is a significant part of
operations for the industrys major
players and is important for establishing
brand loyalty. Smaller players also engage
in advertising, but on a much smaller
scale. These costs have risen as a share of
industry revenue over the past five years
as major players have invested in
advertising and distribution in an attempt
to boost sales and bypass wholesalers.
While private-label products have

grown within the industry, the larger
firms significant brand loyalty and
competitive power have curbed this
trend. The major players are well
entrenched as leaders in branding, with
Coca-Cola and Pepsi products beating
private labels. This is due to their ability
to cut margins while maintaining high
brand awareness and loyalty. Smaller
firms can only compete by working with
large supermarkets to provide privatelabel products, due to their inability to
achieve the same scale and brand image
as the two major companies.
External
External competition is high, as industry
products face competition from other
beverages such as fruit juice drinks and
bottled water. The bases of competition
are largely the same as those in the
industry: branding, flavour and price.
Additionally, industry products face
competition on the basis of health content,
as consumers are increasingly conscious
of the high sugar content in soft drinks.
While this generally leads to a preference
for bottled water or fruit juice drinks, the
effect is likely to be offset by the increase
in low- or zero-sugar soft drinks.
21
Basis of Competition
continued
Diversified operations curb external

competition for the major players.
Coca-Cola and Asahi maintain product
lines in a variety of beverages, including
juice drinks, bottled water and alcoholic
Barriers to Entry

has high barriers to entry and the level has
increased over the past five years. The
market power, scale and scope of
operations, and brand equity of the major
players raises barriers for new entrants.
The ability to compete with existing
industry operators, which have wellestablished distribution networks, requires
significant investment. Coca-Cola Amatils
established distribution network is a
strong source of competitive advantage.
Entry into the industry can occur
through acquisition, as demonstrated by
Asahis purchase of Schweppes. Brand
loyalty is also a barrier that new entrants
must overcome. The major players
undertake significant advertising and
marketing activities due to the
importance of their brands being
household names. Acquisitions of other
beverage companies and the vertical
integration of bottling facilities for the
major players have led to their continued
dominance over the market.
New entrants must offer a range of
beverages to gain significant market
share. Existing major players in the
industry offer products in all segments of
the market, also competing in the bottled
water and fruit juice drinks
manufacturing industries. This diverse
product offering helps reduce per-unit
Level & Trend

arriers to Entry
B
in this industry
are H
ighand
Increasing
Industry
Globalisation
Level & Trend
lobalisation
G
in
this industry is
Mediumand the
trend is I ncreasing
Globalisation in the Soft Drink

Manufacturing industry is at a medium
level and increasing. Globalisation is
assessed based on foreign ownership
among industry participants,
international trade and the involvement
of Australian companies overseas. The
most prominent brands in the soft drink
industry were developed overseas and
have a global presence. For example, the
drinks. These firms are unlikely to

promote external competition from
alternative beverages, instead focusing on
product categories and gaining market
share from private labels.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
High
High
Mature
Medium
Medium
Medium
Low
production costs as fixed expenses are

spread over greater volumes.
Additionally, it helps the major operators
maintain their positions as dominant
players in the industry, as retailers prefer
to deal with larger, diversified
manufacturers to minimise the number
of transactions and increase convenience
for purchase orders.
The high cost of establishing operations
poses a further barrier for new entrants.
While manufacturing and bottling
machinery is readily available, the cost of
acquiring the machinery is expensive. The
major players have adopted technologies
in all facets of their business. This
presents a barrier for new entrants as it is
difficult to keep up and compete with
larger firms, which constantly improve
and automate their processes for both
production and distribution.
Coca-Cola and Pepsi brands are both

owned by US companies that have sold
the manufacturing and distribution rights
of these brands to domestic operators.
Coca-Cola Amatil owns the rights to the
Coca-Cola brand, while Schweppes
beverages originated in the United
Kingdom and are produced in Australia
under a similar arrangement.
Foreign ownership in the industry is
22
Trade Globalisation
200
with foreign ownership. Exports account

for a small proportion of revenue, while
imports make up a moderate share of
domestic demand. The low levels of
international trade are a result of the low
value of soft drinks relative to their weight,
making international freight of industry
products relatively expensive. Domestic
production primarily focuses on meeting
domestic demand, which indicates that
while foreign ownership is significant,
international trade is much less so.
Going Global: Soft Drink Manufacturing 20042016
Global
Export
150
200 Export
Exports/Revenue
International trade is a
major determinant of
an industrys level of
globalisation.Exports offer
growth opportunities
for firms. However there
are legal, economic and
political risks associated
with dealing in foreign
countries.Import
competition can bring a
greater risk for companies
as foreign producers satisfy
domestic demand that
local firms would otherwise
supply.
high, with the majority of industry

revenue generated by firms with
significant foreign ownership or origins.
Asahi is a Japanese company that
operates in Australia through its
Australian subsidiary, Asahi Holdings
Australia. The Coca-Cola Company from
the United States has a minority share of
Coca-Cola Amatil. Japanese company
Suntory owns Frucor, the producer of V,
while Unilever owns Lipton Ice Teas.
International trade is low compared
Exports/Revenue
Industry
Globalisation
continued
100
50
0 Local
0
Import
40
80
120
Imports/Domestic Demand
160
Global
150
100
50
2004
2016
0 Local
0
40
Import
80
120
160
Imports/Domestic Demand
23
Major Companies
Coca-Cola Amatil Limited | Asahi Holdings (Australia) Pty Ltd | Other Companies
Major players
(Market share)
Asahi Holdings (Australia) Pty Ltd 24.9%
21.3%
Other
Coca-Cola Amatil Limited 53.8%
Player Performance
Coca-Cola Amatil
Limited
Market share: 53.8%
Industry Brand Names
Coca-Cola
Fanta
Sprite
Lift
Mother
Deep Spring
Kirks
Vitaminwater
Coca-Cola Amatil Limited (CCA) is an

Australian publicly listed company. CCA
is the largest beverage manufacturer in
the country, with the majority of its
income derived from manufacturing and
distributing soft drinks. CCA has
exclusive Australian bottling rights to the
Coca-Cola brands range of beverages.
The company acquires concentrates from
US-based The Coca-Cola Company to
manufacture and distribute its products
in exclusively licensed territories across
Australia, New Zealand, Indonesia, Fiji,
Papua New Guinea and Samoa. CCA is
headquartered in Sydney and employs
over 14,000 people.
CCA participates in the Soft Drink
Manufacturing industry by producing
and distributing a range of carbonated
soft drinks, sports and energy drinks and
other functional beverages. Brands
include traditional soft drinks such as the
Coca-Cola range, Fanta, Sprite and Lift.
The company also produces a range of
other products including Kirks, Deep
Spring, Appletiser, Powerade, Mother
and Glaceau Vitaminwater.
The five-year Project Zero program,
which started in 2010, has brought
significant cost savings for CCA. The
program involved overhauling the
companys production plants, processes
and capacity. CCA invested in vertical
integration through in-house production
of PET bottle packaging. Another part of
the program was automating processes
across many warehousing operations.
The company also announced moves to
improve manufacturing efficiency by
closing smaller facilities in Melbourne,
shifting capacity to larger sites. The
Coca-Cola Amatil Limited - industry

segment performance**
Year*
Revenue
($ billion)
(% change)
2011
2.53
N/C
2012
2.67
5.5
2013
2.56
-4.1
2014
2.41
-5.9
2015
2.37
-1.7
2016
2.35
-0.8
*Year end December **Estimate
SOURCE: IBISWORLD
announcement was part of wider plans

to cut $100.0 million from costs over
three years.
Financial performance
The companys financial performance has
been historically strong, although weaker
soft drink consumption and high
competition have weighed on revenue
from their soft drink operations over the
past three years. CCAs industry-specific
revenue is projected to decline at an
annualised 1.5% over the five years
through December 2016 to total $2.4
billion. This represents an
underperformance of the overall industry
in nominal terms. The companys profit
has also fallen sharply over this period
due to competitive pressures and rising
marketing costs. Despite this, CCA has
received some support from its launch of
Coca-Cola Life. The Mother range has
also provided a source of growth in the
energy drink market.
24
Major Companies
Player Performance
Asahi Holdings
(Australia) Pty Ltd
Market share: 24.9%
Industry Brand Names
Pepsi
Schweppes
Solo
Mountain Dew
Gatorade
Passiona
Sunkist
Other Companies
Asahi Holdings (Australia) Pty Ltd is a

Japanese-owned beverage company that
manufactures a range of soft drinks,
mixers, mineral waters and cordials. The
company has exclusive bottling rights to
the Pepsi range of brands in Australia. In
April 2009, Asahi entered the industry in
Australia following a $1.2 billion
acquisition of the Cadbury Schweppes
Australian beverage business. A price
increase in Schweppes beverages
immediately followed the acquisition,
signalling a change in strategy, which had
previously focused on discounting
products and gaining market share.
In August 2010, Asahi Breweries put
forward a proposal to buy P&N Beverages
for over $360 million. The combined
company would have created Australias
second-largest beverage producer,
accounting for over 30% of industry
revenue and significantly reducing
competition. However, the ACCC
announced its opposition to the proposed
acquisition in early 2011 due to
competition concerns, with CCA and
Asahi likely to account for over 90% of
the industry if approval was granted.
During June 2011, Asahi revised its offer
and announced its intention to spin off
P&Ns soft drink and cordial businesses
to Tru Blu Beverages, a company owned
by P&Ns former owner. The new deal
was valued at $188.0 million, with Asahi
acquiring P&Ns fruit drink and water
bottling operations. The deal was
completed in September 2011, following
ACCC approval.
In December 2015, Asahi announced
its intention to close three of its nine
bottling facilities in Australia. These
include its plants in MacGregor, QLD;
Moorebank, NSW; and Payneham, SA.
Following several acquisitions over the
past five years, the company is planning
to streamline its extensive
The structure of industry companies

varies according to the product range
offered. A few large companies dominate
the industry, but several smaller,
Asahi Holdings (Australia) Pty Ltd

- industry segment performance**
Year*
Revenue
($ million)
2011
736.1
N/C
2012
827.8
12.5
2013
968.2
17.0
2014
1,022.3
5.6
2015
1,062.6
3.9
2016
1,084.9
2.1
*Year end December **Estimate
(% change)
SOURCE: IBISWORLD
manufacturing network to better

manage operations and capacity.
Financial performance
Asahis revenue has grown rapidly since
its entry into the industry in 2009. The
strong performance has largely been due
to the companys acquisition activity.
Asahis industry-related revenue is
projected to grow at an annualised 8.1%
over the five years through December
2016 to reach $1.1 billion. The companys
outperformance of the overall industry
has largely been attributable to the
Schweppes acquisition, which has
brought various brands to the companys
portfolio and created the second-largest
beverage manufacturer in Australia.
Robust growth in core brands such as
Schweppes, Solo and Pepsi has also
boosted revenue, while the Monster
energy beverage was successful before
Coca-Cola Amatil acquired the rights in
May 2016. In contrast, profitability has
been volatile, with the company
recording a loss for much of the past five
years. This has largely been due major
acquisitions and the process of
integrating them into existing operations.
regionally based operators also operate.

Many of these operators produce
private-label products and service niche
market segments.
25
Major Companies
Other Companies
continued
Tru Blu Beverages Pty Limited
Estimated market share: Less than 5.0%

Formerly known as P&N Beverages, Tru
Blu Beverages is an Australian-owned
private beverage company. Tru Blu
Beverages competes mainly in the
grocery stores channel, with products
such as Pub Squash, LA Ice Cola and
Lido Lemonade. The company was
formed after the previous company P&N

Beverages was sold to Japanese brewing
giant Asahi Holdings. After initially
being rejected by the ACCC on
competition grounds, Asahi revised its
offer for P&N Beverages in June 2011
and agreed to divest the companys soft
drink and cordial businesses to form Tru
Blu Beverages.
Soft Drink Manufacturing in AustraliaJune 2016 26
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is M
edium

exhibits a medium level of capital
intensity. For every dollar paid as wages,
an estimated $0.30 is spent on capital
investment. The level of capital intensity
reflects the amount of machinery and
automation required in the industry.
While manual labour is important to
industry operations, machinery is
required across nearly all processes, from
manufacturing to distribution, with
automation constantly increasing across
all areas. As a result, the level of capital
intensity in the industry has risen over
the past five years and the trend is
expected to continue as automation
grows and major players continue to
invest in greener bottling technologies.
CCAs Project Zero program
exemplifies this move towards more
capital-intensive operations. Since 2010,
the company has invested heavily in
producing PET bottles and automating
Capital intensity
Capital units per labour unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Manufacturing
Soft Drink
Manufacturing
Dotted line shows a high level of capital intensity

some production stages and

warehousing. Increasing wholesale
bypass has led to CCA investing heavily
in improved distribution centres to speed
up the process. Given CCAs significant
market share, this has contributed to a
rise in the industrys capital intensity.
Tools of the Trade: Growth Strategies for Success

New Age Economy
Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labour skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Labour Intensive
Capital Intensive
Supermarkets and
Soft Drink and
Pre-Packaged Food Grocery Stores Soft Drink
Wholesaling
Manufacturing
Traditional Service Economy
Milk and Cream
Fruit and Vegetable
Processing
Wholesale and Retail. Reliant
Processing
on labour rather than capital
to sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Change in Share of the Economy
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labour abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialise
in niche, high-value products.
Technology & Systems The Soft Drink Manufacturing industry

of
Technology Change
is M
edium
Revenue Volatility
Level
The level
of
Volatility is L ow
based plastics in the manufacturing of

bottles has become increasingly
prevalent, with Coca-Cola Amatil leading
the way with its PlantBottle technology.
Other technology changes have
focused on improving distribution
efficiency. Coca-Cola Amatil Ltd uses an
online ordering system, which is part of
an e-business strategy enabling the
company to build relationships with its
domestic customers and improve supply
chain effectiveness. Wholesalers and
retailers can select, order and pay for
supplies online and check their order
statuses, histories and accounts. These
initiatives are expected to reduce
operating and administrative costs for
industry operators.

has displayed a low level of revenue
volatility over the past five years. Demand
for industry products is reliant upon
disposable income levels, particularly as
there are available substitutes at lower
pricepoints. As a result, consumption and
industry revenue vary in times of
economic turmoil. This was especially
evident in the years following the global
financial crisis, when industry revenue
exhibited higher volatility. Revenue
volatility has since fallen back to a low
level. Weather conditions also affect
consumer demand for cold beverages, but
the effect of this on revenue volatility

generally applies within individual years
rather than year to year. A warmer climate
in certain months or higher average
temperatures tend to increase demand for
industry products, while cooler months
and lower average temperatures tend to
weaken demand. As a result, demand and
consumption of these products can follow
weather conditions.
The high degree of industry
competition limits revenue volatility to
an extent. Two major players dominate
the industry, using aggressive pricing
strategies to expand market share. The
A higher level of revenue

volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilised
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Volatility vs Growth
1000
Revenue volatility* (%)
Level
The level
exhibits a medium level of technological

change. Processes in the industry involve
combining water, flavourings and
sweeteners, carbonation, and then
bottling or canning. Technology changes
have largely been related to
improvements in quality control, and the
automation and computerisation of
production processes. Significant changes
have also occurred in product packaging,
especially the use of new polyethylene
terephthalate (PET) plastics technology,
which has made bottles more
environmentally friendly. New plastics
technology has also eliminated some
restrictions on the portability and storage
of industry products. The use of plant-
Hazardous
Rollercoaster
100
10
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualised revenue growth (%)

* Axis is in logarithmic scale
Revenue Volatility
continued
firms also face price-based competition

from smaller players and private labels,
which prevent any significant price
increases. However, high brand loyalty
has helped to retain customers for major
brands such as Coca-Cola and Pepsi,

preventing a significant switch to
private-label soft drinks. The effect of
brand loyalty is particularly strong
within the cola varieties.
Regulation & Policy
The Soft Drink Manufacturing industry is

characterised by a medium level of
regulation and policy, with food and
health regulations applicable to industry
operators. The regulation of foods for
sale in Australia is primarily a state and
territory responsibility, with individual
food laws prohibiting the false and
misleading labelling of foods for sale. The
industry is also subject to labelling
regulations in relation to the country of
origin and ingredients.
Food Standards Australia New Zealand
(FSANZ) is a government agency that
develops uniform food standards across
Australia and New Zealand. The agency
was established as part of the Australia
New Zealand Food Authority Act 1991,
with final decisions on food standards
made by the Australia New Zealand Food
Standards Council, which comprises
health ministers of the various states and
territories, and New Zealand. These Food
Standards enable the effective
measurement and enforcement of general
food laws. Current food standards regulate

the composition of some beverages
produced by the industry, such as sports
drinks, and labelling requirements.
The Australian Consumer Law (ACL),
administered under the Competition and
Consumer Act 2010, also affects the
industry. The ACL is enforced by the
Australian Competition and Consumer
Commission (ACCC) and prohibits
anti-competitive behaviour by companies
across all industries. The ACCC has
blocked several proposed acquisitions in
the industry on the grounds of
competition, such as Asahis proposed
deal to acquire P&N beverages in 2010.
Competition legislation also affects the
strategic decisions of major players, as
shown by Coca-Cola Amatils problem of
being unable to generate growth through
acquisitions within the industry, which is
likely to raise competition concerns. As a
result, CCA relies on organic growth or
acquisitions in other parts of the
beverages sector.
The level of assistance within the Soft

Drink Manufacturing industry is low and
steady, although the industry receives
some protection and assistance through
tariffs. The current tariff rate is 5.0%, but
imports from developing countries are
afforded a lower tariff rate to encourage
economic development. The ChinaAustralia Free Trade Agreement is
expected to result in tariffs for some
industry products being reduced between
the two countries. This is likely to
increase demand from China as industry
products become less expensive for the
overseas buyers. The effect on the
industry will be minor though, given
exports constitute a small portion of

industry revenue.
The Australian Beverages Council is
the body that represents firms in the
industry. The council also stands for the
interests of manufacturers, distributors
and franchisors of all non-alcoholic
beverages. The industry bodys role is to
provide representation on regulatory,
public policy, trade and commercial
issues to government at all levels,
community groups and the media. They
also host industry events and offer
professional development, technical and
regulatory support, and other resources
for members.
Level & Trend

he level of
T
Regulation is
Mediumand the
trend is S
teady
Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is L owand the
trend is S
teady
29
Key Statistics
Industry Data
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
Sector Rank
Economy Rank
Revenue
($m)
3,666.8
3,650.3
3,707.4
3,962.9
3,868.4
4,058.1
4,127.6
4,189.5
4,272.4
4,365.0
4,399.8
4,351.9
4,403.9
4,470.0
4,559.2
22/193
266/859
Annual Change
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
Sector Rank
Economy Rank
Revenue
(%)
-0.5
1.6
6.9
-2.4
4.9
1.7
1.5
2.0
2.2
0.8
-1.1
1.2
1.5
2.0
45/193
408/859
Industry
Value Added
($m)
Establishments Enterprises
1,130.7
94
79
1,069.5
95
77
1,107.9
94
76
1,196.9
94
76
1,142.0
95
77
1,196.0
95
76
1,226.6
95
77
1,236.4
95
77
1,269.2
96
78
1,293.8
96
78
1,345.9
97
79
1,381.2
97
79
1,412.0
98
80
1,425.9
100
81
1,455.0
101
82
17/193
152/193
144/193
281/858
760/860
707/859
Industry
Value Added Establishments Enterprises
(%)
(%)
(%)
-5.4
1.1
-2.5
3.6
-1.1
-1.3
8.0
0.0
0.0
-4.6
1.1
1.3
4.7
0.0
-1.3
2.6
0.0
1.3
0.8
0.0
0.0
2.7
1.1
1.3
1.9
0.0
0.0
4.0
1.0
1.3
2.6
0.0
0.0
2.2
1.0
1.3
1.0
2.0
1.3
2.0
1.0
1.2
60/193
66/193
66/193
445/858
497/860
478/859
Key Ratios
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
Sector Rank
Economy Rank
IVA/Revenue
(%)
30.84
29.30
29.88
30.20
29.52
29.47
29.72
29.51
29.71
29.64
30.59
31.74
32.06
31.90
31.91
88/193
502/858
Imports/Demand Exports/Revenue
(%)
(%)
13.36
0.69
13.01
0.65
12.63
0.72
11.95
0.74
12.47
0.79
12.94
0.74
13.25
0.67
13.26
0.59
13.37
0.56
13.35
0.55
13.50
0.55
14.02
0.56
14.11
0.56
14.28
0.57
14.39
0.56
123/178
167/179
141/231
221/236
Employment
6,834
6,766
6,733
6,685
6,531
6,547
6,518
6,478
6,490
6,434
6,462
6,467
6,504
6,562
6,582
48/193
412/857
Employment
(%)
-1.0
-0.5
-0.7
-2.3
0.2
-0.4
-0.6
0.2
-0.9
0.4
0.1
0.6
0.9
0.3
96/193
616/857
Revenue per
Employee
($000)
536.55
539.51
550.63
592.80
592.31
619.84
633.26
646.73
658.31
678.43
680.87
672.94
677.11
681.19
692.68
36/193
135/857
Exports
($m)
25.4
23.9
26.6
29.4
30.4
30.0
27.6
24.6
24.1
23.9
24.3
24.4
24.8
25.3
25.6
139/179
187/236
Exports
(%)
-5.9
11.3
10.5
3.4
-1.3
-8.0
-10.9
-2.0
-0.8
1.7
0.4
1.6
2.0
1.2
132/179
174/236
Wages/Revenue
(%)
11.20
11.44
11.57
10.66
10.61
10.04
10.00
9.98
10.08
9.95
9.96
10.19
10.23
10.26
10.16
162/193
724/858
Imports
($m)
561.4
542.3
532.3
534.1
546.8
598.5
626.0
636.5
655.7
668.9
683.0
705.5
719.6
740.5
762.0
75/179
86/232
Imports
(%)
-3.4
-1.8
0.3
2.4
9.5
4.6
1.7
3.0
2.0
2.1
3.3
2.0
2.9
2.9
86/179
111/232
Employees
per Est.
72.70
71.22
71.63
71.12
68.75
68.92
68.61
68.19
67.60
67.02
66.62
66.67
66.37
65.62
65.17
5/193
45/857
Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data.
Wages
($m)
410.7
417.5
429.1
422.4
410.5
407.3
412.7
418.1
430.7
434.3
438.2
443.5
450.5
458.4
463.3
44/193
384/858
Domestic
Demand
($m)
4,202.8
4,168.7
4,213.1
4,467.6
4,384.8
4,626.6
4,726.0
4,801.4
4,904.0
5,010.0
5,058.5
5,033.0
5,098.7
5,185.2
5,295.6
25/178
37/231
Wages
(%)
1.7
2.8
-1.6
-2.8
-0.8
1.3
1.3
3.0
0.8
0.9
1.2
1.6
1.8
1.1
73/193
529/858
Domestic
Demand
(%)
-0.8
1.1
6.0
-1.9
5.5
2.1
1.6
2.1
2.2
1.0
-0.5
1.3
1.7
2.1
50/178
78/231
Average Wage
($)
60,096.58
61,705.59
63,730.88
63,186.24
62,854.08
62,211.70
63,316.97
64,541.53
66,363.64
67,500.78
67,811.82
68,578.94
69,265.07
69,856.75
70,388.94
77/193
308/857
Share of the
Economy
(%)
0.09
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
0.08
17/193
281/858
30
Jargon & Glossary
Industry Jargon
CARBONATED SOFT DRINKS (CSD)Non-alcoholic

beverages with the addition of purified carbon dioxide
gas.
POLYETHYLENE TEREPHTHALATE (PET)A type of

polymer resin used in synthetic fibres and in the
production of food and beverage containers.
FUNCTIONAL BEVERAGEA non-alcoholic beverage

containing additional ingredients to provide specific
benefits, such as health and endurance.
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labour; medium is $0.125 to $0.333 of capital to
$1 of labour; low is less than $0.125 of capital for every
$1 of labour.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
Australian Bureau of Statistics implicit GDP price
deflator.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%; medium is 5% to 20%; and high is more
than 20%. Imports/domestic demand: low is less than
5%; medium is 5% to 35%; and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLE All industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISE A division that is separately managed

and keeps management accounts. Each enterprise
consists of one or more establishments that are under
common ownership or control.
NONEMPLOYING ESTABLISHMENTBusinesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within Australia, regardless of their country of
origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EXPORTS Total value of industry goods and services

sold by Australian companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in Australia.
INDUSTRY CONCENTRATION An indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITY The level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. Benefits and on-costs are
included in this figure.
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Going soft: Rising health consciousness will

slow revenue growth over the next five years

IBISWorld Industry Report C1211a

Soft Drink Manufacturing

2 About this Industry

18 Market Share Concentration

18 Key Success Factors

18 Cost Structure Benchmarks

30 Jargon & Glossary

23 Coca-Cola Amatil Limited

Key External Drivers

24 Asahi Holdings (Australia) Pty Ltd

Industry Life Cycle

11 Products & Markets

28 Regulation & Policy

11 Products & Services

www.ibisworld.com.au | (03) 9655 3881 | info@ibisworld.com

Soft Drink Manufacturing in Australia June 2016

About this Industry

Industry firms primarily produce canned

The primary activities of this industry are

energy drinks. The industry does not

Carbonated soft drink production

The major products and services in this industry are

C1131 Milk and Cream Processing in Australia

For additional information on this industry

Provided to: RMIT Library (211848891) | 14 September 2016

Soft Drink Manufacturing in Australia June 2016

Annual Growth 11-16

Annual Growth 16-21

Demand from supermarkets and grocery

Revenue vs. employment growth

Key External Drivers

Demand from fast

Life Cycle Stage

Provided to: RMIT Library (211848891) | 14 September 2016

Soft Drink Manufacturing in Australia June 2016

Executive Summary | Key External Drivers | Current Performance

A weak retail environment and changing

with high sugar content. This has

Key External Drivers

Demand from supermarkets

issues and lifestyle choices. An increase

Demand from fast food services

Provided to: RMIT Library (211848891) | 14 September 2016

Soft Drink Manufacturing in Australia June 2016

Key External Drivers

Real household disposable income

drinks. A rise in sugar prices increases

Demand from supermarkets and grocery

Revenue growth in the Soft Drink

higher value sports and energy drinks,

Industry sales volumes have remained

Mother and Monster, both of which are

Provided to: RMIT Library (211848891) | 14 September 2016

Soft Drink Manufacturing in Australia June 2016

industry is expected to record steady

performance. These firms have

Industry operators have faced significant

Advertising and packaging costs have

The industry has been contending with a

2015 and has 30.0% less sugar than

Provided to: RMIT Library (211848891) | 14 September 2016

Soft Drink Manufacturing in Australia June 2016