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Reports show 2017 challenging year for flavoured alcoholic beverages, drinking yoghurt and mageu

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Recent BMi Research reports confirmed that the flavoured alcoholic beverage category declined in volume during 2017, the mageu category volumes suffered a loss in 2017 and the drinking yoghurt category experienced both volume and value declining compared to 2016.

The flavoured alcoholic beverage category has been affected by the economic turmoil faced globally and in South Africa. Players have been struggling to meet target sales in the light of limited consumer spending. It is hypothesised that consumers are opting to purchase other affordable alcoholic beverages, such as homebrewed craft beer and traditional beer which are relatively low priced, rather than flavoured alcoholic beverages. However, the category seems to be on the brink of recovery as it showed a softer decline in volume compared to that experienced in 2016 and 2015. 

The well-established on-consumption channel remained the dominant channel for the category, however it shed some volume to the off-consumption channel for the base year as this is attractive to consumers with limited spending power due to their cheaper pricing on FAB products. 

Much of the advertising focus for this category also concentrates on the ‘occasion’ for purchase, for instance, while out with friends, thus driving on-consumption and demand during social events. The off-consumption channel increased in market volume for the base year. It is hypothesised that retail outlets, liquors stores, and wholesalers offered competitive pricing and promotional activities that may have encouraged consumers to buy more of these products through this channel.

The category is expected to remain under pressure in the short to medium term due to the competition from other alcoholic beverages.

Mageu volumes decline but value increases
It is believed that the mageu category is more sensitive than others to the country’s economic situation, as the target market includes lower-income, price sensitive households. However, the category yielded growth in value from 2016 to 2017, in spite of a decline in volume during this time.

In order to bypass the suppressed economy, it is hypothesised that consumers in rural locations are making their own mageu. They are believed to be the dominant consumers of the product and during challenging times they naturally shift to cheaper alternatives. 
Other reasons for the category decline include:

Players diverting their focus to alternative beverage categories.

The depletion of consumer disposable income and job losses in certain regions due to the drought and other social and political challenges.

The discontinuation of certain mageu lines within the base year.

Although all local channel volumes are down on 2017, on-consumption, bottom end retail and top end retail showed smaller percentage declines year on year. On-consumption is said to be highly dependent on feeding schemes to maintain volume levels, and there were fewer of these prospects compared to previous years.

Drinking yoghurt category experiences challenging year
The drinking yoghurt category experienced a challenging year in 2017 with both volume and value declining compared to 2016. The average selling price increased at a lower than inflation (CPI) rate in that period. The decline in category value was attributed more to the loss in volume rather than the slow growth in price.

The category decline may be attributed to the factors listed below:

The increase in awareness of consumer health and sugar intake. The government and other organisations have been working on educating consumers about the dangers of consuming too much sugar and introduced sugar tax in an attempt to curb obesity and other health issues. There may be more product reformulations in future in line with this.

Competition from other dairy and non-alcoholic beverage products that are considered healthier and have the same price point as drinking yoghurt. Consumers are spoilt for choice by on-the-go beverages options available.

Limited consumer spending on products that are considered non-essential. 

Limited supply of raw milk in some regions that were still experiencing drought at the beginning of the year.

The category is expected to remain under pressure as it competes with other dairy beverages that are marketed as healthier, low sugar options and offer added value to attract health-conscious consumers. The category is expected to decline again in 2018 and regain some traction in the mid to long term, where it is expected to grow at a conservative rate.

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