Refresh yourself

Are Latin American beverage companies in tune with their consumers?

Latin America’s huge potential in terms of consumption of food and beverages is well known, thanks to booming economies and a positive upward social mobility trend across the region. However, the assumption of a European/US style of consumer development in these economies could be setting some companies off track.

In terms of beverage consumption, what really explains the huge potential for the industry is simple arithmetic: a human being drinks – give or take – 2.2 liters of liquid per day; this includes hot drinks such as tea and coffee, milk, alcoholic drinks such as beer, home-made juices, soft drinks and of course tap water.

The case is that in Latin America, during 2011, around 240 billion liters of commercial and branded beverages were consumed by a population of almost 600 million. 

This means that only half of this liquid intake comes from these branded beverages. The rest of the daily consumption, around one liter per day, is still driven by unbranded commercial beverages, such as freshly squeezed juice sold on the streets, homemade drinks and tap water. 

Billions of sips will inexorably be replaced by some form of brand-named products, concurrent with the economic progress that implies more time out of home and less time to prepare homemade drinks.

The same calculation for a typical European country tells us that only 30 per cent of the total intake comes from non-branded drinks and that number is even lower for the US. 

Industry forecasts are projecting that the total commercial beverage volumes in Latin America will increase by around 3 per cent yearly until 2016. What categories will drive this volume growth? Well, I believe that the answer is also simple, but somehow could be controversial.

If you conduct a survey across many marketing teams, you will probably hear, erroneously, that most Latin America consumers are willing to pay extra for functional products. Some will refer to the much overused "wellness trend". 

Not many companies have actually understood what Latin Americans are willing to drink and this might be one of the reasons why an industry concentration has become more evident in the region. In order to explain this, allow me to use a basic interpretation of the need states analysis model. 

In the mid-Seventies, marketing gurus came up with the need states theory. This model provided a new approach for analyzing consumers, moving from time specific consumption occasion (breakfast, party, etc.) to segmentation by needs; in the case of beverages, needs could go from plain refreshment to relaxation, hydration, energy boost, need for fun, weight management, heart health, and so on.

A basic application of this model would start allocating all existing commercial beverages categories in four different quadrants limited by two axes with the horizontal axis going from Wellness to Indulgence and the vertical axis going from Functional to Refreshing. Something like this:

Ten years ago typical Latin America consumption was driven by indulgence/refreshing drinks (mainly carbonated soft drinks) with more than 40 per cent of total consumption. Many were betting that in future years the opposed segment, the wellness/functional, would start growing as it did in Europe or the US.

Contrary to that, in 2011 indulgence/refreshing drinks represented more than 45 per cent of total consumption, while wellness/functional have lost share of throat accounting for only one quarter of total consumption.

Does this mean that Latin Americans are turning their back on more functional and “healthy” drinks? No. It means that drinks that fulfill the indulgence and refreshing needs are still outperforming the much-hyped new functional drinks, which in many cases will remain limited to something just larger than a niche.

A couple of months ago, while discussing this with an executive of a global company, I received a clear explanation: “Simple," she said. "For a house-wife in El Salvador, wellness means being able to put on top of the family table at lunch time a cold two liter bottle of cola flavor soft drink”.

Drinker: Getty Images

Pedro Ibañez is Latin America director for consumer market group, Canadean

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Find the EU renegotiation demands dull? Me too – but they are important

It's an old trick: smother anything in enough jargon and you can avoid being held accountable for it.

I don’t know about you, but I found the details of Britain’s European Union renegotiation demands quite hard to read. Literally. My eye kept gliding past them, in an endless quest for something more interesting in the paragraph ahead. It was as if the word “subsidiarity” had been smeared in grease. I haven’t felt tedium quite like this since I read The Lord of the Rings and found I slid straight past anything written in italics, reasoning that it was probably another interminable Elvish poem. (“The wind was in his flowing hair/The foam about him shone;/Afar they saw him strong and fair/Go riding like a swan.”)

Anyone who writes about politics encounters this; I call it Subclause Syndrome. Smother anything in enough jargon, whirr enough footnotes into the air, and you have a very effective shield for protecting yourself from accountability – better even than gutting the Freedom of Information laws, although the government seems quite keen on that, too. No wonder so much of our political conversation ends up being about personality: if we can’t hope to master all the technicalities, the next best thing is to trust the person to whom we have delegated that job.

Anyway, after 15 cups of coffee, three ice-bucket challenges and a bottle of poppers I borrowed from a Tory MP, I finally made it through. I didn’t feel much more enlightened, though, because there were notable omissions – no mention, thankfully, of rolling back employment protections – and elsewhere there was a touching faith in the power of adding “language” to official documents.

One thing did stand out, however. For months, we have been told that it is a terrible problem that migrants from Europe are sending child benefit to their families back home. In future, the amount that can be claimed will start at zero and it will reach full whack only after four years of working in Britain. Even better, to reduce the alleged “pull factor” of our generous in-work benefits regime, the child benefit rate will be paid on a ratio calculated according to average wages in the home country.

What a waste of time. At the moment, only £30m in child benefit is sent out of the country each year: quite a large sum if you’re doing a whip round for a retirement gift for a colleague, but basically a rounding error in the Department for Work and Pensions budget.

Only 20,000 workers, and 34,000 children, are involved. And yet, apparently, this makes it worth introducing 28 different rates of child benefit to be administered by the DWP. We are given to understand that Iain Duncan Smith thinks this is barmy – and this is a man optimistic enough about his department’s computer systems to predict in 2013 that 4.46 million people would be claiming Universal Credit by now*.

David Cameron’s renegotiation package was comprised exclusively of what Doctor Who fans call handwavium – a magic substance with no obvious physical attributes, which nonetheless helpfully advances the plot. In this case, the renegotiation covers up the fact that the Prime Minister always wanted to argue to stay in Europe, but needed a handy fig leaf to do so.

Brace yourself for a sentence you might not read again in the New Statesman, but this makes me feel sorry for Chris Grayling. He and other Outers in the cabinet have to wait at least two weeks for Cameron to get the demands signed off; all the while, Cameron can subtly make the case for staying in Europe, while they are bound to keep quiet because of collective responsibility.

When that stricture lifts, the high-ranking Eurosceptics will at last be free to make the case they have been sitting on for years. I have three strong beliefs about what will happen next. First, that everyone confidently predicting a paralysing civil war in the Tory ranks is doing so more in hope than expectation. Some on the left feel that if Labour is going to be divided over Trident, it is only fair that the Tories be split down the middle, too. They forget that power, and patronage, are strong solvents: there has already been much muttering about low-level blackmail from the high command, with MPs warned about the dire influence of disloyalty on their career prospects.

Second, the Europe campaign will feature large doses of both sides solemnly advising the other that they need to make “a positive case”. This will be roundly ignored. The Remain team will run a fear campaign based on job losses, access to the single market and “losing our seat at the table”; Leave will run a fear campaign based on the steady advance of whatever collective noun for migrants sounds just the right side of racist. (Current favourite: “hordes”.)

Third, the number of Britons making a decision based on a complete understanding of the renegotiation, and the future terms of our membership, will be vanishingly small. It is simply impossible to read about subsidiarity for more than an hour without lapsing into a coma.

Yet, funnily enough, this isn’t necessarily a bad thing. Just as the absurd complexity of policy frees us to talk instead about character, so the onset of Subclause Syndrome in the EU debate will allow us to ask ourselves a more profound, defining question: what kind of country do we want Britain to be? Polling suggests that very few of us see ourselves as “European” rather than Scottish, or British, but are we a country that feels open and looks outwards, or one that thinks this is the best it’s going to get, and we need to protect what we have? That’s more vital than any subclause. l

* For those of you keeping score at home, Universal Credit is now allegedly going to be implemented by 2021. Incidentally, George Osborne has recently discovered that it’s a great source of handwavium; tax credit cuts have been postponed because UC will render such huge savings that they aren’t needed.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle