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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

A second referendum? Photo: Getty
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Will there be a second EU referendum? Petition passes 1.75 million signatures

Updated: An official petition for a second EU referendum has passed 1.75m signatures - but does it have any chance of happening?

A petition calling for another EU referendum has passed 1.75 million signatures

"We the undersigned call upon HM Government to implement a rule that if the remain or leave vote is less than 60% based a turnout less than 75% there should be another referendum," the petition reads. Overall, the turnout in the EU referendum on 23 June was 73 per cent, and 51.8 per cent of voters went for Leave.

The petition has been so popular it briefly crashed the government website, and is now the biggest petition in the site's history.

After 10,000 signatures, the government has to respond to an official petition. After 100,000 signatures, it must be considered for a debate in parliament. 

Nigel Farage has previously said he would have asked for a second referendum based on a 52-48 result in favour of Remain.

However, what the petition is asking for would be, in effect, for Britain to stay as a member of the EU. Turnout of 75 per cent is far higher than recent general elections, and a margin of victory of 20 points is also ambitious. In the 2014 independence referendum in Scotland, the split was 55-45 in favour of remaining in the union. 

Unfortunately for those dismayed by the referendum result, even if the petition is debated in parliament, there will be no vote and it will have no legal weight. 

Another petition has been set up for London to declare independence, which has attracted 130,000 signatures.