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Tonic water market expected to reach $1.1bn by 2027

The gin craze has spawned a complementary boom in tonic water – here are some insights into this market published in the US by Allied Market Research.

The report, “Tonic Water Market by Flavor, Packaging form and Distribution Channel: Opportunity Analysis and Industry Forecast, 2021–2027,” puts the global tonic water valued at $805.4m in 2019, projected to reach $1,168.9m by 2027, registering a CAGR of 7.3% from 2021 to 2027.

The market is expected to exhibit an incremental revenue opportunity of $363.5m from 2019 to 2027.

The tonic water market is propelled by:

  • Rising preference for premium brands
  • Changing consumer tastes
  • Rising standards of living globally
  • Innovate product introductions

In order to engage tech-savvy young consumers that seek greater value for money, more personalisation, and integrated digital access, luxury tonic water brands have started to develop accurate social media platforms to expand consumer reach.

Furthermore, millennials also value quality, authenticity and provenance, and hence, are willing to pay more to enjoy this. These young consumers are inclined to experiment with their alcoholic beverages, which has essentially led to the resurgent ‘cocktail culture’. This has further enhanced the use of mixers as an ingredient, thereby propelling the global tonic water market trends. 

The global tonic water market is also expected to be further explored using organic, natural and authentic ingredients. This creates opportunity for tonic water manufactures to expand the consumer base and generate growth avenues. 

The COVID-19 pandemic has made a considerable impact on the tonic water market. The on-trade segment has especially been impacted, since bars, restaurants, pubs, breweries have been shut due to the lock-down and customer visits are entirely restricted.

Comparatively, the impact was less likely felt on the off-trade sales channel since consumers stock-piled beverages in the initial stages of the lockdown. However, the lockdown has generated a great opportunity for the e-commerce channels.  

Plain tonic water was the dominant segment in 2019 with 58.1% market share, owing to the fact that plain tonic water has been traditionally largely consumed as a mixer for alcoholic beverages.

However, with changes in consumer tastes and preferences, the demand for flavoured tonic water is expected to grow at a higher CAGR. This shift in demand is anticipated to create widespread flavoured tonic water market opportunities. 

Packaging and distribution

Packaging: Bottles (plastic and glass) were dominant in 2019 with 62.9% share in the market – and are the long traditional packaging for tonic water. The dominance of plastic bottles is being eroded by the popularity of glass, driven by premiumisation and environmental elements and rise of the on-trade segment. 

Distribution: As per distribution channel, the off-trade segment was the dominant segment in 2019 with 49.3% share in the tonic water market, since off-trade sales segment plays a crucial role in terms of quantity selling.

Majority of off-trade sales are generated through large supermarket chains. Sales strategies such as in-store promotions, tasting for selective products, membership offers and many others have spurred this sales growth. 

Regions: Europe was the prominent region in 2019 due to tremendous popularity and substantial consumption of alcoholic beverages in the region. Europe region is also the highest producer and consumer of tonic water across the globe, with the UK accounting for a maximum global tonic water market share. 

Key findings of the study:

  • By flavour, the plain tonic water segment was the highest contributor, with $468.0m in 2019, and is estimated to reach $655.1m by 2027, at a CAGR of 6.8% during the forecast period.
  • By packaging form, the bottles segment was the highest contributor, with $506.9m in 2019, and is estimated to reach $759.9m by 2027, at a CAGR of 7.7%.
  • By distribution channel, the off-trade segment was the highest contributor to the market, with $397.4m in 2019, and is estimated to reach $540.3m by 2027, at a CAGR of 6.4%.
  • In 2019, Europe was the highest revenue contributor, accounting for $360.8-m in 2019, and is estimated to reach $495.6m by 2027, with a CAGR of 6.5%.

The key players operating in the global tonic water industry include Fever-Tree, Dr Pepper Snapple Group, Fentimans, London Essence Company, East Imperial Beverage Corporation, Thomas Henry, Q Mixers, Zevia, Franklin & Sons, and White Rock Products.