Europe’s Soft Drink Industry in 2026: Navigating Moderate Growth Amidst Innovation, Sustainability, and Supply Challenges

Europe’s soft drink sector continues to demonstrate resilience and adaptability in a landscape shaped by societal shifts, regulatory pressures, technological advancements, and evolving consumer preferences. While the industry remains on a steady growth trajectory with an expected compound annual growth rate (CAGR) of approximately 1.4% through 2035 and an estimated 88 billion liters consumed in 2024, recent developments highlight a period of dynamic transformation driven by innovation, operational resilience, and strategic repositioning.

Sustained but Moderating Growth Driven by Societal and Technological Trends

Despite ongoing expansion, industry indicators suggest a more moderated growth pace, influenced by several key factors:

• Urbanization and Convenience: The continued growth of European cities amplifies demand for portable, on-the-go beverages. Consumers increasingly gravitate toward health-conscious, active-lifestyle products, prompting brands to innovate in packaging and product formats that emphasize ease of use alongside health benefits.

• Technological Innovation: The industry leverages AI-powered manufacturing, real-time supply chain traceability, and automated production to boost efficiency and sustainability. For instance, Coca-Cola Beverages Africa’s deployment of Copilot Studio, an AI-driven platform, exemplifies how digital tools enable faster responsiveness, greater transparency, and personalized products—crucial for maintaining competitiveness in a rapidly evolving market.

• Health & Wellness Focus: Consumers are increasingly choosing natural ingredients, low-sugar, organic, and plant-based offerings. Brands are reformulating existing lines and launching new products emphasizing functional benefits like hydration, immunity support, and metabolic health, embedding wellness at the core of their strategic initiatives.

These societal and technological shifts collectively foster an environment where wellness-oriented and sustainability-driven products are central to ongoing innovation, signaling a sector transformation toward health-conscious and eco-friendly offerings.

Evolving Product Portfolio: From Classics to Functional and Plant-Based Innovations

The product landscape is experiencing a significant paradigm shift, marked by these key trends:

• Functional Beverages & Flavored Waters: Enriched with vitamins, minerals, adaptogens, and herbal extracts, these drinks aim to hydrate while supporting overall well-being. The rise of enhanced waters exemplifies the move toward personalized health solutions.

• Reformulated Energy Drinks: Moving away from traditional high-sugar formulas, brands emphasize natural ingredients and reduced sugar content. The focus is on clean-label, plant-based, and minimally processed options that appeal to health-conscious consumers.

• Low-Sugar & Organic Soft Drinks: Transparency, clean-label ingredients, and minimal processing are increasingly demanded. Brands are emphasizing plant-based formulations and organic certification to meet these evolving preferences.

• Non-Alcoholic Segment Expansion: This remains a key growth area, with innovative offerings such as:

  • Heineken 0.0, the leading alcohol-free beer, continuing to gain market share.
  • Lyre’s, an Australian-origin brand launched in 2019, offers a broad range of alcohol-free spirits that emulate traditional liquors, appealing to consumers seeking premium, health-conscious, and innovative options.
  • Jiant introduced hop tea, a zero-alcohol, plant-based beverage blending hop water with herbal tea, catering to consumers demanding functional, refreshing, and novel drinks.

Legacy brands are actively revisiting classic flavors and innovating variants to stay relevant and meet evolving tastes.

Strategic Movements: Leadership Changes, Mergers, and Collaborations

Major players are enacting strategic initiatives to shape the sector’s future:

• Leadership Transitions:

  • Andy Bagnall was appointed Director General of the British Soft Drinks Association (BSDA) in December 2024. His focus on sugar reduction, advertising standards, and environmental sustainability aims to influence policy and elevate industry standards.
  • Henrique Braun’s appointment as Coca-Cola’s CEO signals a shift toward faster innovation cycles, personalized offerings, and health-forward initiatives. Under his leadership, Coca-Cola is expanding Fairlife, its high-protein dairy brand, aligning with societal shifts toward protein-rich diets.
  • PepsiCo’s CEO emphasizes ongoing efforts in health-focused beverages, including collaborations with brands like Celsius and Alani Nu, highlighting capacity expansion and product diversification to sustain growth.

• Mergers, Acquisitions, and Collaborations:

  • Refresco’s acquisition of SunOpta exemplifies a strategic push into plant-based and functional beverage innovation, broadening development capabilities.
  • Suntory Beverage & Food GB&I’s collaboration with Polytag aims to enhance packaging sustainability via real-time tracking and data collection, directly addressing consumer demands for transparency and waste reduction.
  • Coca-Cola’s deployment of Copilot Studio demonstrates how AI and automation are transforming manufacturing, reducing costs, and accelerating product development timelines.

• Brand & Sponsorship Initiatives:

  • PepsiCo recently entered into a multi-year global partnership with Mercedes-AMG Petronas Formula 1, significantly boosting brand visibility among young, affluent audiences.
  • The company also expanded route-to-market activations, collaborating with Major League Baseball (MLB) and other sports organizations to directly engage consumers through innovative marketing campaigns.

Coca-Cola’s Strategic Focus

Recent efforts underscore Coca-Cola’s intensified focus on nutrition and innovation:

• Expansion of Fairlife with an emphasis on protein-rich dairy and plant-based nutrition.
• Under Henrique Braun, Coca-Cola aims to accelerate product innovation, especially in low-sugar, weight-management, and personalized nutrition segments, striving to reduce time-to-market.
• The company continues its diversification strategy across functional beverages, water, and non-carbonated formats, leveraging its global footprint to swiftly adapt to regional regulatory and consumer trends.

Financial Indicators and Industry Signals

Recent financial reports present a mixed but optimistic outlook:

• Coca-Cola’s Q4 2025 results show continued growth, though signs of moderating momentum as markets mature. Revenue increases are increasingly driven by product innovation rather than volume expansion.
• Suntory Beverage & Food experienced a full-year income decline, reflecting regional economic headwinds and a need for cost efficiencies and diversification.
• Coca-Cola European Partners (CCEP)’s growth appears to plateau, prompting renewed efforts in market expansion and product innovation.
• Conversely, PepsiCo demonstrates resilience, particularly in emerging markets, supported by investments in functional and health-oriented beverage lines, including recent launches of energy, hydration, and wellness products.

Recent Supply Chain Disruption: Coca-Cola Faces Brand Shortage

Adding to sector complexities, Coca-Cola is currently managing a significant product shortage affecting some of its most popular brands. Supply chain disruptions—stemming from logistical hurdles, component shortages, and manufacturing delays—have led to limited availability across several European markets.

A Coca-Cola spokesperson stated, “We are actively working to resolve supply chain issues to restore full availability of our key brands. We recognize the importance of these products to our consumers and are implementing measures to minimize impact.”

This shortage has already caused retail shelf shortages, prompting consumers to seek alternatives and potentially shift market share temporarily. Industry analysts warn that such disruptions may lead to short-term volatility in sales and marketing strategies, creating both challenges and opportunities for competitors.

New Strategic Investment: Suntory GB&I’s £25m Manufacturing Upgrade

Amid operational challenges, Suntory Beverage & Food Great Britain & Ireland (SBF GB&I) announced a substantial £25 million investment in its N1 site, dedicated to Lucozade and Ribena production. This investment aims to enhance manufacturing capacity, boost resilience, and drive innovation.

The upgrades include advanced automation, sustainable manufacturing practices, and capacity expansion designed to:

• Mitigate supply chain risks,
• Improve product quality and speed to market,
• Meet rising consumer demand for core brands amid a fiercely competitive environment.

This strategic move underscores a broader industry trend: significant capacity investments to counteract ongoing logistical uncertainties and rising costs related to sustainable packaging and regenerative agriculture.

Latest Market Entry: Carlsberg and PepsiCo Launch Poppi in the UK

Adding a fresh wave of innovation, PepsiCo is set to launch its prebiotic soda brand Poppi in the UK next week. The US-based brand, acquired last year for $1.95 billion, aims to tap into the health-conscious and functional beverage segments prevalent among European consumers.

Carlsberg is also exploring similar functional offerings, signaling a broader industry push into gut health and metabolism-supporting products. The entry of Poppi into the UK market marks a strategic expansion and underscores the increasing importance of prebiotic and probiotic drinks as consumers seek digestive health solutions.

Industry Response to Obesity-Drug Trends

The rise of obesity medications like Ozempic (semaglutide) has prompted the industry to adapt marketing and product strategies:

• PepsiCo’s CEO announced a focus on low-calorie, portion-controlled, and metabolism-supporting products, emphasizing moderation and transparency.
• Brands are reframing product lines to highlight calorie content, gut health, and metabolic benefits, positioning themselves as partners in wellness.
• Marketing campaigns increasingly emphasize balanced lifestyles and holistic health, aligning product messaging with societal shifts toward medication-assisted weight management.

Industry Innovation in Packaging and Supply Chain Resilience

In response to environmental and logistical challenges, the industry accelerates packaging innovation:

• Refillable and blockchain-traceable bottles—such as those developed through collaborations like Founteyn’s project with PepsiCo—aim to reduce plastic waste and increase supply chain transparency.
• Emerging startups like Salt of the Earth and Tallow + Ash are pioneering circular economy solutions, emphasizing refillability and sustainable consumption.

Simultaneously, manufacturers are investing heavily in resilient supply chains—notably Suntory’s £25 million upgrade—to ensure product availability, especially amid ongoing disruptions like Coca-Cola’s current shortages.

Current Status and Future Outlook

As of 2026, Europe’s soft drink industry stands at a strategic crossroads—balancing moderate growth with transformative change. Its focus on health, sustainability, and technological innovation positions it for continued evolution, but operational resilience remains critical.

The recent Coca-Cola supply shortage highlights vulnerabilities in supply chain management, emphasizing the need for robust infrastructure investments like those by Suntory. Meanwhile, the industry’s embrace of functional, plant-based, and non-alcoholic innovations signals an adaptive approach aligned with consumer demands.

Implications include:

• A continued shift toward wellness and eco-conscious products.
• Greater emphasis on transparency, sustainable packaging, and regenerative practices.
• The importance of agility in supply chain operations to navigate disruptions and capitalize on emerging trends.

The strategic investments, leadership changes, and product innovations underway suggest an industry that is resilient yet adaptive, well-positioned to influence future consumer habits and environmental outcomes.

In summary, Europe’s soft drink sector is navigating moderate growth amid a period of profound transformation—driven by societal needs for healthier, more sustainable, and innovative products. The recent £25 million investment by Suntory GB&I exemplifies this forward-looking resilience, ensuring capacity and sustainability remain aligned with industry ambitions and consumer expectations.