The Czech Office for the Protection of Competition has published a comprehensive report from its sector inquiry into the production and off-trade sale of non-alcoholic beverages in the Czech Republic. The analysis, covering data from January 2020 to June 2024, indicates a higher concentration in the production market, yet a decline in the dominance of the strongest players.

The inquiry was prompted by several factors raising concerns about competition in the sector, particularly the rapid and above-average increase in retail prices of non-alcoholic beverages, which outpaced average price developments in the European Union and neighboring countries. A long-term high level of market concentration was also observed in both production and retail.

The investigation involved extensive data collection from nearly thirty manufacturers and wholesale suppliers of non-alcoholic beverages, fourteen major retail chains, and two relevant associations active in this area. The authority examined the situation both as a whole and by breaking it down into 14 product categories and 2 summary categories.

Wholesale revenues from non-alcoholic beverage sales between 2020 and 2023 were primarily driven by price increases rather than consumption growth. While sales volumes increased by only a few percent, revenues surged by approximately 40%. The growth in sold volumes and revenues varied significantly across different product categories.

In terms of volume, the most sold product categories included flavored waters, cola drinks, and mineral waters, with cola drinks generating the highest revenues for manufacturers. Retail chains also saw the highest revenues from cola drinks, flavored waters, and energy drinks. The market is predominantly composed of branded products, which account for a substantial majority of both sales volumes (over 75%) and revenues (over 85%), with private labels playing a significant role in bottled water and fruit juice categories.

While competition occurs within individual product categories at the production level, at the retail level, chains appear to compete on the broader food retail market rather than within the isolated sub-sector of non-alcoholic beverage sales.

The wholesale supply of non-alcoholic beverages in the off-trade distribution channel is concentrated in the Czech Republic. The most significant sellers by volume and revenue include Mattoni, Kofola, Maspex, Coca-Cola, and Veseta, with these competitors holding substantial positions across most product categories. Over time, there has been a slight decrease in the combined market share of the five largest manufacturers, while a modest increase in the share of remaining manufacturers was identified.

In some product categories, a clear leader was identified with a very high market share (45-55%), indicating potential dominance if the category were considered a separate relevant market. However, in most categories, the share of the strongest player decreased by more than 10 percentage points during the observed period.

The report also highlighted that the average wholesale price of non-alcoholic beverages increased by approximately 35%, with retail prices rising slightly more at 38%. Retail prices of non-alcoholic beverages grew faster than food prices and overall inflation in the Czech Republic. Price developments varied significantly across product categories.

Despite the observed price increases, the sector inquiry found no significant evidence of competition distortion. While some major manufacturers held high market shares, these shares generally declined over the observed period. Instances where the positions of significant competitors remained stable or increased were attributed to lower prices compared to other competitors.

At the retail level, the inquiry found a relatively small number of significant sellers, but no signs of competition distortion were evident. Retail chains compete not only on pricing but also on product assortment, emphasizing certain product categories and the share of private labels in their offerings.

However, the authority identified significant barriers to entry in the sector, primarily due to high investment costs, marketing requirements, and the negotiating power of retail chains and major manufacturers.

The rapid and above-average growth in retail prices of non-alcoholic beverages, particularly in 2022, was deemed a short-term phenomenon. In the medium term, the price level for non-alcoholic beverages in the Czech Republic was among the lowest in the EU in 2023 and 2024.