December 18, 2018
The packaged beverage category is finally showing signs of life after retailers and manufacturers suffered a slow and declining 2017.
It’s no surprise that a category dominated with sugar-laden soft drinks, fruit juices, and energy drinks has been in decline. A 2016 survey by Mintel found that 84% of consumers claimed a desire to limit their sugar intake was primary decision factor when weighing food and beverage options.
Ready-to-drink coffees, sparkling waters, and better-for-you options have started making up for losses in CSDs as consumers seek healthier alternatives and beverages that offer functional benefits without sacrificing taste. At the 2018 Natural Products Expo East, the formula for new beverage brands was clear: all-natural, low-calorie, slightly fruity, added benefits. Consumers don’t just want it all, they fully expect it.
Here are five shifts from beverage marketers and retailers that are driving growth in this new landscape.
Embracing A Fast-Fashion Approach
Infinite consumer choice is now standard across just about every category imaginable. And in low-investment, low-committal categories like beverage, exploring what’s new comes with little risk. Beverage manufacturers are responding and continue to meet these high expectations with rapid innovation in new products, flavors, formulas, and packaging. Beverage marketers recognize that diversity in their offerings is critical, and they need to have an extensive portfolio of product types and brands that address consumer need states for any given moment.
A recent article by CBX partner and retail expert, Todd Maute, covers the new business models and partnerships being created to meet consumer demand for the new and the niche. According to Maute, “When national chains need new ideas, they’re increasingly turning to these smaller players. Large CPG companies, for their part, are increasingly investing in incubators and startups as well.”
With consumers expecting more out of their beverages than ever, we’ve seen an emergence of hybrid drinks that cross over all different segments of beverages. They offer consumers familiar flavor profiles, nutritional benefits, and fewer calories—and in many cases provide these things naturally. Because while health isn’t necessarily a driver in beverage choices for Gen Z consumers, we’re starting to see them elevate a “lack of unhealthy ingredients” has become a criterion in their selection process.
And these drinks are continuing to gain popularity as more varieties are introduced, directly contributing to this resurgence we’re seeing in the beverage category. When hybrid drinks first emerged on the market, a 2017 Mintel survey revealed that most consumers believed the drinks were more expensive than non-hybrid beverages, and were a marketing gimmick created by brands to make them spend more money on something that didn’t actually have any added value. But the category has seen a significant jump since then—by 2018, 10% of consumers in a more recent Mintel report claimed to be regular hybrid drinkers.
Riding The Growth Of All That’s Grown
Plant-based protein continues to be touted as a healthier alternative to dairy and consumers are buying it—a 2018 report by research firm GlobalData found that there has been a 600% increase in people identifying as vegans in the U.S in the last three years.
In a recent article, Christina Papale, VP of Strategy & Innovation at CBX, stated, “The growth [in plant-based beverages] is driven by consumers who are re-discovering their humanity who also love these new options that science and technology are providing them. They are driven to plant-based for a unique experience, particularly in taste.”
Adding Sparkle To CSDs & Hints Of Flavor To Plain Old Water
While sugary CSDs remain in decline, flavored sparkling beverages are on the upswing. They’re able to provide the fun and refreshment that comes from the effervescence of CSDs without the guilt of sugar or artificial sweeteners. Likewise, lightly carbonated beverages provide greater drinkability but offer a more interesting experience than still beverages.
Additionally, pairing fruit juice with water or tea offers the familiar flavor profiles people love, but with significantly fewer calories than pure juice.
Reinventing The Shopping Experience
If consumers can’t find you, they can’t buy you. With so many new beverages entering the market every day, it can be difficult for consumers to navigate at retail. Brands and retailers alike need to work together to make the beverage shopping experience as seamless as possible.
On shelf, packaging plays a large part in consumer decision making, especially in such a crowded and complex category. A report by Mintel shows almost 33% of new beverage launches from May 2017-April 2018 featured new packaging, an increase of 3.5 percentage points relative to 2013-14. Many brands are quick to dress their packaging with claims like “free from”, “natural”, and “ethical.” But too much verbiage on a package can confuse and discourage consumers, with 13% of them reporting that packaging is often too crowded with information. To maintain the recent uptick in beverage sales, brands are responding to their concerns with more streamlined packaging and graphics, making sure to include only the necessary information in a bold and easy-to-read manner. (read more about trends in packaging design in our three part series, The Golden Age of Packaging.)
In stores, retailers must not only also keep up with these new products and organize them in a clear, logical manner, they need to offer a fresh new experience as well. Even with a smaller footprint, an exciting beverage destination drives foot traffic and distinction for retail brands.
Furthermore, beverage brands and retailers who partner to educate customers across all touchpoints of their journey – from the shelf to mobile devices, across social, digital and linear media – aid in both the discovery and deselection process in ways the drive sales. People want to discover new things, but they also want to be reassured that they’re making a good choice.
The competition is fierce. Tastes are constantly changing. And consumer expectations are higher than ever. But out of this disruption, beverage marketers and retailers are beginning to reinvent the category for a new era.