More than just thirst-quenching, many of today’s natural beverages have a functional side as well.
By Carol Radice
Whether consumers are looking to reduce stress, feel more energized or enhance their overall well-being, they continue to explore the role functional beverages can play in their health regimen. With a steady stream of new products and companies entering the category, retailers have to carefully evaluate which products to carry and which companies they want to partner with, according to industry observers.
“People are moving away from soda-type drinks toward better-for-them options, especially those that offer health benefits,” says Seth Goldman, president and TeaEO of Honest Tea, based in Bethesda, Md. He says that the overall tea category is one of the few beverage categories experiencing growth. While overall liquid beverages were down 3% in 2009, he says ready-to-drink tea was up 1.2%, with growth coming from the premium and value segments.
He notes that Honest Tea drinks are organic, have less sugar, and don’t have artificial colors or flavors, features that appeal to consumers. The company’s top sellers, adds Goldman, continue to be its green teas that are rich in antioxidants.
When he created the Old Tappan, N.J.-based New Leaf Co., founder and CEO Eric Skae wanted his line of beverages to do two things—taste great and offer health benefits. With that as his backdrop, Skae spent years perfecting his ready-to-drink bottled tea line, opting to use all-natural ingredients, organic cane sugar and unique flavors such as honeydew, plum, lime and mint. “The reality is when health and taste collide, taste always wins so we knew it was critical to create a brand that delivers on both,” according to Skae.
In addition to taste, Goldman says that today’s consumers scrutinize a company’s manufacturing and environmental practices, among other sustainability initiatives. “How you act as a company and what you stand for are increasingly relevant factors in the purchasing process today,” he says.
The sentiment applies as much to teas as it does to wine, according to industry observers. “The consumer who purchases our wines is interested in the story behind the brand,” says Jim Bernau, founder and president of Willamette Valley Vineyards, based in Turner, Ore.
According to Bernau, stewardship of the land is a key principle in Willamette Valley’s winemaking philosophy. Not only are its vineyards certified sustainable, its entire farm system is certified and includes preventative measures for water run off into salmon streams, natural pesticide management, riparian areas, and reduced sprays. In addition, all its tractors run on biofuel and the company offers up to 50 gallons a month to employees for use in their cars.
“Whether it is driving a hybrid car or using fabric grocery bags instead of plastic ones, people are looking at ways to reduce their personal impact on the environment,” says Bernau.
While some beverage companies are attracting consumers by touting their environmental efforts, some, such as The Relaxing Co., are getting noticed by bucking the current trends.
A few years ago, founder Matt Moody looked at the plethora of energy drinks available and decided to launch a calming functional beverage. In a short time, he says the Riverside, Calif.-based company has grown to include Mary Jane’s Relaxing Soda and The Relaxing Tea brands. “We saw a need for a relaxing drink people could consume during the day that had the same effect as a cocktail would without the alcohol,” says Moody.
Initially, Moody thought the demographic appeal of its soda would parallel that of energy drink consumers—18- to 25-year-olds—but what he didn’t predict was the interest from consumers age 35 and up. This group, however, also wanted a drink with less sugar. “Our solution was to launch a line of relaxing decaf teas made with black and green tea, which we lightly sweeten with agave syrup and a touch of cane sugar,” he says. Due to the success of the teas, the company has plans to add two flavors in the near future.
The superfruit segment may be one of the smaller components of the natural healthy beverage category, representing about $50 million out of the larger $750 million category, but it’s one that has been receiving a lot of attention, due in part to research linking these fruits with a wide range of health benefits. Driven by what he calls “the truth of the fruit philosophy,” Alton Johnson, CEO and founder of Los Angles-based Bossa Nova, says the intent behind the company was to create a full line of beverages that would capture the nutritional value from nature’s most potent superfruits, including açai, goji, acerola and mangosteen, and deliver it in a good-tasting juice format.
About a year ago the company was acquired by Beverage Holdings Group, a move Johnson says will add vertical integration and help the company create a next-generation opportunity and turnkey solution for this burgeoning category,” says Johnson, who notes that despite the recent popularity of açai products, the potential of superfruits largely remains untapped.
Another well-known player in the superfruit segment is Odwalla. Chris Brandt, vice president of marketing for the Half Moon Bay, Calif.-based company, says he does not consider their products “alternative.” Instead, he wants people to view them as beverages that satisfy a wide variety of consumer needs, usage occasions and taste profiles in products that hone in on “the honesty and artfulness that Mother Nature provides.”
Odwalla, he adds, is about a mindset, noting that their consumers tend to have a zest for life, pursue a wide variety of activities, and are interested in companies that respect the planet.
Regardless of their intended function or benefit, natural and organic beverages continue to wrestle with placement and merchandising issues, according to company officials. Is it better to be in the natural/organic aisle, or with the mainstream beverages? Goldman says that while there is no question growth is occurring in the natural and organic aisles, he has mixed sentiments about where to best place Honest Tea.
On the one hand, he notes that some of its varieties may be more appropriate for the natural/organic aisle, but overall he prefers their drinks to be sold near traditional beverages. “As we expand our products into more mainstream markets, it’s become clear Honest Tea sells better when placed where consumers are looking for bottled beverages in general,” he says.
The fact that its products are both a planned and an impulse purchase makes correct placement all the more important, Goldman says. To facilitate cross-merchandising opportunities, Honest Tea has developed a sustainable rack display made from recycled pallet wood that can be placed in secondary locations throughout the store including the produce section.
To gain attention for his burgeoning brand, New Leaf Co.’s Skae initially targeted placement in high visibility locations such as airports and delis and did tons of sampling. “We worked hard at building the interest and brand recognition so when it came time to talk to grocers we had a case to present beyond our product offering,” he says.
Skae is also among those who feel the natural aisle may not be the ideal place for natural beverages, noting that segregated sets tend not to be shopped as much as inline ones. “I have confidence in our product’s taste and ingredient profile and think they sell best placed next to traditional bottled teas. Today’s mainstream consumer is more conscious of what they consume and healthy beverages are an important part of that equation,” he says.
Consumer interest in sustainable products is helping Willamette Valley Vineyard products be noticed, notes Bernau. A number of retailers such as Safeway and Fred Meyer are making sustainability a priority, with some dedicating an entire set to these products, he says. “Mike Ellis, the CEO of Fred Meyer, is personally on a mission to buy sustainably produced wines for his stores and has even attended programs on sustainability in the wine industry to learn more about the opportunity,” says Bernau.
While some retailers may be tempted to place sustainable and organic wines next to health foods, Bernau believes that approach is a mistake because it limits the number of consumers who see the product. Sustainable wines, he says, belong in the wine section, called out with shelf signage.
He cautions retailers to take care in selecting the wines they put in this set. “Consumers are very informed buyers today and sensitive to ‘green washing,’ so I advise retailers to chose their selections carefully and to check up on claims companies make to confirm they are true,” he says.
As popular as his drinks have quickly become, Moody says he still has to fight to gain shelf space. “Since we are a functional drink, placing our products near energy drinks is where we feel it will sell best,” he says. “However, with interest in energy drinks still relatively strong, it isn’t always easy to convince retailers to give us some of that space.” he says. Moody says relaxing soda and tea drinks also do well when placed near the alcohol section.
Officials at Bossa Nova take a somewhat different approach with placement. Since superfruit beverages are closely aligned in the consumer’s mind with whole fruit, Johnson says a refrigerated case in the produce department is where his products sell best. “Research shows us consumers look for the healthiest foods in produce department,” he notes.
At Odwalla, a key focus has been providing consumers with increased opportunities to purchase their products. According to Brandt, the company has expanded distribution to new retail outlets every year and within its existing outlets they have tried to leverage the multiple usage occasions for consuming Odwalla products by expanding placement to incorporate different locations within stores. “We’d like to be where our active consumers like to shop, consequently we like to be in as many places as possible,” he says.
New product introductions are the lifeblood of any category and functional beverages are no exception. This year, Honest Tea officials launched two new bottled drink beverages. Half & Half, a combination of tea and lemonade, uses certified organic black tea from India. According to Goldman, the new drink offers the antioxidant benefits of black tea with organic lemonade and has less calories and sugar than most bottled beverages. It is the latest addition of Fair Trade Certified beverages to join Honest Tea’s PET line.
This year it also introduced Honest Kombucha, a new line of ready-to-drink beverages containing active probiotic cultures. Goldman says the naturally fizzy drink has a unique, tangy taste. The Fair Trade Certified black tea drink is fermented with active cultures of bacteria, yeast and sugar. The combination is believed to aid in digestion and GI tract support. Honest Kombucha is available in five varieties including Berry Hibiscus, Lemon Ginger, Peach Mango, Maqui Berry Grapefruit and Apple Jasmine. This August, the company will be launching an organic, zero calorie, stevia sweetened drink, which Goldman says is the first of its kind.
Bossa Nova’s line up recently expanded to include a new 32-ounce bottle size in Açai Original, Açai Blueberry and Acerola Mango, something Johnson believes will help establish superfruits as a regular refrigerator staple. “We feel the larger size will encourage consumers to think of our juices as more of an everyday drink instead of a special treat,” says Johnson.
Odwalla’s Brandt says company officials are continuously looking for new beverage ideas centered on taste and nutritional benefits. “In 2010, we’ve already launched Haiti Hope Mango Lime-Aid, with 100% of the profits going to the Haiti Hope Project,” says Brandt, noting that this spring Odwalla also launched Strawberry Protein Monster, the newest addition to their Protein Monster family. “It tastes great and provides 25g of protein per bottle as well as is an excellent source of vitamins B6, B12, calcium, and zinc.”
In addition, Odwalla has some seasonal drinks coming out this summer and fall, including Summertime Limeade and Pumpkin Super Protein.
Officials at New Leaf rolled out a four flavor line of lemonades this spring—Homestyle, Black Cherry, Strawberry and Half and Half. The response, says Skae, has been positive, noting that much of the positive reaction is driven by the fact that the lemonades contain used 10% real juice in their lemonades and most similar drinks do not.