Beverage sales appear to be back on track Following two off years.
By Craig Levitt
Retailers can lead consumers to the beverage aisle, but can they make them purchase? Until a few years ago, most industry observers believed that retailers did not have to pay much attention to this seemingly recession-proof category. That was until the recession hit and beverage sales began to dry up.
According to the New York-based Beverage Marketing Corp., the U.S. liquid refreshment beverage market-which includes bottled water, carbonated soft drinks, energy drinks, fruit beverages, ready-to-drink (RTD) coffees and teas, sports beverages and value-added water-declined by 2.1% in volume and growth in 2008. That was followed by a decline of 2.8% in 2009.
“The impact was felt virtually across the board in every beverage category,” says Gary Hemphill, managing director for the Beverage Marketing Corp. “However 2010 was a better year and I don’t think anyone would say that the economy was perfect, but it was better than 2009 or 2008. The net result has been across the board improvement.”
Beverage dollar sales were up 1.2% in 2010 and thus far observers say the trend has continued this year. Volume growth is being fueled by premium categories such as RTD tea, up 12.5% in 2010, sports drinks, up 9.4% and RTD coffee, up 8.1%.
In the RTD tea category, observers attribute the growth to a number of factors. Not the least of which is that RTD teas are generally considered healthier than carbonated beverages. The availability of more exotic flavor options has helped as well. Of course, as the category grows so does the competition within it. Penny Baker, director of marketing for Smith Dairy Products, maker of Smith’s RTD teas, says it can often be difficult to stand out in the crowded beverage aisle.
To do so, the Orrville, Ohio-based company recently redesigned all of its tea labels as well as its water and juice labels “to better align with our brand strategy,” says Baker.
This past March Smith introduced three tea flavors: diet tea with lemon, a 50/50 tea lemonade blend and peach tea. They are all made with natural flavors and contain no preservatives. “To pique consumer interest we have researched the most popular flavors with the widest spread appeal to consumers,” says Baker. “You have to be unique and yet still have what consumers want.”
While overall beverage sales have improved, not all categories have benefited. More traditional, broad-based categories such as fruit juice beverages and carbonated soft drinks were down 2.0% and 0.8% respectively.
“The primary reason is that we see almost two consumers in the marketplace,” says Hemphill. “One consumer is more working class blue collar, the other white collar, more educated. That white collar consumer has fared better in this economy and the trends in the marketplace are reflective of the dichotomy of the consumer.”
Bottled water sales strong
The one exception is bottled water, up in sales by 3.5%, which observers say was due to aggressive pricing and consumer trends toward healthier refreshments. In the bottled water segment, for some consumers, packaging is also important. While many companies are attracting eco-concerned consumers by decreasing the plastic used for packaging, the Mountain Valley Spring Co. is attracting consumers with its high-end glass bottles. According to Breck Speed, chairman and CEO for the Hot Springs National Park, Ark.-based company, Mountain Valley’s products appeal to consumers who are passionate about quality food and beverages.
“Mountain Valley had great success over the last year in the natural food channel with the top two selling packages in glass,” says Speed. “With a total of four of the top seven glass packages and the No. 2 brand overall we expect to expand on this result since we did not gain the top position by over aggressively promoting on price.”
Other beverages that have thrived due to the ongoing health trend are zero calorie offerings, particularly in the carbonated beverage category. Ten years ago two of the top 10 carbonated soft drinks were diet or zero calorie, today there are four in the top 10.
Within the zero-calorie sub-segment, Paddy Spence, CEO of Zevia, says the Culver City, Calif.-based company’s zero-calorie soda naturally sweetened by stevia, products are sparking interest and passion with consumers.
Spence says that when the Food and Drug Administration declared that stevia was regarded as safe in 2008 and stevia-based products could be marketed as food and beverage items, the stevia market exploded. Since then companies like Coca-Cola and PepsiCo entered the noncarbonated stevia market with sub-brands, increasing the popularity of stevia.
“What’s interesting about those brands is, for the most part, the stevia products are a couple of SKUs within a broader product line,” says Spence. “The consumer could be easily confused and uncertain if they were buying a stevia sweetened item. With Zevia, its pretty clear on the shelf.”
Getting that shelf space can be a difficult thing, especially in the ultra-competitive soda category. The brand has just recently gained traction in grocery with some of the leading edge retailers such as Kroger, Wegmans and Hy-Vee.
To help supermarket sales, Zevia, which is only packaged as a single-serve or as a six-pack, recently completed a redesign that is more streamlined and, according to Spence, has greater mass appeal. This past Spring Zevia introduced five new flavors: cream, grape, caffeine-free cola, mountain Zevia and grapefruit citrus, bringing the number of available soda flavors to 12.
The fruit juice category is similar to soda in that though overall sales are down, sub-segments that offer perceived health benefits are doing well. This despite the fact that observers say that many of these superfruit offerings-which began with pomegranate and now include Gogi berry, acai and mangosteen to name just a few-often carry a price-point that is generally higher than most consumers would like to spend.
As superfruit juices continue to gain in popularity, there are some manufacturers that are aiming to make superfruit juices more affordable. For example, Old Orchard Brands, recently introduced Very Cherre, a line of premium tart cherry juice, which Kevin Miller, vice president of marketing for the Sparta, Mich.-based company says is loaded with antioxidants.
“Up until now, tart cherry juice consumers have resorted primarily to inconvenient juice concentrates and specialty grocers, so Very Cherre represents a movement to take the original superfruit to the mainstream in a convenient, affordable, family-friendly format,” says Miller. “Very Cherre represents an entirely new segment-a multi-serve, shelf-stable premium superfruit that is affordable, convenient and accessible.”
In addition to the Very Cherre line, which includes a 100% tart cherry and three tart cherry blends; Tart Cherry/Blueberry, Tart Cherry/Cranberry and Tart Cherry/Pomegranate, Old Orchard has added its Healthy Balance Pomegrante/Blueberry/Acai. “In the 80s we were often referred to as the ‘blend experts’ because of our ability to create unique juice products,” says Miller. “Uniquely blended flavors is what we do, so the emergence of new popular fruit flavors plays to the Old Orchard strength.”