By Andrew Kaplan
How important is the beverage category? Ask just about any grocery store operator and it is pretty clear that it is right up there with baby food, cereal and pet products as one of the most important segments of the supermarket.
Unlike these other segments, the beverage market is in a state of continual change. Gone are the days that carbonated sodas dominated the marketplace, thanks in large part to changing consumer tastes and the introduction of a number of product subcategories.
Now consumers want specific products that satisfy their individual tastes, not to mention the particular situation they may be in. Sports drinks have emerged thanks to fantastic marketing support and the shoppers’ need for thirst-quenching and vitamin-enhancing products after a workout. The ready-to-drink tea and coffee category has changed drastically as suppliers release new flavors by the boatload.
Bottled water? Well, retailers report that this segment has simply exploded as price points stay low and the low caloric nature of the product gets more positive buzz.
Of course, there are still the two mainstays. The beer segment continues to diversify as more players enter the market with new types of beers and the big producers—including Heineken, MillerCoors and Anheuser-Busch—introduce their own products to stay ahead of the curve.
The carbonated beverage market, however, seems to be the one segment most impacted by all this change. Now, the question is what will the major players in this field do to rebound in the near future?
Our Beverage Almanac, compiled with the great help of the editorial team on sister publication Beverage World, is designed to give retailers a look at several key segments of the beverage arena.
Coffee & Tea - Ready-to-drink, willing and able
The RTD tea category held its own in 2013, while RTD coffee perked up even more.
Ready-to-drink tea comprised the fourth largest liquid refreshment beverage (LRB) category in 2013, holding a 5% share of that market, according to Chicago-based research firm, IRI. RTD tea marketers managed to squeeze out some more growth from this mature category, about 0.4% in volume, making it the 5th fastest growing LRB category in 2013. However, growth was markedly slower in 2013 than it had been in the other years since the recession. “I think tea, like all the other categories was impacted by the weather,” says Michael Bellas, founder, chairman and CEO of New York-based Beverage Marketing Corp (BMC). “We also think the transition of the Nestea brand from Coke to Nestlé hurt the category because much of that volume was not picked up. That was a big brand.”
Nevertheless, Bellas says the RTD tea category is nicely positioned to take advantage of future consumer demand. “It’s got all the wonderful natural health and wellness credentials, and it should come back,” he says.
As for the RTD coffee segment, Starbucks remained the one to beat in 2013. The Top 5 brands were all Starbucks products, with Frappuccino leading the way with strong 4.8% growth. Consumers also embraced light versions of the Starbucks coffees.
The bottled water category increased by 4.7% in 2013. Category sales figures include PET, home and office 5-Gallons, vended waters, and imported waters.
“The category continues to be vibrant,” says Bellas. “It was amazingly strong considering that it was trailing 2012’s hurricane-impacted fourth quarter.”
BMC officials say the driver for bottled water’s growth continues to be single-serve PET waters, which were up about 6% and helped a great deal by very aggressive pricing. “Last year prices declined again,” Bellas says. “That’s been driven by innovations in production and innovations in lightweighting the package. So you’re seeing a lot of the multipacks at all-time price lows. It’s very appealing to a consumer in a struggling economy and plus this category has very strong health and wellness credentials.”
As a result, Bellas says, “the category is right where consumers are looking for it to be and it probably has continued good upsides going forward. It’s in a very good spot. Beverages endured a transitional year in 2013, but even in the face of economic challenges, healthier products, such as bottled water were able to thrive.”
Bottled water had three entries among the leading brands ranked by BMC in 2013: Nestlé Pure Life (No. 6), Poland Spring (No. 8) and Dasani (No. 9). Each of these recorded positive growth numbers, with Nestlé Pure Life growing 4.5%, Poland Spring 0.1% and Dasani, 5.0%.
The one drag on the water category last year was the value-added water segment, which declined by 6.6%, the largest decline of any LRB type. This was an acceleration of the previous year’s decline of only 1.5%. The segment is comprised of the enhanced or functional waters, such as vitaminwater, which saw the largest falloff in sales of the top 10 brands, and flavored waters.
“It’s the big brands that have suffered a little bit and it may be because of the economy, along with questions about their functionality,” Bellas says. “You’re seeing consumers move to simpler products—handcrafted, all-natural, local—and to some degree that may play against fortified and big national brands. The consumer of these enhanced waters has generally been more upscale, more health-conscious so he or she may have moved on to some of these new, handcrafted entries.”
Beer - Cold ones stay hot
Light beer and imports remain popular in the competitive beer segment.
Coors Light, which unseated Budweiser for the No. 2 spot last year, managed to boost sales by 3% as other mainstream beers, such as Bud Light, Budweiser and Miller Lite all had declining sales. Star performers on the Top 20 list include Michelob Ultra Light, which seems to indicate that consumers are shying away from full-calorie beers, as well as Corona Extra and Modelo Especial, which points to the continued growth trend behind import beers.