better for you beverages

With self-isolation being the name of the game and on-premise drinks long gone, we’re more grateful than ever for RTD beverages. So we tuned in to Beverage Daily’s “Better For You Beverages” Webinar on March 31st. Industry leaders gave a rundown on how the future is shaping up for healthy, healthier, and healthyish beverages. Until the day we can cheers to the sound of actual glasses clinking again, we’ll be here to keep our foodie friends and beverage lovers in the know. Check out our webinar summary below.

 

Better For You Beverages Webinar 3/31

Hosted by Rachel Arthurt, Editor of Beverage Daily

We all know consumers are moving away from sugary, high-calorie drinks, but what are they turning to instead?

 

Daina Trout, CEO & Co-Founder Health-Ade Kombucha

Jim Watson, Senior Analyst Rabobank

Oliver Nebbett, Director XITE Energy

 

Jim on an Overview of the Industry

  • Most people are moving away from Cola (Soda)
    • Doesn’t mean they’re moving away from indulgence or ‘unhealthy’ drinks (RTD Frappuccinos are still best sellers), just means consumers aren’t getting as much value from Cola anymore 
  • How are big brands responding to this in-category movement?
    • Global beverage companies look at their portfolio as a whole and look for white spaces (could be categories like kombucha or energy → see Coke Energy, Pepsi buying Rockstar) 
    • But health and wellness is a sort of portfolio effect, pushing companies to change a lot of things in portfolio or shift almost the entire portfolio
      • Need to introduce new ingredients and brands to consumers in a believable way
    • Corporate venture funds are widespread among big beverage companies. Taking shotgun approach to moving an entire portfolio into health & wellness, then looking to M&As to find companies that are already doing a great job
  • Energy category is moving into energy 2.0 
    • Energy 1.0: soda with a bit of caffeine
    • Energy 2.0: about additional functionality (Bang, C4, A Shoc) 
    • Energy also leaking out into other categories 
    • Coffee is its own form of energy drink (Monster Java says your coffee IS an energy drink)
  • Sour/funky flavor happening across categories, from rise in kombucha to sour beers
    • Adventurous palate becoming more widespread
  • On non-alc beer
    • Data that consumers are drinking less alcohol is pretty anecdotal → total gallons of alc consumed is remaining constant
    • Thinks non-alc beer is largely for core beer drinkers who want to cut back or lay off 1 night/week, not really someone who wouldn’t drink beer otherwise
    • Seeing more of a dedication to non-alc in restaurants and bars 
    • Thinks non-alc will have more a featured spot on on-premise 

 

Daina on Starting and Growing Health-Ade

  • Beverages still being consumed as much as ever, but there’s a lot of movement within the category (away from soda, towards other things)
    • Kombucha hits a lot of the attributes of drinks consumers are looking for:
      • Flavor, clean function, organic, less sugar, some functional benefit
  • Believes brand is everything. We talk a lot about product/attributes (that’s often what attracts people to a category) but brand is the real magnet or, at least, the bigger piece of puzzle
    • Younger consumers are savvy, can sniff out who is authentic and who isn’t
  • Taste still king: there is a really niche consumer who will drink bad tasting things for good health (the same person who takes a shot of ACV in the morning) but that’s a tiny group and not who Health-Ade is after. 
    • Health-Ade was able to differentiate based on taste through sampling (80% of people who try Health-Ade say it tastes better than they thought)
  • Health-Ade started in farmers market, entered stores in LA, then expanded to other regions and conventional stores, now can be found in grocery across the country
  • Health-Ade fastest growing refrigerated beverage brand in U.S. for 3 years in a row
    • Health-Ade and Coke entered partnership last year, Coke gave some funding for next stage of growth (Coke not owners, don’t have majority stake)
    • Big lesson learned: once you have the funding, you then have to then go get value. You have to go renegotiate, get better deals, discounts etc. Getting funding doesn’t mean that value just comes. 
  • Biggest challenges in growing Health-Ade:
    • 1st: Manufacturing → Feel like they’re always investing in the next brewery and once manufacturing facility is built, they’re already over capacity 
    • 2nd: Capital → Quick growth is great, but 8x the growth means 8x the problems, need for 8x the money. Feels like constantly sprinting. 
  • LA, San Fran & NY are still Health-Ade’s biggest markets: trends often start on the coast and bleed into the center
    • Health-Ade’s highest growth is coming from the center of the country
    • This did require some strategy evolution (LA and NY messaging doesn’t work in Chicago or rural areas) 

 

Oliver on Starting and Growing XITE Energy

  • Started XITE because:
    • When looking at the back of a conventional energy drinks, didn’t know what he was putting into his body
    • Everything else on the BFY shelf seemed “flowery,” and even though BFY, often still had lots of sugar
  • Three of XITE’s pillars: 
    • Great taste (First prod was a quick failure. Thought health was more important than taste. Realized they were wrong and realized it early, reformulated product)
    • Great logo (Want to wear XITE t-shirt, want to go to an event they put on)
    • Functionality/health (Actually good for you)
  • Initially launched with a DTC subscription
    • Worked well at first, but then as demand built up, wanted to switch to retail
    • Retailers at the time lacked the awareness that the consumers had of product → was a big struggle to overcome
  • With energy category adapting to new, more health-minded consumers, use cases for energy drinks are expanded
  • Younger consumers come in looking for new, better ingredients and new brand propositions (What are you doing beyond just cool events? How are you impacting the planet?)

 

Categories to Keep an Eye On:

  • Jim: RTD Coffee
    • Though already so many players, interested in the category blending going on with coffee
    • Seeing lots of flavor innovation, carbonated options, functional ingredients like protein or MCT oil
    • Thinks we’re just at the beginning of the innovation that we’ll see in RTD coffee
  • Daina: Healthy Sodas and Functional Shots
    • Interested in the people who are lapsing out of sodas, so keeping an eye on really tasty refreshing beverages that have some added function, energy or other addition. 
    • Also keeping an eye on shots, people putting up with ‘adventurous flavors’ in the name of function
  • Oliver: Seltzers in the UK
    • Seltzers haven’t played out yet in the UK. in the way they have in the US.
    • Thinks there’s room for it but the palate will have to evolve to probably go sweeter, thinks people in the UK have a bit more of a sweet tooth

Changing Retail Landscape:

  • Daina: Refrigerated is a Particularly Competitive Category
    • Still not great refrigerated distribution options
    • Refrigerated set costs a lot for retailers to expand (literally have to build more refrigerators) 
    • So it’s a competitive, tough fight for refrigerated beverages right now
  • Jim: Retail Wants to Help New Brands
    • Retailers realizing new brands are where the demand is, and retailers realizing they don’t have to wait for new brands to be acquired by a strategic to stock shelves with that product, can be part of the story where new things are discovery
    • All consumers want to discover something new, not just the people on the coasts. Retailers are picking up on this. 
    • Notices retailers showing dedication to programs that introduce new brands 
      • Even retailers who you might not expect: 
        • Walmart running targeted campaigns for a tiny brands
        • CVS, or 7-Eleven being really innovative about what they’re stocking
  • Innovation won’t stall: consumers in the US expect a lot out of beverages (they want zero calories, great taste, high function, all the above) the high hopeful demand consumers show for beverages will continue to spur innovation.