When consumers buy beverages today, they want drinks that go beyond simply quenching thirst. Drinks today need to meet consumer’s health needs, too — improving sleep habits, aiding gut health, lowering stress levels and boosting energy.
“There’s this real explosion of outcome-based beverages in the industry at the moment,” says Howard Telford, head of soft drinks for Euromonitor International. “Ten years ago, it was easy to identify what was an energy drink. That’s no longer the case, clearly. Because every category now has some form of products on the shelf with a functional proposition. These ingredients-based category lines are blurring. Consumers are rethinking what’s our morning option, what’s our late afternoon option, what’s our evening beverage.”
Clean ingredient lists with functional appeal will differentiate brands. In a beverage trends webinar hosted by FoodNavigator, brand leaders in the beverage industry shared their insight. Here are six beverage trends for 2020:
1. More Consumer Need States for Different Ingredients
Modern beverages straddle between food and dietary supplements.
“Every time (consumers) spend a dollar on a drink or a food item, they want that food or drink item to do more for them,” says Chris Fanucchi, co-founder of drink brands Limitless and Koia. “Brands are starting to put more marketing on the front of their labels, that say ‘Hey, we help you with calming you or with inflammation or with pain or anxiety.’ As consumers start to see that more and more, they’re going to start to expect that. And the second they start to expect that is when the consumers are going to be demanding that their beverages have more and more function to them. So a functional beverage right now I think is definitely about identifying those need states that are more relevant to consumers today.”
2. Mindfully Purchasing Natural Health Products
Consumers are looking for ingredient lists without artificial ingredients (33%) and with limited or no sugar (35%), according to research by Euromonitor International. Sixty percent are following diets – lowering carbs and saturated fat, monitoring weight and tracking calories.
Holly McHugh, marketing associate with Imbide, thinks consumers will seek out healthier products at the end of the coronavirus pandemic. “Like a detox that you see in January because people have overindulgences over the holidays…I do think there will be a bump when people go back to their normal lives.”
“There’s absolutely a stigma against sugary products for your overall health. And people are really concerned about their health right now,” McHugh says.
However, McHugh doesn’t think brands will completely abandon sugar. Instead she hypothesizes brands will provide more options. Like a full-sugar, low-sugar and no-sugar drink, then drinks with alternative sweetener like stevia and natural sweetener like honey.
3. Rise of Cannabis/Hemp in Beverages
Consumers are experiencing mounting stress due to the pandemic and are seeking drinks with stress-reducing ingredients.
Estimates show legal cannabis sales will rise to $150-170 billion by 2023 according to Euromonitor International, mostly from North America. Huge innovations in CBD industry as proving hemp-derived drinks is a growing market. CBD-infused beverages grew by 500% last year.
“I think CBD is going to be a very big category,” adds Thomas Hicks, chief growth officer for Ojai Energetics, which produces various CBD products, including a CBD drink. “The consumer demand is phenomenal and you can see that online. About 90% of our business is direct to consumers.”
Ojai Energetics has seen sales increase 20% during the pandemic.
CBD is poised to become as big of a category as energy drinks. However, more clarity around CBD needs to be provided by the Food & Drug Administration. Thomas notes the FDA has not yet defined the different elements of CBD.
“It’s a race to the bottom if you don’t have really good branding and, quite honestly, a patented process,” says Hicks, who has formerly worked with big drink giants like Hansens and Coca-Cola.
4. Cost Major Factor During Health, Economic Crisis
Brands looking to add more premium ingredients to their drinks need to note consumer’s pocketbooks. Howard Telford, head of soft drinks for Euromonitor International, said he predicts certain drink categories will decline because of cost in a COVID-19 era.
“This event (coronavirus pandemic) is translating to an economic crisis more than a public health crisis, I think we have to be very cognizant of price,” he says.
Comparing sales during the 2008 Great Recession, Telford says consumers will trade down premium products. “Affordable luxury” needs to be the focus of new drink launches, adds McHugh.
“I think cost will be a really important consideration given the uncertainty of the economy right now,” McHugh says. “Brands will need to introduce products that are affordable and meet those clean, quality, functional qualities during this time.”
5. Brands Need to Better Educate Consumers
As more consumers routines are impacting during the outbreak and they turn to healthy eating during, will they turn to kombucha over Coke? Telford believes so. Long-term, consumer’s beverage choices will change because of COVID-19. They’re reducing sugar, trusting health ingredients.
“When we decide to indulge, we’re conscious of the ingredients in those products,” he adds.
“There’s still so much education around CBD with the general public,” Hicks adds.
Research provides CBD helps regulate the immune system, and consumers are becoming savvier and seeking out that research, Thomas says. Key, he adds, is researching the specifics behind CBD brands. Brands should publish their lot number certification online. Consumers should easily be able to research CBD batches should go through two different labels to make sure they are acceptable and organic, he advises.
6. Shelf Brand Launch Until Post Pandemic
Faccuchi, who sold Limitless to Pepsi/Keurig last year, said smaller companies are struggling securing capital to launch. An entrepreneur, Faccuchi invests in beverage companies.
“Lots of clients, especially in the energy category, are having zero luck with retail meetings, confirmation of placement on shelves,” Faccuchi says. “They’re seeing around waiting for those opportunities. It makes it all the more difficult when there’s really no light at the end of the tunnel. These brands could lose a lot of cash over the next several months, they could go belly up.”
His advice to people wanting to launch a new beverage company: “Make sure the category you’re jumping into actually has a need. I run into a lot of entrepreneurs who build this awesome product out of different ingredients that you’d never hear of, and the unfortunate truth is some of those ingredients are just not supply chain ready. So you can’t get the price point necessary for consumer to actually try the brand, which is the No. 1 thing when you’re launching a new company. So make sure you’re identifying a need space that people actually have. Your best way to test that is online marketing.”
Find people in food and beverage industry that are looking to champion brands, he advices. “Those people do exist.”