Future of Kombucha will be Local Brands, Educating Retailers & Adapting to Change

/ / Businesss, Consumer

Kombucha brands biggest competition are not other kombucha brands – it’s soda and functional beverages. Sales continue to hemorrhage in the soda category as consumers shun sugar-filled drinks. And kombucha companies have a great opportunity now to grab that market share.

A panel of leaders in the kombucha and beverage industry shared their insights on the future of kombucha at KombuchaKon, Kombucha Brewers International’s 6th annual conference. They agreed the fermented tea is not a fad, but brands “have to be nimble and creative” to thrive in an increasingly crowded market.

“The future is really, really bright,” said John Peirano, the vice president of marketing at Humm Kombucha. “It’s super exciting – and we’re just getting started.”

Local Brands Will Reign

As more and more kombucha brands enter the industry, the brand’s biggest strengths will be selling to their regional market.

“There are all these local brands retailers are going to want because they care about what’s happening locally,” Peirano said. “Local brands are going to be really, really important.”

John Craven, editor of beverage industry news site BevNET, has covered the beverage world for nearly two decades. He said marketing brands locally works in the kombucha category, but not in any other beverage space.

“Prior to (kombucha), if you said ‘I want to build a regional brand,’ I would have said ‘That’s not a thing,’” Craven said.

Educating Retailer & Consumer

Retailers want to give \consumer’s a variety of product choices, Craven added. They’re more likely to commit to selling kombucha if there are multiple brands and SKUs on their store shelf.

“With (kombucha), it’s OK to like a bunch of different brands,” Craven said. It’s normal for a kombucha consumer to switch between different brands and flavors. “That is one thing this category has going for it that’s really unique. … It definitely has defied traditional beverage logic in that regard.”

Litigation against kombucha brands continues to top headlines, as lawsuits claim alcohol content is misrepresented or sugar levels are understated in different brands. In the next few months, KBI will be releasing their own standards defining kombucha.

Truth in labeling will drive trust with the consumer and the retailer, Peirano said. “It’s important that what’s inside the bottle is on the label,” he added.

“As category leaders, we also have to be category captains. We have to go to the retailers with really strong selling stories. And those selling stories aren’t just about Humm. Those selling stories are about the category and what will drive the most profitability for that retailer category and that shelf set, so they can be successful.”

Refrigerated kombucha and the fermented beverage category has grown 31.4 percent year-over-year, according to data from SPINS market research. And household awareness continues to climb – it increased 20 percent in 2018.

Kombucha is sold in the refrigerated section, some of the most expensive space on a grocery shelf.

“I think it’s all our responsibilities, if we want to continue to grow this category, we’ve got to go out and education and tell people about the magical, beautiful benefits of what kombucha brings to the table from a functional health standpoint,” Peirano said.

Brands Need to Remain Fresh

The kombucha industry is already dominated by a handful of national brands – GT Kombucha, Kevita, Health Ade, Humm Kombucha and Brew Dr. control the majority of market share. The panel agreed smaller brands can still successfully enter the category, but the top sellers are locked.

“There’s not room for a dozen million dollar-plus brands,” Craven said. “But the reality…is that some of these (smaller) brands will be acquired and will probably be absorbed and evolved, ruined, whatever, which makes an opportunity for the next brand to come along.”

“There are a lot of functional products out there…the beverage history lesson is consumers are really fickle,” Craven added. He pointed to Vitamin Water as an example, a brand that rapidly grew popular in the beverage industry but then lost sales. “The consumer keeps moving on to the flavor or the function of the month, so to speak.”

Craven does not think kombucha will be a victim like Vitamin Water because kombucha includes value-added health benefits. The kombucha brands that survive the next decade, though, must be adept to change. They must evolve with new flavors and brewing styles, while maintaining affordability, consistency and health benefits.

Growing Kombucha Enhancement: CBD

One of those kombucha styles keeping the industry fresh: CBD. Conrad Ferrel, founder and CEO of True Büch, said combining the benefits of the cannabis plant with the functional compounds in kombucha makes sense.

“The evolution of cannabis used with kombucha, it’s a natural marriage,” Ferrel said. “If you want to have kombucha for sleep, there will be a specific kombucha for that. If you want it for pain management, it will be there. It will be functional and specific to the certain (medical aid) people want.”

There are 140 compounds in the cannabis plant, but so far only two – THC and CP – have been studied, added Ferrel. CP is a value-added compound, known to aid in improving medical ailments. But science is lagging.

“As the world gets used to the science … the struggle is to sell people something that for years was considered a drug, now we’re trying to sell people on the fact that it’s good for you,” Ferrel added.

Hard Kombucha Gaining Traction

Hard kombucha is another brewing style keeping the kombucha category competitive. It’s evidence of how many beverage categories kombucha bleeds into – like alcohol, tea, juice, flavored water and functional beverages.

Kyle Oliver, quality assurance scientist at Boochcraft, said regular kombucha has an ABV of .5 percent to 2 percent. Hard or high alcohol kombucha goes above that level. Boochcraft has 7 percent ABV. The ABV is higher because hard kombucha goes through a secondary fermentation process, where more yeast and sugar are added.

“Our organisms we want in our kombucha are spoilage organisms in other industries (like wine and beer),” Oliver said. “The higher ABV doesn’t kill probiotics, they’re able to still grow in that environment.”