Two years after kombucha sales began to clock double-digit growth during the pandemic, sales are slowing, increasing only 1% over the last 52 weeks. But kombucha is still the sales leader in the fermented, non-alcoholic beverage space, representing nearly 85% of the category.
Kombucha pioneered the refrigerated functional beverage industry. For years it was one of the few beverages in the fermented, non-alcohol beverage space. But now there’s competition from new functional drinks — like prebiotic- and probiotic-infused sodas — that are diverting sales from kombucha.
“The consumer really is not OK with just drinking water. They want functionality out of everything they consume,” says Caroline Davidson, director of channel partnerships at SPINS (a data provider for natural, organic and specialty products). “Non-alcoholic beverages are traditionally not healthy options. To see that kombucha is actually one of the few segments contributing to double-digit growth (in that category), it’s really refreshing and encouraging.”
Those numbers were presented at KombuchaKon, the conference and trade show produced by Kombucha Brewers International (KBI). The event had been virtual the last two years, and brewers were anxious to meet in person again. Hundreds of brewers and brand leaders converged last week in Long Beach, Calif.
Here are highlights from SPINS’s kombucha market analysis.
Functional Beverages Grow
Refrigerated functional beverages are a top growth category across all sales channels — natural products stores, regional groceries and multi-outlet retailers (MULO) like WalMart, Target and CVS. Beverages made with -biotic cultures, high fiber sodas, water kefir sodas, drinking vinegars, kvass and tepache are all part of that growing category — and they compete with kombucha.
Shelf-stable functional beverages are growing even more quickly. For example, in the natural channel, sales of these drinks have increased nearly 25%, versus 4% for their refrigerated counterparts.
“It may not be refrigerated, but it still may be competition to a kombucha,” Davidson says.
Major Brands Diversify
Kombucha-adjacent products — like powdered kombucha and kombucha-flavored yogurt bites — are entering the market. So are kombuchas with no sugar or less than 1 gram of sugar.
“I am consistently seeing no sugar options in fermented beverages, which I know I’m speaking to an audience that already knows this, but fermentation doesn’t happen without sugar,” Davidson says. She notes more and more beverage categories “are seeing differentiation within probiotics of fermentation.”
Of the five fastest growing kombucha brands,— only two – Wild Tonic and Better Booch – are selling just traditional kombucha or hard kombucha. The other three – Humm, Health-Ade and Rowdy Mermaid – have added new product lines. Humm and Health-Ade sell prebiotic sodas and Rowdy Mermaid offers tonics.
Health-Ade is marketing their brand as a “gut health beverage” instead of simply kombucha. In a statement, Health-Ade CEO and co-founder Diana Trout says: “We have seen a dramatic increase in consumer interest in gut health over the past year as people begin to realize just how important gut health is to immunity and overall health. We wanted to offer our customers something that doesn’t compromise on taste and has legitimate gut health benefits, and (our new prebiotic drink) Pop does just that.”
Defining the Product
KBI has been well aware of changes in the category. Two years ago, it released the kombucha Code of Practice, the first set of safety and quality standards for the industry.
“Kombucha” is not a protected product name, unlike “tequila” or “champagne.” With the code, KBI aims to protect kombucha as a traditional fermented beverage. But KBI also doesn’t want to eliminate kombucha brands that may pasteurize and sell in shelf-stable cans, process from a base or brew with sweeteners.
Joshua Rood, CEO and managing director of Dr Hops hard kombucha, attended the SPINS presentation and thinks KBI “is standing in the right place.”
“First, we have to define what kombucha is. And then how you label variations of that, like if it’s filtered or pasteurized. Then you can actually have clarity and transparency for consumers so they actually know what they’re getting,” Rood says. “Right now, we don’t have that. It’s very rough, it’s essentially just an honor system.”
Rood emphasizes he has no problem with kombucha brands not brewing with traditional methods. But he says there needs to be a classification system and transparent labeling of how a kombucha is made. “There’s a lot of room for education,” he says.
Dr Hops, for example, prints a nutrition fact panel and calorie listing on their hard kombucha, even though most beer, wine and spirits are not legally required to do so.
“We try to be massively over-communicative on our labels,” Rood says. “And, if you’re looking at our labels from a calorie stance, it doesn’t look good because we have such high alcohol content. We’re not competitive in calories. But if we put it on there, people will learn that it’s 10% alcohol and most of the calories come from the alcohol.”
Shift in Retail Channels
Sales in natural stores – the retail channel that helped launch the kombucha industry have slowed, actually declining 5% over the past year. . But sales over the same period grew 3% in MULO outlets and 2% at convenience stores.
“People are still trying to find outlets where they can get everything in one trip,” Davidson says. “We’re seeing a lot more consolidation of what people are purchasing in one trip or fewer trips per month.”
Hard Kombucha “Massively Outperforming”
SPINS’s “flavored malt beverages” category includes a number of alcoholic drinks that don’t contain malt. While hard seltzers have long dominated here, six of the 10 fastest-growing brands in natural retailers are now hard kombucha brands: Boochcraft, Flying Embers, June Shine, Kyla, Strange Beast and Nova Easy.
“Natural retailers are fully embracing this as a new category and it’s paying off exponentially,” Davidson says.
Hard kombucha sales are still small overall, at $58.31 million, are driving growth in the category and “massively outperforming hard cider,” Davidson says. Dollar growth for hard kombucha is almost 60%, while sales of hard cider are declining. Sales for the hard seltzer – including category leaders White Claw and Truly – are also slipping in all retail channels.