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.

Especially CBD.

“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.”

Craft breweries, which were heading into their second decade of a major boom, are now shuttering during the coronavirus pandemic. “There’s going to be a lot of dead distilleries coming out of this,” said Paul Hletko, the founder and distiller of FEW Spirits, in Evanston, Ill. “Even if you survive, the new normal is going to be punishing for small brands.” Craft distilling relies on bars, tasting rooms, face-to-face sales and customers willing to pay a higher price for a premium product — all factors dramatically changing with social distancing and a global recession.

Read more (The New York Times)

Sales of functional foods and beverages — products that provide additional nutrients — grew 5.3% to $71.4 billion in sales in 2019, at a growth rate two times faster than conventional products. Sales of function foods and beverages were $68 billion in 2018. (New Hope Network)

The coronavirus outbreak forced coffee prices to spike in April, with coffee futures estimated to rise 15% in May. Though prices are high, coffee farmers internationally are suffering. The COVID-19 lockdown in Colombia is disrupting coffee exports, the lockdown in Brazil is causing container shortages and a locust invasion in East Africa is hurting harvests. Despite rising prices, consumers are still purchasing coffee. CNBC analysts suggest the price increase could be short lived, as coffee shops reopen again and the public begins consuming stockpiled coffee supplies.

Read more (Food Dive)

Amazake — an ancient, fermented superdrink from Japan — is jumping in sales in Japan. Boyband Kanjani Eight was even hired as spokespeople for Hiyashi Amazake, a popular Japanese brand. Amazake was developed around 250 to 538 AD. It’s made by boiling rice, water and koji for 8-10 hours. It’s a sweet drink with a lumpy texture, and its name translates to “sweet sake” (thought it only has trace amounts of alcohol thanks to the fermentation process.) Amazake has earned the nickname “drinkable IV” because it’s packed with nutrients and gut-friendly bacteria. In Japan it’s considered a drink and a health product.

Read more (BBC)

The new innovation in vinegars is grape vinegars. Grape vinegar is made from grapes macerated and slowly allowed to ferment with their skins for a year. “The fermented juice then spends several years in small oak barrels to evolve into the delicately fruity pinkish vinegar,” according to the New York Times. The white grapes and skin contact is why the grape vinegar makers call it to the “orange wine” of vinegars. The latest grape vinegar collection comes from Sirk in Friuli, a region in northeast Italy. The grapes grown there, Ribolla Gialla white grapes, are prized for wine making.

Read more (New York Times

In a matter of days, the novel coronavirus outbreak dramatically changed grocery shopping. Empty grocery store shelves have become a ubiquitous symbol globally of home quarantine.

Sales exploded for pantry staples like dried beans (62.9%), powdered milk (126.3%) and rice (57.5%). But another grocery quarantine must-have item is emerging – fermented food and drink. Sales are up for kombucha (10.1%), natto is selling out in Japan, yogurt is selling out in Europe and pickle and sauerkraut sales in Russia are up 79%. Fermentation brands are reporting some of their biggest sales during the month of March, as much of the nation was forced into self-isolation to prevent the spread of COVID-19.

“For fermented food, it’s an interesting time. We’re an immune boosting type of food, so our sales are skyrocketing. We’ve had the best month we’ve ever had in business,” says Drew Anderson, CEO of Cleveland Kitchen and TFA board member. Cleveland Kitchen makes sauerkraut and fermented dressings and marinades. “It is bittersweet. Obviously, we want this virus to go away. But we’re seeing the fermentation industry as a whole, the one benefit is it’s driving a lot of trial. People say ‘I heard fermented food is supposed to be good for you, I’m cooking more, why not grab a pack of kraut.’”

Though sales are high, brands are changing their operation model. Rather than running two shifts of processing at Cleveland Kitchen, they’re down to one. Employees must take daily temperature readings before work, stop for mandatory handwashing breaks and use new Purell hand sanitizing stations.

“Sales are up overall, but we have had to implement our emergency sanitation protocols to continue production,” says Meg Chamberlain, CEO of Fermenti, LLC. The North Carolina-based brand sells a variety of vegetable ferments, teaches fermenting workshops and hosts annual the annual WNC Fermenting Festival. Their staff is under voluntary home quarantine – which means staff only goes from work to home. “Overall our company is proving resilient and we are hopeful to continue to provide Fermenti to our community.”

Because food production is considered essential business, licensed fermentation companies have not been forced to stop working during the coronavirus outbreak.

Aneta Lundquist, CEO of 221 B.C. Kombucha, has been posting videos to her Instagram stories of the Florida based kombucha processing facility. Lundquist says employees are working overtime to deliver orders.

“Our orders during the global pandemic have spiked. Consumers have gone full blown ‘healthy’ food during this health crisis,” she says. “Now is the time to make a switch from over-processed and denaturalized pseudo foods to real, natural and unprocessed foods that nourish our body, mind and spirit and help building a strong immunity.”

Lundquist adds customers need to “think of kombucha, kimchi, sauerkraut and other fermented fruits and vegetables as microbiome rock stars!…Always choose wildly fermented foods.”

“Remember it is about diversity and the quality of microorganisms, not just quantity. You can only achieve this by fermenting traditionally.”

Keenan Smith, CEO of Goodwolf Kefir in Portland, agrees. He says: “The probiotic and fermented space will increase as people have an increase in health awareness and want a better functioning immune system.” They are home delivering their kefir, and donating a

Brands are getting creative with their marketing, too. Goodwolf Kefir is home delivering kefir to the Portland area and donating a proceed of sales to their local food bank. Cultured South and Golda Kombucha have setup a pick-up fridge at their Atlanta location where customers can prepay for an order online, get a secret code to unlock the fridge and grab fermented food and drinks. Wild Kombucha in Baltimore is offering free, local, “no human touch” home delivery for their 12 pack bottles. 28 Mile Vodka & Distillery in Illinois have converted their distillery to make hand sanitizer that they call “Fool’s Gin.” The CEOs of Miyoko’s Creamery and Lifeway Kefir are both using the brands Instagram accounts to share recipes using their product.

Outside the U.S., though, different government rules are restricting fermentation brands from operating during the global outbreak. In India, Mountain Bee Kombucha has halted operations during a 21-day lockdown.

“There is no question that our business is impacted immensely, one for the fact that we are still quite small-scale which supplies directly to a handful of local grocery stores. Currently those grocery stores have been working at limited capacity and/or temporarily shut,” said founder and head brewer Honey Islam. “Another reason for lesser business in these times is due to the lack of awareness in the Indian market about fermented foods, especially kombucha. We are engaged in educating our customers as well as spreading awareness in the community via workshops, classes, 101 sessions, pop-ups, all these channels are education are currently disrupted which stalled our efforts in bringing kombucha awareness to the masses.”

Mountain Bee Kombucha is focusing on educating through Instagram videos and YouTube tutorials.

Craft alcohol producers, who asked the government for assistance this month, may now obtain SBA loans interest free to help maintain payroll, mortgage, rent and utilities during the coronavirus outbreak. The CARES act was designed to incentivize small businesses to avoid layoffs. Craft breweries and cideries who were forced to close breweries, bars, wineries and taprooms this month during the coronavirus outbreak. The Emergency Disaster Loans will provide assistance up to $10,000. ..Both the Brewers Association (BA) and the American Cider Association praised the stimulus package, but noted it’s not perfect. 

“This this is a significant step forward that provides much needed relief for small and independent breweries who are facing dire economic challenges, there is more work to be done,” according to a statement by the BA.

Read more (Beverage Daily)

Americans are hearing the term “microbiome” a lot lately. It’s become a common phrase in health food marketing. But the microbiome is still uncharted territory in science.

Dr. Shilpa Ravella, a gastroenterologist and professor of medicine at Columbia University Medical Center, says a large army of trillions of bacteria lives on or in us, and we can alter that bacteria by fueling it with the right (or wrong) foods.

“There are also ways of preparing food that can actually introduce good bacteria, also known as probiotics, into your gut. Fermented foods are teeming with helpful probiotic bacteria, like lactobacillus and bifidobacteria,” Ravella says.

Fermented food and drink are critical to caring for gut bacteria. Because fermented products are minimally processed and provide nutrient-rich variety to diets, she adds.

But that doesn’t mean all fermented products are created equally. Yogurt is a beneficial food, for example, but some brands add too much sugar and not enough beneficial bacteria that the yogurt may not actually help.

Ravella shared her insight in a TedED talk. As the director of Columbia’s Adult Small Bowel Program, she works with patients plagued by gut issues.
“We don’t yet have the blueprint for exactly which good bacteria a robust gut needs, but we do know it’s important for a healthy microbiome to have a variety of bacterial species,” she adds. “Maintaining a good balanced relationship with them is to our advantage.”

Gut bacteria breaks down food the body can’t digest, produces important nutrients, regulates the immune system and protects our bodies from harmful germs.

Though multiple factors affect our microbiome – the environment, medications and even whether or not we were birthed vaginally or through a C-section – the food we eat is one of the most powerful allies for the microbiome.

“Diet is emerging as one of the leading influences on the health of our guts,” Ravella adds. “While we can’t control all these factors, we can manipulate the balance of our microbes by paying attention to what we eat.”

In addition to fermented food and drink, fiber is also key. Dietary fiber in foods like fruit, vegetables, nuts, legumes and whole grain are scientifically proven to colonize the gut.

“While we’re only beginning to understand the vast wilderness inside our guts, we already have a glimpse of how crucial our microbiomes are for digestive health,” Ravella says. “We have the power to fire up the bacteria in our bellies.”

When Keenan Smith made his first batch of water kefir, it was for his kids. He wanted something more nutritious for his young daughters, avid sparkling water drinkers. 

Tangy, bubbly and packed with probiotics, water kefir hit all the right notes. The next year was full of home kitchen experiments, creating enticing flavors and perfecting the four-core formulation — purified water, kefir cultures, cane sugar and mission figs.

“My daughters are my best taste testers,” Smith says. “We used to be big kombucha drinkers, but water kefir is providing a different alternative. Water kefir is lighter, less sour and it has no caffeine. The kombucha flavor doesn’t work for some people, and water kefir is a perfect entry into the probiotic drink space. It’s a bridge between kombucha and sparkling water. People can still have a yummy, probiotic drink with water kefir.” 

Smith is hardly a kombucha hater, though. He’s a big fan of the fermented tea. Smith was a sales broker for many natural brands for almost two decades — including Health-Ade Kombucha, one of the nation’s leading kombucha brands.

“When I was their broker, they majorly grew their company. But they’re still fermenting in individual glass vessels,” Smith says. “I look to that model because they’ve been so successful without sacrificing the fermentation process.”

By November 2016, Smith rented a commercial kitchen near his home in Portland, Ore. and began brewing kegs of water kefir under his label: Goodwolf Feeding Company. His first customer was Airbnb’s corporate offices. By late 2017, Goodwolf opened their own manufacturing facility, scaling up without sacrificing small batch fermentation. Even now as Goodwolf expands from a Pacific Northwest brand to the West Coast, Goodwolf continues to ferment  in 50 gallon stainless fermentation vessels, cultivating additional kefir cultures as the business grows. 

“Production is moving very quickly. It feels like we’re in a rocket ship,” Smith says. “It’s a great time for water kefir.”

A few months after his big win as the Expo East Pitch Slam winner, Smith shares how he responsibly built a fermented drink brand.

The Fermentation Association: You were formerly a sales broker for natural food and drink brands. How did your background help you launch Goodwolf water kefir?

Keenan Smith: Knowing the industry, understanding how retailers and distributors work, knowing the cost of doing business upfront. That’s why it’s taken so long for us to grow — we didn’t raise venture capital out of the box. We’ve been slow and steady. We haven’t taken on much investment at all.

A lot of brands will start selling at farmers markets, then pitch to stores, but I had the connections to the retailers. We went right to the retailers.

It’s been a blessing and a curse. The blessing is we’ve been able to get into a lot of the retailers, but where we’ve been short-sighted is the on-premise channels. We haven’t done much with food service and the alternative channel side — like local offices, beer distributors and bars, they’re wanting non-alcoholic options. We’ve missed out on that keg business. These were things I didn’t think about when I focused on the retail challenge.

TFA: Functional beverages are shaking up the drink industry. How do you stand apart from other functional drinks?

Smith: Our best IP (intellectual property) is definitely our recipes, our flavor. We have really good recipes because we really came into it, that was our main goal, to create a very good tasting and nicely packaged product. We announced our social mission at Expo East around mental health. We didn’t want to lead with that though, we wanted to make sure the product and the branding was dialed in.

And also our packaging and position stands out. If you look at the kombucha case, there’s a lot of yoga, spiritual, Hindu vector art. Everything screams yoga. It’s a lot of white. And our packaging is black. We are trying to be a challenger brand. We don’t want anything that’s superfluous in there. We want to position ourselves as a challenger brand to the industry norms. We’re trying to stand out that way — with our marketing and positioning that we’re a little different. 

TFA: Tell me about the genesis of the name, Goodwolf.

Smith: Before I started Goodwolf, I was dealing with a lot of depression and anxiety. I was working on eating better and exercising. I was running one day and listening to a podcast and heard the popular good wolf legend story — the classic story on the good wolf, bad wolf. The good wolf is full of joy and love, you feed it by eating healthy. The bad wolf is angry and succumbs to fear, and you feed it a box of donuts. The one that wins is the one you feed. So I had this idea of the Goodwolf origin story.

TFA: What’s your most popular flavor.

Smith: Ginger. But our Gold is creeping up there. It’s cold pressed organic ginger, lemon, lime, pineapple and spices like turmeric and a little bit of black pepper. Our newest flavor is Habanero Fire, it’s our 5th flavor. It’s a nice addition because most brands don’t think about habanero, there’s a lot of cayenne cleanse, but no habanero. I tasted a habanero-infused cider and it had more of a round flavor, while cayenne is more of a single note of heat. Habanero is more well-rounded. We add cayenne, but the habanero really comes through. And it’s cold-pressed with ginger and apple cider vinegar. 

TFA: It sounds like a lot of work goes into crafting your flavors.

Smith: Yes. There’s a lot of R and D. Our No. 2 ranked SKU is called Bloom. That was originally called Wolf Berry because Wolf Berry was another name for goji berry, which we were fermenting with in the beginning. The way we use figs now, figs are used to culture the wild yeast out of the air, they float to the top of the water when fermenting, then you throw them out. We were doing the same thing with goji berries. But something happened in fermentation that made it very foamy with goji berries. So we stopped using the goji berries and now we’re using figs. 

TFA: You announced a social mission at Expo East. Tell me more about your social mission. 

Smith: Coming from a broker world, I worked with a lot of brands that were social mission first. “Buy our product and we’ll give our product to someone that doesn’t have this product!” But this doesn’t always work. Maybe this product isn’t something needed, or it’s not as good as something else on the market so it didn’t make sense. We didn’t want to lead with that social mission. 

We could slap 1% for the planet on the bottle, that would be easy. But I struggled with anxiety, I have family members who have struggled with depression. I can really get behind that interest because I relate to it. This felt unique. It’s part of the challenger brand position. And it’s feeding the good wolf, making the right choices.

We’re trying to do something harder, align our brand with mental health awareness. We can’t just donate our money to it because we don’t have money yet, all our money is going back in the business. You can’t really volunteer unless you have a degree, they don’t just want anyone off the street working with people suffering with mental health issues. A friend who is a doctor is consulting with us on how we can best use it. Maybe profits go to the National Association On Mental Illness. Right now it’s an intention versus a full fledged mission. It will be baked into the company as we grow.

TFA: How can brands effectively advertise the health benefits of their product?

Smith: I personally think you have to be crafty. You don’t want to scream health at the customer because you alienate people who think it won’t taste good because it’s healthy. Or you’re preaching to the choir because the healthy people know it’s healthy. You need to be able to imply the benefit without being too forward.

TFA: What challenges do fermented food and drink producers face?

Smith: Education. Even though we’ve made strides, there’s still so much education to be done. One of the big challenges is how do we stay true as smaller brands that are doing traditionally fermented products against larger brands with tons of venture capital and are adding probiotics. It’s apples and oranges when you’re talking about products sitting on a shelf together. Are they a brand funded by Coke? We have to tell our story. It’s advantageous when you’re going into retailers and say we’re small, we’re traditionally fermented. If you can tell that story to your buyers and convey it to your customers. We pushed the traditional fermented aspect.

TFA: What are the fermented food and drink industry strengths?

Smith: Well look, there’s a global pandemic happening and I think that ultimately, you will begin to understand that health is your only wealth. Health and your family are the only things that matter. When people understand that, your product is like gold because you’re providing health to people. And that’s the most important thing we have. 

TFA: What’s your advice to other entrepreneurs starting a fermentation brand?

Smith: My advice is some advice I heard recently: Find a space that isn’t already crowded. Maybe we don’t need more sauerkraut and kombucha brands or water kefir, frankly. But try to focus on how you can expand to your maximum potential locally and regionally. Don’t just look at national chains and distributors, but look at on-premise sales. How can you get your product into universities, schools, tech campuses? Think outside the box, find something truly unique that the markets are not flooded with. Or else we’re all just cannibalizing each other.