Category Reviews / Food Reviews / Retailer Features / Trend Features

Alternative route

March 29, 2012
The down economy of the past few years has given private label alternative beverage brands a greater foothold among consumers to the point where, today, they’re trying to become permanent alternatives through a mix value and taste.


Attractive package gets consumers to try, taste gets them to come back

The down economy of the past few years has given private label alternative beverage brands a greater foothold among consumers to the point where, today, they’re trying to become permanent alternatives through a mix value and taste.
Private label has done particularly well among energy drinks, with 19.9 percent growth in year-over-year sales as of Aug. 7, reaching nearly $18 million in sales overall, according to data from SymphonyIRI Group, Chicago. Two-ounce energy shots have ridden a surge of spending adrenalin with 82.5 percent growth during that period, pacing the category with nearly $11 million in sales.
The private label markets for both sports drinks and bottled water have been considerably flatter, with sports drinks falling 2.6 percent to about $9.8 million in sales, while bottled water rose 3.5 percent to $1.26 billion for the 52 weeks ending Aug. 7, the SymphonyIRI data show.
Across the beverage category, private label has been doing quite well and should continue to, predicts Andy Dratt, executive vice president for Imbibe, Wilmette, Ill., which handles formula development and sells flavor for private-label beverages including soda, energy and sports drinks.
“The economy is not good; people are looking for value where they can get it,” Dratt says. “There’s a price benefit compared to the branded product. What makes that sticky is, they’re finding the products are really good. It’s not the generic products of four years ago, where they use whatever cola flavor the retailer happened to have.”
Steve Fay, executive vice president of Berner Food and Beverage, Roscoe, Ill., is similarly optimistic. He says that his company, which makes dairy-based coffee drinks and ethnic drinks, anticipates “double digit growth for several years to come in store brands. We have only scratched the surface on the opportunity. We have demonstrated that store brands can flourish in some widely diverse settings,” ranging from Target, to H-E-B, to Aldi.
A May 2011 report from Mintel Group, Chicago, found that use of non-alcoholic beverages remained steady between 2005 and 2010, with fluctuations in category sales mainly due to price changes and consumer shifts to private label. The report found 84 percent of adults drink soda, 67 percent drink bottled water, 39 percent use sports drinks and 16 percent consume energy drinks.
Young adults and men are the most important consumer segments for sports and energy drink manufacturers, the Mintel report says. Large package sizes like the 16-ounce Monster can seem well worth considering, Mintel believes, as consumers see greater value in the price of such servings. The average use of energy drinks declined from 4.71 glasses per month in 2007-2008 to 4.52 glasses in 2009-2010, possibly due to reports of harmful side effects.
Private label has taken advantage of the growth in two-ounce energy shots, Dratt says, while most major retailers have a line of hydration products similar to either Gatorade or lower-calorie vitamin water, or both-but the private label market for sports drinks hasn’t matured yet.
“It’s still a lot of startup brands vying for mindshare,” he says. “Most of the innovation is coming on the source of sweetness. You’re seeing this move in all directions. There are throwback products using sugar … [and] a lot of lower-calorie alternative with artificial sweeteners.”
Mintel believes the market for soda is too saturated to see much growth and observes that manufacturers are turning to other types of beverages for growth opportunities. Functional drinks and carbonated juice drinks might fare better as the economy improves and consumers become less price-sensitive and hew more strictly to their health and wellness aspirations, provided those benefits are clearly delineated, the Mintel report says.
Given the aging of the population, soda makers should probably bank on diet or sugar-free options more than in the past because Mintel’s research shows that those over age 55 consume less regular soda but more diet soda than younger and middle-aged adults.
Dratt has noticed retailers trying their own unusual flavors of soda a la cherry Mountain Dew. “You’re seeing a lot more flavor innovation from private label than in the past,” he says. “Lots of in-and-out programs, like differentiated root beers and cream sodas. … They’re doing a wider offering of products on the soft-drink side.”
Berner Foods has seen strong growth in seasonal flavors of its coffee drinks, such as pumpkin spice and caramel, Fay says. “We also have high hopes for some of our ethnic offerings such as horchata and café con leche items,” he says. “As we gringos get more familiar with these Hispanic ethnic drinks, I think they will be very popular.”
Consumption of bottled water dropped slightly from 2007 through 2010, possibly due to the use of purified water systems at home in lieu of buying cases of bottles as the recession deepened, Mintel says.
But the drop of 3 million adults who were drinking bottled water from 2008- 2010 comes after an increase of 9.5 million from 2005-08. Women are somewhat more likely than men to consume bottled water as well as sparkling water, seltzer and natural soda, due to greater health consciousness.
Lorina, Inc., Coral Gables, Fla., the U.S. subsidiary of a century-old company that makes premium French sodas, has aimed for the all-natural sweet spot by using only pure crystal sugar, says Sophie Rufin, director of marketing. “We address growing consumer needs for ‘better for you beverages,’ ” she says.
Private label beverages of all varieties have been facing higher commodity costs driven by high-fructose corn syrup, in those that use it; the aluminum or plastic they use for packaging; and for shipping, given higher oil prices, Dratt says. “You’ve got to put the stuff on trucks and move all over the place,” he says. “You’re moving liquid, which is heavy.”
Milk and soy oil are the primary commodities for Berner Foods, and “both have flirted recently with historic highs. Although we see some modest easing of commodity pricing, it doesn’t take much in a global economy to move the markets,” Fay says. “Rising commodity costs are hurting almost all of us. Retailers are pushing back hard on price increases. … As a very large retailer recently told me, ‘Get efficient-or die.’ ”
To continue to thrive, private label drink-makers need to keep “staying nimble and innovative,” Dratt says, churning out new line extensions and continuously honing the look of labels and packaging so it continues to “match the product in terms of sophistication.” Plus, retailers need to give their private labels decent shelf placement, he says.
“People will try it based on how it looks, and they’ll buy it again based on how it tastes,” Dratt says. “But you’ve got to get them to try it first.”
The keys to success for premium sodas, Rufin says, are flavor innovations, emphasis on “better for you” benefits, and strong retailer programs with “proper merchandising” that includes off-shelf displays during busy periods like the holidays and summer. “As it is an impulse product, visibility is the key,” she says. “The main objective is to grow the category with, and not against, national brands. Our private label offers are 100 percent complementary to national brands.”
Conversely, Fay says strong store-brand programs that directly compete with national brands are seeing success. He cites HEB, which recently did a promo offer that provided a free store-brand sample with the purchase of the branded product. “That is bold,” he says. “That is saying to the consumer, ‘Try, and compare it.’ It says that they truly believe they have a product that is as good or better, and that they are not afraid to demonstrate it.”
SIDEBAR:
Eye on The National Brands
Brand name beverages take a wide variety of tacks to convince consumers to reach beyond tap water, milk and juice-and to stay with brand names rather than reaching for private label energy and sports drinks, sodas and bottled water.
The Coca-Cola Company touches numerous segments within the beverage market-traditional soda brands like Coke, Sprite and Fanta; Dasani and Evian bottled water; and health and energy drinks like Fuze and Burn, respectively. Recent highlights have included the fifth anniversary of Coca-Cola Zero as well as introductions of Minute Maid NutriBoost, a dairy and juice drink for those with active lifestyles; and the Odwalla Heart Health Superfood berry blend.
They’re best known for their battle of the heavyweights cola competition, but Pepsi matches Coke in just about every other area, too, with brands like Mountain Dew, Sierra Mist, Aquafina, Gatorade, Lipton and Tropicana. Aquafina has introduced the Eco-Fina bottle that uses half the plastic to help reduce carbon footprint, while Pepsi brand MUG root beer boasts about the sassafras roots of root beer, which predates not only sports drinks but also cola.
Gatorade has come out with the G-Series trio of drinks that the brand says is specially designed to give one’s body what it needs before, during and after a workout, practice or competition.


Eye on the national brands

Brand name beverages take a wide variety of tacks to convince consumers to reach beyond tap water, milk and juice-and to stay with brand names rather than reaching for private label energy and sports drinks, sodas and bottled water.
The Coca-Cola Company touches numerous segments within the beverage market-traditional soda brands like Coke, Sprite and Fanta; Dasani and Evian bottled water; and health and energy drinks like Fuze and Burn, respectively. Recent highlights have included the fifth anniversary of Coca-Cola Zero as well as introductions of Minute Maid NutriBoost, a dairy and juice drink for those with active lifestyles; and the Odwalla Heart Health Superfood berry blend.
They’re best known for their battle of the heavyweights cola competition, but Pepsi matches Coke in just about every other area, too, with brands like Mountain Dew, Sierra Mist, Aquafina, Gatorade, Lipton and Tropicana. Aquafina has introduced the Eco-Fina bottle that uses half the plastic to help reduce carbon footprint, while Pepsi brand MUG root beer boasts about the sassafras roots of root beer, which predates not only sports drinks but also cola.
Gatorade has come out with the G-Series trio of drinks that the brand says is specially designed to give one’s body what it needs before, during and after a workout, practice or competition.

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