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Category Insight: Healthful Quick Fixes

As health-and-wellness takes a foothold in beverages, the market shifts, spotlighting juice, smoothies and water.

August 29, 2014
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We’ve come a long way from plain juice and water. With the current focus on anytime, anywhere meals, more consumers are looking for a nutritious quick fix in

The Bottom Line

• Private label smoothies soar

• Nutrition-forward is the name of the game

• Sparkling waters provide differentiation

liquid form. A steady, but slow economic recovery has allowed shoppers to feel more comfortable spending money on discretionary items, and they are particularly attracted to convenient on-the-go products as an alternative to high-calorie beverages. And consumers are typically more willing to accept higher degrees of fortification in beverage form.

“Consumers are constantly on the move and they are looking for products that cater to this lifestyle,” said Laura Klibanow, marketing manager at Imbibe Inc. “Most Americans don’t have time to sit down and eat breakfast at home, so they want single-serve options that they can consume in their car on the way to work.”

The convenience aspect is huge. “They’re consuming calories through beverages because it’s faster and easier,” said Adam Isaacs, senior director, commercial team, at Sun Orchard Juicery.

“Brands are catering to consumers who are looking to multi-task. For this reason, I think single-serve products are experiencing major growth. Consumers are willing to pay an upcharge for convenience,” said Klibanow.

 

A Paradigm Shift

Health-and-wellness, alternative thirst-quenchers, added-value ingredients and changing taste preferences are impacting liquid refreshment sales, which are forecasted to grow by approximately 3 percent in 2014, according to Canadean’s March 2014 “North America Beverage Forecasts.”

Although private label share remains high in carbonated soft drinks (CSDs), consumers are drinking less soda, kept at bay by artificial sweeteners, high sugar

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private label beverages
Top-line takeaways: Smoothies, with 1,513.80 percent dollar sales growth for the 52 weeks ending June 15, 2014 per IRI, continue to show strong growth in private label as consumers look for nutritious, filling beverages to serve as snacks and meal replacements.

content and other ingredient concerns. Sales will continue to decrease another 2.9 percent to $41.1 billion in 2014, according to the June 2014 “Carbonated Soft Drinks—U.S.” report from Mintel. “The CSD category is an easy target as other beverages innovate and entice consumers away from sodas,” said Elizabeth Sisel, beverage analyst for Mintel.

Attention to health and other beverage categories is driving these cutbacks, particularly in the diet soft drink segment, which experienced a 13 percent decline in dollar sales from 2012–14. Only the seltzer, tonic and club soda segment saw growth, likely benefiting from the popularity of sparkling and bottled waters, according to the Mintel research.

“Consumers are moving toward a wellness culture where healthier beverages are part of a holistic, mainstream solution,” said Kristen Bodenstein, director, beverages, for Daymon Worldwide. “Core trends include healthier carbonated beverages, naturally pure, functional and nutrient-dense choices, alternative sweeteners, and organic options.”

Beverage categories on the upswing include private label water, which saw a 9.98 percent increase in dollar sales for the 52 weeks ending June 15, 2014 per IRI. Sparkling and mineral waters likewise saw a gain, up 6.17 percent—again, potentially sourcing some growth from CSDs. Other fast-moving product segments in private label include shelf-stable canned juices (+11.16 percent in dollar sales), juice drink concentrates (+19.23 percent) and aseptic juices (+178.40).

Private label refrigerated cider increased by 4.23 percent in dollar sales (and a significant 31.21 percent in unit sales) and lemonade sales increased 26.26 percent in dollars and 36.71 percent in units according to IRI. Cider sales rose as a result of widening distribution and a broader assortment of products and brands in most channels. Overall consumption of cider is expected to grow by 12 percent in 2014, according to Canadean.

 

Healthy Moves

While 100 percent orange juice has positive health attributes, such as vitamin C, excessive calorie and sugar content and high prices have caused consumers to move away from the category. The availability of low-calorie and less-expensive alternatives such as functional bottled water and do-it-yourself liquid concentrates added to plain water in consumer-customized quantities will limit sales of juice products, according to Euromonitor’s May 2014 “Juice in the U.S.” report. Juices are projected to decline by 5 percent over 2013–2018.

One answer is to use alternative products and flavors. “The growing success of coconut water to reduce sugar content, and coconut cream to improve flavor, creates an opportunity,” said Richard Aust, director, technical services, at iTi Tropicals, Inc.

It isn’t surprising that, given category trends, some of the fastest-growing private label juices are refrigerated and shelf-stable bottled juices and smoothies, respectively up 1,513.80 and 429.81 percent in dollar sales per IRI. The ability for a retailer to bottle such products in-store can up the “freshness” component, commanding an additional premium.

As consumers turn away from conventional 100 percent juice products, manufacturers are turning their attention to smoothies in an attempt to reinvigorate the juice segment. Smoothies have the added benefit of blending the whole fruit to increase the fiber content.


Dynamic Waters

Bottled water—a perennial strong performer for private label—has received a dynamic boost through diversification into new product types. Recent trends favor low- and no-calorie beverages with new flavors and functional innovation, according to Mintel’s March 2014 “Bottled Water and Cold Beverages Mixes—U.S.” report. “Consumers remain price-sensitive in the category and, with so many choices, value will be what consumers fall back on. Products with higher price points need to be justified through unique flavors and innovation to draw in new users,” said Sisel.

According to the May 2014 “Multiple Beverage Marketplace in the U.S.” report from the Beverage Marketing Corporation, bottled water has further solidified its already prominent position in the beverage market, reaching a historical high of more than 10 billion gallons in 2013. Per capita consumption also reached a new peak of 32 gallons (up 4 percent). Still water in single-serve polyethylene terephthalate (PET) bottles drove overall sales. The segment increased by more than 6 percent to almost 6.7 billion gallons, representing two-thirds of the bottled water market. Retail bulk volume experienced some reversals as consumers chose convenient PET multipacks instead of larger (1–2.5 gallon) sizes.

Bottled water ranks as the third leading private label beverage category in unit volume after CSDs and milk. Store brand share is high in PET/convenience still waters at 20.41 dollar share and 15.28 in unit share per IRI. Dollar sales were up 9.98 percent for the period, and sparkling and mineral waters were up 6.17 percent.

Emphasizing regional brands is one strategy retailers are using, according to Euromonitor’s May 2014 “Bottled Water in the U.S.” report. Regional brands can also benefit from connections to promotion of social causes relevant to the region and community.

“The big trend with the ‘choose local’ movement is supporting farmers and regional beverages,” said Collins Speed Pugh, director of marketing for Mountain Valley Spring Company.

Expansion into the sparkling zero-calorie flavored waters segment has likely contributed to the gains reported by IRI in the segment. Sparkling water held a small share of bottled water volume, but grew at a rate faster than any other type, including retail PET, according to the Beverage Marketing Corporation.

“In bottled water, flavored sparkling water is on-trend as consumers move away from carbonated soft drinks,” said Bodenstein.

These new, lightly flavored beverages nicely stand alone—but also work well with foods. Pugh noted that their new sparkling products carry “a delicate fruit essence of lime or blackberry pomegranate flavor, which is much lighter than a lot of similar products. The smaller bubbles and flavor are not overwhelming.”

Sometimes, a lighter touch is precisely what builds momentum.


Related: Store Brand Wine, Beer and Spirits

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