A Golden Alternative

November 24, 2010
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With consumers becoming increasingly concerned about health and wellness, a myriad of opportunities are unfolding for retailers of private label alternative beverages.

“Like virtually all product groups, alternative beverage is trending toward health and wellness wherever possible,” says Steve Fay, executive vice president with Roscoe, Ill.-based Berner Food and Beverage. “In our iced latte line, we are emphasizing antioxidant characteristics of coffee and the wholesomeness of milk. Many of the products we make have moved to a light option with reduced sugar and calorie content.” 
Consumers want to understand what it is they’re consuming and so they’re becoming more and more aware of labels and ingredients, adds Andy Dratt, executive vice president with Wilmette, Ill.-based Imbibe, a private label beverage developer.

In addition to the health and wellness trend, other trends in alternative beverage include simplicity, natural, condition-specific products and functional ingredients, Dratt adds.

When it comes to natural, manufacturers are shying away from high fructose corn syrup and using real sugar. Drink makers also are looking to use novel ingredients that have specific health benefits. Fiber is being added to more products, for example, driven by ingredient technology that makes it easier to add it into a liquid. Stevia and agave nectar are gaining popularity as alternatives to sugar.

“There’s tremendous interest in stevia,” Nicolino says. “It’s the first of the zero-calorie sweeteners where you can actually make the statement naturally sweetened right on the primary display panel of your package. That really has the opportunity to be a game changer.”

Sales of stevia were close to $100 million for the year ending July 2009, according to a report by Mintel International Ltd. The company estimates that by the end of 2011, the U.S. ingredient market for stevia could reach $1 billion.

Nicolino adds that stevia as a sweetener is very difficult to work with because of its off taste. It requires a lot of research and development expertise. Clement Pappas has been working on adding stevia for more than two years. “It’s going to take continued development, but it is, we believe a tremendous opportunity.”
While agave isn’t calorie-free, it’s an all-natural sweetener like honey and it boasts a low glycemic index, which makes it a healthier alternative.

Another reason for the growth of alternative beverage options  is that beverage makers are looking for growth areas in the face of maturing mainstream beverage markets, says Richard Haffner, head of global beverages research for Euromonitor International in Chicago.

Teas and Coffees

While overall ready-to-drink tea and coffee sales rose roughly 7.4 percent in the 52 weeks ended Sept. 5, 2010, according to Chicago-based SymphonyIRI, sales of private label ready-to-drink tea and coffee climbed roughly 26.3 percent. Sales of bottled water overall saw a very slight rise of 0.63 percent and private label bottled water climbed 7.18 percent.

The segments where private label still has the highest share is bottled water and 100 percent juices, Haffner says. “I think those are natural places for private label to be able to command a stronger share, because those tend to be more commodity-based products.” 

One of the areas that is growing dramatically on the juice side of the alternative beverage continuum is 100 percent juices, according to Pat Nicolino, vice president of marketing for Carneys Point N.J.-based Clement Pappas.“The 100 percent juices are made from just that one main fruit such as cranberry, pomegranate or black cherry, and it’s just a pure, straight juice that has a big, bold, intense flavor and carries all of the health properties.”

One former hot alternative category, energy drinks, may be losing some of their pep. “We still see energy drinks growing in perhaps double digit growth, but certainly not the explosive growth we’d seen in the past. So, I’d say in total its beginning to mature a bit. Bottled water is really more of a mature segment now, ” Haffner says.

Co-market for Sales

When it comes to retailers looking to creatively market their private label products, Fay says they shouldn’t be intimidated by fast-moving new age categories. “The store brands from us and our competitors producing store brands are high-quality and offer up value. We, like so many others in store brands, have learned to turn quickly and react in a short space of moving categories.”

If you have the quality and the value flaunt it, Fay adds. Go side-by-side with branded alternative beverages to capture store brand sales.

When it comes to national brands, Pepsi does clever marketing by running joint promotions with Frito Lay, says Haffner. “I don’t see why private label couldn’t do the same thing, where they would partner their alternative beverage with some other snack item. It probably wouldn’t be Frito Lay, but a smaller manufacturer. It would help to boost both items and I’d think smaller manufacturers would be interested in that because that gives them a means of competing with Frito Lay.”

Besides health and wellness, obviously sustainability in packaging is a consumer concern in alternative beverages.

“We offer some plastic and glass packaging options, but we love cans,” says Fay. “Cans are the most recyclable packaging system available. They are freight efficient. They are green as compared to all other options. Ball Container and other are offering dynamic options for great graphics presentations. We see cans as a wonderful packaging option from many different levels.”

“I think going upscale with packaging is a good thing to do,” adds Haffner. “Private label may be less expensive than a premium branded product, but it’s more expensive than the lower-tier branded products. By positioning themselves as a premium product competing against the premium brands, I think they’ll make the private label more successful and I think retailers are moving in that direction.”

Eye on the National Brands

The top six manufacturers – Coca-Cola, PepsiCo, Dr Pepper Snapple Group, Nestle, Dean Foods Company, and Kraft Foods Company – accounted for 52.5 percent of the total U.S.  sales of alternative beverages, excluding Walmart, in 52 weeks ending Jan. 24, 2010, according to a report from Mintel International Ltd.

Although both PepsiCo and Coca-Cola suffered losses during the period, Coca-Cola products fared better in the juice, carbonated drinks and sports drinks segments, thus tempering its decline.
Juice dominated, accounting for more half (53 percent) of launches in the region – the largest share compared to other regions, according to Mintel.

This year, Campbell Soup has released a vegetable & fruit drink with tea extract under the V8 V-Fusion + Tea brand. Beyond the Bean also has released a Mango and Orange Smoothie under the Sweetbird brand.
As far as non-carbonated ready-to-drink beverages, meal replacements and other drinks were very active in North America, accounting for nearly a quarter (24 percent) of launches. Ready to Drink (RTD) tea however, was the top sub-category and accounted for an above-average 65 percent share in launches, while RTD coffees accounted for just 11 percent.

Tung Shaing Foods has released French Roast Coffee under the Café Time brand. First Blush has released Chardonnay White Tea under the First Blush brand.
Energy drinks are by far the strongest segment in North America when it comes to new products, accounting for 68 percent of launches (compared to 65 percent) for the market overall); with sports drinks just accounting for 32 percent of launches.

Harcos LLC has launched Blood Energy Potion, an energy drink claimed to have the same consistency, color and appearance as blood, with a similar nutritional make up. Gatorade also has released Fruit Punch Pre-Game Fuel under the Gatorade G Series 01 prime brand.

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