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Alternative Universe

November 30, 2009
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Take a walk though just about any supermarket today, and you’ll find an alternative universe devoted to single-serve beverage options that run the gamut from enhanced waters and sports drinks to ready-to-drink teas and protein drinks. Such beverages often promise energy- or health-boosting benefits - extras today’s consumers demand.

During wonderfully “simpler” times just five or six years ago, beverages essentially fell into a few very broad categories - milk, juice, alcoholic/mixers, soda and bottled water. But sub-segments of these categories eventually grew to the point where they spawned a new category: alternative beverages.

Take a walk though just about any supermarket today, and you’ll find an alternative universe devoted to these “potions” - mainly single-serve options that run the gamut from enhanced waters and sports drinks to ready-to-drink teas and protein drinks. Such beverages often promise energy- or health-boosting benefits - extras that today’s consumers demand. But alternative beverages’ growth is coming at the expense of at least one other major drink category.

“Soda sales are dropping, and alternative beverages are picking up,” notes Jeff Daanen, vice president of retail sales for Green Bay, Wis.-based Winona Foods.

A major growth driver in the alternative beverage category is consumers’ overall interest in health and wellness.

“The alternative beverage category, as a whole, tends toward being very reactive to societal trends, whether health and wellness or simply the latest youth fad,” says Steve Fay, executive vice president at Roscoe, Ill.-based Berner Food & Beverage.

Laura Corser, senior business manager for the Dunkirk, N.Y.-based Cliffstar Corp., notes that as the interest in health and wellness continues to rise, consumers are becoming more conscious of what they consume.

“Since every calorie counts, they will cut back on calories wherever they can and demand healthy and tasteful products without extra sugar and calories,” she stresses. “Consumer demand for light and low-calorie beverages or those that are naturally sweetened will grow. Retailers are fortunate since they have an opportunity to provide continuity and great-tasting low- or no-calorie beverages across the breadth of their product lines,” she adds.

Water, Water Everywhere

Sales of plain old bottled water are way down - thanks to penny-pinching and eco-conscious consumers who are returning to tap water and reusable water bottles. But Fay says enhanced waters that either promise or infer health or functional benefits have posted strong recent sales gains.

Daanen agrees with the strong interest in enhanced waters, adding that new low-calorie vitamin-enhanced waters also are beginning to gain some ground.

“Doctors are saying that soft drinks are really kind of bad for you, and that there are a lot more alternatives out there,” he says. “But it’s not just Vitamin Water [that’s of interest]; it’s also your Hint-type water, your essence waters, too.”

Larry Williams, vice president of sales for Indianapolis-based Monarch Beverage Co., points to mix-after-opening-type spinoffs of these waters as yet another growth area - and private label opportunity.

“They’re using technologies called ‘blast cap’ and ‘twist cap’ where the vitamin elements are stored in either a compartment or in the twist cap,” he explains. “Then as the product is twisted, it’s activated - you release the ingredients into your product and mix it at the time of consumption.”

Eye on Health

But enhanced waters are not the only healthful-beverage game in town. Consumers also are gravitating toward ready-to-drink teas, sports drinks and nutrition drinks.

Andrew Rashkow, president and CEO of Wilmette, Ill.-based Imbibe, points to a huge opportunity in the tea category. In addition to green tea ready-to-drink options, he says black, white, oolong and red tea formulations boast strong appeal, especially when combined with alternative sweeteners, juices or even functional ingredients.

“The tea category has been a big category for 2009,” he adds, “and we expect it to be an even bigger category for 2010.”

Williams agrees with the push toward health-minded ready-to-drink teas, noting that Kroger and Costco recently came out with their own versions in a multipack format.

“There’s strong double-digit growth in ready-to-drink teas,” he says. “And there seems to be quite a bit of a move toward things like relaxation beverages and antioxidant beverages.”

Although Gatorade sales slid slightly in recent months, Daanen still believes opportunity can be found on the isotonic, or sport drinks, side.

And Beth Wierzbicki, marketing manager for Clement Pappas & Co. of Carneys Point, N.J., notes that sports drinks’ growth is coming from reduced-calorie and zero-calorie offerings such as Gatorade’s G2.

Also of interest are protein enhancements to such isotonic drinks, Daanen adds - as well as protein “Muscle Milk”-type beverages and protein drinks aimed at weight control. High-carb workout recovery drinks also fit in well with the health and wellness push, he adds, but in all cases, the drinks must truly be good-for-you in formulation, with “pretty clean” ingredients, to appeal to consumers (Winona Foods actually developed a workout recovery beverage for the University of Wisconsin’s athletic department).

Yet another opportunity lies in the growing functional beverages arena - a broad catchall segment that provides benefits such as mental alertness, satiety or energy (not to be confused with energy drinks, another huge subsegment).

Wierzbicki says Clement Pappas just launched a functional beverage line targeted to baby boomers.

“Each flavor is packed with a recipe of nutrients that is in tune with the benefits that baby boomers seek,” she says, “including lutein for eye health, fiber to keep you feeling full longer, and calcium and vitamin D for bone strength, among other benefits.”

Get up and Go

But the alternative beverage segment is not limited to health and wellness options. Growth opportunities also are evident on the “dark side,” where energy and indulgence rule.

On the energy drink side, Rashkow notes that the national brand leaders essentially have been established, and many of the “me-too” contenders now are gone. Retailers willing to pare the shelf competition down to the top national brands will have the best go at a successful private label launch here.

But Williams says the energy drink category, while still growing, is losing a bit of its steam. Playing a role in the slowdown are doctors’ warnings and even school mandates related to specific ingredients.

“The Illinois High School Association has banned guarana as a performance-enhancing drug in high school athletics,” Williams reports. “There are other states taking similar measures.”

Williams adds that some school districts also are taking a stand on highly sugared beverages.

“There’s been a movement away from high-sugar, high caloric beverages in schools and activities where children are participating,” he says.

Still, energy drinks are not getting any healthier, according to a new report from Mintel International Group, Chicago.

“Although consumers say they try to eat and drink better, it appears that energy drinks is not a category in which that happens,” says Lynn Dornblaser, Mintel’s global new products expert, “as they continue to choose options that contain sugar, caffeine and taurine, all of which can have negative effects if consumed in excess.”

Speaking of caffeine, coffee-based energy drinks present a particularly compelling private label opportunity, Rashkow says. During this year’s PLMA Private Label Tradeshow, he adds, Imbibe will be launching the first private label product to compete with Starbucks and Monster Java offerings (in a 16-oz. can).

As for ready-to-drink coffees, without the energy drink tag, Fay says they appeal to consumers’ needs for comfort and indulgence. Such drinks definitely are viable for most retailers, he adds.

Fay says retailers can put their “signature on a chilled ready-to-drink coffee drink with their standard program” and sell it to “a consumer that may not be a present hot beverage consumer.” Teenagers, for example, will drink chilled iced lattes, even if they refuse to try a cup of hot coffee.

“If they are familiarized with a retailer’s brand, they will likely convert as they get older to the retailer’s hot coffee program,” he adds.

Dress up the Drink

No matter how innovative or on-trend a beverage is, it will not sell if its packaging comes up short in format, design or shelf presence. And beverage packaging represents a volatile issue right now, Fay notes, with sustainability top of mind with many consumers.

“Plastics are attractive from the standpoint of the versatility they offer in form and shape,” he says. “In our world of low-acid drinks where high-temperature processing is necessary, plastic packaging is generally rated at six or above for recyclability, and thus not very attractive.”

For that reason, and because several states have measures pending to penalize the folk for the distribution of certain plastic containers, Berner is sticking to glass and aluminum for the time-being, he says. Fay also notes that he’s excited about the introduction of a resealable can.

“It bodes to impact the category in a major way,” he maintains.

Williams notes that some consumers also have been questioning the safety of plastic packaging in general, worried about undesirable chemicals leaching into the beverage itself. He views the movement by some national brands into resealable aluminum bottles as a plus that appeals to both environmental and health concerns.

“I think that as people start to consider the environment and know the availability of recycling on aluminum packaging throughout the United States, you’ll see a few more people move into things like aluminum and glass that are traditionally more recyclable than a plastic container might be,” he says.

Daanen does point to heightened interest in thinner PET plastic for many beverages. He adds that communicating this advantage, and any other environmental advantages, to consumers can help retailers boost private label product appeal.

Although alternative substrates and biodegradable bottles also have been in the news, Rashkow says shelf life and price are big issues here.

“Everyone’s still figuring that part out, trying to fine tune the green formula so it works for everybody,” he stresses.

Outside the bottle, full shrink sleeves are appearing more frequently and serve up more billboard space to highlight any health claims, Wierzbicki says.

“The Dasani Essence line of unsweetened lightly flavored waters is an example of a national brand that has done a nice job of utilizing the full shrink to enhance their look and labeling,” she adds.

Corser agrees that the shrink label can be an effective marketing tool.

“The 100 percent recyclable film placed over the bottle provides maximum graphical impact with 360-degree coverage,” she notes, “in addition to a premium appearance and upscale image. It also serves to differentiate the product from competitors on the shelf.” PLB

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