Better beverages- Spotlight on trends and innovations in drinks

Better beverages: Spotlight on trends and innovations in drinks

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The beverage landscape in 2022

In 2022, the beverage premise is an expansive one as a glance at any online or offline retail shelf will testify to. Long gone are the days of just juice, soda, and water

Ever-restless beverage tech, ingredient innovation, and formulation development from Big Beverage and startups alike mean a buoyant category with multiple variants:

• energy drinks;

• sports drinks;

• meal replacements;

• CBD infusions;

• juices;

• waters;

• sports proteins;

• cold-brew coffees;

• mRTD teas;

• hard teas;

• hard seltzers;

• low-/no-alcohol (NOLO);

• soft seltzers;

• carbonated drinks;

• shots;

• dairy drinks;

• plant-based drinks;

• msmoothies

While estimates vary wildly, the global non-alcoholic beverages market is worth $1.25 trillion in 2022, and set for 7 2% annual growth through 2026, according to Statista 1

Within that, InsightAce Analytic sized the functional/healthy beverages component at $188bn in 2021, which is expected to expand 9.4% yearly to hit $266bn in 2030. 2

This healthy segment has been boosted by immune-curious consumers seeking self-defence since the Covid-19 pandemic took hold globally in March 2020.

An FMCG Gurus survey conducted at the end of 2020 found that 75% of people polled were interested in what functional products like beverages could do for their immune health. 3

Health, sustainability, and taste: A bev-olution?

While mainstream carbonated drinks are defying long-time cries of their demise, with both Coca-Cola and PepsiCo turning in strong Q1 2022 figures, the broader rise of ‘Little Healthy Beverages’ continues unabated, as does Big Soda’s interest in acquiring them – to highly variable degrees of success.

“What we've seen over the past few years is the soft drinks market trying to reinvigorate itself. Big beverage companies are trying to target younger consumers who are driven by self-expression and who are more conscious about three key areas: health, sustainability, and taste,” said FMCG Gurus’ head of research and insight, Mike Hughes.

“So, from a health perspective, they are more attentive to ingredients. They want streamlined ingredient lists, tried-and-trusted ingredients. A focus on real and authentic ingredients.”

These and other firms have to an extent become preoccupied with a new generation of consumers who have grown up immersed and saturated in the new channels of information and consumption available via digital culture and who want healthier beverages – for people and the planet alike.

A 2018 Hartman Group report highlighted this mindset among mostly younger consumers, who said functional beverages can “help me be the best that I can be” and help with “feeling good about myself” . 4

Almost half of those polled said it was important “that my beverages do something for me” such as mental stimulation, an energy boost, relaxation, stomach settling, or just providing a nutrient top-up in the service of overall wellness

Big Soda shifts

That said, Coca-Cola, for example, reported an admittedly pandemic-boosted 16.5% upswing in Q1 2022 revenues, including for “non-alcoholic ready-to-drink (NARTD) beverages, which included share gains in both at-home and away-from-home channels” 5

PepsiCo, which sold its $3bn-a-year juice business in 2021, partly to focus on its core carbonated beverage business, also had a strong start to 2022 with 13 3% organic revenue growth

The narrative around the demise of Big Soda is therefore probably in need of some renovation but that does not foreclose the rise of healthy and altbeverages .

“Our data shows consumers are actively looking to moderate their intake of carbonates. Whether they do or not is a different matter,” said Hughes. “But it is clear more people are questioning the nutritional value of carbonates and looking at other options. That's not so good for that industry going forward.”

Vast functional ingredient opportunities

With such a diverse range of categories and clearly rising demand for beverages that deliver health benefits, the role of functional ingredients and healthy ingredients has never been more important

Global 2021 FMCG Gurus data shows that 34% of those surveyed drank functional juices and waters at least weekly, and 37% drank cola. Twenty-seven percent drank energy drinks and 29% protein drinks. 6

The same survey found that 49% of respondents had improved their diet in the past two years, while 26% had taken food supplements.

Frequently it is the nutrients extracted from the supplement aisles – often with robust science behind them, such as botanical extracts, omega-3s, fibre forms, probiotics, vitamins, and minerals, as well as plant and animal proteins – that formulators use in beverage development.

A more detailed list of nutrients of interest to beverage manufacturers could include panax ginseng, red sage, mushroom extracts, L-theanine, L-tyrosine, prebiotics and probiotics, ginger, caffeine, collagen, cinnamon, barley, almond, oat, quinoa, ashwagandha, kava, yerba mate, grape seed extract, turmeric, schisandra, cactus, kombucha, guarana, coconut, stevia, spirulina, liquorice, elderberry, pea, flax, CBD, chamomile, bilberry, and valerian

While immunity has taken centre stage, contemporary functional beverage benefits typically lean to more immediate benefits that can be felt and measured. These include:

• cognitive function-focused nootropics (especially popular in the increasingly massive e-sports and office worker worlds);

• relaxation;

• gut health;

• alcoholic beverage substitution/nightlife;

• energy;

• skin health;

• weight management;

• sports nutrition

Probiotics are becoming more and more available to beverages, with Covid-19 advancing development as more people turn to immune function enhancement via such functional ingredients

“The present world is besieged by the lethal Covid-19 outbreak triggered by a novel coronavirus that puts forth the importance and awareness of ‘immunity-based supplements’, which can boost the proposed functional food-based beverage technology,” wrote researchers in a 2021 paper.7

“Due to such prevalent reasons, there has been more discovery and development in conventional and modern-generation probiotic foods and beverages.”

Sugar reduction

According to FMCG Gurus, 61% of people globally have actively reduced sugar intakes in the past two years. 8

“But here’s where the problem is,” said Hughes. “Consumers have negative perceptions of sugar, but they also prioritise taste. And for most people, sugar tastes great.”

It’s a problem that drink manufacturers have been actively tackling. Approximately 18% of all global non-alcoholic beverage launches since 2020 featured sugar-related claims, according to Illinois-based Flavorchem 9

In 2021, PepsiCo sold off its juice brands like Naked and Tropicana, with sugar’s shifting status partly a motivating factor

“The news of Tropicana and Naked reflects the uncertain role of fruit juice in the consumer’s routine long term and the ongoing concern about sugar – particularly in North America, where Tropicana is largest,” Howard Telford, head of soft drinks at Euromonitor International, said in press reports at the time. 10

“While the category in the US enjoyed a boost in off-trade sales in 2020, with consumers seeking more vitamin C for immune support, the long-term trend has been one of decline.”

The determination of consumers to control sugar intakes is shown in an International Food Information Council (IFIC) survey from 2021, where “twenty-five percent of consumers say that the total sugars information on the carbohydrates portion of nutrition facts labels has the biggest influence on their purchases. Twenty-one percent say the same about total carbohydrates information and only 13% say this about added sugars” . 11

But the IFIC survey also showed that “overall, the number of Americans limiting or avoiding sugars in their diet has remained stable (72%) since 2020 but remains down versus 2019 (80%)”

Prolific development and experimentation around natural and synthetic sweeteners from the likes of monkfruit, pomegranate, agave nectar, stevia, high-fructose corn syrup, honey, erythritol, crystalline fructose, aspartame, and more ensures lower-calorie options continue to offer relevant alternatives in many beverage segments

Shifting alcohol habits and blurred lines:

Softer hard drinks… and harder soft drinks

Much cross-pollination is occurring in hard and soft drinks – with no- and low-alcohol (NOLO) drinks becoming an increasingly significant segment of wine, beer, and spirits portfolios from the biggest players. Simultaneously, soft drink makers have been releasing alcoholic versions of established brands.

This kind of innovation is driven by a swing away from full-strength alcohol – or the way alcohol has traditionally been consumed – often driven by younger consumers more tuned into the negative health effects of alcohol consumption, such as brain, liver, and relationship and life damage

These mostly millennials and centennials are frequently wary of the kinds of pervasive drinking cultures that have characterised and damaged other generations in many countries

Market analyst IWSR found that 37% of people choose NOLO products to “avoid the effects of drinking alcohol”. A third said they liked the taste of NOLO drinks. 12

However, this doesn’t necessarily mean abstaining from alcohol completely. Only 17% said they drank these kinds of products to avoid alcohol completely – 43% said it was just on certain occasions.

“Brands that will ultimately dominate in the no/low space are those that are successful in navigating the barriers of taste, price, pack format, availability, and overall consumer education,” said Emily Neill, chief operating officer of IWSR.

The NOLO market was worth almost $10bn in 2021 in just 10 countries (Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, the UK, and the US), according to IWSR. 13

While they remain very much a niche – IWSR estimates about 3.5% of the entire alcohol category –NOLO drinks are growing faster, at 6% in 2021, and are expected to surge 8% yearly through to 2025, compared with 0.7% for regular alcohol

“While January has become a popular month for people to cut back or abstain from alcohol, interest in no- and low-alcohol drinks has increasingly become a year-round trend among consumers across the world,” said Neill.

“To meet that demand, beverage alcohol companies have invested heavily to introduce a number of innovative new products, and many established mainstream brands have recently crossed over to develop no-/low-alcohol versions of their popular beer, wines, and spirits.”

Big and small brands have moved this way, with Gordon’s alcohol-free gin just one example. 14

Smaller brands like Sobah in Queensland, Australia, produce a range of craft beers with less than 0.5% alcohol and no preservatives or chemicals, marketed as ‘non-alcoholic beer infused with Australian bush tucker’. 15

“We're breaking down the stigma of socialising sober,” the Aboriginal-led firm states.

The ‘alcoholification’ of soft drinks

In the other direction, the likes of hard seltzers represent the alcoholification of soft drinks – again, frequently with younger, alcohol-wary people as the core demographic

The likes of Molson Coors, Carlsberg, Constellation Brands, and AB InBev have all developed hard seltzers in recent years

Heineken’s Pure Piraña is a typical example: the fruit-based, 4.5% alcohol hard seltzer was launched in Mexico in September 2020, and Europe and Australia the following year At the time, the Dutch brewing giant predicted that up to nine flavours could be released, but as of July 2022 Pure Piraña comes in only three flavours – red berries, grapefruit, and lemon lime

Seltzers typically feature these kinds of flavours but can also house botanicals like green tea, while it is not uncommon to see the likes of CBD seltzers blended with botanicals like hibiscus, ginger, and ginseng.

In the opposite direction, non-alcoholic beverage firms have been launching hard teas, hard seltzers, and even hard sodas into alcohol channels

Such a venture was undertaken by PepsiCo in Q1 2022 when, in partnership with Boston Beer, it launched hard Mtn Dew, a hard variant of its popular carbonated beverage, marketed as “the Dew you love, now with 5% alcohol” . 17

“There’s a lot of initial trial,” said CEO Ramon Laguarta. “As always in these circumstances, we have to weigh it and see if it repeats and see really where the business stabilises.” 18

FMCG Gurus’ Hughes questioned how many hard seltzers were winning the repeat purchases vital to ongoing category growth

“To me hard seltzer is a bit like bitcoin. Nobody knows what is going to happen with it,” Hughes said, while acknowledging the 20-year-plus presence of Pennsylvania-based hard seltzer category pioneer Mike’s Hard Lemonade.19

“Hard seltzer exploded during the pandemic, so some were saying in two years’ time hard seltzers are going to be as big as the beer market,” he added. “At the same time, major brewers were throwing away thousands of litres because they had over-produced hard seltzers. I wouldn’t put a bet on what is going to happen over the next five years.”

Sports and energy drinks

Perhaps the biggest push in sports and energy drinks is toward natural and organic ingredients, a segment which Grand View Research estimated could account for something like 40% in 2025. It put the global energy drinks market at $86.35bn in 2021. 20

The main players in this category, such as Red Bull, Monster, Rockstar, and 5-Hour Energy, tend to feature similar formulations based around varying doses and derivatives of caffeine, taurine, and B vitamins, which have made energy drinks and shots such a blockbuster ‘feel the benefit’ category for more than two decades. But perhaps the more interesting aspect of this segment is natural and organic, which Grand View Research expects to surge to 40% of category sales in 2025 – about $34bn.

“With some energy drinks, they're using protein now instead of taurine or caffeine. All of a sudden, energy drinks are not seen as the kind of necessary evil they once were,” said Hughes.

A brand like Hi-Ball offers an energy drink marketed as an energy seltzer with ‘good energy’. 21 Its actives include 160 mg of organic caffeine, 50 mg of organic guarana, and 50 mg of organic panax ginseng, as well as a B vitamin complex

In this sector, brands like UK-based Tenzing proclaim their plant-driven energy sourcing, as well as being “the first carbon-negative drink in the world”.

“What Tenzing does is say, ‘we're plant-based’,” says Hughes. “The energy comes from protein, they proclaim their sustainability. It’s a healthy, sustainable message and it’s completely different from the typical energy drink messaging.”

“It’s a really good example of how companies can use ingredients to challenge perceptions around product categories.”

E-sports

Beverage makers are also increasingly targeting the massive e-sports market, usually with nootropics.

The likes of G-Fuel 22 have become mainstays among gamers, and Coca-Cola, Pepsi, Red Bull, and others are prominent and regular sponsors of e-sports events, but well-targeted offerings with appropriate science backing are less common.

As US-based Gamer Diet owner Casey Thomas opined in a recent Natural Products Insider e-sports report: “At a bare minimum, data supporting a brand’s choice for an ingredient should come from healthy, young individuals. E-sports players can trust the connection much easier. Stop citing clinical conditions.” 23

Nutrients in this space include MCTs, DHA omega-3, lutein, CBD, ginseng, L-theanine, L-tyrosine, phosphatidylserine (PS), pine bark extract, rhodiola, and B vitamins.

UK firm Brite 24 – founded two years ago by a professional swimmer and a chemical engineer – makes much of its scientific credentials, boasting that its Liquid Focus drinks are “based on research by leading neuroscientists, made with nature’s superfoods”.

The science is, however, generic to the key ingredients here: caffeine and L-theanine sourced from organic matcha, guarana, and guayusa, and which the firm says delivers “better focus and productivity”.

The Digital Marketing & Sales Funnel

Sustainability

FMCG Gurus data from 2021 shows that 74% of global respondents say sustainability claims are ‘important’ when choosing which beverages to buy Only 8% said such pledges were not important 25

People were most interested in recyclable packaging, lightweight packaging, reduced carbon footprint, and less plastic

Companies like Nestlé and PepsiCo have pledged to make 100% of their packaging materials recyclable, reusable, or compostable by 2025.

Hughes said big brands did not always warrant the environmental criticism they attracted. “Big brands never have a particularly good reputation from a sustainable perspective, irrespective of what they do,” he said.

“Whereas, actually, if you look at PepsiCo and Coca-Cola, and their ethical and environmental cases are pretty sound. The problem is people don't research them, and so there is a lot of misinformation and stereotypes. Just because a firm is small doesn’t necessarily mean its carbon footprint is smaller per bottle.”

Tenzing issues a feisty challenge for others to follow its lead: “For all those businesses out there not taking full responsibility for their impact yet, the planet is running out of time .” 26

The spectre of greenwashing

Accusations of greenwashing are never far away from the beverage world, where the main business of its two biggest players, PepsiCo and Coca-Cola, is selling single-use RTD products. These have been slammed by plastics watchdogs as the world’s biggest plastic polluters and massive contributors to the climate emergency. 27

A recent report from Changing Markets Foundation accused Coca-Cola of greenwashing by making claims about bottles being made with 25% marine plastic while being the world’s most problematic plastics producer. 28

The scale of the problem is amplified by consumer attitudes on the demand side. While sustainability is clearly increasingly important to more and more people, a 2021 IFIC survey shows it still lags well behind other purchase drivers, at least among the US people who were polled. 29

In this IFIC survey, taste (82%), price (66%), healthiness (58%), and convenience (52%) were all ranked as more important than sustainability (31%) . Another 68% said familiarity was also important .

It is difficult to imagine suppliers making the necessary shifts to address the climate emergency without greater consumer will or tighter government mandates

Sustainability initiatives

Some examples of sustainability initiatives in the beverage sector include Corona Canada partnering with metals company Rio Tinto on recycled cans, using low-carbon aluminium, with the promise of cutting carbon emissions by 30%

PomWonderful is shifting more than 11 million bottles to 100% rPET annually as part of the juice maker’s push to reduce single-use plastic, while German packaging manufacturer Papacks is testing 100% plastic-free bottles with soda, juice, and water products

In the UK, Coca-Cola is debuting bottles with attachable caps to make recycling easier, with plans for a global launch in 2024 . The multinational says it is a “small change that we hope will have a big impact” .

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Spotlight on category innovations

Energy drinks

Launched in Spain, Innocent’s Berries Juice is a blend of fruit and vegetable juices that is infused with guarana and enriched with vitamins . The pasteurised product is made with raspberry, cherry, and goji berries and claims it helps maintain normal energetic metabolism, as well as reduce tiredness and fatigue .

In Poland, WK launched a mango-flavoured, sugar-free energy drink. The zerocalorie fizzy drink contains 0.4% taurine, 0.4% caffeine, 0.015% L-carnitine, and guarana. Sweetened with artificial sweeteners – acesulfame K and sucralose – it is fortified with vitamin B6, vitamin B12, panthotenic acid, and niacin – which, it claims, contribute to energy metabolism .

With a more natural positioning and using a lesserknown botanical for its energy drink, Italian brand Wami Wanderfuse adds guayusa – a super leaf from Ecuador that it says is perfect for energising at any time of day – to its RTD energy drink, along with mint and lemon juice from Italy. The non-carbonated soft drink is made with organic ingredients, fruits, herbs, and spices

Soft drinks and iced teas

US brand United Sodas of America launched a strawberry basil soda. With a natural and premium positioning, the drink is sweetened with erythritol and organic stevia and flavoured with natural flavours, while the colour comes from concentrated purple carrot juice .

In Germany, Danone Waters launched a Pear & Jasmine Flavoured Matcha Drink under its Volvic brand. Made with natural mineral water, concentrated green tea infusion, matcha powder, organic sugar, natural flavours, and organic lemon juice, it contains 30% less sugar than other tea-based drinks, according to the brand.

In Croatia, Stanic Beverages launched a Orange & Mango Drink with a high fruit content of 19.5%, including orange, mango, and apple, under its Juicy Kids brand. With 30% less sugar than similar drinks, the pasteurised drink is made from concentrated juices and concentrated purees, and is a source of calcium and vitamin C .

NOLO and hard seltzers

In the UK, Vacay Drinks launched an RTD cocktail, Tom Collins. The company says it is made with a serving of copper-distilled craft London dry gin, soda water, natural cane sugar, and Sicilian lemon juice It contains 6 1% alcohol by volume (ABV).

In Germany, Bitburger Braugruppe launched alcohol-free herb dry pilsner beer The product is sugar-free and has reduced calories, containing 22kcal in 100ml. According to the company, it has a refreshing tangy flavour.

In the hard seltzer sub-category, Finnish brand Crowmoor launched a grapefruit vodka spritz. The brand describes the 4.1% ABV drink as a 99-calorie spritz made with vodka, sparkling water, and a dash of citrus juice, adding that the sugar content comes only from the fruit

Source: All product images & information from Mintel GNPD

Key takeaways

• The beverage industry clearly has a plastics problem. PepsiCo and Coca-Cola have been named the world’s worst plastic polluters four years in a row by the Break Free From Plastic Movement30 – a damning charge and one that calls for urgent action.

• Big Beverage is taking action around recyclability and materials, and has made significant commitments to complete product renovations, even as polls show sustainability is a low priority among many consumers when selecting beverages. Green pledges from smaller firms don’t necessarily make them more potent. 31

• Functional beverages are outperforming other types of beverages . Never has demand for science-backed nutrients with stable and lengthy shelf lives been greater.

• No- and low-alcohol (NOLO) drinks and the likes of hard seltzers are responding to shifting demographics and tastes but remain niche

• E-sports are only going to get bigger and gaming consumers like beverages. Those with science-backed, brain performance-first blends could quickly go viral among the chatty gaming communities .

• Big Soda is not dead. Carbonated drink sales are reversing years of declines.

Sources

1 https://www.statista.com/outlook/cmo/non-alcoholic-drinks/worldwide

2 https://www.prnewswire.com/news-releases/functional-beverages-market-worth-265-9-billion-by-2030--exclusive-report-by-insightace-analytic-301467892 html

3 https://fmcggurus com/reports/fmcg-gurus-whats-next-for-immune-health-in-2021-global-report/

4 https://www.hartman-group.com/infographics/909188451/millennials-beverage-habits-aspirations

5 https://www.coca-colacompany.com/press-releases/coca-cola-reports-first-quarter-2022-results

6 Proprietary FMCG Gurus data

7 https://www.tandfonline.com/doi/full/10.1080/21655979.2021.2005992

8 Proprietary FMCG Gurus data

9 https://www.foodingredientsfirst.com/news/sugar-reduction-demands-continue-to-propel-beverageformulation-flavorchem-research-reveals.html

10 https://www cnbc com/2021/08/03/pepsico-to-sell-tropicana-and-other-juice-brands-for-3point3-billion html

11 https://foodinsight.org/wp-content/uploads/2021/05/IFIC-2021-Food-and-Health-Survey.May-2021-1.pdf

12 https://www.theiwsr.com/wp-content/uploads/IWSR-2022-No-and-Low-Alcohol-Press-Release.pdf

13 https://www.theiwsr.com/wp-content/uploads/IWSR-2022-No-and-Low-Alcohol-Press-Release.pdf

14 https://www gordonsgin com/en-gb/the-collection/gordons-00-alcohol-free/

15 https://sobah com au/

16 https://www.theheinekencompany.com/our-brands/flavoured-brands/pure-pirana

17 https://hardmountaindew com/

18 https://www.cnbc.com/2022/04/26/pepsico-pep-q1-2022-earnings-beat-estimates.html

19 https://www.mikeshard.com/

20 https://www.grandviewresearch.com/industry-analysis/energy-drinks-market

21 https://hiball .com/ 22 https://gfuel com/ 23 https://www naturalproductsinsider com/sports-nutrition/esports-arms-race-digital-magazine 24 https://britedrinks.com/

25 Proprietary FMCG Gurus data 26 https://tenzingnaturalenergy com/ 27 https://www.breakfreefromplastic.org/brandaudit2021/ 28 http://changingmarkets.org/wp-content/uploads/2022/06/Greenwash.com-packaging-press-release.pdf 29 https://foodinsight.org/wp-content/uploads/2021/05/IFIC-2021-Food-and-Health-Survey.May-2021-1.pdf 30 https://www.breakfreefromplastic.org/brandaudit2021/

31 https://foodinsight.org/wp-content/uploads/2021/05/IFIC-2021-Food-and-Health-Survey.May-2021-1.pdf

The information provided here was compiled with due care and up to date to the best of our knowledge on publication.

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