Rebalancing beverages

Drinks have always lent themselves to fortification and there has never been a dirth of ?liquid promises.? Dr A Elizabeth Sloan explores a dynamic North American market in the midst of a major reinvention

Heavily fortified smoothies that claim ?75 per cent nutrient absorption? — five times higher than a vitamin pill or capsule. Energy drinks supercharging the menus of fast food restaurants. Red wine labels touting resveratrol content. Fortified grab-and-go coffee that heats in the can.

There?s a brand new beverage business brewing in North America, and it?s getting healthier by the day.

The stats don?t lie. Mintel International?s US Functional Beverage Report estimates functional and fortified beverage sales at $10 billion and projects they will grow to $12.8 billion by 2009.

Beverage Marketing Corp predicts per capita bottled water consumption will jump by nearly 50 per cent by 2009, as flavoured functional waters add $800 million to the bottom line. The NPD Group reports that diet soft drinks were the fastest-growing restaurant beverage in 2004. Bottled water and iced coffee weren?t far behind.

Energy drinks and smoothies were the standout market leaders last year, recording growth rates of 56 per cent and 51 per cent respectively. Other categories grew less spectacularly with ready-to-drink coffee/tea at 13 per cent, diet soda (10 per cent), bottled water (nine per cent), sports drinks (nine per cent), wine (six per cent), spirits (five per cent), light beer (five per cent) and tea bags/loose (three per cent).

Further evidence of the shift away from traditional beverages is provided by Information Resources figures, which reveal regular soda sales falling four per cent and regular beer numbers dipping 3.5 per cent. In 2004, 2,768 new beverages were introduced in the US with Mintel predicting another 3,000 new drinks in 2005. Mintel research indicates more than a third of Americans are functional beverage users who have strong opinions about what belongs in a functional beverage.

So Long Sugar . . .
There is a shift occurring in North America from sugary drinks to functional and low-calorie beverages. In fact, the Natural Marketing Institute (NMI) reports that of the 69 per cent who bought a carbonated soft drink in the last three months, about half also bought a natural soda, while among the 53 per cent of diet soda users, 44 per cent also bought a natural soda.

ACNielsen reports full-calorie colas for example, have been in decline for four years, down 10.7 per cent and offset by a 7.9 per cent gain in diet cola sales. Mainstream soda ambitions also have been hurt by the failure of the much-heralded mid-calorie carbonated drink category to capture the consumer imagination in North America.

NMI reports that 72 per cent of consumers used low-calorie foods and beverages in 2004, 71 per cent low-sugar, 63 per cent sugar-free, 60 per cent low-carb and 22 per cent low-glycaemic.

Significantly, just over 56 per cent of consumers used artificial sweeteners with researcher Health Focus noting sugar and high-fructose corn sweeteners topped the list of sweeteners mothers sought to avoid.

Innovative carbonated soft drinks are launching to an increasingly receptive market. Examples include Steatz, a carbonated RTD tea marketed as ?green tea soda?; Izze and Switch, both marketed as ?sparkling fruit juices? (100 per cent fruit juice blended with sparkling water); and Nantucket Nectars? NectarFizz.

Energise Me . . .
With 43 million Americans currently aged 18-24 ? and four million turning 18 every year for the next 10 years — Generation Y will drive a surge in the sports, performance and energy markets. NMI reports that 44 per cent of this age group, the prime drivers of the sports nutrition market, use energy/sports drinks, 20 per cent sports nutrition bars, 18 per cent protein powders and 11 per cent sports supplements.

HealthFocus reports that one-quarter of Gen Y always/usually chooses foods and beverages daily to improve performance. Nutrition Business Journal (NBJ) estimates the energy and sports beverage market at $5.6 billion in 2004, an 18 per cent rise on 2003. Mintel?s July 2005 Energy Drinks Report estimates sales of energy drinks in the US at $1.1 billion, excluding the significant contribution of Wal-Mart and health food stores.

With one in three young adults and teens dissatisfied with their weight, it?s not surprising energy beverages like Coca-Cola?s sugar-free Full Throttle are going on a diet. Lighter, less-intensive energy beverages for women, no-caffeine and energising beers such as Anheuser-Busch?s B-to-the-E brew with caffeine, ginseng and alcohol are other avenues worth watching. Look for hybrid energy beverages to emerge such as Hansen Natural?s Energy, Lost, Khaos and Lost Perfect juice-based energy line.

Retailers are also getting in on the act. McDonalds now sells Power-Ade, White Castle offers Full Throttle free to late-night diners, while Dunkin? Donuts has launched Turbo Ice iced coffee.

Coffee and Teas
While more than half the population drinks coffee daily, it is young drinkers who are taking up the caffeine drink faster than anyone else — 26 per cent of those aged 18-24 now drink coffee according to the National Coffee Association — an all-time high. At the same time, gourmet coffee has stalled at 15 per cent of coffee drinkers.

Javafit coffees, including Javafit Mind and Javafist Heart, are among the first functional coffees designed to increase metabolism, boost energy and aid weight control. Caffe Botanica has developed a process that adds the benefits of calcium to 100 per cent certified organic Arabica beans. Premium functional teas are also ?hot? and projected to grow from $8.8-$10 billion by 2010 in Packaged Facts? new Tea Report.

Milking It . . .
Led by a plethora of yoghurt drinks and smoothies, dairy-based beverages remain one of the brightest segments. In fact, interest in milk is so strong that a majority of parents in an Insights Research survey said they?re more likely to visit restaurants that promote milk over soda.

Hybrid functional smoothies such as Stonyfield Farms? Juice Smoothies continue to grab attention, as does its all-natural Light Smoothie. Yoplait offers a portable 5oz four-pack of Go-Gurt Smoothies for lunch pails or kids? snacks. PepsiCo entered the milk market with Quaker?s chillers, a flavoured milk line fortified with calcium and other vitamins. Sales of flavoured milks have increased from about $750 million in 1995 to $2.5 billion last year, according to Bravo! Foods International Corp.

School vendors are proving fertile ground for fortified dairy drinks. The American Beverage Association announced a new self-policing vending policy aimed at providing lower calorie and/or nutritious beverages to schools and limiting soft drinks. Organic, lactose-free milks such as Organic Valley?s Organic Single Serves and Bravo! Foods Single Fruit & Cereal Smoothies are moving in on this market.

One category that has not fared so well is meal replacements, which fell 18 per cent to $2.12 billion in 2004, according to NBJ. The total $2.4 billion meal supplement category, almost exclusively weight-control products, fell eight per cent.

A new generation of nondairy beverages such as Pacific Foods? Almond Vanilla, Organic Oat, Hazel Nut, and Multi Grain lactose-free and cholesterol-free fortified nondairy beverages are poised to give soy beverages a run for their money. With 85 million Americans aged over 50, expect marketers to reinvent multi-claim, high-protein supplements and meal replacements designed to meet ageing concerns.

All Juiced Up . . .
Perhaps the most enigmatic market is the juice segment. Simultaneously disappointing and impressive, it accounts for 78 per cent of the US beverages market. But it has been stung by the backlash against high calories and sugars, leaving formulators to pursue lower-calorie blends, spritzers and lower-sugar options.

Ocean Spray is testing organic cranberry juice while Campbell?s offers V-8 Organic in grab-and-go sizes. Cadbury Schweppes Mott?s line includes Plus Light, an adult-targeted apple beverage with half of the calories and sugar of regular Mott?s apple juice, and Mott?s Plus for Kids Health is 100 per cent juice and fortified with vitamins C and A, and calcium.

The importance of health
Of course, most of this activity is being driven by one underlying factor: the public?s increasing interest in taking their health into their own hands. HealthFocus reports that 73 per cent of shoppers in 2004 agreed that some foods contain active components that help with current health.

More than half of shoppers believe red wine is an excellent source of phytochemicals that may reduce the risk of heart disease. Polyphenols, flavonoids, lycopene, lutein, carotenoids and resveratrol are all moving beyond the speciality channel according to Sloan Trends Inc, while HealthFocus reports 48 per cent of shoppers have increased their consumption of fruits and vegetables in the past two years. It?s a trend that shows no sign of slowing.

Dr A Elizabeth Sloan is president of Sloan Trends Inc in Escondido, California. Respond: [email protected]

Top food and beverage introductions, US and Canada, June 2002-June 2005


















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Source: Mintel?s Global New Products Database

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