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06/24/2022

Beverage market rebounds with help from the pandemic

Quality, simple ingredients continue to lead the drive with new beverage products.

During the past two years, after consumers reconnected with their health, and it left many wondering if this renewed interest in living “one’s best life” would extend beyond quarantine. Halfway into 2022, the answer seems to be a resounding “yes.” 

In a recently published “State of the Industry” report, New York City-based Beverage Marketing noted that the U.S. beverage market has quickly rebounded after a period of relatively soft performance, largely a byproduct of the pandemic.

“Ever since the pandemic started, people are looking toward food and beverages to make them feel better.”
Bill Sipper, managing partner, Cascadia Managing Brands

Among other things, the report found that carbonated soft drinks returned to growth after several years of decline. It also found that bottled water hit a milestone by becoming the largest beverage category in the United States. 

By most indicators, interest in functional and healthy beverages remains high as consumers continue to seek out sustainable, cleaner, healthier and more socially responsible options. CBD-infused drinks, functional waters, bubble teas, organic beverages and fermented drinks are all poised to see substantial growth for the next several years. On a broader basis, energy drinks, sports drinks and ready-to-drink coffees are some of the products positioned to see the largest growth. Within RTD coffee, the demand for low sugar and sugar-free alternatives, coupled with a host of innovative new products, are two of the biggest factors behind this growth.

[Read More: Get them to crave candy: With curbside pickup growing, retailers are looking at ways to ignite sales of impulse-driven merchandise]

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Another rising star in the beverage category is tea. Nitro offerings, cold brews and plant-based milk blends are attracting new consumers to the cold-tea category. At the same time, growth is also being seen in bottled herbal teas, driven by the increasing number of health-conscious consumers looking for a caffeine-free energy boost.

“We expect RTD coffee, enhanced waters and energy drinks to be the star performers in refreshment beverages this year,” said Gary Hemphill, managing director of research at Beverage Marketing. “Additionally, bottled water is projected to continue to widen its gap as the largest beverage category on a volume basis.”

One of the latest segments to show promise are mood enhancement beverages. Bill Sipper, managing partner with Cascadia Managing Brands in Ramsey, N.J., said brands such as Body IQ and The Cure are doing surprisingly well as they pioneer the new category. “Ever since the pandemic started, people are looking toward food and beverages to make them feel better,” Sipper said. “Some consumers even look to beverages as a type of medicine.”

The other high-growth area Sipper sees is canned bottled water, replacing the non-environmentally friendly plastic options with brands like Rain, Chiki Chiki Boom Boom and Liquid Death leading the pack, he said. 

Growth Predictions 

Given the health kick consumers have been on for the past several years, it is no surprise that growth across the category is being credited to products that provide perceived or actual health benefits. This continued trend is expected to spur more better-for-you beverage innovation well beyond this year.

[Read More: Retail brands now face rising expectations to deliver omnichannel customer experiences]

Ryan O’Connor, senior category manager at Coca-Cola North America, said health and wellness, hydration, and convenience are the largest purchasing drivers for beverages within the drug channel this year. “We are seeing expansion in functional beverages and premiumization, which aligns with drug channel shoppers’ need states and desires,” he said.

Some leading companies, including Coca-Cola, are finding success with the introduction of short runs. According to O’Connor, the company’s new platform, Coca-Cola Creations, is designed to “quench Gen Z’s thirst for discovery through a series of unexpected beverages and packaging designs, culturally relevant expressions, and creative collaborations.” In February, the company dropped its first innovation from Coca-Cola Creations: Coca-Cola Starlight, which O’Connor noted was inspired by the infinite possibilities of space, “fusing signature Coca‑Cola taste with unexpected touches.”

The company followed this up in April with Coca-Cola Zero Sugar Byte, the first-ever Coca-Cola flavor born in the metaverse. “Gaming-inspired Coca-Cola Zero Sugar Byte brings the flavor of pixels to life in a limited-edition beverage that transcends the digital and physical worlds, ” O’Connor said.

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Value-added Beverages Shine

The continued attention on premium beverage offerings has been a benefit to several niche categories including coconut water and kombucha. “Continuing in line with trends we started to see emerge last year, hydration will continue to be a top beverage need consumers are looking to meet in the coming months,” said Savita Kharbas, senior director of category and consumer insights at The Vita Coco Company, based in New York City. “Looking at recent sales data, the fastest growing beverage categories have been very hydration-forward, including premium water, isotonics and coconut water, with top-growing brands offering hydration that is a step above mainstream water.”

Another trend continuing to see traction is an environmental one. With pressure to minimize the amount of single-use plastic, beverage companies are continuing to investigate more environmentally friendly options. Companies such as Rain Water for instance, have launched a line of waters in recyclable aluminum bottles.

[Read More: Mindful snacking: Consumers are seeking out flavorful and nutritional options]

As for the remainder of this year, Beverage Marketing’s Hemphill said that while growth is expected across many categories, unprecedented cost increases in ingredients, packaging, labor and fuel have the potential to impact the category’s realized volume growth. “The cost of virtually everything has increased relatively dramatically, and this will likely trickle down to what we pay for goods such as beverages beginning this summer,” he said.

Product Picks

Body IQ 
Body Intelligence has introduced Harmony and Euphoria, two lines of sparkling waters. The low calorie functional beverages feature blended antioxidants, minerals, adaptogens, biopolymers and vitamins for wellness, immunity support, refreshment and hydration. Both Harmony and Euphoria are free of artificial flavors, colors and preservatives and are packaged in 12-oz. cans. 

Chiki Chiki Boom Boom 
Chiki Chiki Boom Boom is a plant-based fruit punch, made from herbs, flowers and alkaline water from Ecuador. This ancient recipe was recently brought to the United States for the first time. Sold in 16-oz. glass bottles, the beverages are fair trade, non-GMO, natural and USDA organic certified with only 3 g of sugar, zero fat and 20 calories. Chiki beverages are said to offer immunity, anti-inflammatory and gut health protection. It comes in Classic Punch & Lemon, Mango & Passion Fruit, Apple & Pear and Strawberry & Lemon flavors.

Rain 
Founded in 2018, Rain Water is on a mission to end dependency on single-use plastics. Rain’s packaging is 100% aluminum, which makes it 100% recyclable. Its single-sourced, alkaline-balanced pure mountain spring water comes from a federally protected spring in Georgia. The bottles feature a BPA-free liner and because they are aluminum, they get colder faster. Currently available in 16-oz. aluminum bottles, the company will be launching 750-ml aluminum bottles, as well as 12-oz. aluminum singles and multipacks in June.

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