The beverage industry is experiencing some major changes heading into the new year.
In other words, it’s a dramatic time to be in the world of beverages. Here are four key trends to watch out for in the industry in 2016, according to some of the biggest executives and experts in the business.
The growth of energy, water, and sports drinks brands
Focusing solely on carbonated soft drinks is “a thing of the past,” PepsiCo CEO Indra Nooyi told investors in October.
Instead, Pepsi and other major beverage companies are all about developing new healthy beverages — or at least brands perceived as healthier — in the new year.
“We’ve had some substantial investments in R&D that have allowed us to put out more new products,” Al Carey, the CEO of PepsiCo Americas Beverages said at Beverage Digest’s Future Smarts conference. “Not all of it is skewed toward healthy, but very much healthy and very much single serve. And, what that’s done for us is allowed us to change the mix of its portfolio.”
Next year, Pepsi is launching products like an organic Gatorade, new Aquafina flavored waters, and healthy vending machines. At Coca-Cola, customers can expect the roll out of sparkling Minute Maid and sparking Smartwater. In 2016, healthy beverages will take center stage, especially drinks that emphasise positive health benefits, instead of cutting calories, sugar, or sodium.
While companies are eager to brag about new healthy drinks, reformulation is a touchier topic — but a necessary one.
Core brands like Coke and Pepsi need to be reformulated with fewer calories or replaced with revamped versions, former Beverage Digest editor John Sicher said in a foreboding opening address at Future Smarts.
Mountain Dew Kickstart’s success provides a key model for a successful recipe revamp. The line launched in 2013, combining aspects of sports drinks with the established soda brand to create a lower calorie beverage that quickly took off. PepsiCo also recently reformulated Diet Coke, changing the recipe to remove aspartame.
Coke is more adverse to the idea of reformulation, with the debacle of “New Coke” still fresh in executives’ minds even 30 years after the fact. However, newer, health-centric lines like Coke Life allow for launches of new recipes and easier tinkering without negative backlash.
“I’ve always seen Coke Life as 1.0,” said Coca-Cola COO James Quincey at Future Smarts. “If there’s a 1.0, there’s going to be a 2.0.”
Smaller cans and bottles
“The number of calories consumed by the population in… countries [where obesity is an issue] will have to go down,” Quincey said at Future Smarts, a bold statement in an industry where, historically, cutting calories means cutting sales. “Moderation is going to have to be key, and beverage is going to have to be a part of it.”
That requires reformulation and switching customers to lower-calorie offerings, but it also means finding ways to make more money selling less soda.
In 2014, the American Beverage Association pledged to cut calories by 20% by 2025. By serving smaller cans and bottles, can do just that, without necessarily cutting sugar from the recipe.
The downsizing of containers can’t go on forever, but for now, smaller cans mean more profit for the beverage industry — and less flack from anti-obesity advocates.
Attempts at authenticity
As the demonization of sugar increasingly paints big beverage companies as the enemy, the industry is eager to humanize itself.
One route to authenticity is to attempt to tap into shoppers’ nostalgia. PepsiCo recently launched or announced plans to launch a number of vintage-inspired sodas, including Caleb’s Kola, 1893, and Dewshine.
Another path is to earn external symbols of approval. Next year, PepsiCo is launching a line of non-GMO labelled Tropicana, while Coca-Cola has faced backlash after quietly funding research groups and nutritionists who supported the company and its views.
The rise of craft beverages additionally gives big companies the chance to cash in on drinks with hipster credibility. The $1 billion acquisition of craft beer company Ballast Point Brewing & Spirits by Constellation set a new high mark for craft beer — and will likely have a ripple effect on the pricing and importance of acquisitions in nonalcoholic beverage companies going forward.
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