Changing Consumer Beverage Trends

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Changing Consumer Beverage Trends

Changing Consumer Beverage Trends

By Bridget Goldschmidt - 08/19/2020

No matter what’s going on in the world, to paraphrase an old saying, people still have to eat — and drink. Paying attention to how beverage trends have been affected by the COVID-19 pandemic, and how they’re likely to remain, even after the current situation has passed, can help grocers plan accordingly to keep category profits flowing.

Unsurprisingly, given the ongoing concern about getting sick, health and wellness is a key long-term trend identified by various industry observers.

Key Takeaways

  • The shift toward functional beverages and increased in-home consumption of coffee and alcohol are major trends likely to outlive the COVID-19 pandemic.
  • Retailers should consider carrying larger beverage sizes and multipacks and promoting items more strategically to accommodate consumers shopping in stores less frequently.
  • Emerging trends include high-protein plant-based beverages, the mainstreaming of CBD beverages, and sustainable packaging innovation.

“Health has become top of mind for consumers throughout the pandemic, and consumers will continue to focus on overall well-being in the future,” observes Julie Terrazzino, senior category manager at Naperville, Illinois-based KeHE Distributors, who is responsible for the soda, water, shelf-stable RTD coffee/tea and juice categories. “The products that are coming out now that help boost immunity are not yesterday’s chalky or horrible-tasting products. The products we are seeing are ... delicious, imaginative, beverages that also have clean, natural ingredients, in gorgeous packaging.”

For retailers looking to capitalize on this trend, Terrazzino advises: “Adding an end cap display of beverages with added functionality gives the consumer the solution they are looking for: beverages that taste good and help build their immunity. With most of these items being a single sell, give consumers an easy place to find their immunity-boosting solution.”

“The macro-trend in beverage is all about functionality,” notes Kimberly Senter, EVP of analytics, insights and intelligence for Irvine, California-based Advantage Sales. “Consumers are seeking multiple benefits in a bottle, especially for immediate-consumption products. Product attributes and ingredients that promote health and wellness and/or include life-enhancing ingredients, i.e., probiotics, vitamins, protein, antioxidants, kombucha, electrolytes and sustained energy, combined with a great taste, will remain in demand. Also, lower sugar content is another major trend as people have adopted dietary regimens that focus on low carbs/sugar. This will lead to the continued growth in energy, RTD coffee and sports drinks, whereas carbonated soft drinks, bottled juices and iced tea may continue to decline.”

“Health-and-wellness-focused beverages, including the use of functional ingredients, will outlast the pandemic,” asserts Michael Taylor, president of Stamford, Conn.-based private-brand consultancy Daymon. “Closely linked with the demand for enhanced functionality, consumers are continuing to shift away from overly processed and artificially enhanced beverages. Currently, over 80% of consumers are focusing on what they consume as part of taking care of themselves, with 77% of consumers looking to lead a healthier life than pre-pandemic. As a result, 35% of consumers are preferring to add functional ingredients through their diet by way of inherently functional beverages. Successful innovative beverage offerings must align with more general health-and-wellness aspirations, including natural and clean ingredients [and] transparency, as well as the desire for higher-quality experiences.”

“Consumers are seeking multiple benefits in a bottle, especially for immediate-consumption products." — Kimberly Senter, Advantage Sales

Noting that “[t]he time is now for retailers to take advantage of the accelerated growth within the functional space, providing communication around the end benefits of various functional claims,” Taylor advises that “private brands must innovate within functional beverages to maintain or outpace competition, [and] have the opportunity to lead growth. Top growth categories for retailers to consider when developing private-brand products with functionality include coffee, tea and fermented drinks as consumers shift away from traditional sugary beverages such as soda and juice.”

Think Big

Not all such sales are lost, however.

“Multipacks and larger sizes are driving growth for beverages in the marketplace,” says Terrazzino. “The increase in sales comes from consumers limiting the frequency of their shopping trips, along with the closures of restaurants, bars, events, schools and other gatherings, forcing consumers to eat and drink at home. Water and soda have been the biggest winners in this trend, with their gallon or multipack sizes.”

Eighty percent of consumers are focusing on what they consume as part of taking care of themselves, with 77% of consumers looking to lead a healthier life than pre-pandemic.
Eighty percent of consumers are focusing on what they consume as part of taking care of themselves, with 77% of consumers looking to lead a healthier life than pre-pandemic. Source: Daymon

That being the case, she continues, “Creating a mass display of multipacks or large sizes, like sparkling water, noncarbonated water, soda and juice, will help the consumer fill their basket quickly with products that they want and will keep the retailer in stock while reducing labor and touchpoints.”

A similar strategy applies to beverages that need to be prepared, like most people’s morning go-to, coffee.

“Retailers should consider allocating more permanent shelf space, or secondary locations, to larger pack sizes, in coffee in particular,” suggests Senter. “Coffee shoppers are adapting to preparing their own coffee and are seeing the value in more affordable coffee versus away-from-home premium prices.” 

Coffee, Tea and Hybrids

In fact, Senter sees the coffee segment in general as ripe for growth.

“Increased at-home coffee consumption is likely to sustain beyond the pandemic as more of the population adapts to a remote work environment,” she predicts. “It is estimated that 25%-30% of the workforce will be working remotely at least partially on a permanent basis by the end of 2021, and in-home beverage consumption will be impacted by this shift. Expect categories often supplied in an office environment or school to benefit most over the long haul.”

Taylor, meanwhile, as noted earlier, has identified the celebrated bean as ripe for a functional upgrade, along with its leafy counterpart, tea.

“The inherent functionality of coffee and tea has made this category an easy-to-adopt vessel to provide consumers with enhanced functionality,” he points out. “RTD varieties are in the spotlight as manufacturers develop new ingredient profiles that provide more benefits than ever before, i.e., protein, antioxidants, healthful herbal infusions, plant-based alternatives.

Forty-four percent of coffee drinkers say their ideal coffee would have antioxiants, promote brain health (37%), help with relaxation (37%), or have high caffeine (28%).
Forty-four percent of coffee drinkers say their ideal coffee would have antioxiants, promote brain health (37%), help with relaxation (37%), or have high caffeine (28%). Source: Daymon

From a consumer standpoint, coffee drinkers say their ideal coffee would have antioxidants (44%), promote brain health (37%), help with relaxation (37%) or have high caffeine (28%).”
The best way to capture these consumers’ dollars? Hybrid beverages, which “offer opportunities for private brands to innovate via combining more challenging categories with beverage categories where private brands drive growth, i.e., water, coffee,” recommends Taylor. “While sugar content is a major consumer concern in categories such as juice, hybrid drinks offer an avenue to enhance functionality while decreasing sugar content.”

Soft Sell

Meanwhile, consumers purchasing in larger quantities could mean a boost for certain soft-drink concepts, while the product shortages especially prevalent at the beginning of the pandemic have influenced what consumers are drinking.

“COVID ... reoriented cooking and eating behaviors, as about 30% of people plan to cook at home, which will be affecting buying decisions, from buying in bulk to buying more online than in store,” says David Stone, managing partner and principal at The New England Consulting Group, in Westport, Conn. “For beverages, this trend will likely affect companies [such] as SodaStream, which offer build-your-own solutions for home consumption.”

With regard to beverage choice, “COVID has accelerated the trend towards more basic drinks such as seltzer and club soda, and because of  poor supply-chain issues, many retailers have focused more on core brands and SKUs,” notes Stone. “The impact of this in the short term is to limit market access of newer and smaller brands.”

That’s not the only obstacle facing upstart suppliers, though. “Conversely, demand for customized or personalized concepts of SKUs will make it difficult to gain retail access, and more innovative brands will likely increase DTC [direct-to-consumer] efforts to go directly to consumers with expanded assortments, in addition to larger-case sales offerings,” he observes.

Although bigger product packaging may be hot, Stone contends that “[s]maller sizes will continue to expand to manage consumption intake and price-level issues,” noting that Coke and Pepsi are offering 7- or 8-ounce options, and that energy drink shots are growing in popularity.

Also, despite soft drinks’ less-than-healthy halo, Chicago-based Nielsen, at least, sees opportunities for growth amid a landscape of better-for-you beverages, noting in January that “as soft drink manufacturers and brands continue to evolve to meet healthier lifestyles (with reduced-sugar, healthier and premium options), the opportunity to effectively and strategically engage both ... regular and occasional [alcohol] abstainers will continue to grow.” The market research firm also identifies the use of soft drinks such as cola, club soda and ginger ale as premium mixers in popular alcoholic beverages as a growth spot.

“Soft drinks sit at the crux between health-conscious abstaining and premium mixing,” Nielsen notes. “The onus is on U.S. retailers, suppliers and manufacturers to maximize a sizable revenue opportunity.”

Raise a Toast

It’s no secret that these days, Americans are imbibing more often on their own premises.

“Another trend we expect to outlast the COVID-19 pandemic is at-home alcohol consumption,” says Terrazzino. “While everyone is anxious to get back out to bars and restaurants, the at-home experience has allowed many people to creatively reconnect to family and friends while enjoying a cocktail. Zoom Happy Hour meetings, back-of-the-car/-van parking lot get-togethers, and family game nights will continue, in some fashion, in a post-COVID era.”

Boston-based alcohol e-commerce platform Drizly reveals similar findings in its “2020 Consumer Report,” released in June. “Even as states reopen and allow for some form of on-premise consumption, those who became accustomed to imbibing more frequently at home are likely to keep at it,” the company notes. “70% of respondents said they are planning to continue to drink less away from home, and 30% are poised to do so more at home … for the remainder of the year, at least.”

Further, more than half (52%) of the consumers surveyed by Drizly said that they’ve made more cocktails at home during the past three months, and 54% predicted that they’ll continue to do so. The company has seen a sharp uptick in sales of cocktail ingredients since mid-March, with mixers, syrups and bitters becoming the fastest-growing category on the platform.

This new-found love of do-it-yourself cocktails extends even to low- or no-alcohol options mimicking favorite mixed drinks, while a certain beverage alcohol segment is on course for a meteoric rise.

Predicting that “the beverage alcohol mashup will continue as ‘mocktails’ with low/no ABV,” Stone also acknowledges that hard seltzer brands like “White Claw and Truly are rewriting new approaches to reach the consumer.” This observation aligns with Nielsen’s recent assessment of the beverage as “the most resilient alcohol segment in the U.S.,” due to “its correlation with health and wellness, convenience, and an intriguing variety of flavors.”

Additionally, with grocery e-commerce on the increase — a trend accelerated by COVID-19 — more consumers than ever are buying their booze online. According to Drizly, 71% of its current users and 50% of non-Drizly users anticipated that at least 50% of their alcohol shopping would take place online, versus in store, in the next year.

Exactly what alcoholic beverages are shoppers purchasing from home? Chicago-based Grubhub, in its recent “State of the Plate” report, identified wine as the top food and beverage item searched during the pandemic (beer came in fourth), with Pinot Grigio the most-ordered alcoholic beverage, followed by hot sake, rosé, light beer, IPA, Merlot, frozen strawberry margarita, and Chardonnay.

Also noting the runaway popularity of wine, followed by cocktails and beer, Stacy DeBroff, founder and CEO of Boston-based social media and digital marketing firm Influence Central, urges marketers of alcohol brands and services to capitalize on the growing momentum of online grocery and pickup.

Fifty-two percent of consumers surveyed said that they’ve made more cocktails at home during the past three months, and 54% predicted that they’ll  continue to do so.
Fifty-two percent of consumers surveyed said that they’ve made more cocktails at home during the past three months, and 54% predicted that they’ll continue to do so. Source: Drizly

A major factor in the rise of in-home consumption of alcohol, as with such old standbys as hot cocoa or favorite sugar-laden beverages from childhood, is the need for simple comforts in difficult times. Terrazzino observes that these offerings “have become a stress reliever and brought feelings of well-being during COVID-19.”

Once discovered — or rediscovered — such seductive solaces often prove hard to relinquish, even when times improve, so these beverage choices may well persist beyond the current health crisis.

Step it Up

Something else that retailers need to bear in mind is how often to promote beverages to shoppers who are making fewer in-person trips to the store.

According to Terrazzino: “[P]eople are not shopping as often, which means promotion frequency may be more strategic than depth of promotion. Frequency not only assists the consumer, but also reduces the mass amounts of products needed to fill deep promotions, reducing out-of-stocks.”

“Retailers should consider the frequency of promotions and merchandising support to meet consumer needs for the balance of the pandemic, especially in light of imminent recessionary pressures,” advises Senter, who adds: “In store and online, beverage brands of all types should offer promotions that encourage shoppers to stock up. Two-for-ones, BOGOs and XX% off can be effective incentives for shoppers who are making fewer but larger stock-up trips in store, and online shoppers will also appreciate the value proposition of these discounts. Retailers should maintain displays of popular beverages and new innovation at end caps and stand-alone PDQs, as these remind buyers to purchase them, even if they don’t venture down the aisle.”

What’ll it Be?

The beverage industry observers also spotlight emerging trends that retailers should keep an eye on.

Within the functional segment, Taylor points to solutions for the aging population and parents with kids, as well as to beverages as meal or snack replacements.

Speaking of the latter, he notes, “High-protein plant-based alternatives represent one option that is highly sought out by a growing number of consumers moving towards flexitarian lifestyles, with four out of 10 U.S. consumers trying to add more plant-based food substitutes into their diet.”

Senter similarly forecasts that “plant-based beverages will see tremendous growth in the beverage category as consumers adapt to these offerings, as we’re currently witnessing with food.”

Functional beverage ingredients expected to rise in popularity include adaptogens, healthy fats like MCT oil, nootropics, global spices and botanicals, BCAA (branch-chain amino acids), and superfoods like turmeric.

For his part, Stone believes that “CBD beverages will come of age as FDA approval will happen, and especially as they will be formulated for lower impact per serving,” and that “[a] very high priority will focus on innovative packaging, as seen by the recent flurry of renewable packaging, especially from sustainable pulp sourcing, as brands [such] as Diageo, Unilever and Nestlé lead the way.”