Beverage Report

Drink to Good Health

Consumers are looking for functional beverages, sustainable packaging and variety

By Nora Caley

It’s important to stay hydrated and to stay healthy. Consumers are purchasing beverages that help them do both and that are packaged in an environmentally friendly way. The pandemic made people think more about their health, and they are looking to retailers to make better-for-you drinks available and convenient to purchase.

According to The Hartman Group’s report, “Functional Food & Beverage and Supplements 2020,” 56% of adults use functional beverages to treat or prevent a specific condition. Among the top conditions that consumers noted were hydration (34%), energy (18%), general prevention (15%) and immunity (13%). Manufacturers are responding to these demands by launching new products, accentuating their wellness benefits, and packaging them in recycled or recyclable bottles.

Functional Beverages

Purchasing better-for-you beverages is part of a larger trend that accelerated last year. “The COVID-19 pandemic prompted consumers to take a more proactive and holistic approach to their personal wellness,” said Stephanie McMahan, category leadership, small store shopping insights, for the North America operating unit of Coca-Cola. “As consumers are becoming more health-conscious, we are seeing an increase in the consumption of beverages that are refreshing without containing as much sugar or calories.”

McMahan said consumers are looking for zero-sugar drinks, beverages with functional benefits that aid in improving physical and mental health, and at the same time, comfort and indulgence from familiar brands.

Another factor driving the demand for better-for-you beverage solutions is that consumers are emerging from their homes and getting back to their routines. “As consumers resume pre-pandemic on-the-go activities with an increased focus on their health, they’re looking for ‘good for you’ beverages that contain functional benefits,” said Scott Miller, CEO of Bothell, Wash.-based Essentia Water.

Citing April 2021 SPINS data, Miller said sales of shelf-stable functional beverages grew almost 100% among conventional products, with more shoppers reaching for options like electrolyte water. Essentia, which earlier this year was acquired by Nestlé USA, offers ionized alkaline water that contains a pH of 9.5 or higher. The brand recently launched its 500-ml six-pack of bottles to answer another increasing consumer demand, which is for multipack options.

The desire for bottled water with benefits will be a lasting trend. “Consumers are continuing to look for products that help support their active lifestyles and tap into their pursuit of health and wellness — both trends that became even more sought out during the pandemic,” said Rachel Chambers, senior vice president of marketing at Voss Water. “Taking care of yourself — both inside and out — elevated in importance with the challenges of COVID-19.”

Voss, which launched in Norway 20 years ago and now has corporate headquarters in New York City, recently launched the Voss+ range of three enhanced waters. “We want to help consumers look and feel their best by helping them meet their daily vitamin, mineral and hydration needs,” Chambers said. “By offering unique and meaningful ingredients, along with outstanding taste and the iconic VOSS bottle, Voss+ provides an exceptional experience.”

Kombucha Gains, Juices Have Opportunity

Gut health has captured consumers’ attention in recent years. As a result, the fermented drink kombucha has exploded in popularity. There is much curiosity now about how probiotics and prebiotics can help people with self-care, said Vanessa Dew, co-founder and chief sales officer of Torrance, Calif.-based Health-Ade. “There are amazing gut health benefits with kombucha that help to advance this idea of self-care.”

Sales of kombucha at retail stores are up significantly, Dew said, and she pointed to burnout as one driver in this increased interest in self-care in general and in Health-Ade specifically. “With endless Zoom calls, a year and then some of COVID-related restrictions and trying to ‘be well’ versus ‘get well,’ there’s huge momentum around doing things to advance self-care,” she said. Health-Ade announced in August that long-standing partner First Bev had acquired a controlling stake in the company. When it comes to format, consumers are looking for multipacks and single-serve packs. At the beginning of the pandemic, consumers purchased multipacks because they were spending more time at home,

said Andy Baran, head of sales for small format and specialty channel at Stamford, Conn.-based BlueTriton Brands, the new corporate name for Nestlé Waters North America. “While purchases of single-serve beverages declined as people spent more time at home, they are now coming back. Multipack growth accelerated during the pandemic and has continued, even as the country has opened up. This appears to be a sustained change in consumer buying behavior.”

One area that has seen its ups and downs is juices. In August, PepsiCo announced that it had entered into an agreement to sell Tropicana, Naked and other juice brands across North America to the private equity firm PAI Partners. While news outlets, such as CNBC and The Wall Street Journal, pointed to pressure on fruitjuice sales due to consumers’ desire to decrease their sugar intake, opportunities for brands to boost sales of juice drinks abound.

Mintel notes in its U.S. Juice and Juice Drinks Market Report 2021 that the category saw an unexpected boost from the pandemic. People bought juice for at-home consumption when they were working and going to school remotely. In early 2021, 30% of category participants reported they increased their purchases of juices, and only 10% said they decreased their purchases of juices. The report identified growth opportunities for juices that have added benefits, such as prebiotics, probiotics and protein. Also, juices can highlight their inherent benefits, such as vitamin C, to prevent the mature category from returning to the sales declines it saw before the pandemic. Innovation will be crucial as will messaging about nutrition, especially to parents looking for better-for-you items for their children.

Sustainability Still Important

For bottled water, juice or any beverage, opportunities to highlight sustainability exist. Plastic waste and recycling are factors that affect many consumers’ purchase decisions. Among the initiatives of Coca-Cola’s environmental program, World Without Waste, the company introduced a 30%-recycled-content cap for Dasani water bottles on the West Coast in 2020 and is expanding this innovation across the United States.

Baran said BlueTriton Brands has seen an increase in consumers who are seeking beverages that are packaged in ways they perceive to be more sustainable. To meet that preference, all the company’s regional spring water brands are available in bottles made with recycled PET plastic, excluding the labels and caps. Also, the bottles, labels and caps were designed to be recyclable. The brands include Poland Spring, Deer Park, Zephyrhills, Ice Mountain, Ozarka and Arrowhead.

Consumers are looking for brands that embrace sustainability and offer more recycled package options, said Voss’ Chambers. “Helping take care of our planet, especially with the revelations in the recent UN [climate change] report, is mission critical.” Voss uses 100% recycled PET bottles as part of its sustainability commitment.

Retailers Can Drive Sales

To capitalize on these demands, Chambers said retailers, especially drug retailers with a mission anchored in supporting health and wellness, should continue to expand their enhanced and functional beverage offerings. The right assortment provides consumers the opportunity to “trade in and trade up,” which in turn builds incremental sales and category growth. Trade in refers to bringing new consumers to the beverage category with new benefits, and trade up enables a higher dollar ring due to inclusion of value-added ingredients. “It is an exciting trend that should enable solid growth for years to come,” she said.

There are larger trends that affect consumer purchase decisions more broadly, and retailers can leverage these trends to drive sales. The pandemic made everyone search for healthful items but also easy, convenient ways to purchase them. Digital solutions such as mobile orders, scan-and-go and curbside pickup have become a trend across all channels. These provide a major area of opportunity for retailers, according to Ryan O’Connor, category leadership, drug channel, for the North America operating unit of Coca-Cola. “As consumers are increasingly seeking out digital solutions, drug channel retailers should leverage digital channels to communicate these messages and offer frictionless shopping solutions to get beverages into shoppers’ hands,” he said.

As for in-store solutions, retailers must focus on both impulse and convenience purchases. Items for immediate consumption should be within consumers’ reach in high-traffic locations throughout the store. Items for future consumption, such as for at-home, can be bundled with family-sized meal or snack solutions.

Some retailers have made significant investments to accommodate the demand for healthful beverages and other items. Dew, from Health-Ade, said certain chains have introduced new concept stores that highlight a wellness section, with signage that calls out organic or pharmacist-recommended beauty, food and skin care products. Other chains are creating stores featuring a whole health destination with self-care options. “This idea of education will become increasingly important,” Dew said. “The better a retailer can help educate the consumer on self-care, wellness or better-for-you products, the more loyalty and repeat business they will probably see.” dsn