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You Are What You Drink
Today’s consumers want more than just refreshment from their drinks. They must be functional as well as satisfying.
By Cecelia Blalock
Life used to be simple. If you were thirsty, you reached for coffee, tea, milk, juice, or a soft drink. You might even have turned the tap for a glass of water. Sure, milk or juice was healthier than a soft drink, but all a person really demanded from a beverage was that it be wet and taste good.
Today’s consumers have turned into a demanding bunch. First, they started to demand that their foods provide the convenience that matched their increasingly busy lifestyles. Now they want their beverages to "do something" for them. Beverages must fit with their latest diet, be it low fat, low carbohydrate, low sugar, or something else. They must boost flagging energy, rehydrate exercised bodies, calm and soothe rattled nerves, or provide vitamins and minerals for better health.
"Refreshment is the cost of entry, and consumers are looking for added value benefits beyond refreshment," says Maura Mottolese, vice president of Snapple Marketing.
The result has been a plethora of products in what is vaguely defined as alternative beverages or enhanced beverages. They are as simple as calcium-enriched orange juice and as complex as an herbalist’s concoction.
The near endless variety offers great opportunity for convenience stores because most of these beverages are sold in single-serve packages and are generally regarded as impulse purchases. They are not cheap and can provide a healthy profit margin. C-stores are a primary channel for these beverages. According to ACNielsen, dollar sales of "alternative beverages" in c-stores jumped 616 percent and unit sales rose 656 percent in the 52-week period ending October 26, 2003. While these beverages represent a relatively small part of noncarbonated beverages, their growing popularity is undeniable. The challenge is trying to find the right mix of products with limited shelf space.
The category can roughly be divided into new age or functional drinks, energy drinks, sports drinks, and waters. Each has its target audience, with properties designed to meet a need.
"One of the key drivers is consumer demand for health and wellness properties," says Gary Hemphill, senior vice president, Beverage Marketing Corporation. "In general, people who like these products think they are better for them, although they may not know everything that is in them.
"Enhanced is still a relatively small business," he says. But it’s not a fad. They are fairly well positioned because of consumer lifestyle trends. People are looking for healthier alternatives. Carbonated beverages have a tough time selling themselves that way, at least the sugared ones."
So Be It
The South Beach Beverage Company of Norwalk, CT, was one of the first to enter and eventually lead the new age sector with its SoBe beverages containing herbs, minerals, vitamins and other nutrient enhancers. Its humor-based marketing aimed at health-conscious consumers aged 18-34 made it an edgy company initially. The broad range of SoBe products now includes enhanced juice drinks, energy/sports drinks, exotic teas and dairy-based beverages. SoBe Lean is a sugar-free diet line. The distinctive brightly colored drinks tell their story with names like SoBe Love Bus Brew and SoBe Adrenaline Rush. Three new flavors – SoBe Black and Blue Berry, Pomegranate Cranberry Elixir, and SoBe Courage – will hit shelves this year. The SoBe Lizard Line is promoted by members of "Team Lizard," athletes representing nontraditional sports like snowboarding and freestyle motorcross.
"People are becoming more knowledgeable about products and ingredients and know what they are looking for," says Kristine Hinck, director of public relations for SoBe. "They are holding beverage companies accountable."
Single serve is huge for SoBe, says Hinck, making c-stores one of its biggest channels and a primary means of introducing new products. Hinck suggested that c-stores could do more to promote this profitable category by carrying more SKUs and making use of point-of-purchase marketing materials.
"Studies have shown that the more variety is offered, the more purchases are made," she reports. "While dairy drinks may be popular, c-stores should try to offer a diet option or energy drinks.
SoBe is typical in that it was a relatively small company that spotted the wellness trend and aimed at a niche market. It has since been acquired by Pepsi.
The market has continued to grow and segment with lots of new products, notes Hemphill. It’s become a very complex marketplace. The trend favors niche brands because it’s hard for a large brand to be all things to all people, he says.
Less Is More
AriZona Beverage Company is another major player, well known for its enhanced teas and juices. It was one of the first to offer green tea, often associated with promoting health. Catching the current wave of low- or no-carb products, AriZona has now introduced No Carb Green Tea in White Cranberry Apple Green Tea and Blueberry Green Tea. Both are sweetened with Splenda and contain only 10 calories per 8-oz. serving. An on-package promotion links the drinks with the Atkins Diet.
"The low- or no-carb diet is sweeping the country," says Francie Patton, vice president of corporate communications for AriZona. "These products have been well received in limited distribution and are now going national.
"We’re always looking for the next beverage," she continues. "We want to keep our product line fresh and retailers interested. People are reading labels. Soft drinks will always have a place on c-store shelves, but people are looking for other things as well."
Single serve has been big for AriZona, but it has now begun expanding its packaging to meet other demands. Its gallon-size packages have taken off, Patton says.
Also jumping on the low-carb bandwagon, Snapple’s Fit for a Low Carb Lifestyle Snapple-a-Day bills itself as a good way for carb-conscious consumers to maintain a healthy diet and get needed vitamins and minerals. It boasts 0 grams of fat, 24 vitamins and minerals and nets nine carbs. Its resealable bottle is convenient and practical. The low-carb variety joins the popular line of Snapple-a-Day fruit-based meal replacement products.
"The key to staying ahead of the competition is understanding what consumers’ hot buttons are and quickly developing great tasting products that deliver the most relevant benefits," says Mottolese. The "low-carb" groundswell was great enough to prompt Snapple to develop three new line extensions, even though the line itself is less than a year old.
Water Plus
Bottled water remains the fastest growing segment of the beverage industry. Dollar sales of still water climbed 21 percent over the past year, according to IRI figures for the 52 weeks ending November 2, 2003. Helping along that growth is infused water that offers added benefits and flavors.
"The interest in healthy lifestyles is what is driving it, says Matt Kahn, director of marketing for Energy Brands, Inc., maker of glaceau vitaminwaterTM and smartwaterTM.
"Consumers are moving away from carbonated, and glaceau vitaminwaterTM is perfect. Most consumers know they should be drinking more water, but they don’t do it because it has no taste. With its 14 flavors, glaceau vitaminwaterTM offers taste and variety."
Each of the 14 flavors has its own "functional formula" that begins with smartwaterTM, water enhanced with electrolytes (calcium, magnesium, and potassium). Three of the flavors are "inspirational" vitamin-enhanced teas. In typical New Age fashion, they are marketed as + determination, + leadership and + perseverance. The water products are available in both 20-oz. and 32-oz. PET bottles and the teas in 20-oz. bottles in 10 focus markets.
"We’re selling the idea of a healthy lifestyle," Kahn says. "Some consumers are very well educated about these products, while others just base their conclusions on a perceived ‘health halo.’"
Many c-stores recognize that offering healthier products is a smart move, Kahn observes. He believes providing sufficient shelf space is the first thing c-stores can do to reap the benefits of these products. Then they can merchandise around the healthier mix. Like other beverage companies, Energy Brands is only too happy to work with c-stores on merchandising ideas.
Giving a Boost
For those whose energy begins to flag, whether because of hard exercise, long hours, or simply the time of day, energy drinks promise a quick lift. They are not to be confused with beverages designed to provide hydration or those trying to stick to a diet. Many are high in sugar or caffeine.
"Some energy drinks are better than others," notes James Thomas, a personal trainer who is a distributor for XS, an energy drink that provides its boost through vitamin B12 with a sugar substitute for flavor. Currently available only online, XS is good for people who work out or for those with a sedentary lifestyle. It’s also good for older folks who might need the supplements it provides, Thomas says, adding "it’s almost like a multi-vitamin."
Sales of energy drinks are skyrocketing, rising almost 40 percent in the 52 weeks that ended November 2, 2003 as tracked by IRI. Unit sales jumped 30 percent.
Red Bull leads the energy category. Its website (www.redbull.com) advises consumers to drink a can of Red Bull about 30 minutes before starting a task demanding concentration or the start of a race or sports competition. Because it is not formulated to provide re-hydration, it encourages people to also drink lots of water during exercise.
Some familiar names are moving into the energy drink category. Campbell Soup Company is launching Invigor8TM, a new addition to the popular V8 franchise, which also includes V8 Splash. Invigor8TM comes in two varieties – Energy Boost and Nutrition Boost, each with 100 percent juice with B3, B6, B12 and antioxidant vitamins A and C. Energy Boost also contains caffeine and guarana, while Nutrition Boost is a nutritional drink that is a good source of Vitamin E, calcium and potassium. The products will be available in early spring.
"These are the first energy drinks that are 100 percent juice with no sugar added," says Sean Connolly, vice president and general manager or U.S. Beverages for Campbell Soup Company. "It is an important point of difference. Consumers who don’t want a caffeine lift may opt for the Nutrition Boost."
The energy category is exploding, he says. It’s on track to see $1 billion in sales worldwide by the end of 2003 and, according to some projections, could triple in size over the next five years. Campbell’s felt that one way to help drive the growth was by offering products with a difference. And using the V-8 "trust mark" should give it added appeal. The no-sugar feature makes it a good choice for Mom to give the kids, adds Connolly.
"We want to give consumers another choice that they can feel good about," Connelly explains. "This is the first real choice that fits a healthy lifestyle."
Like most energy drinks, Invigor8TM skews young, aiming at the under-30 crowd. It’s for people who work hard and play hard and need a source of energy.
"We choose to provide them with a healthy source, says Connolly. Tried and true V-8 is geared to an older demographic while V-8 Splash is for everyone. "All of these are functional beverages in their own way."
Energy drinks are very high velocity items for c-stores, Connolly noted. C-stores are partial to energy drinks, so the question is what should the stores carry. "Our answer is differentiation," he says.
Snapple has its own line of energy drinks called Elements. In addition, Mott’s USA has come out with Clamato Energia, a non-carbonated, vegetable-based energy drink with a taste designed to appeal to Hispanic consumers.
What a Sport
Sports drinks remain a popular choice, with both dollar sales and unit sales continuing to rise, according to ACNielsen figures. Athletes tend to lose both energy and fluids in their sports activities. The ideal sports drink provides hydration and an energy lift that does not come from sugar, says Leon Wolek, a representative of a Hobart, IN-based company that makes Q-Blast, a sports drink that won its first spurs with the Chicago Black Hawks hockey team. It also was the choice for the "Miracle on Ice" U.S. Olympic hockey team that won the gold medal, as well as several X Games teams.
The problem with energy or sports drinks that give a lift through sugar or caffeine is that the energy spike is followed by crash, Wolek explains. Q-Blast is a complex carbohydrate beverage so the energy is time released. There are no spikes and sharp declines. It uses Splenda for sweetening and has only 12 grams of carbs per serving. The taste is clean and there is no aftertaste, according to Wolek.
Q-Blast is the product of a family-owned business, headed by Wolek’s 70-year old Mom. Their testing methods are somewhat unique. As a former triathelete, Wolek exercises until his heart rate is up to 80 percent and then tastes the product.
"Taste buds are the most sensitive at that level," he explains. "We also test it under the most brutal conditions. It was the first beverage to be tested at -20 degrees."
Wolek sees the energy/sports drink category continuing to grow because of society’s fast pace. People will always be interested in things that help them keep going, he says.
"A lot of beverages have been marketed in such a way that once people get through the ‘what’s new’ phase they want something new," Wolek says. "We have withstood the test of time with a solid concept."
All Dressed Up
Packaging is particularly important for enhanced beverages, primarily because it is a huge single serve market and most often an impulse purchase. Packaging can be a way of identifying the type of drink. Energy drinks, for example, virtually always are packaged in tall, slim 8-oz. aluminum cans. Packaging sets alternative drinks aside from others. Arizona got the ball rolling when it shunned the traditional red, white, and blue soft drink packaging in favor of turquoise and pink. With so many choices out there, packaging is a primary way to shout "try me." There is little brand loyalty in this category, notes Hemphill.
In today’s world, multi-tasking applies to food and beverages as well as to individuals. It’s a trend that is likely to continue unabated as long as companies can keep coming up with new and different products that offer functionality as well as good taste.
Cecelia Blalock is a food industry writer based in Jessup, MD.
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