Euromonitor beverage industry outlook: Declines in carbonates, the promise of 'natural' and the war on caffeine

16-Dec-2013 - Last updated on 16-Dec-2013 at 15:03 GMT

From declining interest in soft drinks to the ongoing war on caffeine and the explosion of raw juices and functional beverages, 2013 has certainly been an eventful one for the beverage category. Count on another strong year for premium juices, coconut water and other functional beverages, as well as growing interest in sweetener blends that can satisfy both low-calorie needs and demand for “natural” marketing claims.

“When it comes to your Coca-Colas and Pepsicos, the challenge is the continuing decline of interest in carbonates,” Euromonitor US analyst Virginia Lee told FoodNavigator-USA. “Carbonated soft drinks are very high-margin products and consumer interest continues to wane. In 2013, we all saw that Americans were not as interested in reduced calorie carbonates mainly because of health reasons—with some studies about possible negative health effects of sucralose surfacing [such as its purported effects on sugar metabolism], as well as competition from other beverages.”

Indeed, store sales of diet sodas tumbled 6.8% in the 52-week period ending Nov. 23, according to scanner data analyzed by Nielsen. That's more than three times the 2.2% drop seen in regular sodas during the same period. Sales of low- and zero-calorie sodas, (once considered the soft drink industry’s knights in shining armor), have fallen faster than those of regular soda for three consecutive years.

Sweetener blends could take the place of artificial sweeteners

In the place of artificial sweeteners, Lee said manufactures are turning instead to blends of natural, low-calorie and standard sweeteners, “which provide good taste and are low in calories. Monkfruit is a fairly recent sweetener that’s being marketed as natural. The maker of Skinnygirl vodka just introduced squeezable bottles of agave syrup, monk fruit and stevia extract. That’s the first time I’ve seen a single brand available in all three.” Moreover, dairy companies are adopting monk fruit as a lower-sugar sweetener in chocolate milk, she added.

So where are the most promising areas for growth when it comes to beverage?

“In juices that are premium, not from concentrate,” answered Lee. “While middle-of-the-road juices like Minute Maid and Tropicana are not doing well, people are gravitating toward the $10 fancy juices, like Blueprint juice as well as the slightly more affordable Bolthouse and Naked. Juicing is quite trendy among the Hollywood set and that whole notion of detox and purity of mind and body is appealing to affluents.”

Lee also predicts that coconut water, despite its recent slowdown, is poised to do well for next few years among midlevel and affluent customers, “because of its positioning as nature’s electrolytes along with its low-calorie appeal,” and ready-to-drink coffee will also continue to do well as a convenient option.

Consumers also remain enamored of exotic flavors, though they tend to be successful when delivered in recognizable forms, Lee noted. “I saw a lot of hibiscus at IFT. Corner Bakery recently introduced hibiscus lemonade that’s appealing because it’s slightly exotic, but still with a pleasant taste profile.”

The war on caffeine

From a regulatory standpoint, the controversy surrounding caffeine continues in the months after a mother of a teenage boy sued Monster Beverage Corp. alleging his 2012 death following a cardiac arrhythmia was a direct result of his drinking Monster Energy. The FDA’s recent probe into energy drinks and caffeine has raised concerns, though recent data suggests energy drinks and shots actually contribute minimally to total caffeine intake.

“Possibly there could be concerns among people not just about energy drinks but other products with a high caffeine content,” Lee said, noting that earlier this year, Wrigley pulled its caffeinated gum from store shelves just two weeks after launch after the product roused concern from the FDA.

But, as fellow Euromonitor US analyst Matthew Hudak noted, it was also because the “foul-tasting” gum didn’t test well. “But it might be that they didn’t want to get into regulatory hot water,” he added.

Read Lee and Hudak’s analysis of the year ahead in packaged food.

Want more on the hottest trends in food and beverage? To hear what the CEOs of some of the most innovative US food and beverage firms think, tune into the first-ever FoodNavigator-USA business leaders round table debate on Jan. 15, 2014 at 12 pm EST.

To register for this unique FREE-to-attend event, click here.