June 18, 2013 § Leave a Comment
Health-conscious beverage formulation is proving to be highly profitable in the industry. According to the Hudson Institute’s recent study, entitled “Lower-Calorie Foods and Beverages Drive Healthy Weight Commitment Foundation Companies’ Sales Growth,” a staggering 82% of the combined sales growth of sixteen companies in the last five years has been attributed directly to low- and reduced-calorie products.
The sixteen companies, which include Kellogg, General Mills, and Coca-Cola, are all member companies of the Healthy Weight Commitment Foundation (HWCF) which oversaw the study. The combined sales growth of 82% was calculated using product and sales data from each of the companies over a five-year period, from 2006 to 2011.
The growth of lower-calorie products was proven to be four times that of higher-calorie products, increasing more than $1.25 billion. Beverages in this category also fared better than foods, showing that reducing calories and sugar content in beverage formulation has proven to be quite profitable for many companies in the industry.
The study was led by Hank Cardello, director of the Hudson Institute’s Obesity Solutions Initiative. In a press release, Cardello took note of the growing preference for low or reduced calories: “The Hudson study shows that food and beverage companies are making progress in meeting burgeoning consumer demand for lower-calorie products,” he said. “There is now a fundamental business reason to do so. The food companies that get this are acting in their shareholders’ best interests — not just in consumers’ best interests. A crucial way to accelerate a decline in the national obesity rate is to show food companies where the growth is.”
Beverage formulation is likely to undergo significant changes in the future as these trends continue. In the last few years, the push to take excessive sugar and calories out of our beverages has expanded in many directions, resulting in everything from nationwide public health campaigns to full-scale product line innovations. This powerful trend is likely to have an ongoing impact not only on company sales, but the beverage industry as a whole.
June 14, 2013 § Leave a Comment
In monitoring the spirit industry, Power Brands Consulting has found that while vodka is the number one seller in terms of volume, whiskey is quickly outpacing it in dollar sales.
In a recent study this year by SymphonyIRI InfoScan, whiskey bypassed vodka sales by $1.5 million. However, vodka showed an increase of 61% in new product launches in 2012 while whiskey only had a 58% increase in new product launches.
These studies have also shown that consumers are willing to pay for quality when it comes to the brands they love. Higher-end whiskeys showed an increase in sales in 2012 and accounted for 57.4% of all sales in the whiskey category.
Upon further research, Power Brands Consulting notes that flavored vodka is on the rise with a 25% increase. There are well over 175 varieties of vodka available on the market, including unique flavors such as root beer and cookie dough. Consumer love of flavored spirits is evident when considering that 46% of all spirits on the market have some sort of flavor component to them. Even flavored whiskeys are available, such as Jack Daniel’s Tennessee Honey Whiskey and Crown Royal Maple.
In addition Power Brands Consulting has noticed an increase in premixed cocktail sales such as Beam Inc.’s brand Skinnygirl which grew in sales by almost 45% in January 2013. Skinnygirl is considered the fourth bestselling premixed cocktail brand. Brands like Skinnygirl are targeting the female consumer under the age of 30.
Despite the economic recession in the United States, the spirit industry continues to see an increase in sales as brands release innovative products and flavors. New consumer groups, such as health conscious consumers, are being targeted through the use of all natural ingredients, and lower calorie options.
Spirit sales will continue their pattern of success and should expect to see a 5% to 7% increase in sales over the next ten years.
June 11, 2013 § Leave a Comment
Darin Ezra, a beverage consultant at Power Brands Consulting, reviews functional beverage and their place in the beverage industry. Ezra speculates that functional beverages will continue experiencing increases in popularity due to their added health benefits and the increasing demand from consumers for beverages that offer more than simple hydration and Philip Bromley, CEO of US biotech firm VIRUN, agrees with him. He revealed that at the moment, in the US, the top health claim is simply the addition of Omega-3s, followed by claims of energy, increased heart and joint health, and well-being and brain health.
The CEO explained that a lot of the big pharmaceutical companies (such as Pfizer, Bristol Myers-Squibb and GSK) stopped investing in the research and development (R&D) of new drugs and they are now heavily focused on producing consumer products. As a result, the food and beverage industry, the supplement industry and the pharmaceutical industry are becoming more interconnected and they are inching closer to what he calls the “Holy Grail of science”: a product that provides the same nutrition as food, but with added health benefits.
Bromley predicts that not long from now, colas and other beverages that are perceived to be harmful will be reinvented to actually be health beneficial. He singles out joint health and glycemic value improvements as important selling points in the future, but mentions that companies are still being reserved with making any claims related to glucose, glycemic value or diabetes. Bromley points to the shift in focus from resveratrol’s anti-aging properties to its effect in reducing blood glucose and the recent introduction of curcumin (associated with improved glycemic value) and other similar ingredients in supplements as evidence for his claims. He believes that once beverage producers can claim heart and diabetes health benefits for their products, they will be more appealing to this large demographic group (resulted from the disease’s exponential spread).
According to Darin Ezra of Power Brands such developments will assist beverage startups in fully-matured and very competitive market segments. Ezra explained that it is impossible to compete with The Coca-Cola Co. and PepsiCo. over conventional beverages but added-value health benefits and extra ingredients could work in the startups’ favor. Bromley explained that most of the small companies end up being bought out within three to five years, as larger companies prefer acquiring an already popular brand to developing a new one. When startups target a market with no competition, they can experience higher margins and quickly build a following and at it is at that point that they are bought out, Bromley added and gave as an example Zico Coconut Water.
According to Darin Ezra, Bromley’s company VIRUN experience the market’s need for differentiation after they developed an Omega-3 and Vitamin D enhanced beverage, CocoFit, manufactured with natural coconut water and faced pressure to differentiate after Omega-3s (which represent an important share of VIRUN’s beverage business) were introduced in more of the firm’s products.
June 5, 2013 § Leave a Comment
Many US coffee shops report that hot tea sales were up a whopping 18% for year ending February 2013; while iced tea varieties showed a steady increase of 5%. For years now, coffee shops, fast food chains, restaurants and supermarkets have added many new hot and cold tea products to their shelves and menus. While consumers are expanding their tea buying preferences, it is important to note that this shift over to tea will directly impact the sales of coffee, soda and other beverage types.
In supermarkets alone, hot and cold tea sales have made a big splash over the past 5 or 6 years. Growing about 58%, tea sales rose from $2.4 billion to $3.8 billion in total sales over this period. Beverage Marketing Corp reports that last year alone tea sales increased 5%, securing the tea beverage category as the 4th fastest growing.
Splash goes the tea, but this time we’re not talking about a revolution, but rather the booming industry that is specialty teas. Coffee shops from across the spectrum report that tea sales have been on the rise for a while now. With hot tea sales growing an estimated 18% and iced tea sales growing about 5%, according to year end reporting in February 2013, the overall industry has seen an approximate 23% increase in sales and this is enough for most companies to get their marketing attention.
For the past five or six years now, supermarkets have reported an increase of about 58% in tea sales, climbing from $2.4 billion to $3.8 billion in total tea related purchases. A report made by Beverage Marketing Corp indicates that in 2012 alone tea sales jumped 5%, which locked tea in as the fourth best selling type of beverage on the market. The top three beverage categories are said to be bottled water, energy drinks and ready to drink coffee brands.
June 3, 2013 § Leave a Comment
An industry insider revealed that Monster Energy abandoned the plans to launch the Ultra Pink line, which was going to be focused on female costumers. Not long after, a spokesperson for the energy company confirmed that they are not going to move forward with the launch and claims that it was simply a business decision. He confirmed that the company is going to launch the new Ultra Blue line, a position echoed by Monster Beverage CEO, Rodney Sacks, in the earning call for Q4 2012. Sacks states that consumers responded positively to the company’s launch of the Zero Ultra line, leading to the decision to introduce the new Ultra Blue line extension, but to cancel the launch of the proposed Ultra Pink line extension.
Darin Ezra, a beverage consultant at Power Brands Consulting reviews the launch of the Ultra Pink line extension. Ezra believes that the reason for the cancellation is that Monster Energy’s line-up already includes many low-carb flavors and that a new addition to this category wouldn’t differentiate itself enough from the other products. The new Ultra Pink line, which was revealed last December, was presented as a new zero-calorie flavor that was going to be focused on female customers.
Marty Molina, also a consultant for Power Brands Consulting, agrees with his colleague that Monster has many low-card flavors, pointing out that Monster Energy has more than five different product lines catering to the low-carb market, including the Absolutely Zero, Zero Ultra, Monster Lo-Carb and Import Light. The newly launched Ultra Blue line extensions will be another zero-sugar product in the company’s line-up and Molina thinks that Monster might be saturating this particular market.
Monster Beverage is a new member of the American Beverage Association (ABA) and as a result they plan on listing caffeine levels for more than 90 percent of their products, even though they are not legally required anymore. In February, the company decided to reclassify its products, previously listed as dietary supplements, as beverages, which aren’t legally required to have their caffeine levels listed.
The new line extensions launches for Ultra Blue and Ultra Pink are among the first launches coming from Monster after the reclassification, but with only Ultra Blue hitting the market we can observe a caffeine level of 140mg in a 480ml can.
May 30, 2013 § Leave a Comment
Power Brands Consulting beverage specialist Marty Molina reviews the energy drinks market in Australia and New Zealand. Molina points out that these two markets are very different than most other international markets due to their geographical location. Often disregarded by international soft drink companies despite their large consumer-base, the two isolated markets have experienced an exponential growth in locally manufactured energy drinks, notes Molina.
Even though international brands, like Red Bull, have entered the market and total sales of imported energy drinks have reached 100 million liters a year, consumers still prefer the local brands that developed around their preferences. The leading energy drink in both Australia and New Zealand is “V”, which is produced by Frucor Beverages in New Zealand and it account for more than 33% of all the energy drink sales in both markets. Originally from Australia, Mother Energy Drinks (now owned by The Coca-Cola Co.) is another popular drink in the region which, like V, is virtually unknown anywhere else in the world.
The Australian and New Zealand markets also developed strong preferences for different product packaging, compared to other international markets, noted Darin Ezra, also a beverage consultant at Power Brands. Ezra points out that in the two countries, the most popular energy drink can is the 500ml one, after Mother’s successful re-launch in 2008. The larger can now accounts for almost 40% of volume sales, closely followed by the 250ml can, while on a global scale the 500ml energy can represent less than 5% of total sales.
Local energy drink Down Under also popularized non-refillable glass bottles, which now account for over 15% of the region’s market share, while global sales of single-serve glass bottles are much lower. Customers find these products more convenient during the hot summer period, when they spend more time outdoors where screw-cap bottles are more functional, according to Ezra. Resealable products are also preferred by female customers, who helped popularize this product in the last ten years since both Red Bull and V have launched sugar-free alternatives.
Market research firm Canadean reports that energy drinks with no sugar account for 7% of all the sales in New Zealand and Australia, which is higher than the global average but has stayed the same since 2003. Canadean informs that customers in the 18-35 age range, which represent the target market for energy drinks, are not particularly concerned with a product’s calorie content, instead focusing on the energy boost provided.
The research firm also reveals that the energy drinks market In Australia and New Zealand has been growing continuously since 2003, producing a market that is now four times bigger than ten years ago. Even though growth has slowed down in recent years Canadean still expects that total volumes sold will exceed 220 million liters in 2018.
May 25, 2013 § Leave a Comment
Manufacturers of the highly-caffeinated beverages claim that there is no more caffeine in an energy drink than in the popular brands of gourmet coffees. However, several of the highest-ranking health professionals in the US state that the caffeine in an energy drink is much different than that in a Starbuck’s coffee…in “three important ways.” They maintain that the FDA should apply GRAS standards to the energy beverages with added caffeine. In the letter from these health professionals, the point is made that while coffee is sipped slowly by the consumer, people tend to “chug” energy drinks, or drink them much faster, thus receiving a much higher level of caffeine in a much shorter time period. Power Brand’s beverage consultant Darin Ezra wonders if this could make the energy drinks more dangerous if consumers are not warned.
A spokeswoman for the American Beverage Association disagrees, “Most energy drinks contain about half the caffeine of a similarly-sized cup of coffeehouse coffee and the body of evidence does not suggest that energy drinks cause adverse health outcomes.”
However, a letter from the doctors to the commissioner of the FDA, Margaret Hamburg referred to the beverages as “highly caffeinated energy drinks,” and commented on many concerns to the safety of them, including scientific, political, and consumer issues. The group of eighteen who signed the letter stated, “As researchers, scientists, clinicians, and public health professionals who have studied and conducted research on energy drinks, we are writing this letter to summarize the scientific evidence on this issue and encourage action.” Among these professionals is Amelia Arria from the University of Maryland Public School Health, Mary Claire O’Brien of Wake Forest School of Medicine, and Roland Griffiths of John Hopkins University School of Medicine. They studied the levels of caffeine in the beverages, and their links to death, visits to emergency rooms, heart issues, seizures, childhood obesity, and other issues. In the studies, which the professionals conducted themselves, the effects of mixing energy drinks with alcohol were also noted. It is a study which Power Brands is taking a keen interest in.