LinkedIn article, originally published December 4, 2018
Energy drinks, iced coffee, sparkling water and bottled water. What do these four seemingly different products have in common? They’re helping to save the global nonalcoholic beverage industry from their stagnant sister: soda.
While stevia-sweetened products from major soft drink manufacturers began to flop in recent years, others also have fizzled. Demand for traditional carbonated soft drinks has been declining for decades as consumers increasingly opt for bottled water and other healthy beverages. More nonalcoholic beverage manufacturers are expected to take advantage of growth in bottled water and others performing better than soda. PepsiCo recently announced the acquisition of sparkling water firm SodaStream, for example, while Coca-Cola is investing in coffee brands.
Let’s take a look at each major industry segment, along with their respective trends and opportunities I unearthed during research for my recent update of the D&B First Research industry profile on Non-Alcoholic Beverage Manufacturing.
1. Energy Drinks
Did you know that about 25% of kids in the UK who are between 6 to 9 years old consume energy drinks? While that number may be shocking to some of us on the other side of the pond, more than two-thirds of those ages 10 to 17 consider brands like Monster and Red Bull to be a regular part of their diet. That’s led the UK government to consider banning all energy drink sales to those under age 16, while some regional grocery supermarkets like Aldi have already done so. UK also implemented a sugar tax in 2018 that targets other soft drinks. Rising sales of energy drinks, however, are helping soft drink manufacturers offset declines in sales of traditional carbonated sodas. Energy drinks account for $12 billion in sales in the US alone each year. That number is predicted to top $18 billion by 2020, per Beverage Marketing Corporation.
2. Iced Coffee
Refrigerated cold brew coffee sales in the US jumped 460% from 2015 to 2017, and the segment is forecast to grow another 67% from 2017 to 2022, according to Mintel. Although ready-to-drink (RTD) teas and coffees are a smaller market in the US than energy drinks, both have contributed to significant growth in the nonalcoholic beverage sector. The US wholesale market for RTD tea is valued at nearly $6 billion, according to the Tea Association of the USA, while RTD coffee in the country is valued at about $3 billion. Many perceive tea as a healthier option than soda, even though many times sweet tea has no less sugar.
3. Sparkling Water
You’ve probably gone to the grocery store only to notice new brands or flavors of sparkling water every month. Sparkling water is one of the smaller product segments in the nonalcoholic beverage market, but it is among the industry's fastest-growing categories. US sales of domestic sparkling water jumped nearly 30% in 2017, compared to a 5% increase in sales of still (noncarbonated) domestic bottled water, according to the International Bottled Water Association. And sales are expected to grow significantly in the years ahead as more consumers give up soft drinks for healthier alternatives, Beverage Industry reports. To meet that demand, major beverage makers including Coca-Cola, PepsiCo and Nestlé are adding new flavored and carbonated items.
4. Bottled Water
Already No. 1 by volume in the US market for nonalcoholic beverages, bottled water is expected to soon surpass carbonated soft drinks in worldwide consumption. Research firm Zenith Global recently forecast the segment to overtake all other soft drink categories sometime in 2019. Global bottled water consumption nearly doubled between 2007 and 2017, the firm said. Enhanced water brands and private-label water multi-packs have performed well. Bottled water also has seen little increase in price in the past 10 years.