CHICAGO -- With an enviable collection of high-level beverage executives, retailers and consultants offering their thoughts on the future of the largest beverage categories, Beverage Marketing Corp.’s Beverage Forum was a trove of insight into where the major segments are headed.
Here are six more highlights from the two-day event held in Chicago April 24-25 and co-sponsored by Beverage Industry magazine ...
1. The next generation of innovation
Muhtar Kent, former CEO and current chairman of the board of directors of the Coca-Cola Co., promised the next decade will be a period of remarkable beverage innovation, though not necessarily in the usual ways. “Everything is moving from mass market to mass personalization,” he said. Kent sees the beverage market from three angles today:
- Ready-to-drink products, those bottled and canned drinks retailers are familiar with.
- Technology-enhanced consumption at the point of purchase, or on-site fountain opportunities such as Coca-Cola’s Freestyle machine.
- And, in the future, technology-enhanced consumption at home.
This would come in some yet-to-be-developed machine/digital cassette that would create a consumer’s beverage of choice in the home. Citing the now-defunct Keurig Kold machine, for which Coca-Cola Co. was a partner, Kent said the market wasn’t yet ready for that kind of innovation.
2. Getting beer growing again
When will the beer category see volume growth again? Paul Hetterich, executive vice president of Constellation Brands and president of its beer division, said it’s a matter of equilibrium.
For a long time, the category was driven by premium and subpremium brands, leaving high-end beers fighting for what remains. But over the past decade, superpremium brews, craft beers, flavored malt beverages and imported beers, significantly including Constellation’s Corona and Modelo Mexican imports, have led the market, driving high-end beer to account for 40% share of category sales in the U.S., even as the total beer market has declined. It’s once that equilibrium between high-end beers and the rest of the market is reached that the category as a whole will grow again, he said.
“Once high-end becomes more than 50% of the volume, you’ll see [the beer category] return to growth,” Hetterich said. “It will just be 0.5% or 1.0% growth, rather than the 0.5% or 1.0% declines you see now.”
3. Closing the loop
7-Eleven Inc. has experimented with in-store pickup and on-demand ordering for delivery, and its next frontier is closing that last mile from its stores to customers’ homes, said Jesus Delgado-Jenkins, executive vice president and chief merchandising officer.
“We like to have lots of stores where we operate; that puts us very close to customers,” he said. “We’re working on connecting that last mile or last few blocks. … I like to think of it in terms of ‘minutes to the door,’ and we’re working on closing that loop. I can’t say how many minutes that will be, but you’ll see that [rolled out] soon.”
4. Beverage megatrends
Michel Doukeris, the new CEO of Anheuser-Busch, also sees premiumization as a major trend for the beer industry. In fact, it’s one of the three megatrends he said are driving innovation at the St. Louis-based beer company.
“Premiumization is a hug trend cutting across all demographics,” he said, “and people are trading up across all categories.”
His two other megatrends:
- Health and wellness. “Consumers care more and more about what they drink and eat,” he said. This is one of the reasons A-B is embracing nonalcohol beverages, having recently invested in sparkling-water, energy-drink and iced-tea brands. The company was also the first to embrace a healthier way of looking at beer when it introduced Michelob Ultra as a workout-friendly drink. “[Consumers] continue to lead their lives and have fun, but they’re doing things in a more balanced way,” Doukeris said.
- Purpose-driven brands. “Consumers are looking for brands and companies that they can engage with and make an impact on society,” Doukeris said. Recently for A-B, that’s come in the form of a Stella Artois campaign through which the company donates revenue from the sale of its Stella chalices to water.org to help resolve the global water crisis. “That’s one brand making a big impact on people’s lives,” he said.
5. Rethinking soda taxes
Susan Neely, president and CEO of the American Beverage Association, pointed out the slowdown in municipalities proposing beverage taxes under the guise of good health and fighting obesity. Citing the reversal of such a tax in Chicago, she said in most cases consumers have turned against the increased costs.
“They think [the taxes] are onerous,” Neely said. “They don’t trust that the money is going where they say it is.”
She also predicted that Philadelphia’s sweetened-beverage tax, the most-watched and hardest-fought struggle reaching all the way to the state Supreme Court, “will ultimately be repealed.”
6. Fountain factor
Nonalcohol beverages sales account for 55% of all convenience-store foodservice dollars, according to Technomic data shared by Senior Principal David Henkes. However, limited-service restaurants represent the largest nonalcohol beverage sales among foodservice channels. C-stores bring in about $11.5 billion annually from beverages (excluding packaged beverages), while LSRs collect $86.3 billion. Two other channels top c-store sales: full-service restaurants ($25.8 billion) and vending ($16.6 billion).