How Are Nonalcohol Beverages Faring?

NEW YORK — The U.S. beverage market struggled in 2020.

Dispensed beverage sales plummeted as convenience-stores shut down foodservice operations and restaurants closed amid the COVID-19 pandemic; however, consumers still picked up packaged beverages at the store or ordered them online.

The total U.S. beverage market, including all channels, edged up slightly in 2020, up 0.1% in volume, according to Beverage Marketing Corp. Managing Director and COO of Research Gary Hemphill. When consumers shopped for beverages, they were driven by trends like health and wellness, convenience and the desire for beverage variety, he said.

Hemphill spoke at the New York-based management consulting, research and advisory firms’ annual event, The Beverage Forum, which was held virtually this year.

Click through to see how nonalcohol beverage categories like bottled water, fruit drinks, energy drinks and more performed in 2020 and what their outlook is for future growth …

Carbonated soft drinks (CSDs) have declined for 16 consecutive years on a volume basis, and more declines are likely to come, Hemphill said. Declines in the category hovered around 1% for the last few years; however, 2020 restaurant closures accelerated the decrease and category volume was down 4.7%.

“I think you’re going to see improvement this year, the question is, how much improvement?” Hemphill said.

CSDs are still a large category, though. The category faces many hurdles from heightened consumer demand for healthier refreshment beverages, tax threats aimed at reducing consumption, an increasingly crowded marketplace and more, he said.

“When you combine all that, I do think it’s a little bit amazing the category hasn’t performed worse,” Hemphill said. “It still continues to be a favorite with American consumers.”

Bottled water served as a “must have” like toilet paper and hand sanitizer in 2020. The category saw a big spike in second-quarter 2020 as people stocked up at retailers. It was up about 4% in volume for 2020, Hemphill said.

The single-serve PET segment is the largest—about 70% of the category; however, some of the smaller segments are also worth keeping an eye on, he said.

While growing from a small base, domestic sparkling water has seen great growth, with a compound annual growth rate of 28% over the past five years, Hemphill said. Part of what’s driving this is high-profile introductions and consumers moving away from CSDs who still want their carbonation fill.

Notable releases in sparkling water include PepsiCo’s bubly, The Coca-Cola Co.’s Aha, Nestle’s Poland Spring and Spindrift Beverage Co.’s Spindrift, he said.

“It’s probably the segment that is likely to have the most success in future years,” Hemphill said of sparkling water.

Value-added or enhanced waters, which account for just 7% of single-serve water beverage volume but hold a larger share of revenues due to higher pricing, are also a segment to watch, Hemphill said. This includes alkaline waters, essence waters, protein water and more.

Fruit beverages, which include 100% juice and juice drinks, were up 5.8% in volume in 2020 following three years of declines.

The category has struggled in recent years due to it having a relatively high sugar content compared to other categories; however, the pandemic changed this with more people at home ordering juice online and picking it up at grocery stores, Hemphill said.

“It’s doubtful that is going to continue again in 2021,” Hemphill said of juice’s growth. “But it’s a pretty remarkable turnaround for a category that’s had very soft performance in recent years.”

Sports drinks are defined primarily by a few dominating brands, so it’s very concentrated, and the category’s performance is typically determined b those brands.

The benefit to sports drinks is they provide hydration, electrolytes and energy. It saw 6.8% growth in 2020.

“We think it’s a category that is going to continue to see growth in the years ahead. It’s pretty well positioned for a health and wellness consumer,” Hemphill said.”

Energy drinks grew 1.8% in volume in 2020, a deceleration from 2018 and 2019 when the category saw 8.6% and 8.7% growth, respectively.

Hemphill said there will be continued growth in energy drinks. Performance energy drinks such as Bang and Reign (from Monster) have emerged in the past couple of years, often with extra caffeine and other ingredients such as branched-chain amino acids (BCAAs).

Ready-to-drink tea was down 3%, following two years of decline. While the RTD tea category has experienced sluggish performance in the last four years, it remains well-positioned from a health and wellness perspective.

RTD tea has been a bit overshadowed by other segments, like RTD coffee, Hemphill said, which saw double-digit volume growth over the last five years and was up 17% in 2020.

This is due partially to a surge in growth of multi-serve packaging through channels like supermarket, he said.