Where Is the Beverage Industry Headed? Forum Offers Insights, Data
CHICAGO — The Beverage Forum in Chicago on April 28-29 offered a wide range of compelling subjects and speakers and deep insight into this evolving industry.
The forum, produced by the New York-based Beverage Marketing Corp. and Beverage Industry magazine, welcomed experts including Boca Raton, Fla.-based Celsius CEO John Fieldly, Victor, N.Y.-based Constellation Brands executive Mallika Monteiro and New York-based Goldman Sachs managing director Bonnie Herzog.
Steve Pintarelli (pictured), publisher of Troy, Mich.-based Beverage Industry magazine, gave the welcoming remarks.
Early in the forum a statistic revealed that a survey by Teterboro, N.J.-based Symrise North America, a flavor and fragrance maker, found 37% of consumers seek functional beverages. This statistic helped set the tone for the forum.
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Awash in Data
With a bevy of data, Brian Sudano (pictured), managing partner at the Beverage Marketing Corp., rolled out numerous numbers related to the industry.
- 4% of all sales now go to e-commerce.
- Beer sales were down 0.5% on a depletions basis in 2021. If this trend continues, sales of spirits will pass beer in 10 years.
- "After you strip out flavored malt beverages, beer is only a 40% share, spirits 36%, wine 13%. What is growing is alternative adult beverages,”
- Beverage lines are blurring. “It’s no longer ‘I’ll have a spirit, beer, wine.’” Sudano said. “It’s all the same; some people think it’s something else. People are thinking, ‘It’s just an alternative and I like it’.”
- Craft beer is so dependent on tap rooms and struggled with closures and COVID-related impediments. Now, however, they are improving.
- The 5.5% decline in light beer was due primarily to imports and flavored malt beverages.
- Mexican beer is 70% of all imports, and of that primarily the Constellation Brands portfolio.
- Flavored malt beverages grew 8.8% in 2021. “That’s a lot,” Sudano said.
- Spirits have been growing every year in the last 10 years. In the last two years, growth has accelerated.
- Wine dominates the ecommerce landscape, with 62% of sales, but the market overall lags, down 6% from five years ago.
- Sparkling wine is the biggest growth segment, while canned wine is growing fast.
Sudano thinks traditional spirits will pass traditional beer by 2026. “That’s a definition of a shifting culture,” he said. “We’ll become more of a spirits culture than a beer culture.”
Youth Will be Served
The year 2010 was the start of consumers viewing beverages as something that could be genuinely better for their health, said Michael Bellas (pictured), chairman and CEO of the Beverage Marketing Corp., in the opening address. This was particularly true regarding the subject of aging.
- The first steps in the evolution of adult beverages has started.
- The more a product sounds like a chemical, the less appeal it will have.
- Millennials and Gen Z see personal and planetary health as one and the same.
- Millennials, Gen Z, Gen X and baby boomers all seek wellness and functional solutions in beverages.
- Companies must show social equity in their missions.
- In these stressful times, consumers are asking more of their beverages and embracing them to aid their well-being and help them cope with everyday life.
- Younger consumers in particular view wellness through a broader, more sophisticated lens, and seek simpler formulations
- Good taste is still the leading purchase driver.
- Exciting flavors and low/no calories are a must.
- Marketers must present consumers with functional solution sets in curated, exciting ways.
- The next era of wellness and functionality will be here in the late 2020s, and beverages will be more personalized than ever.
- Beverage marketers will increase direct digital connections with their target consumers, and the desire for personal benefits will transcend privacy concerns.
The growing energy drink field was the first subject in a panel with John Fieldly (center), CEO of Celsius, and Kyle Watson (left), vice president of marketing at Celsius. Bellas (right) of the Beverage Marketing Corp. moderated.
- Gen Z is entering the work force and college, and they seek different things than older generations. “They want more of everything: transparency, functionality, better for you, a bit more premium, and they’re willing to pay for it,” Watson said.
- The energy drink category continues to grow and “there’s lots of growth left,” Fieldly said, noting opportunities in overseas markets. “People are busier than ever and connected 24 hours a day,” he said. “Energy is going to continue to grow and evolve.”
- Consumers want only the best ingredients and functionality, Watson said.
- Young people, particularly Gen Z, won’t jump on a bandwagon or leading brand, but rather they want to be part of conversions and be part of building brands.
- To be successful, it’s critical to be cross-generational and not alienate anyone.
- Experiential is one of Celsius’ biggest pillars—creating emotional connection with consumer.
- Convenience stores are the next frontier for Celsius, which recently closed a deal with Circle K.
- Celsius has embraced he omnichannel world. “Consumers want it when they want it,” Fieldly said.
Value on Wants
Consumers place a higher value on things they want or need, said Angela Smith (center), manager of consumer insight and engagement at Preston, Wash.-based Talking Rain Beverage Co., and her company places high value on what consumers tell them. “We listen and anticipate their needs,” she said in a discussion with John Shea (left), chief marketing officer at Seattle-based Mark Anthony Brands. Gary Hemphill (right), managing director and chief operating officer for research at the Beverage Marketing Corp., moderated.
- As Talking Rain learned its customers seek variety, it built out its flavor portfolio. “At any time, we have more than 20 flavors and recently added a caffeine version because some wanted an extra kick,” Smith said.
- Knowing consumers want to improve the quality of their lives, Talking Rain last year launched a sparkling ice super fruit, adding plant-based natural sweeteners. “Consumers tell us all the time they want to use our products as mixers, so we added a hard seltzer,” she said.
- Mark Anthony’s White Claw has 46 times the number of social mentions as its next biggest competitor. “This goes back to understanding the consumer and letting consumers have fun with it,” Shea said.
- The biggest obstacle to transforming a brand is having to divide by what you can and can’t control, Smith said.
- When transforming a brand, starts with the consumer and what one is solving for, Shea said. “You can get lost in the data. Understand what consumer insight is and what role your brand plays and don’t be too grandiose.”
- Flavor in everything is critical, and consumers have lots of choices, Smith said.
- “We constantly have to keep our finger on pulse of our consumer,” Shea said. “They’re always changing and expectations are changing constantly, and we need to keep our brand modern and fresh.”
- “With any trend that’ll be lengthy enough so you can develop a product and get it on the shelves,” Smith said, “you have to have been anchored in trends like healthier living, sustainability, zero sugar, because there is that drive, you can play off that.”
Constellation Brands is the only player in beer, wine and spirits, Brian Sudano (right) said in a discussion with Mallika Monteiro (left), executive vice president, chief growth, strategy and digital officer at the company.
When asked why this was, Monteiro said it’s because two-thirds of consumers drink across all three categories.
“Consumers are looking for great flavor and unique brand experiences, and we’re going after this opportunity,” she said.
Other highlights from Monteiro:
- Ecommerce has been a force of change across almost all consumer categories. “Even before COVID, we were focusing on this,” Monteiro said.
- Ecommerce is not just about online sales, and behavior online affects behavior offline. “Often a consumer’s experience with our brand is only online,” she said.
- On-premise is still a powerful place to build brands. “We’ll see a resurgence as markets open up,” she said.
- Companies must innovate to stay competitive and relevant. “This is particularly true in consumer-driven categories where they’re looking for new taste and flavor experiences,” she said. “We believe strongly in smart, consumer-driven innovation, and doing it in a disciplined way, extending the equities we have to places consumers give us permission to go.”
Over a Beer
Beer is extremely resilient and profitable, said St. Louis-based Anheuser-Busch CEO Brendan Whitworth (left), who spoke with Bellas (right) on the subject. “We’re seeing the definition of beer expand and taking advantage of the growth of the seltzer segment,” he said. “That’s exciting. There’s plenty of opportunity to bring the right solutions to consumers into the category.”
Other Whitworth highlights:
- The beer industry took its eye off consumers and the drivers of industry growth and innovation. “It became too inward critical vs. outward looking in really understanding what consumers were and are looking for,” he said. “That has changed to a degree. We’ve really looked outside the industry for opportunities for what consumers want.”
- Nonalcoholic beer, which has an 11% share in Europe, is still a “very small, a sleepy part of the industry that got woken up in last few years,” he said. “We launched Budweiser Zero a few years ago, and a new brand under Stella called Stella Liberte.”
- Malt-based seltzer has expanded the definition of beer.
- Two-third of consumers have no affinity for legacy spirits brands.
Hard Seltzer, Energy Drinks
Hard seltzer experienced a boom-bust situation, more than doubling for a couple of years but then experiencing overproliferation, said Bonnie Herzog (second from right), managing director at Goldman Sachs. “There was a lot of confusion and it got incredibly crowded,” she said. “Then, coupled with that, you had the reopening and saw the category fall pretty dramatically. But I think the category will stabilize and return to growth. It’ll evolve and the lines will blur in terms of what is a hard seltzer. Will it be more spirit based?”
Herzog offered this insight as part of a trio of analysts who weighed in on the beverage market. The others were Carlos Laboy (second from left), managing director, global beverage sector head, London-based HSBC, and Robert Ottenstein (right), senior managing director, New York-based Evercore ISI. Caroline Levy (left), founder of Washington, Conn.-based Caroline Levy Advisory Services, moderated.
- The convenience store’s outlook for the hard seltzer category is more tempered with about 4% growth. “I’m optimistic, but we’ll have to see how the summer plays out,” Herzog said.
- Retailers think Hard Mountain Dew can be promising, but there might be bumps in the road as PepsiCo builds it, she said
- “The last thing I’d want to be right now is a beer marketer,” Laboy said. “You’re getting attacked from all sides.”
- In energy drinks category, the growth is coming from the array of brands innovating, Herzog said, “and maybe taking from the carbonated soft drink category and others. Our outlook is quite robust for energy drinks.”
- Monster and other energy drinks are really taking off in Latin America, Laboy said.
- “The reason energy drinks are so vibrant in the U.S. is because everyone makes money: the manufacturer, distributor, supplier. So that promotes innovation,” Ottenstein said.