8 Data Insights From the 2018 Beverage Forum
By Steve Holtz on May 09, 2018CHICAGO -- It was with lukewarm enthusiasm that Beverage Marketing Corp. (BMC) announced that the U.S. beverage market had grown about 1.1% in 2017.
"Consider that the U.S. population generally grows about 1% each year," Gary Hemphill, managing director and chief operating officer of BMC Research, said during the company's 25th annual Beverage Forum. "So that growth is just treading water. The beverage industry should be tracking at least that much."
That insight led to a conference that embraced product innovation while also considering ways to get stalled categories such as beer and carbonated soft drinks growing again.
Here are eight highlights from the two-day event held April 24-25 and co-sponsored by Beverage Industry magazine ...
The c-store factor
Despite the scant 1.1% lift in volume—including all recorded channels of retail, dining and tap water—2017 was still the fourth consecutive year of growth after a flat performance in 2013, according to BMC's state of the industry report.
The group laid much of the blame for that minimal growth at the feet of the convenience-store industry, noting that as a large contributor to beverage sales, slower c-store traffic led to declines in overall volume. In 2017, consumers made one less trip per week to c-stores than in 2014, according to NACS data. Other reasons cited for the weak volume growth:
- Strong comparables from 2016.
- Modestly higher gasoline prices.
- More stay-at-home eating.
- Increased volume through difficult-to-track outlets such as taprooms and cafes.
CSDs, the struggle continues
Carbonated-soft-drink (CSD) volume declined for the 13th consecutive year in 2017 (down 1.2%), and more declines are likely to come in the years ahead, BMC's Hemphill said. "We expect this to continue," he said. "Even if CSDs are repositioned to be a bit more healthy, it's going to be tough to win consumers back because the marketplace has changed so much."
Water sparkles
Bottled water, meanwhile, seems to be the beneficiary of CSDs' lost share, growing 7.0% in 2017. Performing particularly well is flavored and unflavored sparkling water, up nearly 25%, despite many brands containing similar ingredients to CSDs. “This works because it [sparkling water] retains that health and wellness halo of plain water but brings the carbonation and taste that people are looking for,” Hemphill said.
A sports-drink comeback?
Hemphill predicted that the sports-drink segment, down 1.3% in 2017, will turn itself around this year. “That’s a very concentrated product category; two brands—Gatorade and Powerade—own 90% share, and both declined [in 2017],” he said. He expects newer brands, particularly BodyArmor, to lead the segment’s return to growth, predicting an increase of about 1.3% volume in 2018.
Defining a niche
One of the challenges to reinventing the beverage category is the fact that no one segment is leading the change. Rather, several small subcategories are taking share from major segments piecemeal. To characterize those subcategories, Hemphill created what he calls the “niche” category, “a host of emerging categories [that] have entered the market and most boast health and wellness attributes and/or promise specific functional benefits. Among them:
- High-pressure pasteurized juice
- Coconut water
- Cold-brew coffee
- Kombucha
- Plant-based waters
- Dairy alternatives
- Protein drinks
- Probiotic drinks
- Matcha
- Premium mixers
Combined, this niche category represents about 3% of the beverage market and grew an astounding 13.6% in 2017. “This is innovation beyond the major categories,” Hemphill said, “though on a small base, sometimes a very small base.”
Brewer blues
Total beer shipments in the United States were down 1.3% in 2017, according to BMC, and it’s not difficult to see why, said Brian Sudano, managing partner of BMC Strategic Associates. “
The major [brewers] are losing,” he said. “And the big crafts continue to struggle as local craft grows. … More often than not, those that are staying local are growing unlike those that are trying to establish a national presence.”
And with craft beers typically containing higher alcohol content, consumers are drinking fewer servings of craft beer than they may have with a lighter offering.
Sudano’s analysis is evident in significant volume downturns, per IRI data, for the four largest beer brands:
- Bud Light, down 5.7%.
- Coors Light, down 4.1%.
- Miller Lite, down 2.8%.
- Budweiser, down 6.8%.
Those brands, together, account for nearly 40% of the entire beer market.
Trolling wine
Sudano noted the consistent growth of wine over recent years but also pointed out that volume growth has been moderate, ranging from 2.2% in 2012 to 0.6% in 2015. With growth last year at 1.2%, Sudano said the segment needs a burst of innovation to keep it fresh.
“It hasn’t been very creative, unless you consider prosecco innovative,” he said. “Is wine a future laggard in the category? Unfortunately, a lot of their consumers are dying off.”
Raising spirits
With the spirits segment of the alcohol-beverage category growing for at least a seventh year in a row, it’s possible it could surpass beer sales sometime in the not too distant future, according to Sudano.
In 2017, dollar sales of spirits grew 3.6% to reach $77.6 billion, compared to $110 billion in sales for beer, according to BMC data.
“It’s not unfathomable that spirits could pass beer someday,” Sudano said. “Who would have thought that just a few years ago?”
At the same time, growth of flavored spirits has slowed in recent years. In 2011, flavored vodkas grew 23.3% in volume and flavored whiskeys an amazing 56.3%, according to BMC. Six years later, flavored vodka sales were down slightly (0.5%) and whiskeys grew 6.8%. Sudano said there’s reason to believe that trend will continue as today’s young adults come of drinking age.
“Teenagers are drinking water,” he said. “As these teenagers become adults, will they be [less interested] in flavors?”