If It’s Popular in the Cold Vault, Consider It for Dispensed, Expert Says

Energy, ready-to-drink, sports drinks and more are all candidates, notes Nik Modi of RBC Capital Markets at CSP’s Dispensed Beverages Forum
Nik Modi, managing director of RBC Capital Markets
Photograph by CSP Staff

Many growing areas of the cold vault should be leveraged into dispensed beverages.

This nugget of advice comes from Nik Modi, managing director of Toronto-based RBC Capital Markets, who spoke last week at CSP’s Dispensed Beverages Forum in Schaumburg, Illinois.

Those areas include rapid rehydration/sports drinks, protein, low-alcohol beer/wine/spirits, non-alcohol drink mixes/cocktails and beverages with natural ingredients like cane sugar.

More Dispensed Beverages Forum Coverage:

Other areas are ready-to-drink beverages and hard teas, as well as energy drinks.

“Energy drinks: Why not more?” Modi asked. “It’s one of the fastest-growing segments.”

In a slide titled “An Opportunity?” Modi discussed lapsed fountain beverage buyers at quick-service restaurants (QSRs) and their change in percentage of spend. Gas and Convenience, at 8.7%, is the top area to where these buyers have turned. Food stores came in a distant second, at 0.9%, followed by shopping clubs at 0.6% and mass merchandisers at 0.2%.

Turning to emerging beverage trends, Modi said:

Personalization is tops; 76% of consumers say they’re more likely to buy from brands that personalize.

Flavor globalization is hot, with Asian Americans the fastest-growing ethnic group in the United States. Google searches for the Japanese citrus juice yuzu have grown from than 300% year over year as of May 2023.

Health and hydration comes in third. As of 2022, an estimated 75% of Americans are chronically dehydrated.

Finally, there’s next-gen caffeine; 66% of Americans drink coffee daily, more than any other beverage including tap water.

When it comes to beverage buyers, Modi said 64% are 45 years of age or older.

“Don’t ignore younger consumers, just think of them differently.”

“We’re forgetting ourselves,” Modi said to the mature crowd. “We’re so obsessed with the younger generation that we forgot the core of our market group. This is a big opportunity if we simply understand this dynamic.”

The 35-to-44 age range is 16.9% of beverage buyers, 25 to 34 is 15.6%, 21 to 24 is 3.4%, and 18 to 20 is 0.4%, Modi said. Contrast this with:

  • 65-plus: 28.4% of beverage buyers
  • 55 to 64: 19.2%
  • 45 to 54: 16.0%

Tied to these numbers is the fact that lifespans are expanding and older people are more active than past generations, Modi said. And older consumers’ use of the convenience channel lags the rest of the population but is on the rise.

“Household penetration in convenience for consumers 55-plus is up to 43.1% from 42% in January 2023,” Modi said. “We need to cater to these consumers.”

Specifically in beverages, consumers 55-plus look to c-stores for:

  • Still water: 28.4%
  • Cola: 28.3%
  • Citrus and berry soda: 22.9%
  • Premium beer: 21.6%
  • Ready-to-drink tea: 21.5%
  • Sports drinks: 21.2%
  • Dr Pepper and Skipper soda: 18.0%
  • High-end beer: 17.3%
  • Energy drinks: 16.9%
  • Ready-to-drink coffee: 16.0%
  • Fruit juice: 15.8%
  • Value beer: 13.4%
  • Premium-plus beer: 12.9%
  • Root beer and cream soda: 12.7%
  • Ginger ale: 9.0%
  • Whiskey: 6.0%
  • Dry coffee: 6.0%
  • Flavored-malt beverages and progressive adult beverages: 5.7%

However, beverages are not the only category to which consumers 55-plus look to c-stores, though it is the top choice. The penetration rundown is:

  • Beverages, 33.6%
  • Snack: 31.2%
  • Deli and prepared foods: 30.6%
  • Candy (snacks): 29.8%
  • Alcohol beverages: 26.9%
  • Produce: 23.2%
  • Meat: 23.0%
  • Dairy: 22.6%
  • Frozen foods: 22.4%
  • Combustible nicotine: 21.0%
  • Bakery sweet goods: 20.4%
  • Packaged bakery: 15.8%
  • Condiments: 14.4%
  • Ice: 13.3%
  • Bakery and cooking: 11.4%

While recognizing the importance of older consumers, Modi said, retailers also must be recruiting young consumers. The racial makeup of baby boomers is 78% white, 8% Black, 8% Hispanic, 4% Asian, 1% indigenous and 1% mixed race. However, for Generation Alpha, those born from 2010 to 2024, the makeup is 39% Hispanic, 32% white, 13% Black, 9% Asian, 6% mixed race and 1% indigenous.

“Don’t ignore younger consumers, just think of them differently,” Modi said. “Different generations require different approaches. You need to start thinking more like mixed families.”

The trend of rising intermarriages in the United States not only increased the number of holidays and celebrations per household but leads to future generations that celebrate more holidays on average, he said.

In addition to traditional holidays, Modi said, “You need to focus on Cinco de Mayo, Diwali. Do you know how much money is spent around the other holidays?”

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