The hottest beverage in stores right now might not be a beverage at all – and no, we’re not wading into the whole energy shot debate here, even though their growth is as much of a move toward nontraditional drink formats as this one – we’re talking about single-serve powdered drink mixes.
Buoyed by their own low price and the even lower price of the waterneeded to complete the equation, as well as by new formats that put them in sleekly attractive, easy-to-use single-serve sleeves – also called stick packs – mixes are now firmly in the mix.
Not that beverage makers are complaining, particularly those whose products are as much about function as they are about flavor.
“If you’ve built a function, being in ‘solids’ lets you do so many more things,” said Steve Haley, the CEO of Celsius, a fast-growing “fat-burning” beverage that has launched a powdered line of its functional drink mix in CSD and tea flavors. “For us, being in the functional beverage world, you’ve built a refreshment brand, but you need to keep delivering the functionality, and you’re evolving the delivery system.”
Not only that, but companies are also coming to realize that it’s an efficient evolution, as well. Beverage companies have long been aware that there is a lot of efficiency to be gained by taking out the water, fizzy or otherwise. Both Coke and Pepsi, for example, were, until the recent purchase of their bottling arms, basically syrup suppliers for CCE and PBG.
But now a growing number of beverage companies have decided that a major strategic beverage initiative will be in, as one wag called it, “pre-beverage products.” And many more are seeing their existing mix sales take off, as well. Crystal Light, for example, has doubled its sales since 2004, according to Mary Garris, a Senior Associate Brand Manager.
And it’s not just Crystal Light. Tablets and Powders are growing – not just in terms of profitability, but also product variety. Mintel reported that in the past 12 months there have been 131 new drink mix introductions, outpacing previous hot categories like tea (112) and energy drinks (111). Powdered Drink Mixes were actually the only segment of the juice market that grew as the economy fell apart between 2006 and 2008, according to the consumer products tracking firm; energy drink mixes tripled during that time, albeit off a much smaller base.
The category recently passed $1 billion in sales – and there is a lot more coming, as a result of the growth of one particular channel: the World Wide Web.
“Stick packs are a major part of our grocery business,” said Andy Burger, the senior buyer for consumable products at online retailing giant Amazon.com. How big a part? He estimated about 15 percent of Amazon’s entire grocery business was coming through powders and mixes.
What makes powders a potent product for Amazon is similar to what makes them a preferred choice for marketers and consumers alike – their light weight and small form factor mean they’re easily shipped, stocked, and carried. They also don’t take up much room in the warehouse and they’re environmentally friendly when compared to their fully-realized counterparts – Crystal Light, for example, estimates the switch from single-serve mini-tubs to stick packs saved about 250 tons of packaging annually.
But the stick pack isn’t just a boost to the powder business. With the right product mix, powders and their more traditional analogs are able to take off as well.
“Marketed effectively, it’s not just seen as a greener product. It allows us to build brand equity for a preexisting line,” David Sackler, the founder of Trimwater, said of his most recent brand, Calibr8. Launched with the backing of Cal Ripken Jr., (#8 in your programs) Sackler believes the new product could be a hit everywhere from the school store to the soccer field.
Still, the key to growing a good powder brand seems to be having it join forces with a liquid product, which is considered an easier entry point to a brand.
Drinks are a great advertising medium for a function,” says Celsius’ Haley. “Start with the RTD, cold, and you can evolve to the other systems.”
It’s a methodology that appears to have helped functional brand FRS, which recently pulled in a whopping $23 million investment for a brand that is still mostly sold online, and dry. Go to a conference or a sampling event, however, and chances are the FRS you sample will have come out of a bottle.
Meanwhile, other liquids are trying to extend their reach through powders. In addition to a new generation of sports drinks, powdered beverages are reaching into the same areas of functionality as beverages. For a long time, there have been powdered energy drinks and colas like Zipfizz, but recently probiotics makers Goodbelly and Pre extended their lines into stick-packs. Meanwhile, up-and-coming company PhD, which had started out in powders with the reservoir cap, has similarly moved into sachets.
Beauty beverages, like Nestle’s Glowelle and newcomer Noah’s Naturals, are taking skin health inside the packet, while with the launch of Relaxity last year, there is even, yes, a relaxation drink.
Even Starbucks’ Via, a new line of just-add-hot-water packets of instant coffee seems to be inspired by the growth of the powdered single-serve market.
Meanwhile, Crystal Light, the warhorse of the market, has started to play up its functional characteristics as part of what has turned into a massive run for the brand. With the release of Crystal Light’s Pure Fitness in its “on-the-go” sleeves, the company is giving Gatorade Natural and vitaminwater zero a run for their money, with a stevia-sweetened electrolyte drink. And the best selling energy mix? Also Crystal Light, which sold more than $10 million of its Energy-On-The-Go packets last year – not counting Wal-Mart, a major player in the Crystal Light demographic.
In December, Crystal Light marshaled a major media campaign behind its products, offering consumers the notion that its consumers drank more water.
“It’s a way for consumers to really get it,” said Neil Kimberley, a beverage consultant and strategist. “It’s cheap, convenient, portable, and that’s the simple biggest driver.”
Those factors also give functional beverage marketers a bit more leeway with powders, Kimberley adds. While consumers might expect more developed flavors from “wet” products, with mixes, he says, “as a consumer I think you’re willing to make the tradeoff because you’re saving money.”
At a time when consumers are still focused on that kind of saving dynamic, and investors and marketers are, as well, maybe that tradeoff will actually end up being more of a takeoff.
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