The Price is Right

The endless hours of animated discussion were one of the most enjoyable aspects of our recent BevNET Live conference. The knowledge imparted from the sessions is strong, but the informal banter from the breaks, meals and after-hour cocktail-and-bull sessions provides just as accurate a sense of the industry as what is said on stage.

Change and innovation are two of the constants in the industry. Logistics and efficiencies are keystones to executing the plans. There were so many topics to mull over that the event went by too fast. I want to address one of the most often spoken about in Santa Monica: pricing.

The advent of a new generation of beverages – those employing high pressure processing or other value-added technologies – has created high-priced offerings and changed the cost structure in the industry. There has always been a high end in beverage marketing. Premium products have been around forever. Obviously, the wine, spirits and beer categories have had great differentials in pricing. Consumers have always been willing to pay for what they perceive the best. The snob factor has always entered into the equation. That’s been around forever. Particularly as Juice and Water emerged as categories, non-alcoholic products entered into the premium pricing mix. It then rolled into all the other categories.

Now, we have an explosion of brands of NA’s that are trying to redefine the threshold of what the consumer will spend. Added to the equation is that many of these new brands are attempting to create a regimen for their consumption, creating a constant high investment for imbibing.  I’ve always believed that treating oneself to a special luxury on occasion trumps the practical sense of making fiscal decisions. Beverages are one of the few treats that one can enjoy without breaking the bank.

I am not sure how widespread the consumer base will be that embraces a price point of $5-$10 for a single serving of an exotic drink. There will always be a small, price-be-damned buyer, but can these products achieve the mass success that they are all bravely predicting? My history of observing consumer spending habits says “no,” but my experience with the ever-increasing pricing I’ve seen over the years says “yes.”

Still, I have seen very bold expectations laid out and strong projections that I don’t think are realistic. I admire these new entries and think that many can make it, if they can capture the niche consumer that can afford their brands. In order to achieve success, however, they must be realistic in their goals, manage their costs, pinpoint their marketing and accept that the double, while not as glamorous as a home run, still keeps you in the game.