Beverages have often been a harder CPG product to sell direct-to-consumer because sending liquid can be an expensive prospect for many drink makers trying to break into the market.
Thrive Market was founded in 2014 to be a digital grocery platform that provides healthy food options to consumers shopping online. The membership-based digital marketplace has become a launching pad for many emerging food and beverage brands by allowing more visibility for a new product as part of a curated digital shopping experience.
Brands like Asian-inspired Sanzo, Odyssey Elixir and probiotic seltzer maker Revive are some of the many fast-growing beverage brands that have seen success in-part through being on the Thrive Market platform.
Thrive Market’s beverage category manager Christine Dang talked to BevNET recently about the platform’s strategy evolution during and after the pandemic, how the direct-to-consumer model provides different challenges to the beverage category and how pack size and format play an integral role in curating Thrive Market’s beverage offerings.
This interview has been edited for length and clarity.
What segment of the beverage category is seeing the most consumer demand this year? Where has there been a decline?
The segment of the beverage category seeing the most consumer demand continues to be the sparkling beverages. We are seeing double-digit growth for this category year over year. We have found that the highly addictive canned format provides healthier and cleaner alternatives for soda drinkers who find comfort in the carbonated taste. Sparkling beverages also continue to blur the category lines into different brackets like non-alcoholic, juices, functional, and mood-enhancing, allowing it to attract a wide range of our consumers. The sparkling beverage category is accelerating as consumers seek healthier, more flavorful, and convenient options.
Brands [like Sanzo, Odyssey Elixir and Revive] that are highly successful hit the main attributes our members are looking for: little to no sugar, natural ingredients without fillers, and, most importantly, they deliver on taste. As a brand, you can provide all of the trending attributes, but if it’s not palatable, you won’t retain the consumer to repurchase your product. These brands are refreshing but also full of flavor. They’ve also been at the forefront of innovation within the category. For example, Sanzo is showcasing Asian-inspired flavors that many consumers haven’t heard of before that pique their interest. This unique flavor profile keeps members returning for more once they’ve tried it.
From a decline perspective, coffee and creamers have slowed down. During the COVID-19 pandemic, the category showed strong trends as at-home coffee-making spiked. Now that we’re out of quarantine and with businesses back open, we are finding that our coffee consumption has dropped since.
What pandemic-driven purchasing trends/habits have stuck around and which have tapered off? How have you adapted to both conditions?
The pandemic served as the impetus to bring health and wellness to the forefront. Members are increasingly seeking healthier options, including functional beverages and organic ingredients. We’ve advocated for brands to look into organic and certify their offerings; when members see the organic accreditations, it automatically establishes trust.
During the pandemic, we saw an increased demand for bulk purchasing, such as bigger-pack sizing. We started looking into bringing on pound coffees when we typically only carry 12 oz bags. These offerings were successful as members moved through these items much faster during the COVID-19 pandemic. Also, with supply chain disruptions, our consumers turned to bulk purchasing to ensure they had enough of their favorite products — and while this behavior tapered off after quarantine, there has been a shift back to single-serve formats. While we still carry these bulk items, I’ve shifted much of my focus to smaller on-the-go pack sizes that are convenient and easy to transport as things have opened.
How does Thrive Market strategize around a category like energy which remains dominated by “unhealthy” brands?
We’ve curated a selection of clean energy drinks from brands that align with our values using natural ingredients that are non-GMO or organic. We’ve worked to educate our consumers about the benefits of natural energy sources, such as caffeine from green tea or yerba mate, and offer educational materials on the negative impacts of sugar and artificial sweeteners. We’ve been able to showcase this through the content we push out on our platform. We also position our energy drinks as a supplement rather than a staple, emphasizing the importance of a balanced diet, with energy as a supplemental need for those needing an energy boost.
How do private label products fit into Thrive’s beverage strategy? (What kind of margins you add in when shipping is accounted for, etc.)
For our beverage category, we use our Thrive Market brand products as a pillar to hold the category for our profit margins while also offering our members an excellent price for staple products. Our mission is to make healthy living accessible to our members, so it’s imperative to provide affordable and high-quality offerings. We also find we have better control of the supply chain with our private label offerings, creating consistent stock levels. We do find that there is a place for both our private label offerings and brands to coexist and do find it necessary to have representation of both for success. We rely on our brand partners to create excitement with new trends and innovation. We have launched more than about 600 plus products under our Thrive Market brand, each focused on raising quality standards or bringing new and innovative trends to our members.
How does an online retailer like Thrive Market fit in alongside a company’s DTC and brick-and-mortar strategy? Has the online environment around beverages matured enough to sustain these brands exclusively?
It is difficult to sustain these brands exclusively direct-to-consumer since brick-and-mortar helps drive brand awareness and, most importantly, trial. For beverages, trial is essential and easy to execute since most beverages don’t require a lot of prep, especially if in the RTD format. Within brick-and-mortar, it’s also easier to drive trial as they typically sell single-serve formats, which are usually at a low price point that is easy for a consumer to add quickly to their cart — this is much harder with direct-to-consumer as there is always a need to ship products in their larger case packs due to freight costs, which creates a barrier for someone who does not want to commit to that many products at a much higher price point in comparison to the single-serve retail.
Are you finding that there are more beverage companies trying to be offered on Thrive because the direct-to-consumer model can be tricky when shipping a lot of liquid weight? How much does a format and pack-size of a beverage brand play into if a brand will be a good fit for Thrive Market?
Yes, we receive countless beverage brand submissions for Thrive Market. Our beverage category is intentionally curated as we look deeply into category margins, which is significantly impacted by freight costs associated with beverages. We manage this impact by narrowing our assortment to brands that help us meet our margin targets. One way we do this is by selling many products in the single-serve format instead of 8-packs or 12-packs since the higher weight can dramatically increase freight costs. If we do look outside of single serves, 4-packs or 6-packs are a more ideal format for freight. Usually, our members purchase multiple products within their orders to meet our $49 free-shipping threshold on grocery orders, so we always hope those orders contain lighter products that can help offset the freight costs of heavier beverages. We know that’s not always the case, but we consider it a win when it does happen.
Sustainability has also been at the forefront of our company’s values, which has always been a large part of my decision-making process. Our overall beverage category only carries less than 5% of plastic bottles because we are trying our best to avoid having single-use plastics. We always look at canned and even glass formats that are more easily recycled. Glass bottles are always relatively expensive to ship, so I always consider the additional freight costs when reviewing products with glass.