BevNET Live 2017: Analyzing Global Trends

From coconut water to kombucha, many of the biggest beverage trends in the U.S. have come to America from overseas. As such, observing the drinking habits of people around the world can reveal an early glimpse of what might be showing up in New York City bodegas and L.A. convenience stores in the near future.

During a breakout discussion at BevNET Live Winter 2017 earlier this month, Euromonitor analyst Michael Schaefer, who serves as the market research firm’s global lead on food and beverage, delivered a detailed exploration of some of the current top global trends. During the half-hour presentation, he examined how the beverage market is evolving worldwide and where American entrepreneurs may find inspiration for their own ventures.

“Global beverage trends are really converging more than ever,” Schaefer said at the top of the presentation. “I think a lot of the distinctions that we make between so-called ‘emerging markets’ and developed markets are breaking down. We’re seeing a lot of the same concerns among consumers, a lot of the same preferences.”

Value Growth Shifts, Water Reigns

Looking forward several years to 2021, much of the global sales value growth in beverage is expected to come from alcoholic drinks and roasted and ground coffee due to increased premiumization and innovation, Schaefer said, noting that consumers are “trading up” to higher quality products.

Meanwhile, he predicted bottled water will experience the highest volume growth as demand for water surges.

Including plant-based options, the $1.3 billion coconut water category is expected to see the largest compound annual growth rate (CAGR) between 2016 and 2021 at just over 16 percent, with the $28.3 billion mineral water category and $4 billion functional water categories each coming in at a distant second at just under 8 percent.

“In just about every market bottled water leads the way in terms of volume growth,” Schaefer said. “One way of thinking of it is it is becoming the new old default for consumers. The one thing you can reliably point to in the refrigerator, for a lot of consumers, high income or low income all over the world.”

In most markets, the purest and the cheapest products are winning, he added. Sugar consumption is declining worldwide, and a sea change is coming, in particular, for childrens beverages.

In Asia, which leads global beverage sales and is expected to grow to more than $200 billion in annual sales by 2021, “refreshing drinks” are on the rise. According to Schaefer, the continent is witnessing a convergence of the water and sports drinks categories as consumers in hotter climate nations seek products for daily hydration. Branding on some products merge signifiers of traditional bottled water and sports drink labels. Many functional water products include salt, juice, and limited amounts of sugar — ingredients typically found in isotonic sports drinks — that position them for either casual or athletic performance-based use occasions.

“The takeaway here is not just using natural ingredients, but looking to other countries not just for products but for occasions,” Schaefer said. “Having that hydration drink that is valuable in hot weather that sits between sports drinks and water.”

Most other non-alcoholic beverage categories find themselves stable in the middle, with tea, ready-to-drink (RTD) coffee, juice, and dairy facing limited value increase and moderate volume growth.

Think Globally, Act Locally

Schaefer also noted that the fragmented media environment is making it more difficult for large brands to reach consumers worldwide as they seek out more interesting, local flavors.

One key example of this local drive is a boom in India for “ethnic drinks,” which are packaged versions of beverages sold in local markets which include spices and flavors unique to the region. Like the rest of the Asian hydration drink category, many of these “ethnic drinks” provide a refreshing profile.

“We’re definitely seeing more of a push to rediscover traditions, especially in emerging markets, a kind of new patriotism; a search for heritage, authenticity, and nostalgia,” he said.

While the search for the next great ingredient continues, the pace of innovation is accelerating. According to Schaefer, “foodie culture,” particularly in the U.S., is driving consumers to seek out new flavors both at home and from abroad. Novelty continues to be a strong driver for brands, and a search for functional products and whole food solutions leave the door open for products that are both exotic and better-for-you.

A Generational Shift

Indulgence is shifting, Schaefer said. Younger consumers would rather avoid sugar and put their calories toward experiences such as eating out, or cannabis products as that market emerges. Likewise, gone are the days of having a Coke with every meal, as more consumers are avoiding consuming indulgent drinks on a daily basis.

“Understanding where indulgence takes place, understanding where it’s shifting, I think this is where a lot of the value creation is going to come from going forward,” he said.

As trends converge, traditional beverage categories could give way to platforms based around need states. Hybrid products are in demand, and money is flowing into innovative new brands.

Taken together, Schaefer predicts new types of drink companies will soon become more prevalent.. Townshend’s Tea, maker of Brew Dr. Kombucha, is one example of a company that combines elements of different categories to create a new type of brand, as craft production, hot drinks, and retail presence come together to create a new hybrid business model.

“We’ve seen a lot of shifts, he said. “We’ve seen companies like JAB come in and buy up everything in retail, package companies and put them together, and I think that’s going to continue.”