The Exploding Beverage Market
A recent story in The Wall Street Journal explored the transition that major beverage companies are making into new categories. As consumer preferences evolve beyond soda, companies like PepsiCo, The Coca-Cola Company and Keurig Dr. Pepper (KDP) are expanding into the dairy, tea, coffee, juice, soy milk, bottled water and coconut water spaces.
In doing so, they are creating hybrid products that span multiple categories. For instance, PepsiCo’s released Coco Blends, a line which features fruit juice and coconut water, through its Tropicana brand.
“The consumer is moving to this triangle of taste, nutrition and convenience where I think we are in a very sweet spot,” said Ramon Laguarta, who was named as the successor to outgoing PepsiCo CEO Indra Nooyi in August.
The story indicated that the wave of new products are causing some challenges for retailers seeking where to place them on the shelf.
Starbucks Opens First Store in Italy
47 years after opening its first store in Seattle, Starbucks has ventured into Italy with the opening of the Starbucks Reserve Roastery in downtown Milan.
Starbucks founder Howard Schultz told ABC News that the coffee chain was inspired in part by his experiences with Milanese coffee culture while visiting the city in 1983.
“We are coming to Italy with humility and respect to show what we have learned,” said Schultz.
However, the coffee giant may face headwinds in translating some of its offerings across the Atlantic. As noted in the report, to-go coffees, flavored drinks and iced coffees are not part of traditional Italian coffee culture.
The Emergence of Speciality Coffee
As a category, Instant Coffee has traditionally always prioritized convenience over quality, but a new wave of startups are trying to change that notion. A story in the Chicago Tribune highlights the recent work done by companies like Swift Cup Coffee, Sudden Coffee and Voila that have developed close relationships with coffee growers and roasters in order to offer sustainable, high quality instant coffee to the market.
“I think speciality coffee has huge market potential,” Joshua Zloof, CEO of Sudden, told the Chicago Tribune. “Speciality coffee is a category with high brand loyalty, a premium price and regular consumption.”
While the specialty instant coffee market is still emerging, there’s already been sizable growth. A report from Euromonitor International found that global sales of instant coffee have tripled since 2000 and are projected to surpass $35 billion this year.
Soda Tax May Be Coming For California
The California Medical Association and California Dental Association are leading the charge for a statewide soda tax, according to a story on CNBC. To get onto the ballot in 2020, the proposal will need to get 585,407 signatures by March 2019.
If successful, the tax could raise between $2-$3 billion to pay for public health programs that would address childhood obesity and dental disease. Diet soda, milk, juice, instant formula and medical beverages would be exempt from the tax.
In June, California’s state legislature banned local soda taxes until 2031, though that measure did not rule out a statewide tax.
An Increasingly Crowded Market
An article in the Wall Street Journal highlighted the growing competition amongst enhanced drink brands that tout health benefits as well as taste.
Sales of enhanced drinks rose 11 percent in the past year to reach $3 billion, according to market research group Spins. Yet the majority of enhanced brands are out of business within a few years.
The article highlighted the challenges beverage makers face as consumer preferences continue to change. By the time a brand has developed a product that it can scale and market effectively, the category may no longer be popular.
Despite the risk, however, investors are still willing to supply the funding. To date, venture capital firms have invested more than $170 million this year in enhanced brands, according to PitchBook.