If sugar has become public enemy #1 in consumers’ eyes, its various replacements have proven to be almost as unpalatable.
For different reasons, a dark cloud has lingered over artificial sweeteners like aspartame and sucralose for decades. At the same time, natural zero calorie sweeteners like stevia, monk fruit and erythritol have continued to rise in prominence as more retailers and shoppers embrace clean label products with natural ingredients.
But over the past year, amid a backdrop of record inflation and supply chain disruption, many beverages made with artificial sweeteners have outpaced their naturally-sweetened counterparts – a group that includes sugar. While consumers may not necessarily be flocking to artificial ingredients with open arms, the data shows that strong product launches from top beverage conglomerates and insurgent brands, such as sucralose-sweetened energy players PRIME and Celsius, are pushing lab-developed sweeteners ahead in certain parts of the store.
“I don’t think anyone’s looking at it like ‘Oh, let me get some more sucralose in my life,’” said Scott Dicker, market insight director for SPINS. “But it’s not hindering them either.”
SPINS found that in the 52-weeks ending March 26, combined energy and sports drinks containing artificial sweeteners saw their retail dollar sales grow 13.6% to around $5 billion, compared to naturally sweetened drinks, which were up just 5.8% to roughly $5.8 billion. While average pricing for the natural drinks has grown at a faster rate (+19.4%) than the artificial options (+14.2%), the increases equalized the average price point of both categories at $3.09 per unit.
In that time, artificially sweetened energy and sports drinks also saw significantly fewer declines in unit sales, down just half a percentage point in the 52-weeks, versus a steep -11.4% drop for naturally sweetened products.
Other categories have experienced similar market shifts. In soda, artificially sweetened drinks grew retail dollar sales 15.7%, compared to 12.5% for naturally sweetened CSDs. In refrigerated juice, artificial (10.1%) greatly outpaced growth for natural (+0.1%) – although sales of artificially sweetened juices are a drop in the bucket at $515.1 million compared to the $5.7 billion naturally sweetened segment.
Liking Low-Cal
The rise in artificially sweetened energy and sports drinks sales arrives as both categories have seen large shifts towards a healthier positioning, particularly in energy, where the performance subcategory has seen emerging brands achieve triple-digit sales growth as pre-workout beverages. Brands like Celsius, PRIME, C4, Bang, Ghost and Alani Nu – all of which use sucralose in their respective products – have all emerged as competitive next generation energy players within the past five years and boast low or zero-calorie nutrition or supplement panels.
Sales and marketing may play a significant role in the trend, said Jeff Grogg, founder of food and beverage product innovation firm JPG Resources. In channels like convenience, where many retailers have been slow to expand their selection of natural products, consumers may only have a choice between a sugary but technically natural beverage and a zero-calorie option made with sucralose or aspartame.
“I think there’s a lot of factors,” Grogg said. “If you look at the success of Celsius and so forth, looking at those brands, the ubiquity of their availability drives adoption. And there’s that hierarchy, if the masses move for low sugar, there’s a bigger portion of the masses that don’t care as much about the ingredients as much as the early adopters in the natural organic space.”
Beyond indifference, Dicker suggested, a lack of education may also be important to understanding the trend, as it’s easy for consumers to get confused about which ingredients are natural and which were man-made, particularly when there are so many on the market. Can the average shopper in the conventional channel really be expected to know whether xylitol is organic or not? What about neotame, erythritol, or purified stevia leaf extracts?
“[Sweeteners] can get kind of cloudy in consumers eyes, and so some of them might just look and say, ‘I’ll just take the sugar, or, I’ll just go for the no calories, no sugar.”
Natural Supply Chain Returns
Nevertheless, there are plenty of label readers and health conscious shoppers who are still helping to fuel demand for natural products. A March report by Mordor Intelligence found that the global stevia market is expected to achieve a CAGR of 8.85% between 2023 and 2028, while Market Data Forecast projects a CAGR of 5.05% for artificial sweeteners in the same period (however, that report did not list sucralose as a tracked sweetener).
In kombucha, a smaller category with strong ties to the natural channel, SPINS reported artificially sweetened products down -15.9% to just $19.3 million in the 52-week period, while naturally sweetened drinks were up 2.8% to $963.3 million.
When it comes to innovation, many CPG companies are still continuing to look to natural ingredients like stevia, monk fruit and erythritol first and foremost. Vikrant Lal, manager of beverage formulation and ingredient services at beverage development company BevSource, said those three sweeteners are still the top three choices for brands seeking to have a presence in the natural and specialty channels, where many early stage companies launch. While flavor can still pose a challenge, and sucralose remains the closest in taste to sugar, Lal noted that developments over the past decade have led to significant improvements in ingredients like stevia.
On the back end, inflation and supply chain have had an impact on natural zero-calorie sweeteners, Grogg said, noting that around six to 12 months ago many brands were making formulation decisions based solely on what was available at the time. Today, brands have “more or less a full option set” of sweeteners to choose from.
Robert Curtis, senior buyer at BevSource, noted that crop yields can also highly influence pricing, and said signs currently look good for the price of monk fruit to decrease in the coming months thanks to a strong harvest, while stevia is likely to have a lower yield than past years.
Pricing on sucralose, meanwhile, has decreased over the past year, but Curtis warned that the increased demand could lead to another fluctuation in the market.
“There’s consumers that are gravitating to sucralose, and because [brands are] paying probably around $20 per kilo it’s pretty cheap,” Curtis said. “So now that demand is increasing, their supply is going to decrease and your costs are going to go up over time.”