There’s really no overstating the importance beverages have on the foodservice industry or how monstrous the market is.
By Renee Lee Wege
There’s really no overstating the importance beverages have on the foodservice industry or how monstrous the market is. From iced tea to smoothies to energy drinks and nearly any type of water under the sun (maple, aloe, honey and protein, to name a few), the beverage market is booming just about any way you pour it. Datassential’s recently-released Non-Alcoholic Beverage Report dives deep into the world of beverages, showcasing a thriving and ever-evolving beverage landscape where 1 in 4 operators say they’ve seen growth in non-alcoholic beverage sales over the past year. That aligns with the Beverage Marketing Corporation, which reported that the US beverage market grew again in 2017, with retail sales increasing about 3%, exceeding $180 billion (yes, that’s “b,” as in billions of bucks of beverages). Along with the new Non-Alcoholic Beverage Report that includes insights from nearly 2,000 consumers and 300 operators, Datassential also recently covered over 70 retail beverages in Creative Concepts: Retail Beverages. When it comes to the bustling (or should we say bubbling?) beverage market, we have a ton of thirst-quenching insights – here are five keys to boosting your beverage business:
1. While soda slouches, sparkling water’s picking up steam
It seems every other day there’s an article shared on Buzzfeed or Facebook about La Croix, the sparkling water that’s become a phenomenon (its parent company, National Beverage Corp., reported that sales of the sparkling water last year netted nearly $827 million), and after diving into the beverage landscape, it’s easy to see why sparkling water is buzzing. While categories like sparkling water rise, at the same time, sales and consumption figures for carbonated sodas and soft drinks continue to decline. That’s not to say that soft drinks are “out” per se – pop, soda, or whatever your preferred term is, is very much still ubiquitous (it’s available at 98% of restaurants). What has changed, however, is soda consumption, which has dropped over the past year for one-third of drinkers, more than twice as many as those who report drinking more. Most who have reduced consumption say they are switching to other beverages – enter sparkling waters like La Croix, Waterloo, or bubly (PepsiCo’s foray into sparkling water). As soda companies look to sparkling water, you may want to turn your gaze as well: a quarter of consumers reported drinking more packaged sparkling water over the past year, compared with only 15% for soda, showcasing a shift from more traditionally sugary drinks to those that market themselves as healthier.
2. The health halo isn’t just for foods anymore
And speaking of health, we’d be remiss not to mention the wealth of beverages coming into their own now due to purported health benefits. When asked why they pick certain beverages over others, consumers picked “because it’s a healthier choice” as a top driver for drinks such as packaged water and smoothies. Health has come to be intrinsically tied to functionality, especially as consumers look for both foods and beverages that’ll do more than just satisfy hunger or thirst. While overall restaurant menu penetration is low for functional beverages like probiotic drinks, one standout is kombucha, the fermented tea that has rocketed to reach over 7% of fast casual menus in the past four years. As consumers look for foods and beverages that are natural and lower in additives, they’re also looking for drinks that will carry out some sort of additional benefit: our data in Creative Concepts: Retail Beverages aligned with the sentiment of functionality, as the top two best-scoring drinks, in terms of interest, were protein drinks and sleep drinks. In the US alone, consumers will find brands like G-Cubed, a drink made with ginger, black garlic, and ginseng that’s said to give you 20 days of advanced heart health; or Som Sleep, which looks to make counting sheep obsolete; while globally, there are companies like Brite in the UK that bills itself as a natural productivity drink.
3. Restaurants are turning to retail beverage counterparts to make the most of sales
It’s the age-old question: should restaurants offer soda fountains or beverage coolers? While soda fountains can help operators offer the classics in a streamlined way, coolers have the edge when it comes to offering a variety of drinks that may only be available in bottles or cans. Our beverage report shows that while restaurant usage of both fountain and bottled beverages is similar, most growth is coming from the cooler. Currently about 75% of operators offer reach-in coolers (compared to just under 60% with soda fountains), and while fountains have the edge in cost, profitability, and requiring little storage space, packaged beverages are better at differentiating restaurants from competitors. Think of it like this: while customers could go to any number of restaurants for mainstream fountain drinks like root beers and colas, you probably can’t say the same for trendy options like Thai iced tea or lavender lemonade, which could be offered in small scale ways in the beverage cooler.
4. Beverage flavors are moving beyond the basics
While turmeric soda may not become a soda fountain staple anytime soon, beverages both at retail and at restaurants are going beyond mainstream flavors like cola or lemon lime. Turmeric, which has seen significant growth on menus (up over 45% over the past year alone, according to Datassential MenuTrends), is showing no sign of slowing down – Datassential’s menu prediction tool Haiku estimates it’ll grow another 45% over the next 4 years. Heralded for its health benefits, turmeric is also one of the fastest-growing juice flavors and is commonly found as a “superfood” boost in smoothies. According to our report, nearly 80% of operators agree that these types of premium beverage flavors can help them stand out from the competition. For more on flavor innovation, ask about our beverage keynote and the retail beverage issue of Creative Concepts, which features flavors like ginger-lime, watermelon mint tulsi and smoked jalapeno.
5. With their generally lower price point, beverages can be a low-risk way for both consumers and operators to expand horizons
Trying out a new beverage flavor, whether from a beverage cooler at the local grocery store or from a restaurant, can be a much less costly risk for consumers – worst case scenario, they don’t love it and end up with a few less dollars in their pockets. Compare that to trying out a whole new entrée, and it’s easy to see that because beverages are generally a lower cost item, consumers may be more willing to take a chance on a craveable new flavor or variety. Consider working trendy flavors into the menu as limited time offers to test the waters (pun intended) with consumers. Gambling on a few trendy packaged beverages also allows operators to try a variety of options without going all-in on a few varieties for a soda fountain. Consider treating beverages like food LTOs and gauge sales and interest to see if a beverage is something to offer in the long term.
Renee Lee Wege is the senior publications specialist at Datassential