9 Beverage Industry Trends to Watch

Chris Layne
October 24, 2016

The beverage industry is undergoing a period of rapid change. Soda sales have fallen for 11 years straight and are now at a 30 year low. Millennials are emerging as the most important demographic for the beverage industry, an especially influential one due their high engagement on social media, which tends to amplify demographic trends. The millennial demographic and the broader market are focusing on healthy eating and drinking, locally sourced or traceable ingredients, and small-batch—or “craft”—foods and beverages. The beverage industry is reshaping itself, eschewing traditional sugary drinks and mass-market approaches for approaches that are more focused on health with a more “handcrafted” aesthetic. Key players in the  beverage industry are paying close attention to these changes in order to  predict consumer preferences so they can stay ahead of the trends.

Here are 9 key beverage industry trends we’re watching:

  1. The Millennial Market Millennials are more health conscious than previous generations, and this impacts both the types of beverages that beverage companies are producing, but also how those products are packaged and distributed. 2. Clean Labels Following a general trend in healthier eating and drinking habits, consumers and regulatory agencies are pushing for more thorough labeling. Many consumers are very concerned about GMO products, even pushing for legislation requiring GMO labeling. In the meantime, beverage companies are responding to consumer concerns by providing GMO labeling and other information that supports consumer demand for more transparency regarding ingredients, health benefits, and other claims. 3. Water, Energy, and Sports Drinks Another result of the trend toward healthier products in the beverage industry is the growth of the water, energy, and sports drink market. This category is expanding with the addition of products that don’t just replace carbs and electrolytes but also provide other important nutrients like protein and minerals. 4. Less Sugar and Reduced Calories Consumers’, and particularly millennials’, increased concern about the health of the products they consume has led beverage manufacturers to reformulate recipes with an eye toward reducing calories and added sugar. Pepsi, for instance, recently announced that by 2025, it would reduce the calorie count of 60% of its products to 100 calories or less per 12 ounce serving. 5. Sparkling Water, Ready-to-Drink Coffee and Tea With the falling sales of sugary sodas, many consumers are looking to replace those sugary drinks with flavored sparkling waters like La Croix, as well as cold-brewed and lightly sweetened tea and coffee beverages sold  in cans and bottles. How important is this trend? Food Dive recently reported that as of July 12, sparkling water sales for 2016 were up 16% over 2015.  Beverage manufacturers can combat falling soda sales with sparkling water as well as tea and coffee that are ready-to-drink in cans and bottles. 6. Smaller Cans and Bottles The standard size can for many sodas and other beverages has traditionally been a 12 oz. can. Many beverage industry manufacturers are now moving to smaller can sizes to address consumer concerns about portion sizes. This is yet another way that the beverage industry is responding to consumer concerns about excess sugar consumption. 7. Authenticity and Nostalgia Even more than Generation X before them, millenials crave a sense of authenticity in the products they buy. The result of this in the beverage industry has been the rise of products like craft beers and other types of drinsk as well as  vintage-inspired beverages that appeal to a sense of nostalgia. Whether it’s authenticity as a result of a beverage’s ingredients or the story behind it, consumers are seeking to connect with a brand either on the basis of shared values or shared history. 8. Multisensory Marketing Drinking a beverage isn’t just an experience we have with our taste buds—other senses are also involved. Brands like Stella Artois are experimenting with multisensory marketing:. Stella recently partnered with Tonight Show house band The Roots to create a “multi-sensorial song” the brand claims consumers can actually taste. Through science like neurogastronomy, brands are working on ways to engage multiple senses to create a sense of nostalgia and connection with consumers. 9. Longer Shelf Lives Beverage industry manufacturers are experimenting with ingredients and packaging materials that can extend the shelf life of many products. Examples include ingredients such as hydrocolloids that can not only help products last longer but can also improve mouth feel of beverages that benefit from thickening such as coffee or protein drinks. Of course, the drive toward healthier eating also means that for many products that tout health benefits, consumers may prefer that longer shelf-lives do not come  from added ingredients. In those cases, an approach like aseptic packaging may be a better choice to extend beverage shelf lives.

What do these trends mean for the beverage industry?

  Given the beverage industry’s unique need to understand and predict the changing tastes of consumers for a quick response with products that appeal to those tastes, technology that delivers data-driven insight should be a major area of focus for manufacturers and distributors that want to keep up with—or even outpace—change. This market can change very quickly, and beverage industry insiders need data to understand the nature of demographic and market changes. A recent example of  using data analysis to predict consumer trends comes from beverage industry giant PepsiCo, which partnered with its grocery customer Food Lion to implement a consumer-driven supply chain. The partnership allows PepsiCo to fine-tune in-store replenishment based on current and expected consumer demand, inventory, and sales at Food Lion stores instead of simply reacting to goods pulled from Food Lion warehouses. This provides faster identification of and response to changes in the marketplace and reduces the “bullwhip effect,” for which the food and beverage industry is notorious. Working closely with retailers and other supply chain partners to understand how consumer tastes are changing to identify opportunities in the market is crucial for beverage industry companies that want to stay ahead. Technology can help by delivering the data that helps beverage companies use to gain a better understanding of their supply chains. What beverage industry trends are impacting your business? We’d like to hear from you in the comments.