How Beverage Innovation is Responding to Evolving Consumer Needs

Thirst-quenching fun and convenience continue to drive beverage purchase decisions. But consumer interest in health & wellness, premiumization, variety, and sustainability are leading beverage brands to expand their assortment or explore new areas.

The FlavorSum team identified growth opportunities by exploring the market, consumer, and flavor trends in several beverage segments.

Market Dynamics Offer Positive Signs for Beverages

Macroeconomic factors positively affecting the North American beverage industry include the following:

• An improving economy is spurring more consumer spending. After a slow 2020, North American GDP is forecast to grow by +7 percent in 2021 and +6 percent in 2022.
• Consumers are trying new brands after relying on big brands’ familiarity (and availability) last year.
• E-commerce logistics capabilities continue to increase after surging to supply consumers who limited store trips.
• On-premise sales are recovering as people re-engage with venue events.
• Off-premise sales growth remains steady as stay-at-home behaviors stick.

Consumer Needs Propel Beverages in New Directions

Consumers’ desire and ability to buy refreshing beverages is building, but their changing expectations are creating innovation opportunities. For example,

• Hydrating beverages are transforming into health & wellness solutions with the addition of protein.
• Premium, emerging beverages like kombucha or plant-based water gained momentum in 2020 (4 percent and 7 percent, respectively).
• People want variety from beverages – in flavor, sweetness level, and brand story – leading to growth in flavor blends, no/low sugar options, and hand-crafted drinks.
• Single-use plastic concerns haven’t risen to a level that demands legislated change, but some proactive producers are turning to environmentally friendly packaging like paper or rPET (recycled PET material).

Beverages that are Bubbling Up Growth

Opportunities exist across most beverage segments, from mainstays like carbonated soft drinks (CSDs) and fruit-based beverages to large emerging areas like enhanced water, energy drinks, and mocktails.

• CSDs, up +9 percent in the U.S. through May according to IRI’s multi-outlet data and showing flat performance in Canada from IBISWorld, are attracting attention with:
  • New flavors, named by more than 55 percent of consumers as ‘an important purchase consideration’ in a recent Mintel
    • Summer-inspired tropical flavors, coffee-infused varieties, and low/no sugar options are making headlines.
  • Functional benefits such as probiotics, tree sap, and CBD or THC that appeal to adults, with about 70 percent of 25–34-year-olds interested in purposeful CSDs.
• Fruit beverage sales jumped almost +6 percent in the U.S. and +1.3 percent in Canada last year, with gains influenced by:
  • Increased in-home consumption and consumer recognition that fruit (and vegetable) beverages contain immunity-boosting ingredients like Vitamin C.
  • Innovation focused on functions such as digestive health with probiotics and post-workout recovery through added potassium and electrolytes.
  • Carbonated line extensions that add the sparkle of CSDs to the fresh, natural flavors and health benefits of fruit.
• Enhanced waters are capturing more market share, in part due to premium pricing, but also reflecting consumer interest in:
  • Flavors and/or carbonation, with still and sparkling flavored waters up more than +6 percent last year in North America.
  • Product development focused on hydration and energy, with new entries delivering 35 to 75 mg of caffeine sourced from coffee or tea. Many add carbonation to the mix.
  • Stress-relieving drinks infused with CBD or hemp in North America and globally, with nootropics like citicoline and tyrosine. Recent consumer research from FlavorSum shows North American consumers have limited knowledge about nootropics or brands that contain them.
• Energy drinks, traditional and reimagined, continue to sell well in North America with gains of almost +12 percent in the last year.
  • For the core base of energy drink consumers, the promise of vitality outweighs concerns about calories and sugar content (and occasional poor taste profiles).
  • Innovators seeking to broaden the appeal of energy drinks are turning to natural sources of caffeine like green coffee/tea and vitamins that support immunity and energy.
• Mocktails are on the upswing and represent a growing opportunity area as on-premise service returns.
  • As major manufacturers enter the space, International Wine and Spirits Research (IWSR) predicts consumption of global no-low alcohol spirits will increase by over 70% by 2024.
  • Mintel research shows that younger consumers (22-25) are a key target since 35% who ordered from restaurants and don’t order alcoholic beverages indicate alcohol doesn’t interest them. 27% of the same group say they don’t drink alcohol at all.
  • Formulation expertise can help mocktails deliver the taste sensation found in cocktails.
    • Sweetener optimization and flavors that balance the profile of the non-alcoholic base can help with consumer acceptance.

Flavor Trends in Beverages Reflect Familiar Favorites and Intriguing Blends

Mintel launch data reveals that North American performance beverage manufacturers’ top flavors are popular, known tastes – usually fruit-based.

Emerging flavors often have health halos, although a few ‘fun’ flavors like ‘cola’ and ‘cotton candy’ hit shelves in 2020.

Within beverages positioned as ‘wellness,’ flavor blends represented more than 50% of launches during 2018-2020. We’ve highlighted the single flavors to identify core profiles.

Emerging flavors in health & wellness included warm browns and global tastes.

Source: Mintel Global New Products Database, North America 2020

Partner with FlavorSum for Refreshing Beverage Solutions

For support with your next refreshing beverage launch, contact the FlavorSum team. We’re uniquely qualified to offer help with new product development by:

• Speeding Your Time-To-Market: From hundreds of trending flavor sample options that ship in 24-hours, to online, on-demand product documentation, FlavorSum helps you keep your projects moving.
• Extending Your In-House Capabilities: Our cross-functional teams have supported the development of more than 500 flavors annually over the 3 years by using consumer insights, industry knowledge, and commercialization expertise.
• Achieving Unmatched Reliability: When it’s time to ramp up production, you can count on FlavorSum. We’ve maintained industry-leading on-time-in-full delivery performance over the last 3 years.