The beverage industry is becoming more focused on meeting consumer demand for healthier drinks and environmentally-friendly packaging, experts tell CM&P. The change in demand results from increasing concerns about personal health and the environment, analysts say.

“For health reasons, there has been a shift to alternative beverages and away from carbonated soft drinks,” says Neil Stern, senior partner of the Chicago-based research firm McMillan Dolittle LLP. The demand for better-for-you drinks has been so high that big name manufacturers like Coca-Cola have scaled down their carbonated beverage product launches by half between the second quarter of fiscal 2010 and the first quarter of fiscal 2011, according to the Mintel Group Ltd., a Chicago-based market research firm.

National and private label manufacturers have instead placed greater focus on expanding the selections within their natural and organic beverage lines. For example, in 2010 PepsiCo introduced Mountain Dew Throwback and Pepsi Throwback, the natural versions of each product, to cater to the rising trend. Both have now become a permanent part of Pepsi’s product portfolio.

Sales of natural and organic beverages also have increased, according to Packaged Facts, a Rockville, Md.-based market research firm. Last year, sales of natural and organic beverages rose from $35.5 billion to $39 billion, allowing retailers such as Publix to further enjoy growth in its private label juice category.



Natural and Organic

“Our organic private label drinks continue to resonate well with our customers,” says Maria Borus, director of media and community relations for Publix supermarkets. “We’ve had our organic juice offerings for several years and each year the category continue to grow.”

As the natural beverage category grows, stores like Fresh & Easy are taking notes and coming out with their own brands of natural coffees, teas and fruit juices. In addition to trying to appeal to customers on a value level, the snowballing rollout of natural products is an attempt “to look more wholesome,” says Jonathan Asher, senior vice president of the Fort Lee, N.J.-based retail consultant firm Perception Research Services.



Staying Green

In addition to health concerns, consumers also are becoming more vigilant about reducing waste.. As a result, “the single serve water bottle that was the icon of chic style and fitness just a few years ago is now the symbol of evil and environmental insensitivity,” states Asher.

Large and small manufacturers initially responded to environmental sensitivity by using bottles containing recycled plastic. Today, manufacturers are finding additional ways to reduce waste.

Pepsi, for instance, has reduced the amount of plastic used for its Aquafina water bottles by 30 percent, while competitors like Ice Mountain and Evian have completely transformed their bottles in the name of appealing to all that is eco-friendly.

Coca-Cola also has responded to consumer demand for environmental sensitivity by integrating organic compounds into its plastic bottle formulas. Currently, bioplastic makes up 30 percent of the total material for a plastic bottle manufactured by Coca-Cola.

“Over the past few months, we’ve seen several major beverage vendors incorporate percentages of recycled plastics into their packaging,” says Swenson. “Brand owners are realizing that they need to be responsible for the proper disposal of their products’ packaging and embrace extended producer responsibility.”

Coke also has responded to increased eco-consciousness by selling its feature products in smaller cans. The use of smaller cans also appeals to the health-conscious, according to Asher.

Natural beverages will experience growth as a result of the increased interest in personal health and wellness. Sales are expected to double from $39 billion to $78 billion by 2015, according to Packaged Facts.

The ready-to-drink coffee and tea categories are expected to grow the fastest, with yogurt drinks, fruit juices and energy drinks trailing closely behind them. The emphasis on health and grab-and-go convenience, says Packaged Facts, is the largest selling point for these types of beverages.

Industry At-a-Glance

• From 2005 to 2010, the non-alcoholic beverage market grew 6 percent in current dollars to $50.5 billion in 2010.

• Private labels continue to exert influence in the market and accounted for 21.4 percent of the total sales in FDMx in 2010.

• Coffee sales grew more than 7 percent during 2008-10.

• The average price of polyethylene terephthalate (PET) bottled water declined by 13 percent from 2008 to 2010.

• Major vendors have begun incorporating percentages of recycled plastics into beverage packaging.

• Natural beverages saw an increased growth as a result of the health and wellness trend.

• The ready-to-drink coffees and tea segement is expected to grow the fastest within the category.

• An emphasis on health and convenience are the strongest selling points for natural and organic beverages.

Source: Mintel International, Ltd.