Functionality Gives Non-Alcoholic Beverage Segment A Boost
The non-alcoholic beverage category continues to see a great deal of new product development with functional drinks offering myriad health benefits to consumers the focus of product development efforts.
Where basic water was once the hydration solution for consumers of all ages, shoppers today expect more from their drinks. Whether seeking an energy boost throughout the day, or items that offer benefits to digestive health, shoppers are drinking not just to quench their thirst, but also to improve their well-being.
Sherry Frey, vice president of Total Wellness for NIQ, spoke with Store Brands and shared insights on the latest trends impacting the world of non-alcoholic beverages.
STORE BRANDS: What are some of the more significant trends you’re seeing currently in the non-alcoholic beverage segment?
SHERRY FREY: One of the big areas that we're tracking closely from a wellness perspective is the growth of functional beverages. That’s everything from beverages that are tied to energy drinks to one of the emerging areas we’re watching which is digestive health. Functional beverages are an area where we're seeing a lot of interesting, unique ingredients and we're also seeing beverages that are designed to meet emerging consumer health needs.
"We have also found that store brands were one of the areas where we saw outsized growth. Retailers are leading the way with innovation and things such as sustainability and are trying to be at the forefront of innovative trends."
— Sherry Frey, NIQ
STORE BRANDS: Are there a few areas that consumers are drawn to when they look for functional beverages?
FREY: The first one is energy, but there are shifts around how people are looking for their energy. This could be through products with natural ingredients or ones with caffeine. Then there is a growing focus on digestive health. This is a topic that we’re seeing across the generations and there is a lot of growth. The other area of growth is in general performance, which is tied to electrolytes and hydration.
STORE BRANDS: With the growth of functional beverages, is more being done to support the claims many of these products are making?
FREY: What I think is still evolving is what is the science behind all of this? What are the beneficial effects of certain ingredients? Since this is the food and beverage space, the requirements around claims are very well regulated. And with functional beverages, this is one of the places where we see a ton of innovation in terms of new ingredients.
STORE BRANDS: New product growth in non-alcoholic beverages is constant. Are retailers challenged today to keep up with what’s new to ensure they have what their customers want?
FREY: This is a category where we’re seeing some phenomenal innovation, and store brands are leading the way with many new innovative flavors. We have also found that store brands were one of the areas where we saw outsized growth. Retailers are leading the way with innovation and things such as sustainability and are also trying to be at the forefront of innovative trends. At the same time, we’re seeing another dynamic that’s happening with functional beverages. We’re seeing many influencer brands that are coming in and are driven by personalities. Retailers are watching to figure out what trends they don’t want to be out front on but be in on the second wave so they have an idea of where a given trend is going. I think that’s the reality for store brands. They want to have the latest innovations, but not be completely at the forefront.
STORE BRANDS: From a generational standpoint, what differences are you seeing in terms of what is expected from products in the non-alcoholic beverage space?
FRYE: Each generation has certain attributes that they’re looking for in the products they are buying. The biggest thing we're seeing is the demand for clean label and sales of clean label are highest with those in Gen Z. When we think about what the future is going to look like, no artificial colors, no artificial flavors, et cetera, we're going to probably see an acceleration of the expectation because we are seeing new consumers coming in. We see millennials as a group that indexes the highest for organic overall across the entire store. They're the ones that also index the highest for ‘better’ in food and beverages in general. This makes sense because Millennials are in the period of their lives where they are having kids. Gen Xers are the boring group. There is really nothing popping for that generation. We’re also seeing older consumers have a focus on health. Baby Boomers are looking for something other than water. Products that improve cognitive function index high among older consumers.
STORE BRANDS: How has inflation affected the non-alcoholic beverage category?
FRYE: We did see a period where there was an inflationary impact on the category. But then at the same time, we're human and we tend to reset ourselves in terms of what's our new level of expectation. I think beverages are interesting, too, because they’re a low price point, it’s an easy purchase, and there’s immediate satisfaction for the customer.