Shake it up

The drink mix sector is awash in growth obstacles. In addition to encountering stronger competition from the expanding array of ready-to-drink offerings, the segment — which includes both powdered and liquid products — is suffering from a perception that the items typically contain artificial ingredients and, subsequently are less healthful, says Elizabeth Sisel, beverage analyst for Mintel, a global market research firm.

Mintel projects that revenues in the “beverage enhancer” segment will decline or remain stagnant through 2019. Among products in the category are liquid flavor enhancers, which also can contain vitamins, minerals and electrolytes.

To help ignite sales, retailers must respond to the growing consumer demand for more healthful products, which includes the use of natural ingredients, Mintel reports. The company says more than two in five consumers surveyed said natural sweeteners would encourage them to buy or purchase more water enhancers, and nearly a third of current users said the absence of artificial sweeteners is important to them when choosing a water enhancer.

In addition to offering products with health attributes, which are especially important to millennials and parents, retailers could trigger greater interest in store brands by offering attractive flavors, running promotions and supporting in-store samplings, Sisel states.

“Because millennial are less brand-loyal private label manufacturers have an opportunity to encourage trial ” she notes. “The majority of millennials are influenced by consumer reviews and family and friend recommendations.”

Millennials also find quality and affordability most important when considering their favorite brands, Sisel adds.

“Private label already tends to have more affordable prices, but manufacturers that can demonstrate their quality can help encourage trials,” she says.

Health is top of mind

Quality includes wellness elements. While healthful ingredients are in demand in most product categories, they are particularly sought by drink mix shoppers because the items have traditionally been high in sugar, says Said Merhi, sales manager for FlavourTech, an Izmir, Turkey-based drink mix supplier.

“More consumers are counting calories and staying away from drink mixes that contain sugar,” he notes.

Randy Krebs, director of consumer sales for Insight Beverages Inc., a Lake Zurich, Ill.-based supplier of beverage mixes, agrees, stating that consumers are increasingly seeking products with clean labels. Consumer demand is resulting in the rollout of items with five ingredients or less, as well as healthier additives such as antioxidants.

“People are looking for any value-added health benefit, and they are reading labels more,” Krebs says. “There is a greater concern over what they are putting in their bodies. They are looking for indulgences that are not bad for them.”

Protein-laden mixes, meanwhile, also are becoming popular as more shoppers seek products that contain essential nutrients, adds Tarick Gamay, director of the retail division for Dreampak LLC, an Alexandria, Va.-based supplier of liquid water flavor enhancers, coffee and tea concentrates and creamers.

“Consumers want to feel full after drinking the beverages and not worry about negative effects from ingredients,” he states. “It is resulting in a big demand for protein.”

Start with the basics

In addition to leveraging products with a healthy aura — including those with an all-natural designation — retailers could build interest with premium offerings. Merhi says that premium private label drink mixes often will outsell the less-expensive store brands, as well as national brands, if consumers perceive they are getting added benefits.

Nevertheless, it is not always prudent for retailers to offer innovative store brands, he adds, noting that initial brand launches should typically be “me-too” items.

“Innovations should come in the second phase as retailers often don’t have a strong understanding of the drink mix category,” Merhi notes. “They have to first know the basic products that sell best. Innovation comes into play one or two years after initial launches and when the private brand portfolio matures.”

Krebs agrees that store brands should first mirror the national brands, and notes that retailers could then seek to stand apart by selling limited-time private label offerings such as pumpkin spice drink mixes in the fall.

“Prior to branching into creative flavors, there needs to be a base of basic flavors such as dark chocolate and sea salt caramel,” Krebs states. “The most effective retailers understand their customers and know where they want to go to please them and also to attract new consumers.”

And while offering innovative flavors is a way for retailers to differentiate their private label selections from the national brands, such a maneuver is not prudent in all locales, adds Sharon Porter, Insight Beverages’ director of sales and marketing. “Innovation would be a little out of place at dollar stores as those consumers expect to find the national brands or me-to’ private label selections,” she states. “The strategy has to be in line with how retailers want to condition their customers.”

Respond to geographic demands

It also is crucial that retailers know the specific tastes of consumers in different geographic regions so they can segment products accordingly. Private label will then have an advantage over the national brands, as the same branded varieties of natural offerings often are on shelves across the country, Merhi states. Key lime, for instance, is a popular and traditional flavor in the South, but will generate lower interest in other regions, he says.

“Sellers of store brands know their requirements and what flavors can do well in their particular areas,” Merhi notes. “By being part of the community, they know what they need to sell to fill the product gaps.”

Clear the expansion hurdles

Although category sales are sluggish, growth opportunities remain, as a devoted base of consumers always will seek drink mixes because they want control over the strength of their beverages, Gamay states.

“They get to be their own barista,” he notes.

Retailers, meanwhile, could better attract current and new customers by situating store brands next to complementary items, Gamay adds. That includes, for instance, displaying mixes near milk cases, water enhancers adjacent to bottles of water, and coffee next to creamers.

A growth challenge for retailers is overcoming the perception by a segment of consumers that drinks from mixes are inferior in quality to ready-to-drink items, he states. In response, Gamay suggests that retailers demo their store brands in outlets and also educate shoppers as to how they can often get more servings at lower prices with mixes.

Suppliers also could be a strong packaging design resource as they frequently know the packaging graphics and shapes that will be most effective for selling specific drink mix selections, Merhi states.

“Often retailers will have third parties — who are not familiar with the category — handle the designs,” Merhi notes. “Those who don’t get the supplier involved in the process may not do as well as they should.”

He adds that while packaging for private label should differ from the national brands to standout on the shelf, there still should be somewhat of a resemblance.

“It doesn’t make sense for anyone to carbon copy any product,” Merhi states. “Investing in packaging goes a long way. But the look still should be familiar to show it is part of the category.”

Do respond to consumer demand for natural ingredients and less sugar.

Don’t develop premium drink mixes before you develop the basics.

Do merchandise drink mixes near complementary items such as bottled water.

Don’t forget to educate shoppers about potential savings tied to drink mixes.