Cross-Category Beverages Reshaping U.S. Non-Alcoholic Drink Sector

The U.S. non-alcoholic beverage market has been blurring the lines with a shift toward better-for-you alternatives, 78 percent of consumers consider taste and flavor key variables in their buying decision, while only 21 percent look to health/nutritional attributes and 16 percent seek out functional attributes, according to a new market data from Mintel.

“Beverage blurring is the concept of cross-category beverages, also known as hybrid or fusion drinks, and the impact they have on the consumer impression and behavior. Cross-category drinks combine two or more drink categories, blending flavors and functionality to create a new beverage that could fall under multiple categories," said Elizabeth Sisel, beverage analyst at Mintel.

According to the “Beverage Blurring - US - February 2016" report, the top three categories of non-alcoholic beverages saw stagnant or declining sales from 2014-2015, with carbonated soft drinks (CSDs) (0.1-percent growth), juice (0.1-percent growth) and dairy milk (7-percent decline) suffering the most. This comes as trending beverage categories, including energy drinks (8.9 percent growth) and coffee (8.7-percent growth), experienced strong sales growth.

Although the majority of consumers drink juice (66 percent), CSDs (64 percent) and dairy milk (64 percent), consumers are looking for alternative drink options. In fact, 67 percent of Americans sometimes or frequently purchase new/different beverages, and 18 percent drink a wide variety of beverages.

Sales trends suggest the better-for-you movement is reshaping the non-alcoholic beverage industry, but brands should consider a stronger focus on communicating flavor, in addition to health-centric or function attributes, of cross-category products.

“While the non-alcoholic beverage market is innovating to address consumer interest in healthy options, taste and flavor remain the most influential reasons for consumption. No matter how healthy a drink is, if it doesn’t taste good consumers won’t buy it, and the amount of available products on the market makes it easy for consumers to simply move to another option," Sisel said.

While cross-category beverages present an opportunity for brands to meet trending consumer preferences, they also present new challenges. According to Mintel, 21 percent of consumers say there are too many beverage choices. Further, the majority of consumers do not strongly favor hybrid beverages, with just 14 percent of consumers agreeing hybrid drinks are more interesting than non-hybrid drinks, and 8 percent think they are better tasting or healthier (7 percent) than non-hybrids. Twenty-four percent of Americans agree hybrid drinks have too many calories, while 20 percent say they taste artificial.

“The emergence of cross-category beverages has led to the development of new drink fusions, and the array of beverage options can be overwhelming for some consumers. This presents big challenges for brands looking to retain their customer base without polarizing those who are inundated by the growing selection of beverage options. Adding to overall category confusion, some consumers struggle to identify certain drink fusions. It is essential that brands use clear messaging to illustrate what sets products apart," Sisel said.

Despite the challenges facing cross-category drinks, consumers are willing to try new/different beverages with 48 percent of consumers enjoying the wide selection of beverages available in-store. What’s more, 40 percent of consumers would be encouraged to purchase a new beverage offering if there was a sample they could try in-store first.

“There are many opportunities for beverage brands to engage with consumers and encourage trial of cross-category products. Our research suggests that brands should offer consumers the opportunity to taste-test new products before committing to a purchase, such as free product trial or in store sampling. This could help cut down on consumers’ product confusion and the sense of being overwhelmed by too many options," Sisel said.

Shifting consumer demands have led to immense innovation in the beverages category with the current trends led by the emphasis on health and wellness. Better-for-you beverages encompass a range of attributes health-seeking consumers desire. Download INSIDER’s “Formulating Better-For-You Beverages" Digital Issue to find out how product developers are improving nutrition by adding more of the things consumers want—like nutrients, vitamins, minerals and “natural" ingredient alternatives—and less of the things they don’t—like added sugars and preservatives.