Beverages Insights Report BLENDING, BREWING AND BLURRING ...

Beverages Insights Report

BLENDING, BREWING AND BLURRING THE LINES . . . CREATING A NEW BREED OF BEVERAGES

From beverage technologies, to new fusions, functions and flavors, to personalized nutrition, the common denominator in the beverage category is that product formulators are breaking boundaries to provide consumers with more choices. But this is also making the category harder to define and more difficult for product formulators to anticipate what comes next.

And that is important, because there is a lot at stake as beverages become inextricably tied to how we take in nutrition. More consumers now view beverages as an important and convenient substitute for both snacks and meals, one that can help them maintain health, and may also help manage their weight.

2 Beverages: Blending, Brewing and Blurring the Lines . . . Creating a New Breed of Beverages

The beverage industry is big business world-wide, with the global beverage market expected

to reach $1.9 trillion by 2021.1 The market for non-

alcoholic beverages alone comprises an $854 billion

category and ranges from bottled waters to ready-to-

drink coffees, teas and sports drinks.2 Although both

alcoholic and non-alcoholic beverages are predicted to

see solid market growth, beer is expected to remain the

top overall segment by value and emerging trends are

having a significant impact. This is especially true in the

non-alcoholic sector, where health and sustainability

concerns drive the use of natural flavors and sweeten-

ers, as well as interest in new functional ingredients and

exotic options.

The soft drink category has been at the epicenter of

changing consumption for nutrition and energy. This

has prompted the beverage category to lead the way

in product development trends like sugar reduction,

sustainability, label-friendly ingredients, function and

innovation. Now the alcoholic beverage sector is also

getting in on the action. This report offers insights on

where the overall beverage category is today—and

what’s in store for the future.

Consumers are driving beverage innovationConsumers across all generations are re-shaping the

landscape for beverage product development. Here are a

few key trends:

Sweetener opportunitiesConsumers are increasingly scrutinizing the sugar content of

packaged beverages. Coupled with health concerns regard-

ing alcohol consumption, this may hinder the growth of the

overall beverage market over the near term, but it also pro-

vides a solid opportunity for brands. Their choice of ingredi-

ents, especially sweeteners, will be critically important.

Consumer sweetener trends

80% of those surveyed are now limiting or avoiding sugars*

One in three consumers is cutting back on sugar more than last year**

Close to 30% currently check labels for the amount of sugar**

60% say artificial sweeteners are bad for health**

59% say they want to see more natural sweeteners in foods and beverages**

Sources: *International Food Information Council Foundation (IFIC). Food and Health Survey 2019; **Mintel. Consumer Trends in Sweeteners. Feb. 27, 2019.

These attitude shifts prompted a drop in artificial sweet-

ener use between 2014 and 2019 and a rise in use of natural

sweeteners over that time period, according to the Mintel

report, "Consumer Trends in Sweeteners." Interestingly, the

report notes that not all categories are equally affected by

concern over sweeteners: among the products that gener-

ate highest concern are beverages such as carbonated soft

drinks (49%) and juices (41%). Dairy drinks and energy bev-

erages, on the other hand, have significantly lower concern

at 25% and 22%, respectively.3

$3

Global soft drinks market

Source: Euromonitor International. “Examining Sustainability Challenges in the Non-Alcoholic Drinks Industry.” June, 2019.

USD IN BILLIONS

$50$19

Asia

n sp

ecia

lty

Bottl

ed w

ater

Carb

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es

Juic

e

Conc

entr

ates

RTD

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e

RTD

tea

Ener

gy d

rinks

Spor

ts d

rinks

$224

$313

$138

$17 $22

$67

Proprietary Research Beverages: Blending, Brewing and Blurring the Lines . . . Creating a New Breed of Beverages 3

That said, consumers do still want products to taste

good. This is evidenced by the fact that many do still drink

beverages containing sugar. What’s more, even though artifi-

cial sweeteners are under the microscope, many consumers

believe that sweeteners are a good way to reduce calories.4

This leaves brands and product formulators seeking the

“sweet spot” in what consumers will and will not accept.

To take advantage of these opportunities, brands are now

focusing on front-of-package claims for reduced sugar, low-

or no-sugar.

But claims remain a tricky area in an ever-changing land-

scape. At this point, claims that tout a product's naturalness

(like no artificial ingredients, no preservatives or all-natural)

resonate for approximately two-thirds of consumers. On the

other hand, claims noting less of a certain undesirable ingre-

dient (such as sugar-free, low-carb, or lower calorie), tend to

be important for at least half of consumers.5

Transparency is increasingly important and simple mes-

saging is now critical—especially when it comes to sugar

reduction.

Nearly 60% say it is misleading for a product that is high in naturally occurring sugar to be labeled as “no added sugar”6

48% now say that products labeled as “no added sugar” are more appealing than those with “low” or “reduced” sugar7

Ultimately, consumers want to know why products con-

tain the ingredients they do and how the specific ingredients

enhance the product.

SustainabilityA well-planned sustainability strategy is no longer optional

for companies in the food and beverage space. According

to New Nutrition Business’ “10 Key Trends in Food Nutrition

and Health 2020,” sustainability is one of four mega trends

impacting product development. This is especially pertinent

in the beverage sector. The idea of sustainable products

with ingredients that consumers recognize and understand

is certainly a new benchmark in beverages. More than half

of Americans now say that environmental sustainability is

important in products they purchase. Sustainability trends

52% say knowing where the products are from is “somewhat” to “very” important

46% want to know if a manufacturer has a commitment to environmentally friendly and sustainable production Source: International Food Information Council Foundation (IFIC), 2019

These beliefs are motivating consumers to become sav-

vier about evaluating products. Though sustainability still

means many things to many people, top attributes include

being labeled as locally grown (51%), sustainably sourced

(47%), non-GMO* (47%), organic (44%) and made with recy-

clable packaging (41%).8

But sustainability is presenting both opportunities and

challenges in the beverage space. The trend is particularly

important in the already disrupted dairy beverage category,

where consumers are now looking beyond the first gener-

ation of plant-based dairy alternatives to a next generation

of products made from more sustainable nuts, grains and


Beverage functionality 2.0Beverages that are inherently functional have seen

growing momentum, which has paved the way for new bev-

erage products touting specific health benefits, according

to the The Hartman Group's report, “Modern Beverage Cul-

ture.” Consumers are increasingly conscious of beverage

calories, and they now want a drink to do more—such as

provide energy, added protein, or provide other nutritional

benefits.10

Drinks that do more

Nearly one in four now say they are looking for products offering health benefits11

62% say beverages play a very important role in their health and wellness12

More than 40% say they are looking for products to support digestive health, energy and weight management13

pulses and offering improved texture and taste. Oat milk, for

example, has become a new darling of the alternative milk

space, with a number of products now on store shelves. Its

rise was driven by the success of Swedish oat milk company

Oatly, which offered consumers a chance to taste its “Barista

edition” oat milk creamer in high-end coffeehouses, while

also touting a strong sustainability story.9 Products made

from nuts or seeds that don’t require large quantities of water

to cultivate are also gaining popularity.

However, there are also three key challenges in sustain-

able beverage formulation, according to a report from Euro-

monitor International:

1The intersection of climate and agriculture, which will

increase focus on production, especially in coffee, tea

and fruit supply chains.

2 The role of consumer beverages in water security. While

beverages are not a main source of water use, producers

do have a responsibility to promote universal water access.

3 Packaging waste, particularly from plastics, has been

a flashpoint, and the beverage category has had an

outsized impact on creation and growth of plastic packag-

ing materials. This will boost further focus on new initiatives,

such as rPET and reusable bottles to remedy the crisis.

Source: Euromonitor International. “Examining Sustainability Challenges in the Non-Alcoholic Drinks Industry,” 2019.

With the continued popularity of beverages fortified with pro-

tein, probiotics and prebiotics/fiber, it follows that the cate-

gory will remain at the forefront of these trends, building on

successes like kombucha and creating new beverages with

added-value nutrition. Brands are utilizing new ingredients for

health promotion and support, including botanicals, whole

foods, fruits and vinegar. Powerhouse beverage categories

like coffee and tea are leading the way by working to provide

new consumption options, while addressing health and well-

ness trends. Coffee and tea have existing health halos; they

have been able to capitalize on this to support the creation of

healthier energy drinks, while also serving as a better-for-you

flavoring or mixer in high-end cocktails.14

With added nutrition, beverages are now also becom-

ing an eating occasion, as consumers view ready-to-drink

options as a snack. Currently, 28% report using beverages

to replace a meal. This is particularly high among millennial

consumers.15


Mindful mashups: Mixing up drinking experiences

Consumers are not only changing why they con-

sume beverages, they are also shifting how and when

they choose to drink them. This is leading manufac-

turers to create new beverage drinking occasions that

meld traditional drink categories, such as positioning

coffee as a substitute for energy drinks, or tea as mix-

ers for alcoholic beverages.16

At the same time, ideas about food and bever-

age products have become increasingly fragmented.

Consumers are looking for beverages that go beyond

what’s expected . . . and they are taking a more mind-

ful approach to beverage consumption. For example,

while per-capita consumption of alcoholic drinks is on

the rise,17 people are also drinking more moderately,

choosing healthier cocktail mixes, low-alcohol beers

and wines, and temporarily abstaining with initiatives

like “Dry January.” Traditional beverage categoriza-

tions are losing relevance, which is blurring the lines

of classic categories and creating opportunities—

especially for coffee and tea manufacturers—to meet

these demands at the expense of soft drinks.18 Hard

seltzers and malt-based RTDs are also gaining trac-

tion as low-calorie, low-sugar substitutes for beer.19

Consumers also see a rising value for authenticity

and craftsmanship in beverages, which is prompting

beverage brands of all sizes to boost their craft cre-

dentials through product innovation, new takes on the

traditional, and emphasis on production process and

detail. For example, spirit-based RTD cocktails are

seeing growing popularity as consumers note their

desire for both convenience and premium cocktails.20

A new beverage culture

Source: The Hartman Group. Modern Beverage Culture 2018.

Mor

e w

ater

20% 18% 16%

Less

sod

a

Less

sug

ar

Less

caf

fein

e

Mor

e nu

triti

ous

Mor

e te

a

Less

pro

cess

ed

Mor

e ex

citin

g

Less

alc

ohol

49%

31% 29%25%

22% 22%

What millennials want from their beverages

On the whole, these young consumers are more likely than

older generations to say that beverages play an important

role in their health and wellness, and that they like beverages

to do something—such as provide energy or nutrients.21 Mil-

lennials also say they use beverages as snacks to replace

meals at rates well above Gen X and Boomers.22

Millennials are the poster children of this new beverage

era. Their demands and aspirations are driving much of this

emerging beverage culture, according to insights from the

Hartman Group’s 2018 "Modern Beverage Culture" report:

Steady sippers

Nearly three in four millennials (73%) always

have a beverage on-hand, compared to Gen Xers, who say this at a rate of 63%, and Baby Boomers, at 58%

Millennials regularly drink about 10 different types of beverages, compared to 8.3 for Gen X and 7.1 for BoomersSource: The Hartman Group. Modern Beverage Culture 2018.

Millennials also have a broad range of aspirations for the

beverages they drink:


Cross-functional beverage brands

Because these trends are largely driven by young consumers, it’s safe to say they will continue to gain momentum.

But for brands, keeping track of these innovations can seem daunting, as new products now focus on a cross-section of fads,

claims and science. A Euromonitor report on beverage innovation suggests that there is a three-step process to success in the

beverage space.23

Identifying how a product can meet key consumer needs or occasions,

including: energy/focus, nourishment/

hydration/replenishment, refreshment/

enjoyment and indulgence/relaxation.

Addressing these needs with in-

gredients that consumers trust, such

as caffeine, green vegetables, herbals,

fiber, water, electrolytes and natural

sweeteners.

Overcoming barriers to purchase, such as products seen as not healthy

enough, unsustainable, containing

unrecognizable ingredients or those

in an inconvenient format. Brands are

now balancing these demands to forge

new territory in beverage development.

Here are a few ways these trends will

play out in the marketplace:

Plant-based powerMore than half of consumers are now

using products made with plant-

based ingredients,24 and this trend is

only going to increase. While some

consumers are just becoming famil-

iar with plant-based proteins, more

than half are now at least open to

buying products with plant protein as

an ingredient.25 Consumers are also

becoming more receptive to a variety

of plant-based protein ingredients,

including corn, pea, chickpea, soy,

quinoa and flax.

Source: Cargill Proprietary Research. Plant-Based Proteins Research—Report on Consumer Attitudes and Usage. November 2018.

68%

57%

54%

47%

49%

44%

35%

20%

14%

50%

58%

48%

43%

35%

27%

8%

3%

Sources of plant protein

66%

INTERESTED IN HAVE TRIED

CORN

PEA

CHICKPEA

SOY

QUINOA

FLAX

CANOLA

ALGAE

LUPIN


Clean and green energy

doing a better job of masking the

aftertaste in products. They can also

mask the taste of vitamins in certain

energy beverage applications.

Offering that inherent energy

boost, coffees and teas will also

continue to be important, and both

have forged new ground by mov-

ing into the cold-brew space. But

brands in these key segments are

also leading the pack by address-

ing sustainability issues with inno-

vative packaging formats, such as

single-use, disposable paper-based

filters that attach over the side of a

cup and allow pour-over-style brew-

ing without using a Chemex or large

filter. This format could prove to be a

convenient, recyclable alternative to

pod-based coffee systems.32

Whatever brands do with regard

to sustainability and label-friendly

ingredients, they should be as trans-

parent as possible and share the

unique stories behind the cup.

Nevertheless, energy beverages

now consistently contain lower

sugar content, and many strive for

fewer artificial ingredients. How-

ever, some drinks still contain less-

popular ingredients, like sucralose,

aceK and aspartame, as formulators

continue to use them to mask vita-

min flavors. As these challenges are

met, energy beverages will increas-

ingly feature “better” energy. Prod-

ucts are now showing up boasting

energy from ingredients like guay-

usa and mate.31

Improvements in natural sweet-

ener options are also helping to

address some of these challenges.

For example, next-generation stevia

sweeteners, made from the sweet-

est components of the stevia plant,

are now produced more sustainably

through the natural process of fer-

mentation. The compounds from

Rebaudioside M and D can reduce

calories by up to 100% while also

Plant-based ingredients are show-

ing up in a variety of different bev-

erages, but particularly sports and

nutrition drinks. In general, plant-

based proteins are well-accepted in

these categories, with more than one

plant-based protein—and pea protein

specifically—showing a particularly

strong impact on purchase.26

Pea protein has become a popular

product ingredient because of its mild

taste and versatility in applications.

Combined with its positive impact on

buying decisions, pea protein is now

a high-growth ingredient on a global

scale, with a 21% CAGR from 2016-

2018 and more than 3,000 product

launches over that time period.27 In

North America alone, it saw 713 new

product launches in 2018 (compared

to only 74 in 2010), with the largest

percentage of those launches (29%)

in the sports nutrition category and

another 5% in soft drinks.28

The acceptance of new protein

sources is leading to plant-based

ingredients showing up in new bev-

erage formats, such potent shots and

tonics.29 For the new beverage con-

sumer, this format offers a lot—it is

easy to incorporate, plant-based, with

healthy ingredients, as well as mini-

mizing sugar and calories while maxi-

mizing function.

Plant-based ingredients will also

play an important role as consum-

ers increasingly turn to beverages as

snacks. Beverages are now bridg-

ing the gap between plant-based

RTDs, foods, vitamins and OTC sup-

plements.30 Products such as add-

ed-value coffees and yogurt-based

fitness nutrition beverages can now

replace a meal or a snack with compa-

rable daily requirements for calories,

fats and fiber.

Energy continues to be an important benefit for consumers, with

59% saying they want to have enough energy for an active lifestyle, and 29%

noting that this urgently needs improvement. Because a truly healthy energy

drink is still a work in progress, it’s likely consumers will continue searching for

a “better” energy drink—and this is already a focus of innovation.


References 1 Mintel. “Consumer Trends in Sweeteners.” February 27, 2019. 2 Ibid. 3 Steingoltz, M; Picciola, M; Wilson, R. LEK Consulting.

“Consumer Health Claims 3.0: The Next Generation of Mindful Food Consumption.”

4 Ibid. Mintel. 5 Ibid. Mintel. 6 International Food Information Council Foundation (IFIC).

2019 Food and Health Survey. 7 Franklin-Wallis, O. “White Gold: The Unstoppable Rise

of Alternative Milks.” The Guardian. Jan. 29. 2019. 8 The Hartman Group. “Modern Beverage Culture 2019.” 9 Ibid. IFIC. 10 Ibid. The Hartman Group. 11 Ibid. IFIC. 12 Euromonitor International. “Hot Drinks: Alcohol, Coffee

and Tea: Blurring Lines and Mindful Drinking.” March, 2019. 13 Ibid. The Hartman Group. 14 Ibid. Euromonitor International. Hot Drinks. 15 World Population Reviews. Alcohol Consumption by

Country 2019. http://worldpopulationreview.com/countries/alcohol-consumption-by-country/

16 Ibid. Euromonitor International. Hot Drinks. 17 Euromonitor International. “RTDs in the U.S.” July, 2019. 18 Ibid. 19 Ibid. The Hartman Group. 20 Ibid. 21 Euromonitor International. “Soft Drinks: Beverage Innovation and

Trend Spotting at Natural Products Expo West.” March, 2019. 22 The Hartman Group. Food & Technology 2019 Report. 23 Cargill Proprietary Research. Plant-based Protein Research—

Report on Consumer Attitudes and Usage. November, 2018. 24 Ibid. 25 Kraft Heinz Plant Protein Overview, July 2019. 26 Ibid. 27 Ibid. Euromonitor International. Soft Drinks. 28 Ibid. 29 Ibid. 30 Ibid. 31 Ibid. 32 Ibid. Euromonitor International. Hot Drinks. 33 Ibid. Euromonitor International. Soft Drinks.

* There is no single definition of “non-GMO” in the USA. Contact Cargill for source and processing information.

Conclusion

The lines are blurring, and beverage innova-

tion is crossing into new territory. The expecta-

tion of healthy beverages is now mainstream . . .

and growing numbers of consumers now seek

products that deliver on health, wellness, func-

tion and sustainability. Concepts like responsi-

ble indulgence and naturally healthy alcohol are

taking root, while coffees and teas will be posi-

tioned more like wine to enhance both beers

and spirits in premium products. Juices with

added-value herbs, vegetables and vinegars,

as well as daily drinks that offer function from

proven ingredients like probiotics, will become a

new norm. But it remains important to consider

that beverages must still offer great taste—and

even a bit of indulgence—as well as good quality

and science-based ingredients. Brands that find

the crossroads of these trends will be rewarded

with premium pricing and product success.

Function plus fun

Consumers are gravitating toward a more holistic, mind-ful approach to beverage consumption, and natural and wellness

drinks are now competing with alcoholic beverages. The win-win

may be to address consumers’ changing and variable aspirations

for beverage consumption with new drinks that mix both function

and fun (think tea-beer combos or hard kombucha). These products

will likely see growing appeal, especially among younger consumers.

This approach may also be a good formula for a much-needed

revamp of kids’ beverages. Big brands like Honest Kids are leading

the charge, with a new focus on reduced sugar and sweetness in

organic juice blends, but other brands are also looking at new ways

to make water appealing, with flavored waters and seltzers in for-

mats and packaging geared toward ease and convenience for kids.33

Learn more about Cargill’s portfolio of ingredients for beverages at cargill.com/beverages and cargill.com/sweeteners.

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