Drink It Up: Beverage Innovation in Foodservice

Posted on August 30, 2018 by Caitlin Orosz under Foodservice 101

Hot and cold beverages accounted for $181 billion in annual sales in 2016. Beverage innovation is key in keeping up with changing consumer behavior. David Henkes of Technomic explains that beverages account for $1 out of every $5 consumers spend away from home.

A beverage is a big part of what makes your meal’s experience complete. Alice Crowder, VP of Marketing at Krystal Company says, “The more … differentiating the beverage, the more it adds to the meal experience, and encourages guests to return. A good beverage program has choices that can stand alone.”

It’s time for restaurant operators and foodservice manufacturers to appreciate how innovation impacts consumer satisfaction, and ultimately, the bottom line.

Innovation is more important than ever before, says Amy Vincent of the Coca-Cola Company. Today, consumers want a nutritious, delicious beverage – they want options, they want an experience. Vincent adds, “Sixty-six percent of consumers say that a restaurant that offers interesting food and drink specials would tempt them to try the restaurant for the first time.”

What’s Trending in Beverage Sales

Millennials drive a big share of today’s overall beverage consumption. Technomic’s 2016 Beverage Consumer Trend Report learned that respondents in the 18-34 age group purchase drinks away from home four times a week.

Beverage only sales are on the rise, as more consumers seek out indulgent, healthy or specialty drinks. Chains like Dunkin’ Donuts and Jamba Juice might test vending machines for dispensing fresh hot or iced beverages, reports FoodService Director.

Looking for Non-Sugary Drinks

Soda consumption has declined for the 10th year in a row amid concerns over its ties to obesity, and Beverage Digest says the typical American’s cola intake has fallen to its lowest level since 1986. Diet soda isn’t perceived to be healthy anymore. 60.7 percent of children and 50 percent of adults drank a sugary beverage on any given day in 2014, down from 79.7 percent of children and 61.5 percent of adults in 2003.

“Look at coffee,” said Andy Dratt, Chief Commercial Officer for Imbibe Magazine. “Stores are built around made-to-order. We are seeing this in other areas, too. Coke has Freestyle and Pepsi has Spire. We are seeing these products that offer customization, but also provide manufacturers with a lot of data they can learn from.” Generally, product innovation focuses on cocktails and food, and beverages are an afterthought.

“Major trends in the market include cold-brew coffee, flavored teas, as well as more complex flavor combinations in beverages,” says Pam Everett of S&D Coffee & Tea.

Iced coffee is up 23 percent and iced tea comprises 70 percent of beverage sales at limited service concepts. Tea producers are adding functional ingredients like matcha and B12 vitamins to boost sales among health-conscious consumers.

Another big trend? Kombucha. 51 percent of US adults aged 25-34 are drinking the fermented beverage. Kombucha is touted for a variety of health benefits including detoxification, joint health, digestion / gut health, and immune-boosting properties, Mintel reports.

Undeniably, sparkling water is more popular than ever. People are turning to the fizzy drink as a healthier option from soda.

Seltzer Water On Top

In the past five years, seltzer sales are up 42 percent. Americans are drinking 170 million gallons of the bubbly beverage every year, according to NPR. “Consumers like bubbles, they want carbonation, but they want it in a healthier product,” said Gary Hemphill, Managing Director of Research for Beverage Marketing Corp.

National brand names want to mimic the success of LaCroix, a sparkling water brand known for its fruity flavors in pastel-colored cans. (Source)

  • Nestle. Nestle’s Waters division rolled out new sparkling versions of its six regional spring water brands. While the brands’ water sales top $2.6 billion, only $103 million of that total comes from sparkling.
  • PepsiCo. Having already added a sparkling version to its Aquafina line, Pepsico promotes a new sparkling water product called Bubly. Pepsi announced in mid-August that it’s buying SodaStream for  $3.2 billion.
  • Coca-Cola. The soft-drink giant acquired sparkling mineral water brand Topo Chico for $220 million in September 2017.
  • Anheuser-Busch InBev. In August, the brewer bought organic energy-drink maker Hiball Energy, whose portfolio includes Alta Palla sparkling waters and juices.

 

Nearly 574 million gallons of sparkling water — $6.1 billion worth — were sold in the U.S. in 2016, according to Beverage Marketing. And that figure was expected to reach 790 gallons and more than $8.5 million in 2017. Compare that to about 263 million gallons and $2.6 billion in 2011.

“Bottled water overall as a category has been on this remarkable growth juggernaut since the early ’90s. Mostly, that’s been driven by still water, but in recent years, sparkling water has caught fire,” Beverage Marketing’s Hemphill said.

Bottled water overtook carbonated soft drinks as America’s favorite drink for the first time in 2016 — 12.8 billion gallons sold versus 12.4 billion, Beverage Marketing reported.

Conclusion

Technomic reports that pricing and taste remain the top two attributes operators emphasize when sourcing their beverage products.

Beverages account for 30 percent of a typical foodservice operator’s profit. Fast Casual reports that the average American experiences 22 away-from-home situations every week in which he or she could purchase a beverage or food – that’s about 5 billion situations every week. Only half of those 5 billion situations include a beverage, whether with food or not. The other half — when no beverage is consumed —  is an untapped opportunity for foodservice operators.

Beverages influence a consumer’s choice in operator nearly half of all away-from-home eating and/or drinking occasions. By offering food and beverage pairings on their menus, operators have a clear, significant opportunity for growth.