The draw to indulge in a guilt-free treat without repercussion is nothing new. In the beverage world, consumers once flocked to sugar-free Diet Coke when it was introduced in 1982, and the beverage remains a fixture of the company's product line.
Now, cardiovascular research highlights the role sugar-sweetened beverages play in chronic disease, and today's health-conscious consumers are more informed — and more focused on health and well-being, particularly when it comes to their beverage choices. Whether they're addressing physical fitness, emotional well-being, or concerns about the planet, consumers are drinking with a purpose.
Today's beverage manufacturers are capitalizing on the diversification of the industry by maintaining a pipeline of new products and reformulations — including plant-based milks, functional beverages, and better-for-you adult beverages — that address consumers’ evolving preferences. They're also acquiring other businesses already operating in these emerging spaces. And as consumer demand continues to evolve, here are some key trends developing in the beverage industry.
Plant-based dairy alternatives
Consumers are increasingly seeking alternatives to animal-based dairy products out of concern for their own health, concerns about animal welfare, and a growing awareness of the impact of animal farming on the environment. Data from Good Food Institute shows that plant-based milk alternatives are now a $2.5 billion category, with a growth of 20% in 2020.
Examples of plant-based dairy alternatives include fast-growing brands such as Oatly, which inked a nationwide distribution deal with Starbucks. The coffee chain is seeking to address the environmental impact of bovine dairy products and meet consumer demands for plant-based milks.
Other plant-based milk alternatives, including those made from soy, almonds, hemp and other sources, have also been gaining traction in both retail and foodservice applications.
Functional beverages
Functional beverages are also seeing strong sales growth, with ingredients such as adaptogens, probiotics, and nootropics (compounds or supplements that enhance cognitive performance) increasingly appearing in mainstream drinks. One example is Poppi, a prebiotic soda infused with apple cider vinegar, designed for gut health. Its brightly colored cans and celebrity endorsements have made it a top-selling brand in the category.
Growing consumer demand for functional beverages — which include energy drinks and Kombucha — can be seen in robust projections of market growth. According to a study by Simporter, (data from over 2,200 products, 1.7 mentions on social media, and 528 brands) demand for traditional beverages with a twist has grown by up to 31% since May 2020. This includes soft drinks, sodas, coffee, and water sold with additives such as macronutrients (plant-based protein, fiber), micronutrients (vitamins, minerals, sleep aids), reduced sugar, and zero artificial ingredients.
“The pandemic really accelerated demand for functional products as concerns increased around immunity, digestion, cognitive health, and more,” Rebecca Shurhay, a marketing analyst at Flavorchem told Food & Beverage Insider. “Consumers are embracing holistic lifestyles that encompass more than just diet and exercise, and they’re turning to foods and drinks to address their needs.”
Adult beverage trends
Adult beverage categories are in a state of flux. In part, that is the result of falling demand for alcohol. In the U.S., for example, Gallup reported in 2021 that 60% of U.S. adults drink alcoholic beverages, down from 65% in 2019. In response, beverage companies are releasing new alcoholic drinks in hopes of replicating the recent success of hard cider. For example, the brewer Molson-Coors released its own whiskey last year. Pepsi and Boston Beer, the brewer of Sam Adams, partnered to release Hard Mountain Dew and Bud Light Seltzer recently unveiled a hard soda.
Among the most significant trends in adult beverages is the growth of the “sober-curious” consumer segment. A good example of this trend is the increasing interest in "dry January," where people abstain from alcohol in the first month of the new year. A NielsenIQ survey from October 2021 reports that alcohol sales dropped by 6.7% in the first two weeks of January while sales of non-alcoholic drinks rose by 19%. The same survey shows that 22% of respondents were cutting back on their alcohol consumption.
Recently, non-alcoholic spirits companies have emerged, such as Seedlip, which offers sophisticated, non-alcoholic spirits. Other brands in the space include Sober Carpenter and Surreal, offering zero-alcohol beers, and Ritual and Damrak, which offer “virgin” versions of tequila, gin, and vodka, for example.
The market for beverages is rapidly diversifying to meet consumer demands for health and wellness and new dietary regimens. Beverage manufacturers are accommodating these trends by innovating with new products and reformulations that meet these evolving demands, and by making acquisitions in these spaces to gain expertise and leverage the entrepreneurial enthusiasm that start-up brands can bring.