Thursday, October 26, 2017

Top Non-Alcoholic Drinks Trends Seen at 2017 NACS Show

The National Association of Convenience Stores hosted its NACS Show from October 17 - 20, 2017 at Chicago’s McCormick Place. In this article, I will highlight noteworthy trends in non-alcoholic drinks that I saw at the show – RTD coffee, cleaner energy drinks, zero-calorie sparkling waters, and unsweetened & lower-sugar RTD teas. I will be writing a separate article on food trends from the show.

1. RTD Coffee Outperforms Other Non-Alcoholic Drinks in C-Stores

Non-alcoholic drinks as a whole have not been doing well in convenience stores in 2017 according to figures from IRI cited by CSP Dollar sales of carbonated beverages, the largest category, declined by 3.3% in the 24-week period ended June 11, 2017. However, three categories did show growth – RTD coffee, RTD tea, and bottled water – in c-stores. Sales of RTD (ready-to-drink) coffee/tea and bottled water grew by 4.6% and 1.3%, respectively, in c-stores in the same time period. Given the strong performance of RTD coffee, it is not a surprise that many exhibitors offered RTD coffee products at the NACS Show. In fact, two of the top 10 rated products (based on scans by retailer attendees) in the show’s Cool New Products Preview Room were cold brew coffees. The number one product out of about 320 items was JAVA HOUSE Authentic Cold Brew Coffee from Heartland Food Products Group (available in both concentrate and RTD bottle formats) while the number three product was STOK Cold Brew Coffee Bulk (in 1.5 gallon RTD bags to be used in a proprietary dispenser) from DanoneWave Away From Home. RTD coffee, especially the cold brew variants, have shown strong growth as they meet consumers’ desires for healthy, flavorful, and convenient energy with a list of simple, easy to pronounce ingredients.

Cold brew coffee has been one of the fastest growing subsegments within coffee in both retail and foodservice outlets because the process of steeping coffee grounds in cold water for 10+ hours creates a coffee with a smoother, less bitter taste. At the show, Chameleon Cold-Brew Coffee introduced a new refreshing twist to cold brew coffee with its Sparkling Cold-Brew Coffee line in Ginger, Citrus, Spiced Vanilla, and Black varieties in 12oz cans to its USDA (United States Department of Agriculture) Certified Organic cold brew coffee line. New Age Beverages introduced its Marley Cold Brew Coffee in 11oz cans as a more premium offering to its existing Marley One Drop line. The sell sheet for Marley Cold Brew states that the coffee “is steeped for 16 hours in stainless steel wine tanks, then pressed and filtered for clarity”.

Seeing the trend in cold brew coffee-based cocktails, Café Agave introduced Café Agave Spiked Cold Brew in 187ml (6.3oz) cans. The Spiked Cold Brews are made with Arabica coffee, contain 10% alcohol by volume, and are “Wine License Approved” according to the sell sheet.

Innovation in RTD coffee is not limited to small companies. The largest player in U.S. RTD coffee is the North American Coffee Partnership (NACP) created in 1994 between PepsiCo and Starbucks that sells the number one Starbucks Frappuccino brand.  At the NACS Show, NACP launched the Starbucks Frappuccino Chilled Coffee Drink with Almondmilk in vanilla and mocha varieties to reach younger consumers who are increasingly looking for plant-based options. NACP added two new flavors – Vanilla & Fig and Unsweetened Black – to its Starbucks Cold Brew line and will be launching Starbucks Doubleshot Coffee Smoothies using bananas and almond milk in Dark Chocolate Banana and Vanilla Honey Banana varieties.

The Coca-Cola Company (TCCC) was a later entrant to the U.S. RTD coffee market with the creation of its global joint venture with Italy’s illycaffè SpA in 2008 but now aims to become a bigger player in RTD coffee with a multi-brand RTD coffee strategy. In early 2017, TCCC launched the Dunkin’ Donuts bottled Iced Coffee beverages in partnership with the donut & coffee shop chain and added Cold Brewed Coffee varieties to its Gold Peak RTD tea line. At the show, TCCC introduced McCafé Frappés  – RTD coffees (in 13.7oz PET bottles) created in partnership with the McDonald’s restaurant chain in Caramel, Mocha and Vanilla flavors. Additionally, TCCC owns 16.7 percent of Monster Beverage Corp. who makes Java Monster RTD coffees that combine coffee, dairy, and Monster’s energy drink ingredients. Monster launched two new RTD coffee lines at the show that are more premium than Java Monster. Espresso Monster is billed as “3 shots of espresso with a shot of cream” and contains taurine and B vitamins in an 8.4oz can. Caffé Monster Energy Coffee comes in 13.7oz glass bottles.

2. Cleaner Energy Drinks and Caffeinated Waters

Energy drinks are seeing some of their consumers move toward alternatives such as RTD coffee and caffeinated water as consumers show a preference for products with “clean labels” – a short list of pronounceable ingredients. Sales of energy drinks declined by 0.9% in c-stores in the 24-week period ended June 11, 2017. Energy shots such as5-Hour Energy are struggling, with dollar sales down 2.3% for 52 weeks ended December 25, 2016 per IRI data for U.S. convenience stores. Forto Coffee aims to be a bridge between RTD coffee and energy shots with its USDA Certified Organic, Fair Trade Certified, cold brew formula that contains a short list of ingredients including water, coffee extract, milk, cane sugar, natural flavors, caffeine, and baking soda. The company introduced two new flavors - Hershey's Chocolate in partnership with the confectionary company and Pure Black Espresso. Forto Coffee is billed as a “Ready-to-Drink Energy Shot” in a 2oz shelf-stable format.

Makers of “clean” energy drinks aim to take share from Red Bull and Monster Energy by offering a shorter ingredient list, using organic or natural ingredients, and not using preservatives. Organic energy drinks pioneers – Hiball Energy (acquired by Anheuser-Busch in July 2017), GURU Energy Drink, and Steaz (purchased by Novamex in August 2016) sampled their products at the show.

Organic energy drinks are becoming more mainstream as evidenced by PepsiCo introducing AMP Organic Energy Drinks at the show. PepsiCo also introduced Yachak Organic Yerba Mate that contains 160mg of caffeine per 16oz can and is USDA Certified Organic and fair for life fair trade certified. New Age Beverages introduced Marley Yerba Mate that is also USDA Organic. These sweetened yerba mate products could be considered organic energy drinks or RTD teas.

Other energy drinks companies are positioning their products as natural and using unique packaging to stand out on shelves. +Red Elixir comes from a fashion background as the founder of Rock & Republic and knows how to make a splash. The company hosted a musical performance by CeeLo Green at its booth to promote its line of beverages - Power Elixir, Power 20 Elixir, Rescue Elixir - that are “made with 100% natural flavors, no artificial sweeteners or colors” and the addition of red marine algae. +Red Elixir’s proprietary 12oz cans with a cap do not look like other energy drinks.

UPTIME Energy markets its energy drink as “premium energy with a balanced boost” with a “clean ingredient panel…featuring one fifth the ingredients of other leading energy drinks”. Part of the premium positioning for UPTIME Energy is reflected in the use of tall, slim 12oz resealable aluminum bottles.  

In addition to their Avitae original and flavored caffeine + water and sparkling caffeine + water, Avitae offered their AvitaeXR Extended Release Caffeine product that contains 250mg of caffeine. After the initial dose of 125mg of caffeine, the ZUMXR proprietary energy blend in a caffeine bead format slowly releases 125mg of caffeine over three to four hours. The clear 12oz PET cans allow the consumer to see the caffeine beads after the can is shaken.

In addition to coffee shots and clean energy drinks, companies are also using caffeinated waters to reach out to consumers who want a boost of energy with minimal ingredients. At the NACS Show, Avitae, Hiball Energy, Hint Water, and Klarbrunn offered their caffeinated waters that provide consumers an alternative to colas and energy drinks for the afternoon slump. Klarbrunn introduced BUBBL’R Antioxidant Sparkling Water to appeal to multiple groups - Generation Z (born 1995-2010), millennials (born 1980-1995), and Generation X (born 1965-1980) mothers for the family. A 12oz can of BUBBL’R contains 70mg of caffeine (about one cup of coffee) from white tea extract and green coffee bean extracts, A and B vitamins, and 5 calories. The company says that BUBBL’R is USDA compliant for high schools.

3. Zero-Calorie Sparkling Waters 

In addition to caffeinated waters, zero-calorie sparkling waters are driving growth in bottled waters as health conscious consumers seek out alternatives to carbonated soda. National Beverage Corp.’s La Croix is the most popular flavored, unsweetened sparkling water in the U.S. and continues to show strong growth. Industry players believe that sparkling water has a lot more room to grow. The Coca-Cola Company announced its acquisition of Mexico’s Topo Chico sparkling mineral water brand on October 2. Topo Chico offered Topo Chico Twist of Lime and Topo Chico Twist of Grapefruit in 12oz glass bottles at the show. Nestlé Waters offered its regional (including Ice Mountain Sparkling, Poland Spring, and Zephyrhills) sparkling waters in 12oz cans as well as PET bottles. Previously, the company offered these sparkling waters in PET bottles. Nestlé’s sell sheet citing Nielsen Homescan data stated that new entrants comprise 64% of sparkling waters category growth and that most of these shoppers want flavor options. Talking Rain Beverage Company introduced a new flavor – Ginger Lime – to its popular sweetened zero-calorie Sparkling Ice line at the show. VOSS Water of Norway introduced a new Lime Mint flavor to its sparkling water line. Another premium flavored sparkling water at the show was Hiball Energy's zero-calorie Alta Palla Sparkling Waters that are USDA Organic.

4. Unsweetened and Lower-Sugar RTD Teas

Consumers looking for alternatives to carbonated soda are turning to unsweetened or lower-sugar RTD teas. While few companies offered unsweetened RTD tea options five years ago, consumers now have several options to choose from. At the NACS Show, The Coca-Cola Company (TCCC) introduced Gold Peak in Unsweetened Raspberry and Unsweetened Lemon as well as a Slightly Sweet Lemon Tea in 18.5oz PET bottles. Honest Tea, maker of USDA Organic and Fair Trade Certified RTD teas, introduced Unsweet Mint Green Tea and offered Moroccan Mint Tea with 8 grams of sugar and 35 calories per 16 oz glass bottle. According to TCCC, unsweetened tea is the fastest growing segment in RTD tea and mint flavored teas are growing at 20 percent annually. Sugar content is the first point of decision-making in RTD tea purchases according to  Scott Tillman, Director, Retail Channel Strategy & Commercialization for TCCC. Fuze will also be relaunching as Fuze Antioxidant & Vitamin Infused in January 2018, with two of the four new flavors at 10 calories per 16.9oz bottle.

Bai Brands LLC introduced new packaging for its 5-calorie (and 1 gram of sugar) Bai Antioxidant SUPERTEA at the show. Bai, acquired by the Dr. Pepper Snapple Group in January 2017, is best known for its 5-calorie enhanced flavored waters. With the packaging redesign that emphasizes SUPERTEA, the company wants retailers to display its SUPERTEA next to other RTD teas instead of with Bai’s functional waters. 

Argo Tea, owner of a tea cafe chain, offered several RTD teas at its booth including Unsweetened Tea, Signature Drink Originals, and Teappuccinos made with almond milk. The company's newest offering is Cold Brew RTD teas that contain 20 calories (and use fair trade cane sugar) per 13.5oz glass bottle. The Cold Brew RTD teas are produced using a cold brew process and are being rolled out to Whole Foods Market stores this month. The three varieties are Armenian Mint, First Flush Darjeeling, and First Flush Gyokuro. 

After test marketing its Teavana Craft Iced Tea in select markets beginning in February 2017, Starbucks and its manufacturing and distribution partner Anheuser-Busch launched the super premium RTD tea line at the NACS Show. Two of the six varieties are unsweetened – Meyer Lemon Black Tea and Strawberry Apple Green Tea.


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