Wine, Beer and Tea Profit from Health

Shrinking Energy Options

Soft Drinks Lower Calories, Fuse Flavors

Wine introduction had a good year in 2011.  Despite slipping somewhat from 2010 numbers, the segment remained strong in terms of product launches.The year saw nearly twice as many wine debuts as 2009 and nearly three times the number reported in 2008, according to Mintel’s Global New Products Database (GNPD). Beverage Information Group notes the wine industry marked its 17th consecutive year of case-gains in 2010, with consumption rising 2.1% to reach 303.1 million 9-liter cases, “directly attributed to the improving economy and the resulting increase in consumer confidence,” according to the 2011 Wine Handbook.

A weak dollar resulted in a good export market, while wine importers faced shrunken margins. The growth in wine sales, overall, has been in on-premise sales, the handbook argues, with restaurants accounting for 44.1% of 2010’s $26.9 billion in wine sales. Eric Schmidt, manager of Information Services for the Beverage Information Group, foresees: “Overall wine consumption is expected to increase over the next five years to 321.9 million cases.”

One of the more interesting wine introductions during the year positioned itself squarely with the vegetarian trend, a stance fairly rare in the segment: Clos LaChance Winery’s “Vegan Vine” eliminated the use of animal byproducts it claims are “common in the wine filtration process” in an effort to educate wine consumers about the use of animal products in winemaking. It points to  ingredients such as isinglass, gelatin, egg whites and casein (milk protein).

Morning Drip

While coffee introductions were a distant second to wine launches, the segment remained the beverage category’s most consistently strong performer. Even considering the dip in 2009, new options kept the segment among the top beverages, in terms of product launches. In terms of sales, coffee in retail channels hit $7.3 billion in 2011—a nearly 17% increase over 2010, according to Packaged Facts’ “Coffee and Ready-to-Drink Coffee in the U.S.” report.

Make no mistake, coffee is a mature market, and sales growth is being driven by consumers willing to pay higher prices for coffee products, the report found. Among the factors behind those price increases were: the rising cost of coffee beans; the “premiumization” of coffee; the still-growing specialty coffee market; and the growth of single-serve coffee packets. However, the growth was not solely on the back of a higher price point for coffee; new private label coffee lines emerged from such retailers as A&P, Dollar General, Trader Joe’s and Wegmans Food Markets in 2011; even Entenmann’s Bakery, best known for its sweet baked goods, introduced a signature collection of flavored coffees and cocoa sold at its own outlets, as well as at Burlington Coat Factory and Dollar Tree. Among the coffee line’s flavors were Cinnamon Crumb Cake, Hazelnut, Vanilla and Chocolate Donut, while the cocoas could be found in original and mint varieties.

Starbucks added several new retail offerings in the coffee segment, including a Blonde Roast described as a lighter roast coffee, but the chain garnered much more attention for certain in-store beverage plans. Namely, the company began testing sales of alcoholic beverages in markets around the country. It piloted the project initially in the Pacific Northwest, then Chicago and is now in select West Coast markets.

When it comes to coffee purchased in restaurants, however, Technomic research found consumers were more apt to turn to regular hot coffee than the specialty drinks which have received so much attention in recent years. According to Technomic, 60% of surveyed consumers reported drinking regular hot coffee or tea within the last month, a figure only behind that of the 62% of consumers who enjoyed a non-diet carbonated soft drink during the same time period. Also interesting was the number of repeat consumers—14% say they are making more purchases of regular hot coffee today than they did two years ago, suggesting they are integrating the purchases into their normal routines—and those looking for healthy benefits from their teas and coffees (73% cited interest in health, antioxidants and green tea among the factors influencing their choice).

Reading the Leaves

At first glance, the number of tea introductions reported in the Mintel GNPD would appear underwhelming, considering the bounty of positive health news surrounding the segment. However, ready-to-drink (RTD) iced teas also capitalized on those factors and, when combined with the number of tea introductions, resulted in a strong overall tea segment. Still, RTD iced tea introductions appeared to be on the down-swing, and new-product introductions in 2011 had yet to regain footing after their 2008 peak.

Tea in general has several strong selling points, not to mention a positive nutrition halo. These factors are behind several introductions from Tea Forté Inc. With coconut emerging in several beverage segments (The Smirnoff Co. even introduced a coconut-flavored vodka in 2011), Tea Forté added the flavor to tea with Coconut Tea, in such offerings as Coconut Mango Colada Green Tea, Coconut Chai Latte Black Tea and Coconut Chocolate Truffle Black Tea.

The company also added a range with a distinct cosmeceutical positioning: Its “Skin-Smart Teas” line (within its Fair Trade teas) capitalizes on the detoxifying effect of the polyphenols  to help fight visible skin aging and can be found in Cucumber Mint with Green Tea, Honey Yuzu with Green Tea, Cherry Marzipan with Green Tea, Swiss Apple with Red Tea and Lychee Coconut with White Tea.

Green tea, of course, has additional health benefits, including the ability to reduce LDL cholesterol levels, according to research released in 2011. A study published in the November Journal of the American Dietetic Association found green tea trimmed 5-6 points more from subjects’ total cholesterol and LDL cholesterol levels compared to placebos and other treatments. The trials tested green tea itself, as well as capsules containing green tea compounds called catechins. Green tea in a cup was more consistently effective than capsules, although the overall benefits were fairly small, researchers noted. However, there was no strong evidence that green tea boosted HDL cholesterol.

Battle Ready-to-Drink

SymphonyIRI data put sales of RTD iced teas at $5.3 billion in 2011, led by Arizona brands’ $595 million (39% market share); and Lipton brands’ $559 million (a 34.8% share of the market). While the former added bold flavors fueled by an aggressive price strategy, the latter has been in a piecemeal process of remaking its trademark teas. With such a one-at-a-time approach, Lipton has rejuvenated its Brisk brand to the point where sales are growing at double-digit rates, according to SymphonyIRI. meanwhile, Lipton’s natural and premium Pure Leaf lines benefited from relaunches supported by The Pepsi Lipton Tea Partnership’s $30-million-plus in advertising over the past two years.

As one partnership flourished, another faced an end. The Nestea license Nestlé S.A. granted to The Coca-Cola Co. in the U.S. will expire at the end of 2012, at which time the pair’s Beverage Partners Worldwide RTD tea joint venture will focus exclusively on Europe and Canada. Coca-Cola’s efforts with its signature soda consisted of a somewhat poorly received (albeit temporary) new can design and a repricing strategy. The white can was intended to reflect the company’s support of polar bear preservation but, instead, managed to upset consumers who apparently confused it with Diet Coke. Coca-Cola’s effort to keep its bottom-most price points below a dollar led to a 12.5oz option priced at $0.89.

The soda giant’s most interesting development, however, is in a soft drink with which it would not be obviously affiliated. Cascal is a Coca-Cola brand and plans to join forces with James Beard Award-winning Andrew Zimmern (of Bizarre Foods fame, or infamy) to bring “a new world of flavor fusions” to carbonated beverages. The announced blends might not reflect the experimental creativity audiences expect from Zimmern, with flavors such as Bright Citrus, Berry Cassis and Fresh Tropical. However, Zimmern’s influence can be seen in the products: Bright Citrus promises notes of lemongrass, tangerine and pineapple; Berry Cassis is to feature blackcurrant, tangerine and lemon; and mango jasmine and kaffir lime highlight the Fresh Tropical variety.

Dr Pepper Snapple Group found less is more with its low-calorie Dr Pepper Ten, and that applied not only to the reduction in calories. The advertising for the new product made a (somewhat) tongue-in-cheek declaration that it was not for all consumers. The 10-calorie soda targeted the 25-34-year-old male consumer and, according to the company, exceeded expectations—to the point that 10-calorie renditions of additional sodas (7Up, Sunkist, A&W, Canada Dry and RC) are already in test. Dr Pepper Snapple also made additional inroads into the energy drink segment (it already owns the Venom line of energy drinks) with its current effort to buy up to 40% of Hydrive Energy LLC.

Sapped Energy

Energy beverages and sports drinks are, at first glance, a fairly interconnected trend. They are marketed to the same youthful consumer base and attempt to capitalize on the desire for “something extra” from a beverage, be it an energizing benefit or simply hydration. However, both segments are underperforming in terms of launches. While energy drink introductions in 2011 far surpassed 2010’s totals, almost matching 2009’s, none of those years approached 2008’s heyday. Manufacturers would appear to realize consumers might be looking for benefits beyond energy, as recent years have seen a spate of what are termed “relaxation” drinks.

“There is clear potential for further growth [in relaxation beverages] in the coming years,” Cecilia Martinez, market analyst at UK beverage research group Zenith Int., explained in a Reuters interview. She noted 36 million gallons of relaxation drinks were sold in 2010, twice 2008’s sales, and predicts volume sales of relaxation drinks will exceed 79 million gallons by 2014. This is still well shy of the 357 million gallons of energy-oriented drinks sold in 2009.

Regardless, the relaxation drink segment was active in 2011‑though Innovative Beverage Group’s “drank Island Time” might not be seen much past a year: Peter Bianchi, company CEO, was quoted to have “developed drank Island Time with the end of the world in mind.” Citing Mayans and other cultures said to believe 2012 would bring the end of the world, Bianchi added, “with all the talk about this topic, I would hope to be on an island somewhere with a ‘drank’ in hand, toes in the sand and a clear mind when the world comes to an end.”

For its take on relaxation, Bebida Beverage Co. is less apocalyptic. Announced in December 2011, its “Relax 5” will be a 2oz relaxation shot with an orange flavor and a blend of supplements, including melatonin. It and other such introductions signal a change in course for the energy drink segment, according to The Values Institute at DGWB, a brand researcher within DGWB Advertising & Communications. “Traditionally marketed toward younger consumers, the energy drink market will slowly wake up to the fact that it has been neglecting an even bigger consumer market in the over-60, retired crowd and become increasingly popular among seniors,” stated a company report.

Bad Sports

The sports drink segment appears not to be living up to its reputation. For the past three years, segment introductions have consistently trailed even launches among the maligned flavored alcoholic beverages, regarded as a fad long past its prime for several years. While sales of sports drinks would suggest the market is far from deteriorating (Beverage Marketing Corp. [BMC] statistics indicate the segment grew 9.4% in volume in 2010 alone), new product launches have primarily capitalized on established brands. In many respects, the sports drink segment is one where debuts cannibalize existing products. Examining the segment’s growth in 2010, Gatorade’s volume sales increased by more than 6%, while Powerade ballooned by 19% over the year, per BMC.

While the number of flavored water introductions have not exactly filled store shelves (Mintel GNPD data show introductions in the segment significantly short of their 2008 peaks), water could be stealing some of sports drinks’ reputation as a healthy means of rehydration. Mycell Technologies Inc./Nature’s Way Purewater Systems Inc.’s Nature’s Omega attempted to make water healthier with OmegaWater, flavored bottled water fortified with 100mg of omega-3s and six vitamins. Coconut water could also be catering to the consumer looking for water with something extra, a market for Açai Roots Inc.’s Açai Juice + Coconut Water, described as an “organic whole food, full of omegas and super hydration.”

Nestlé USA attempted to add an ethnic take on packaged water with three flavored Aguas Frescas beverages in select markets. Aguas Frescas are 100% natural and available in such varieties as Jamaica (made from hibiscus flowers and tamarindo and promoted as an excellent source of vitamin C) and horchata (made from rice and cinnamon, claiming to be an excellent source of calcium).

More vitamin-enhanced beverages made their way to shelves in 2011, including one with a unique delivery method: The Rising Beverage Co.’s Activate features a cap with a moisture-resistant compartment inside, where such vitamins as niacin, thiamin, A, B12, B16, C and E are stored, until the consumer twists the cap and releases the contents into the water below. Such an approach helps ensure the vitamins retain their effectiveness, as they and other ingredients can lose their potency sitting in water. Eruption USA also attempted to capitalize on such an approach, though Eruption Effervescent Energy Drink billed itself as a “dietary supplement that can be used in all liquids.” It actually is a packet of powder with such energizing ingredients as caffeine, taurine, ginseng, inositol and CoQ10, as well as several B vitamins, and vitamins C and D.

Ginseng, B vitamins and caffeine also are found in Celestial Seasonings Kombucha Energy Shots, which joined the still-emerging energy shot trend (Mintel notes the segment grew 30% in 2010-2011) as one of the few with kombucha, the fermented black tea with naturally occurring enzymes, probiotic cultures and beneficial amino acids.

Wine introductions had a good year in 2011. Despite slipping somewhat from 2010 numbers, the segment remained strong in terms of product launches. The year saw nearly twice as many wine debuts as 2009 and nearly three times the number reported in 2008, according to Mintel’s Global New Products Database (GNPD). Beverage Information Group notes the wine industry marked its 17th consecutive year of case-gains in 2010, with consumption rising 2.1% to reach 303.1 million 9-liter cases, “directly attributed to the improving economy and the resulting increase in consumer confidence,” according to the 2011 Wine Handbook.

A weak dollar resulted in a good export market, while wine importers faced shrunken margins. The growth in wine sales, overall, has been in on-premise sales, the handbook argues, with restaurants accounting for 44.1% of 2010’s $26.9 billion in wine sales. Eric Schmidt, manager of Information Services for the Beverage Information Group, foresees: “Overall wine consumption is expected to increase over the next five years to 321.9 million cases.”

One of the more interesting wine introductions during the year positioned itself squarely with the vegetarian trend, a stance fairly rare in the segment: Clos LaChance Winery’s “Vegan Vine” eliminated the use of animal byproducts it claims are “common in the wine filtration process” in an effort to educate wine consumers about the use of animal products in winemaking. It points to  ingredients such as isinglass, gelatin, egg whites and casein (milk protein).

Morning Drip

While coffee introductions were a distant second to wine launches, the segment remained the beverage category’s most consistently strong performer. Even considering the dip in 2009, new options kept the segment among the top beverages, in terms of product launches. In terms of sales, coffee in retail channels hit $7.3 billion in 2011—a nearly 17% increase over 2010, according to Packaged Facts’ “Coffee and Ready-to-Drink Coffee in the U.S.” report.

Make no mistake, coffee is a mature market, and sales growth is being driven by consumers willing to pay higher prices for coffee products, the report found. Among the factors behind those price increases were: the rising cost of coffee beans; the “premiumization” of coffee; the still-growing specialty coffee market; and the growth of single-serve coffee packets. However, the growth was not solely on the back of a higher price point for coffee; new private label coffee lines emerged from such retailers as A&P, Dollar General, Trader Joe’s and Wegmans Food Markets in 2011; even Entenmann’s Bakery, best known for its sweet baked goods, introduced a signature collection of flavored coffees and cocoa sold at its own outlets, as well as at Burlington Coat Factory and Dollar Tree. Among the coffee line’s flavors were Cinnamon Crumb Cake, Hazelnut, Vanilla and Chocolate Donut, while the cocoas could be found in original and mint varieties.

Starbucks added several new retail offerings in the coffee segment, including a Blonde Roast described as a lighter roast coffee, but the chain garnered much more attention for certain in-store beverage plans. Namely, the company began testing sales of alcoholic beverages in markets around the country. It piloted the project initially in the Pacific Northwest, then Chicago and is now in select West Coast markets.

When it comes to coffee purchased in restaurants, however, Technomic research found consumers were more apt to turn to regular hot coffee than the specialty drinks which have received so much attention in recent years. According to Technomic, 60% of surveyed consumers reported drinking regular hot coffee or tea within the last month, a figure only behind that of the 62% of consumers who enjoyed a non-diet carbonated soft drink during the same time period. Also interesting was the number of repeat consumers—14% say they are making more purchases of regular hot coffee today than they did two years ago, suggesting they are integrating the purchases into their normal routines—and those looking for healthy benefits from their teas and coffees (73% cited interest in health, antioxidants and green tea among the factors influencing their choice).

Reading the Leaves

At first glance, the number of tea introductions reported in the Mintel GNPD would appear underwhelming, considering the bounty of positive health news surrounding the segment. However, ready-to-drink (RTD) iced teas also capitalized on those factors and, when combined with the number of tea introductions, resulted in a strong overall tea segment. Still, RTD iced tea introductions appeared to be on the down-swing, and new-product introductions in 2011 had yet to regain footing after their 2008 peak.

Tea in general has several strong selling points, not to mention a positive nutrition halo. These factors are behind several introductions from Tea Forté Inc. With coconut emerging in several beverage segments (The Smirnoff Co. even introduced a coconut-flavored vodka in 2011), Tea Forté added the flavor to tea with Coconut Tea, in such offerings as Coconut Mango Colada Green Tea, Coconut Chai Latte Black Tea and Coconut Chocolate Truffle Black Tea.

The company also added a range with a distinct cosmeceutical positioning: Its “Skin-Smart Teas” line (within its Fair Trade teas) capitalizes on the detoxifying effect of the polyphenols  to help fight visible skin aging and can be found in Cucumber Mint with Green Tea, Honey Yuzu with Green Tea, Cherry Marzipan with Green Tea, Swiss Apple with Red Tea and Lychee Coconut with White Tea.

Green tea, of course, has additional health benefits, including the ability to reduce LDL cholesterol levels, according to research released in 2011. A study published in the November Journal of the American Dietetic Association found green tea trimmed 5-6 points more from subjects’ total cholesterol and LDL cholesterol levels compared to placebos and other treatments. The trials tested green tea itself, as well as capsules containing green tea compounds called catechins. Green tea in a cup was more consistently effective than capsules, although the overall benefits were fairly small, researchers noted. However, there was no strong evidence that green tea boosted HDL cholesterol.

Battle Ready-to-Drink

SymphonyIRI data put sales of RTD iced teas at $5.3 billion in 2011, led by Arizona brands’ $595 million (39% market share); and Lipton brands’ $559 million (a 34.8% share of the market). While the former added bold flavors fueled by an aggressive price strategy, the latter has been in a piecemeal process of remaking its trademark teas. With such a one-at-a-time approach, Lipton has rejuvenated its Brisk brand to the point where sales are growing at double-digit rates, according to SymphonyIRI. meanwhile, Lipton’s natural and premium Pure Leaf lines benefited from relaunches supported by The Pepsi Lipton Tea Partnership’s $30-million-plus in advertising over the past two years.

As one partnership flourished, another faced an end. The Nestea license Nestlé S.A. granted to The Coca-Cola Co. in the U.S. will expire at the end of 2012, at which time the pair’s Beverage Partners Worldwide RTD tea joint venture will focus exclusively on Europe and Canada. Coca-Cola’s efforts with its signature soda consisted of a somewhat poorly received (albeit temporary) new can design and a repricing strategy. The white can was intended to reflect the company’s support of polar bear preservation but, instead, managed to upset consumers who apparently confused it with Diet Coke. Coca-Cola’s effort to keep its bottom-most price points below a dollar led to a 12.5oz option priced at $0.89.

The soda giant’s most interesting development, however, is in a soft drink with which it would not be obviously affiliated. Cascal is a Coca-Cola brand and plans to join forces with James Beard Award-winning Andrew Zimmern (of Bizarre Foods fame, or infamy) to bring “a new world of flavor fusions” to carbonated beverages. The announced blends might not reflect the experimental creativity audiences expect from Zimmern, with flavors such as Bright Citrus, Berry Cassis and Fresh Tropical. However, Zimmern’s influence can be seen in the products: Bright Citrus promises notes of lemongrass, tangerine and pineapple; Berry Cassis is to feature blackcurrant, tangerine and lemon; and mango jasmine and kaffir lime highlight the Fresh Tropical variety.

Dr Pepper Snapple Group found less is more with its low-calorie Dr Pepper Ten, and that applied not only to the reduction in calories. The advertising for the new product made a (somewhat) tongue-in-cheek declaration that it was not for all consumers. The 10-calorie soda targeted the 25-34-year-old male consumer and, according to the company, exceeded expectations—to the point that 10-calorie renditions of additional sodas (7Up, Sunkist, A&W, Canada Dry and RC) are already in test. Dr Pepper Snapple also made additional inroads into the energy drink segment (it already owns the Venom line of energy drinks) with its current effort to buy up to 40% of Hydrive Energy LLC.

Sapped Energy

Energy beverages and sports drinks are, at first glance, a fairly interconnected trend. They are marketed to the same youthful consumer base and attempt to capitalize on the desire for “something extra” from a beverage, be it an energizing benefit or simply hydration. However, both segments are underperforming in terms of launches. While energy drink introductions in 2011 far surpassed 2010’s totals, almost matching 2009’s, none of those years approached 2008’s heyday. Manufacturers would appear to realize consumers might be looking for benefits beyond energy, as recent years have seen a spate of what are termed “relaxation” drinks.

“There is clear potential for further growth [in relaxation beverages] in the coming years,” Cecilia Martinez, market analyst at UK beverage research group Zenith Int., explained in a Reuters interview. She noted 36 million gallons of relaxation drinks were sold in 2010, twice 2008’s sales, and predicts volume sales of relaxation drinks will exceed 79 million gallons by 2014. This is still well shy of the 357 million gallons of energy-oriented drinks sold in 2009.

Regardless, the relaxation drink segment was active in 2011‑though Innovative Beverage Group’s “drank Island Time” might not be seen much past a year: Peter Bianchi, company CEO, was quoted to have “developed drank Island Time with the end of the world in mind.” Citing Mayans and other cultures said to believe 2012 would bring the end of the world, Bianchi added, “with all the talk about this topic, I would hope to be on an island somewhere with a ‘drank’ in hand, toes in the sand and a clear mind when the world comes to an end.”

For its take on relaxation, Bebida Beverage Co. is less apocalyptic. Announced in December 2011, its “Relax 5” will be a 2oz relaxation shot with an orange flavor and a blend of supplements, including melatonin. It and other such introductions signal a change in course for the energy drink segment, according to The Values Institute at DGWB, a brand researcher within DGWB Advertising & Communications. “Traditionally marketed toward younger consumers, the energy drink market will slowly wake up to the fact that it has been neglecting an even bigger consumer market in the over-60, retired crowd and become increasingly popular among seniors,” stated a company report.

Bad Sports

The sports drink segment appears not to be living up to its reputation. For the past three years, segment introductions have consistently trailed even launches among the maligned flavored alcoholic beverages, regarded as a fad long past its prime for several years. While sales of sports drinks would suggest the market is far from deteriorating (Beverage Marketing Corp. [BMC] statistics indicate the segment grew 9.4% in volume in 2010 alone), new product launches have primarily capitalized on established brands. In many respects, the sports drink segment is one where debuts cannibalize existing products. Examining the segment’s growth in 2010, Gatorade’s volume sales increased by more than 6%, while Powerade ballooned by 19% over the year, per BMC.

While the number of flavored water introductions have not exactly filled store shelves (Mintel GNPD data show introductions in the segment significantly short of their 2008 peaks), water could be stealing some of sports drinks’ reputation as a healthy means of rehydration. Mycell Technologies Inc./Nature’s Way Purewater Systems Inc.’s Nature’s Omega attempted to make water healthier with OmegaWater, flavored bottled water fortified with 100mg of omega-3s and six vitamins. Coconut water could also be catering to the consumer looking for water with something extra, a market for Açai Roots Inc.’s Açai Juice + Coconut Water, described as an “organic whole food, full of omegas and super hydration.”

Nestlé USA attempted to add an ethnic take on packaged water with three flavored Aguas Frescas beverages in select markets. Aguas Frescas are 100% natural and available in such varieties as Jamaica (made from hibiscus flowers and tamarindo and promoted as an excellent source of vitamin C) and horchata (made from rice and cinnamon, claiming to be an excellent source of calcium).

More vitamin-enhanced beverages made their way to shelves in 2011, including one with a unique delivery method: The Rising Beverage Co.’s Activate features a cap with a moisture-resistant compartment inside, where such vitamins as niacin, thiamin, A, B12, B16, C and E are stored, until the consumer twists the cap and releases the contents into the water below. Such an approach helps ensure the vitamins retain their effectiveness, as they and other ingredients can lose their potency sitting in water. Eruption USA also attempted to capitalize on such an approach, though Eruption Effervescent Energy Drink billed itself as a “dietary supplement that can be used in all liquids.” It actually is a packet of powder with such energizing ingredients as caffeine, taurine, ginseng, inositol and CoQ10, as well as several B vitamins, and vitamins C and D.

Ginseng, B vitamins and caffeine also are found in Celestial Seasonings Kombucha Energy Shots, which joined the still-emerging energy shot trend (Mintel notes the segment grew 30% in 2010-2011) as one of the few with kombucha, the fermented black tea with naturally occurring enzymes, probiotic cultures and beneficial amino acids.