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Beyond Soda: How and Why Your Beverage Options Are Exploding

Beyond Soda: How and Why Your Beverage Options Are Exploding

Postby smix » Sun Aug 26, 2018 4:30 pm

Beyond Soda: How and Why Your Beverage Options Are Exploding
The Wall Street Journal

URL: https://www.wsj.com/articles/beyond-sod ... 1535284800
Category: Business
Published: August 26, 2018

Description: Drink makers create new products, like alcoholic kombucha, seeking sales growth but causing confusion among consumers and grocers
When Colorado-based Lucky’s Market first started carrying kombucha and cold brew coffee in its stores about two years ago, the grocer wasn’t sure where the drinks belonged, so it stocked them in small coolers next to the checkout aisle. Consumers bought them up so quickly that employees across the chain’s 31 stores had to constantly replenish the coolers. Eventually, the stores carved out space for the popular new drinks in the juice section by eliminating gallon jugs of juice and other slow-selling sizes, according to Andrew Vialpando, the chain’s vice president of center-store merchandise. A proliferation of beverages that don’t fit within traditional drink categories is causing problems for retailers, confusion for shoppers and a challenge for manufacturers that are trying to keep pace with changing consumer tastes. No longer do soda companies, coffee companies and alcohol companies stay in their lanes. Coca-Cola Co. and PepsiCo Inc. have expanded into dairy, tea, coffee, juice, soy milk, bottled water and coconut water.PepsiCo last week announced a deal to buy seltzer-machine maker SodaStream International Ltd. Dr Pepper Snapple Group Inc. is now more of a coffee company, recently renamed Keurig Dr Pepper. Anheuser-Busch InBev , the world’s largest beer brewer, is selling ready-to-drink ice tea and organic caffeinated sparkling water. As they expand onto others’ turf in search of growth, the lines between the companies and their products are blurring. The pressure is greatest on the big makers of soft drinks and beer, which are jockeying for market share in new categories mostly dominated by upstarts as Americans’ thirst for lager and sugary soda continues to wane. Shifts in the beverage aisle are being driven by people like Lisa Fink, who used to drink black coffee in the morning and again in the afternoon. Now, the 46-year-old personal trainer in Thousand Oaks, Calif., drinks chai tea with bone broth, protein powder and coconut creamer—a drink that serves as breakfast—and switches to tea and sparkling water for the rest of the day. Sometimes, as a treat, she has a can of Zevia cola made with stevia, a zero-calorie, plant-based sweetener. Figuring out what people want to drink is tricky. The answer, for many companies, has been to mix their traditional beverages with popular new ingredients to create hybrids. PepsiCo’s Tropicana offers “Coco Blends,” fruit juices mixed with coconut water, and “Tropicana Essentials Probiotics,” a line of juice made with the type of active cultures normally found in yogurt. All the new varieties have created confusion for retailers and the shoppers who traverse the supermarket trying to find their favorite drinks. Linda Disney was shopping at a Vons store in Thousand Oaks on a recent day, looking for four-packs of bottled Starbucks Frappuccino, which were no longer in the same spot. “They’re always moving things around,” said Ms. Disney, 77. “I’m sure there’s some logic to it, but as a consumer it’s confusing.” That store has seven different sections devoted to cold drinks, in addition to coolers at every checkout lane stocked with bottles of soda, iced coffee and energy drinks. There is even a display of bottled sparkling water near the gourmet cheese case. Mr. Vialpando, of Lucky’s, which operates supermarkets in 11 states, recently was trying to decide where to put new alcoholic varieties of kombucha, a fermented tea drink. He came up with the idea of creating a divider between the alcoholic and nonalcoholic varieties when the grocery director pointed out that an underage customer could easily confuse the two and accidentally buy one containing alcohol. Mr. Vialpando decided to stock the alcoholic kombucha next to the beer. The introduction of so many new drinks isn’t smooth for the manufacturers, either. PepsiCo’s outgoing Chief Executive Indra Nooyi more than a decade ago staked her career—and the company’s future—on a plan to expand the company’s portfolio into healthier, more nutritious products. Then sales of its core brands tumbled, and Ms. Nooyi had to fend off an attempt by an activist investor to break up the company. More recently, the soda-and-snacks giant has been under pressure to restructure its U.S. beverage business after it shifted too much marketing money and shelf space to newly launched brands in hybrid categories such as Izze Fusions, a combination of fruit juice and soda. Market share fell for Pepsi-Cola, Mountain Dew and Gatorade. “The consumer is moving to this triangle of taste, nutrition and convenience where I think we are in a very sweet spot,” PepsiCo’s incoming CEO Ramon Laguarta said in a recent video to staff. “Yes, there are some headwinds coming our way, but also a lot of tailwinds.” Rival Coca-Cola Co. , by contrast, was criticized for taking too long to acknowledge public-health concerns about the links between sugary sodas, obesity and diabetes. Last year, the new CEO, James Quincey, set a goal for Coca-Cola to meet consumers’ needs every time they want something to drink. “We’re trying things; we’re testing things,” Mr. Quincey said in an interview. Consumers are looking for a greater diversity of beverages, he said. That has led beverage makers to revise their approach to marketing and merchandising. And it has prompted them to branch out into different product categories. “We’ve stopped thinking in terms of category and more in terms of need states,” such as hydration and fuel, said Meghann Seidner, vice president of marketing for Coca-Cola’s Zico coconut water brand. Zico in March launched a new line of “Coco-Lixirs” made from coconut water, cold-pressed juice and ingredients like ginger and turmeric. This year the maker of Keurig coffee machines took over Dr Pepper Snapple Group Inc. for $26 billion, the biggest nonalcoholic drinks deal on record, according to Dealogic. The rationale behind the deal, executives said, was to be able to sell a wider variety of beverages in multiple retailers. Coffee makers are adding sparkling water to cold brews and, separately, experimenting with ingredients foreign to coffee, such as honeysuckle, sour cherries and bitters. La Colombe’s latest drink, “The Shandy,” is a canned nitro cold brew made with lemonade. The coffee company is calling the drink a “hybrid” of coffee and juice, and when it makes its way to retailers, CEO Todd Carmichael said he’s not sure where in stores it will be displayed. Beer companies, too, are trying to reinvent themselves. Anheuser-Busch last year bought Hiball Inc., a San Francisco-based startup making organic caffeinated sparkling water and fruit-juice soda blends. Sometimes, though, companies go too far in trying to create new beverage categories. Coca-Cola’s Honest Tea in 2011 launched a line of tea brewed with cacao called CocoaNova and didn’t properly explain whether retailers should stock it with teas or coffees, Honest Tea founder Seth Goldman said. But the real problem was the taste. Mr. Goldman recalls how, when his son was serving samples of the product at a grocery store, a shopper came up to him and said, “Do you honestly like the taste of this?” Mr. Goldman’s son said, “Not really.” Honest Tea discontinued the product the same year.
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