Post on 31-May-2020
May 3, 2016
BevTech 2016
The Shifting Beverage Landscape
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Unique Beverage Industry Expertise for Providing “Added-Value” to Selected Clients
Beverage Marketing Capabilities
Cutting Edge Insights: New Age Emergence, Multiple Beverage Competition, Specialty Beer Opportunity, Bottled Water Dominance, Hyper-Category
Competition, Micro-Marketing Age
Beverage Marketing Corporation utilizes an integrated model for providing information, analysis and advice to beverage industry clients
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State of the Industry – The Good and the Bad
Beverage Headlines
Liquid refreshment beverage market grows for second consecutive year in 2015 after flat performance in 2013
Carbonated soft drinks experience another modest sales decline in 2015
Bottled water continues its solid growth trend led by single-serve water segment
Niche categories continue to outperform traditional mass-market categories
Wine and spirits lead alcohol growth in 2015, and beer experiences essentially flat performance
The Shifting Beverage Landscape
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Source: Beverage Marketing Corporation; Bureau of Economic Analysis, Department of Commerce, Department of Labor
Quarterly GDP Change2010 – 2015
Unemployment Rate2000 – 2015
2010 2011 2012
4.0%
4.7%
6.0%5.5%
5.1%
9.6%
9.0%
8.1%
7.4%
6.2%
9.3%
5.8%
4.6%4.6%
5.3%
5.8%
0%
2%
4%
6%
8%
10%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '152013 2014 2015
The economy continues to move in a positive direction with improved GDP growth and lower unemployment, but improvement has been slow due to severity of the recession
The Shifting Beverage Landscape
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Gasoline Prices2010 – 2015
$2.8 $2.9 $2.8$2.9
$3.3
$3.9$3.7
$3.4$3.7
$3.8$3.7
$3.6 $3.6 $3.7 $3.7
$3.4 $3.5$3.7
$3.6
$2.9
$2.3
$2.8$2.6
$2.2
$0
$1
$2
$3
$4
$5
10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4
14Q4 – 15Q4: -25% Growth
Gasoline prices are almost a dollar a gallon lower than last year but to date have only had a modest impact on beverage consumption
• Lower gas and oil prices are a net positive for the beverage industry
• However, “thriftiness” under changing economic times is now the new norm
Source: U.S. Energy Information Administration
The Shifting Beverage Landscape
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Annual U.S. Consumer Sentiment Index1995 – 2015
Source: Thompson Reuters/University of Michigan
92.2 93.6
103.2 104.6105.8 107.6
89.2 89.687.6
95.2
88.687.3 85.6
63.866.3
72.668.0
76.479.2
84.1
92.9
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Consumer sentiment surpassed pre-recession levels in 2015 for the first time
Pre Rec Level
The Shifting Beverage Landscape
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U.S. Total Beverage Market2010 – 2015
Source: Beverage Marketing Corp.
Vol
um
e C
han
ge
The U.S. beverage market has experienced overall mixed performance since declines during the recession, but has now achieved back-to-back years of growth
• Growth accelerated in 2015 over 2014
The Shifting Beverage Landscape
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U.S. Beverage Market – 2015V
olu
me
Ch
ange
In 2015, refreshment beverages led by bottled water and some niche categories are growing fastest
The Shifting Beverage Landscape
• Bottled Water• CSD• Energy Drinks• Fruit Bevs• RTD Coffee• RTD Tea• Sports Drinks• VA Water
• Hot Coffee• Hot Tea• Milk
• Beer• Spirits• Wine
Source: Beverage Marketing Corp.
2.9%
0.3%
-0.1%
-4.4%
RefreshmentBeverages
TraditionalBeverages
BeverageAlcohol
Tap Water
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Vol
um
e C
han
ge
The U.S. Beverage Alcohol – 2015
Wines and spirits have been driving beverage alcohol growth with beer experiencing a modest decline
The Shifting Beverage Landscape
Source: Beverage Marketing Corp.
-0.3%
0.6%
1.7%
-0.1%
Beer Wine Spirits Total BeverageAlcohol
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-1.3%
0.6%
1.7%
0.3%
Milk Tea Coffee Total TraditionalBeverages
Vol
um
e C
han
ge
The U.S. Traditional Beverage Market – 2015
Coffee continues to show healthy growth among traditional beverages thanks to success of single-cup brewers and popularity of coffee cafes like Starbucks and others
The Shifting Beverage Landscape
Source: Beverage Marketing Corp.
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Estimated Tap Water Volume Growth2000 – 2015
One reflection of a healthy beverage industry is the decline of tap water, and tap water consumption has been trending down in recent years
• After many years of declines, tap water consumption increased during the recession
The Shifting Beverage Landscape
Source: Beverage Marketing Corp.
20.2%
6.4%
-4.3%
7.4%
1.1%
23.5%
-1.8%
-10.9%-9.7%
-5.3%-4.0%
-6.7%
-0.5%
-0.8%
-4.4%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
'00/01 '01/02 '02/03 '03/04 '04/05 '05/06 '06/07 '07/08 '08/09 '09/10 '10/11 '11/12 '12/13 '13/14 '14/15
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2015 Category Winners and Losers
* Volume increases** Volume declines
WINNERS*
• Bottled Water
• RTD Coffee
• RTD Tea
• Sports Drinks
• Energy Drinks
• Valued-Added Water
LOSERS**
• CSDs
• Milk
• Fruit Beverages
More non-alcoholic beverage categories grew in 2014 than declined, and niche categories generally outperformed large traditional categories
The Shifting Beverage Landscape
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IMPROVED
• Bottled Water
• Energy Drinks
• Fruit Beverages
• Milk
• RTD Coffee
• RTD Tea
• Sports Drinks
• Value-Added Water
WORSENED
• CSDs
2015 Beverage Report Card
More categories experienced improved performance in 2015 even when they declined
The Shifting Beverage Landscape
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Traditional Key Consumer Drivers Are Evolving
Health and wellness Balanced nutrition
Variety Flavors, seasonals, hybrids
Convenience With product information
The Shifting Beverage Landscape
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Cal
orie
s P
er C
apit
a P
er D
ay
U.S. Refreshment Beverage Calories Per Day1990 – 2015
212.5
251.6263.0
243.7 238.0230.3
222.7 214.8 210.1 205.7 202.3197.9 196.5 196.5
1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015P
Despite negative publicity on CSDs and other full-calorie refreshment beverages, caloric intake from refreshment beverages has been steadily declining over the last decade
• The growth of bottled water and lower-calorie options have contributed to the caloric decline
The Shifting Beverage Landscape
Source: Beverage Marketing Corp.
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The beverage industry has committed to a reduction of 20% of calories from beverages by 2025 through the Balanced Calories Initiative
Source: Beverage Marketing Corporation; American Beverage Association
The Shifting Beverage Landscape
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Beverage companies are moving to healthier product portfolios. Coca-Cola, for example, has expanded participation in high-growth areas through investments. Many of the categories feature healthy product attributes
Source: Beverage Marketing Corporation; Coca-Cola Company
The Shifting Beverage Landscape
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1970s
Evolution of Beverage Need-States1970s to Present
• Refreshment• Basic Function
1980s
1990s
2000s
Today
• Pick me up• Social & Fun• Active & Portability• Sweet Indulgence• Healthy Alternative
• Pick me up• Social & Fun• Active & Portability• Sweet Indulgence• Healthy Alternative• Fortified Fuel• Flavorful Health• Portable Hydration• Purifying
• Pick me up• Social & Fun• Active & Portability• Sweet Indulgence• Healthy Alternative• Fortified Fuel• Flavorful Health• Portable Hydration• Purifying• Mood enhancement• Natural• Guilt-negation
• Pick me up• Social & Fun• Active & Portability• Sweet Indulgence• Healthy Alternative• Fortified Fuel• Flavorful Health• Portable Hydration• Purifying• Mood enhancement• Natural• Guilt-negation• Herbal• Relaxation
Key Motivations for Beverage Choices
Since the 1970s, beverage consumers have grown in sophistication, with increasingly complex motivations for consuming beverages
The Shifting Beverage Landscape
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Evolution of Growth of Beverage Categories1970s to Present
• Milk & Juice• CSDs• Coffee &
Alcohol
• Milk & Juice• CSDs• Coffee &
Alcohol• RTD Teas• Juice Drinks• Isotonics• PET Waters• Flavored CSD's
• Milk & Juice• CSDs• Coffee &
Alcohol• RTD Teas• Juice Drinks• Isotonics• PET Waters• Flavored CSD's• Fresh-packed
Juice• Smoothies• Coffee Drinks
• Milk & Juice• CSDs• Coffee &
Alcohol• RTD Teas• Juice Drinks• Isotonics• PET Waters• Flavored CSD's• Fresh-packed
Juice• Smoothies• Coffee Drinks• Nutrient-
enhanced• Energy
• Milk & Juice• CSDs• Coffee &
Alcohol• RTD Teas• Juice Drinks• Isotonics• PET Waters• Flavored CSDs• Fresh-package
d Juice• Smoothies• Coffee Drinks• Nutrient-enhan
ced• Energy• Functional• Health &
Wellness
1970s
1980s
1990s
2000s
Today
Expanding consumer motivations for beverage choices has resulted in a steadily broadening array of beverage categories
The Shifting Beverage Landscape
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Thou
sand
s of
SK
Us
New Beverage Product Introductions2001 – 2015
Source: Beverage Marketing Corp.; Mintel
New product introductions have mostly been on the rise after declining in 2009 due to the recession in the beverage industry
1.7 1.6
2.0
2.92.6 2.6
3.2
3.8
2.7
3.9 4.04.4
4.74.5
4.3
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
The Shifting Beverage Landscape
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State of Emerging Small Brands
Craft & artisanal products trending upward
Consumers seek new experiences
More startups enter industry
The Shifting Beverage Landscape
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Functional Chia Cold Brew Plant-based Water
Probiotic Shots Coconut Water
Kombucha
Select Offerings and Categories of Today’s Emerging Beverages
Most emerging categories have health and wellness attributes and/or promise specific functional benefits
The Shifting Beverage Landscape
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State of Big Brands
Most large iconic brands down
Operating big brands a challenge
Declines accelerated in past year
The Shifting Beverage Landscape
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Top 10 Soft Drinks
Coca-Cola
Pepsi-Cola
Diet Coke
Mtn. Dew
Diet Pepsi
Diet Mtn. Dew
Top 10 Fruit Beverages
Tropicana Pure Premium
Capri Sun
Sunny D
Top 10 Beer Brands
Bud Light
Coors Light
Budweiser
Miller Lite
Natural Light
Busch Light
Busch
Big brands in decline in 2015
The Shifting Beverage Landscape
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Carbonated Soft Drink MarketGrowth by Type
2011 – 2015
U.S. Carbonated Soft Drink MarketShare by Type2010 – 2015
Year Regular Diet
10/11 -1.5% -2.5%
11/12 -1.1% -3.4%
12/13 -1.9% -6.3%
13/14 0.8% -5.4%
14/15 -0.1% -5.2%69.1%
30.9%
73.1%
26.9%
2010 2015
Regular
Diet
Diet soft drinks have hit a ceiling and are declining at a faster rate than regular soft drinks though performance improved modestly in 2015• Some diet consumers have shifted to bottled water and other categories
• Regular CSD volume was essentially flat in 2015 after modest growth in 2014
10/15CAGR -0.8% -4.6%
The Shifting Beverage Landscape
Source: Beverage Marketing Corp.
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Stevia Sweetened CSDs
As the search for a good-tasting, natural sweetener continues, some brands have begun to use stevia but taste issues remain
The Shifting Beverage Landscape
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Craft Soda
One potential source of growth is craft sodas, which are beginning to emerge as a viable option for today’s consumers with new brands and companies entering the market, but the segment is unlikely to reach the same level as craft beer
The Shifting Beverage Landscape
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Smaller packaging sizes have been a source of innovation and also help contribute to reduced caloric intake
The Shifting Beverage Landscape
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Key reasons for reducing CSD consumption:
o Health
o Variety
Legislation and messaging from government and regulatory agencies
Tax threats aimed at reducing consumption
Negative commentary from medical studies and other organizations
Steady drumbeat of negative press
Consumer health and variety demands negatively impact CSD consumption. CSD category performance is further impacted by other external factors that contribute to consumption declines
Source: Beverage Marketing Corporation
The Shifting Beverage Landscape
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Advances in Supply Chain Costs
High-speed bottle filling in a range of 15-18 million cases per year per line
Stable to declining resin costs
Continued bottle light-weighting
Low fuel costs
While stable, PET water pricing continues to be historically aggressive and is likely to remain so at least through 2015
• Every-day pricing has been as low as $2.49-2.99 for 24-packs at retail
The Shifting Beverage Landscape
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Enhanced Waters
PH Balanced Water Plant WaterEssence Water
Essentia Trader Joe’sHint
Cap-Activated Water
Activate
Similar to craft soda, from a small base, enhanced waters of all types are now proliferating and gaining traction in all parts of the country
• These premium value, craft type waters are adding additional benefits to consumers’ water experience
The Shifting Beverage Landscape
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In the future, the marketplace will be characterized by numerous high-value, low relative volume opportunities
Projected Value
High Growth
Energy
Enhanced Fruit
Drinks
Enhanced Water SS
Dairy Drinks
Low Growth
$500M
20%
0%
-5%
Bulk/HOD Water
Milk
Soy
(2010-2015 CAGR)Coconut Water
Hard Cider
AlcPouches
Table Wine
Imp. Beer
MalternativesCraft Beer
Enhanced RTD Teas
Vodka
SPFJ
100% Juice
Fruit Drinks
Flavored Water
$250M
Almond Milk
$1B
Diet CSDs
Reg CSDs
$35B $50B$25B$10B$5BPrem CSDs
RTD Teas
PET Water
Organic Juices
The Shifting Beverage Landscape
10%
RTD Coffee
Sparkling Wine
Straight Whiskey
Sports Drinks
Tequila
Thank You
• Strategic Associates
• Research
• Advisors
Beverage Marketing Corporation