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Beverage Blurring - US - January 2019

"Category-defying hybrid drinks have been at the heart of much growth and innovation in the non-alcoholic beverage market. While just 13% of US adults overall report drinking hybrid beverages, the most engaged consumers – iGens, Millennials, parents, and Hispanics – are often young and influential. Further, these key consumer groups seek to try more, indicating longer-term potential. Opportunities lie in expanding drink occasions, reaching a wider range of consumers, and continuing to integrate innovative ingredients and new functional benefits into hybrid beverages."
- Mimi Bonnett, Director - Food and Drink, Foodservice

This Report looks at the following areas:

  • Hybrids invigorate cluttered beverage aisle 
  • Budding yet low hybrid use 
  • Younger, ethnically diverse generations show high engagement 
  • But don’t forget consumers over 40
  • Diverse opportunity for development and targeted positioning 
  • Keep innovation on the fringe of familiar

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • Hybrids invigorate cluttered beverage aisle
          • Budding yet low hybrid use
            • Figure 1: Non-alcoholic beverages consumed, November 2018
          • Basic Functionality is Imperative
            • Figure 2: Role of non-alcoholic beverages in overall diet, November 2018
          • Younger, ethnically diverse generations show high engagement
            • Figure 3: Hybrid beverages consumed, by group, November 2018
          • But don’t forget consumers over 40
            • Figure 4: Interest in trying select types of hybrid/fusion drinks, by generation, November 2018
          • Diverse opportunity for development and targeted positioning
            • Figure 5: Attributes driving choice of drink, November 2018
          • Keep innovation on the fringe of familiar
            • Figure 6: Interest in trying different types of hybrid/fusion drinks, November 2018
          • What it means
          • The Market – What You Need to Know

            • Hybrids trigger shifts away from larger categories
              • Healthy living trends support BFY hybrid drinks
                • Recovering economy helps buoy premium fusion drinks
                  • Younger, ethnically diverse generations are important to growth
                    • …but don’t forget those 40+
                    • Market Perspective

                      • In a crowded drink market, it’s a mixed bag of success
                        • Figure 7: Total US retail sales and forecast of non-alcoholic drinks, by category, at current prices, 2012-22
                      • Struggling CSDs comprise largest drink category
                        • Concerns with sugar undercut sales in $18.7 billion juice and juice drinks
                          • Bottled water growth reflects popularity of BFY drinks
                            • Energy drinks continue to grow sales
                              • RTD renaissance brings new life to coffees and teas
                              • Market Factors

                                • Wellness for everyone
                                  • Obesity rates remain high and propel need to reduce sugar consumption, lose weight
                                    • Figure 8: Trends in obesity prevalence among adults aged 20 and over (age adjusted), 1999-2000 through 2015-16
                                  • FDA labeling and sugar taxes raise awareness and cost of sugary drinks
                                    • Aging Boomers attentive to health and seek out low-sugar and diet drinks
                                      • A holistic approach to diet and “Foodceuticals” Trend also shapes demand
                                        • Recovering economy supports premiumization in hybrid drinks
                                          • Figure 9: Consumer Sentiment Index, January 2007-December 2018
                                        • Demographic trends should help drive growth in hybrid drinks
                                          • Figure 10: US Population, by generation, 2013-23
                                        • Younger generations are increasingly diverse
                                          • Figure 11: US population, by race and Hispanic origin, 2013-23
                                          • Figure 12: Distribution of population, by age, race, and Hispanic origin, 2018
                                        • Hispanic consumers represent a key opportunity
                                          • Figure 13: Non-alcoholic beverages consumed, by Hispanic origin, November 2018
                                        • Opportunity for CBD ingredients still blurry
                                        • Key Players – What You Need to Know

                                          • Mainstreaming and acquisitions set the hybrid landscape
                                            • Challenges in category reach to older consumers and women
                                              • Nourishing, savory drinks and blurred lines with meals
                                                • Fringe interest in CBD suggests education is needed, maybe
                                                • What’s Working?

                                                  • Mainstreaming of Bai
                                                    • Figure 14: Bai ad featuring Justin Timberlake, 2018
                                                  • Harnessing the power of RTD coffees/teas with functionality, flavor, and nutrition
                                                    • Tapping into healthy gut trend
                                                      • Pair energy with other functions
                                                        • Other hybrid drinks focus on hydration, recovery, and detoxification
                                                        • What’s Struggling?

                                                          • Missing the boat with health-focused Boomers, women
                                                          • What’s Next?

                                                            • Blurring the line between drinks and meals with robust nourishment
                                                              • Can CBD infused drinks be mainstreamed?
                                                              • The Consumer – What You Need to Know

                                                                • Hybrid drinks garner fringe use, but gaining
                                                                  • Switching behavior is evident
                                                                    • Hydration and refreshment are primary drivers, secondary ones are reward driven
                                                                      • Consumers want energy, consumers want to relax
                                                                        • Mainstream ingredients still top choice
                                                                          • Growing use and positive feelings signal good signs for hybrids
                                                                          • Types of non-alcoholic beverages consumed

                                                                            • Water, CSDs, and juice are most widely consumed
                                                                              • Figure 15: Non-alcoholic beverages consumed, November 2018
                                                                            • Men turn to a wide variety of non-alcoholic drinks, including hybrids
                                                                              • Figure 16: Non-alcoholic beverages consumed, by gender, November 2018
                                                                            • Younger consumers enjoy a more varied selection of beverages
                                                                              • Figure 17: Non-alcoholic beverages consumed, by generation, November 2018
                                                                            • Middle-income households anchoring the category, for now
                                                                              • Figure 18: Non-alcoholic beverages consumed, by household income, November 2018
                                                                            • Parents twice as likely as those without kids to use fusion drinks
                                                                              • Figure 19: Non-alcoholic beverages consumed, by parental status, November 2018
                                                                            • Hispanic consumers are highly engaged in many categories, including fusion drinks
                                                                              • Figure 20: Non-alcoholic beverages consumed in past three months, by Hispanic origin, November 2018
                                                                            • Males 18-44 are primary hybrid drink consumers
                                                                              • Figure 21: Non-alcoholic beverage consumption – CHAID – Tree output, November 2018
                                                                              • Figure 22: Non-alcoholic beverage consumption – CHAID – Table output, November 2018
                                                                          • Role of Beverages in Overall Diet

                                                                            • Basic functions can be supplemented with more unique ones
                                                                              • Figure 23: Role of non-alcoholic beverages in overall diet, November 2018
                                                                            • Younger consumers cite more varied reasons for using drinks
                                                                              • Figure 24: Role of non-alcoholic beverages, by generation, November 2018
                                                                            • Middle-income consumers use drinks for wide range of functions
                                                                              • Figure 25: Role of non-alcoholic beverages in overall diet, by household income, November 2018
                                                                            • Parents seek drinks for energy, snacks, replacement meals, and more
                                                                              • Figure 26: Role of non-alcoholic beverages in overall diet, by parental status, November 2018
                                                                            • Hispanics also use drinks for diverse dietary roles
                                                                              • Figure 27: Role of non-alcoholic beverages in overall diet, by Hispanic origin, November 2018
                                                                          • Functional Attributes That Motivate Choice

                                                                            • Hydration is key attribute, with calming or energizing also widely sought
                                                                              • Figure 28: Attributes driving choice of drink, November 2018
                                                                            • TURF analysis indicates the ideal product mix
                                                                              • Figure 29: TURF analysis – Functional attributes of interest, November 2018
                                                                              • Figure 30: Table – TURF analysis – Functional attributes of interest, November 2018
                                                                            • Energy is a key attribute for men, health and beauty valued by women
                                                                              • Figure 31: Attributes driving choice of drink, by gender, November 2018
                                                                            • Calming and health-related attributes appeal to older generations
                                                                              • Figure 32: Attributes driving choice of drink, by generation, November 2018
                                                                            • Parents looking for drinks to help manage busy days, lifestyle
                                                                              • Figure 33: Attributes driving choice of drink, by parental status, November 2018
                                                                            • Hispanic consumers over index for interest in varied functional attributes
                                                                              • Figure 34: Attributes driving choice of drink, by Hispanic origin, November 2018
                                                                          • Key Ingredients Motivating Beverage Choice

                                                                            • Vitamins, caffeine, and antioxidants are top ingredients driving purchase
                                                                              • Figure 35: Ingredients driving choice of drink, November 2018
                                                                            • TURF analysis shows drinks’ top five ingredients would appeal to 75%
                                                                              • Figure 36: TURF analysis – Ingredients of interest, November 2018
                                                                              • Figure 37: Table – TURF analysis – Ingredients of interest, November 2018
                                                                            • Ingredient preferences shaped by gender
                                                                              • Figure 38: Ingredients driving choice of drink, by gender, November 2018
                                                                            • Older consumers less likely to switch types or look at type of sweetener
                                                                              • Figure 39: Ingredients driving choice of drink, by generation, November 2018
                                                                            • Interest in CBDs as ingredient highest among younger generations
                                                                              • Figure 40: Interest in CBD as ingredient driving choice of drink, by generation, November 2018
                                                                            • Parents show high interest in a wide range of ingredients
                                                                              • Figure 41: Ingredients driving choice of drink, by parental status, November 2018
                                                                          • Interest in Trying Hybrid Drinks

                                                                            • Three quarters interested in trying different fusion beverages
                                                                              • Figure 42: Interest in trying different types of hybrid/fusion drinks, November 2018
                                                                            • Gen X and Millennials most interested in trying new fusion drinks
                                                                              • Figure 43: Any interest in trying different types of hybrid/fusion drinks, by generation, November 2018
                                                                              • Figure 44: Interest in trying different types of hybrid/fusion drinks, by generation, November 2018
                                                                            • Parents show ample interest in trying more fusion beverages
                                                                              • Figure 45: Interest in trying different types of hybrid/fusion drinks, part i, by parental status, November 2018
                                                                              • Figure 46: Interest in trying different types of hybrid/fusion drinks, part II, by parental status, November 2018
                                                                            • Hispanic consumers interested in trying functional, sparkling, and juice hybrids
                                                                              • Figure 47: Interest in trying different types of hybrid/fusion drinks, by Hispanic origin, November 2018
                                                                          • Consumption Occasions

                                                                            • Drink choice connected to time of day, hybrids don’t break beyond midday
                                                                              • Figure 48: Consumption occasion, for all types of beverages, November 2018
                                                                            • White space for non-alcoholic beverages, especially hybrids found in evening occasions
                                                                              • Figure 49: Correspondence analysis – Symmetrical map – Non-alcoholic beverage consumption, November 2018
                                                                              • Figure 50: Non-alcoholic beverage consumption, November 2018
                                                                            • Hybrid drink consumption patterns show importance of drink occasion
                                                                              • Figure 51: Consumption occasion, for hybrid beverages, November 2018
                                                                          • Attitudes toward Hybrid Drinks

                                                                            • Alignment with broader consumer trends, feel-good attitudes suggest solid hybrid potential
                                                                              • Figure 52: Attitudes among hybrid/fusion drink consumers, November 2018
                                                                            • Gender shapes attitudes and behaviors of hybrid drink users
                                                                              • Figure 53: Attitudes among hybrid/fusion drink consumers, by gender, November 2018
                                                                          • Appendix – Data Sources and Abbreviations

                                                                            • Data sources
                                                                              • Consumer survey data
                                                                                • Direct marketing creative
                                                                                  • Abbreviations and terms
                                                                                    • Abbreviations
                                                                                      • CHAID methodology
                                                                                        • TURF methodology
                                                                                          • Correspondence Analysis methodology

                                                                                          Beverage Blurring - US - January 2019

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