Six beverage trends worth knowing

Australians are the biggest drinkers of fruit juice on the planet and consume more soft drink than the Brits, yet this former nation of full-strength beer drinkers is turning to bottled water and ‘different’ beers — with a real liking for craft and flavoured beers. And in 2017, Australians can happily raise a glass of coconut water to toast the twofold win of volume and value rises for our wine exports in 2016.

The Australian beverage market has changed, with some clear winners and losers over the past couple of years. Here are six trends worth knowing in 2017, along with the ‘business takeaway’.

1. Juicing the health market

Australia and New Zealand are the world’s biggest fruit-juice drinkers, according to a study by Tufts University’s Friedman School of Nutrition Science and Policy. Despite that, the past five years have been quite tough for the industry; strong competition within the sector from private labels, as well as from outside the sector from different beverages, has reined in growth, which is estimated to be just 2.3% from 2012–17. Consumers have also gravitated to cheaper alternatives. Then there’s the sugar element. Even though fruit juice is seen as healthy, those with added sugars have seen centimetres in magazines devoted to the centimetres they add to waistlines.

Business takeaways: It’s not all bad news: some product-packaging innovation levered off ever-growing health consciousness has seen single-serve beverages grow in popularity. Put it down to Australians’ busy lifestyles, where people want greater convenience and manufacturers meeting that need can potentially add (more than) centimetres to their profits. Nudie is one brand that has done well in targeting health-conscious consumers with ‘no added sugar’ and ‘no concentrate’ in their products.

2. Softly for soft drinks

In Australia, ABS data has shown that 16% more children are drinking sugar-sweetened beverages (or SSBs) than adults. A recent article in the medical journal The Lancet published data showing that Australians drink more SSBs per capita than the Brits, buying 0.88 SSBs a day, compared with 0.84/day in the UK. And Australians also love regular cola drinks, buying 447 million litres in the 12 months to October 2012 out of a total of 1.28 billion litres of SSBs.

But growth in the sector has been limited, due partly to aggressive pricing and changing consumer trends, according to IBISWorld. Other factors include greater penetration of private label and value products, as well as all-round healthier beverages (see above) and packaged water (see below). Over in the USA, Euromonitor International tips Americans will have consumed more bottled water in 2016 than soft drink. (That’s 102 litres of bottled water compared with 98 litres of soft drink.)

Business takeaways: Beverage businesses need to be quick to adapt to market changes and shifting consumer trends. Tastes change, and it’s only by innovating and launching new products that businesses will be able to take a piece of the pie. But it needs to be right. Some may remember when Coca-Cola Life was launched in 2014: it was an attempt to win over increasingly health-conscious consumers, and at the time, Coca-Cola’s local marketing director, Lisa Winn, said the product was for “balance seekers” — marketing speak for those who have concerns around sugar but don’t like the different tastes of Diet Coke and Coke Zero. However, sales more than halved just in the first six months of 2016. Coke insists the ‘green one’ “was never intended to be more than a niche”, but with those sales figures it could well be back to the drawing board. 

3. Nothing watered down

It has its challenges, but the bottled water industry is growing: Roy Morgan Research revealed that in 2015, 5.3 million Australians (27.1%) drank bottled water every week, up from 4.9 million in 2014. So what are the challenges? Increasing competition from private label brands and the environmental concerns of consumers continue to torment the industry. However, despite the cluttered market, some companies are finding a way to differentiate themselves and raise the bar on innovation.

Thankyou Group is one such company, which uses profits from sales of bottled water (and now other products too) to fund safe water projects in developing countries. Liquid water enhancers by Schweppes were a hit, too; the handy, pocket-sized flavours can be mixed into water ‘on the go’, appealing to consumers’ desires for convenience and customisation.

Business takeaways: The bottled water market is more cluttered than some garages, yet there are still opportunities for businesses to set themselves apart — whether with new flavours, social enterprise or unique packaging (see Wet Fix’s approach). It’s also worth noting that Roy Morgan has found more Australian women (29.7%) than men (24.5%) drink bottled water, and younger Australians (25–34 years) are more likely to reach for bottled water. Add to that the fact that more Western Australians (30.2%) like bottled water, followed by NSW (29%), while Tasmanians are into it the least, falling below the state average (at 22.3%).

4. No whining in wine

After a decade of headaches, the wine industry has something to celebrate, with wine export value and volume both increasing. A 2016 Wine Australia publication showed that in the 12 months to the end of June 2015, the value of Australian wine exports increased 5% to $1.89 billion, while volume increased 4% to 724 million litres. Wine Australia says this is the first time value has increased on a financial year basis since 2006–07, with volume the highest since 2010–11.

The wine sector has long been dependent on the Australian dollar. In the mid-1980s, an increase in exports took advantage of the historically low dollar, but this dropped again in the mid-2000s with an appreciated Australian dollar, among other factors such as drought, high water costs and the infamous GFC. While current exports give Australian winemakers something to toast, countries such as Spain, Argentina and Chile continue infiltrating the market with low-priced wine that can be tough to compete with.

Business takeaways: To thrive and grow, the wine sector must stop relying on currency value and educate markets on paying for quality. Producers must look at ways to sustainably grow their profits and, in addition to some investment in innovation, wine producers could look at how to market the unique selling point of their wine offerings. Organic wines are a good example of attracting the attention of some consumers, as are vegan wines.

5. Frothed around

Beer manufacturing has undergone a major upheaval. Consumption is on the downturn — we’re at a 65-year low, according to Deloitte. Added to that, imported, premium and craft beers have overtaken the big mainstream brands in terms of market share. As with bottled water, beer manufacturers are looking to flavours and fusion products to differentiate their brands.

Despite their small market share (2.5–3% by volume, according to Deloitte), craft beers are ‘flavour of the year’, with 150 smaller breweries now in Australia. IBIS World sees a good future for them, too, forecasting sector revenues to grow 5% per annum over the next five years, compared with just 1.7% for the traditional beer market. Yet while they are flourishing locally, craft brewers are struggling to overcome entry barriers nationally, with big supply contracts being used to lock them out of pubs.

Business takeaways: People are looking for beer with a difference — whether that’s something that tastes a little bit different or a beer with an authentic story. Beer and cider companies of all sizes can look at how to promote their unique brand essence, using marketing, packaging and labelling to build a strong connect with their market. Rebello Wines’ award-winning Cheeky Rascal Methode Traditionelle Cider is a great example.

6. Going nuts

And then there’s coconut water, which is now a mainstream category according to Innova Market Insights. That fact in itself shows how the market has grown since Nudie first introduced this exotic beverage in Australia several years ago to meet the growing demands of the health-conscious consumer. A quick check of any supermarket shelf today will show a burgeoning number of coconut water brands. And it’s not just water — beverage manufacturers are looking to coconut in all its forms to boost product sales. According to Innova, coconut flavours and ingredients featured in over 4% of global soft drink launches in the 12 months ending June 2014 and more than 6% of global drink launches in 2014.

Business takeaway: Coconut is big business, with some products garnering celebrity endorsement. But this trend goes beyond coconut water: declining sales of carbonated drinks have opened huge market share in what’s been dubbed ‘better-for-you beverages’ Overall, consumers are shifting towards healthy choices, and PepsiCo is a great example of aligning product strategies with this. In October last year, it announced new targets to reduce sugar, salt and fat in its beverages and snacks by 2025; 66% of its beverages (by volume) are to have 100 calories or less per 354 millilitres from added sugars (a can this size of regular Pepsi-Cola — the ‘namesake’ beverage — currently has 150 cal). But it’s more than that: PepsiCo also set out new 2025 environmental targets, including improving water use efficiency in manufacturing by 25%, halving food waste in its operations and cutting greenhouse gas emissions by 20% (by 2030).

The non-negotiable for consumers in this category is ‘no added nasties’, which also extends to labelling, such as ‘clean labelling’, which clearly highlights the natural ingredients. There’s no doubt that the beverage industry is undergoing some major shifts and transformations, but with change comes new opportunities for companies of all sizes to innovate and tap into new markets

Labelling it

No matter what the beverage, it needs to be coded and labelled correctly. Here are the technologies best suited to beverage coding and labelling.

1. CIJ

Continuous inkjet printers (CIJ) are highly versatile and can code on a wide variety of packaging sizes, shapes and substrates in a wide range of ink colours and contrasts. They’re typically easy to use and reliable, and have a low cost of ownership (partly because they have a robust printhead that’s suited to harsher production environments).

Also called ‘CIJ datecoders’, they can code variable information such as date, best-before and use-by dates, batch numbers, promotional codes, serialisation codes, product ID codes, logos and other graphics, and both upper and lower case text.

2. Laser

Lasers are both cost-effective and very fast, creating permanent, high-quality marks. They are highly useful in the beverage industry, being able code use-by and best-before dates as well as human-readable text on both the bottle (primary) and carton (secondary packaging). They can code onto glass, plastics (such as PET, polystyrene and polypropylene), cardboard and even metal. Having no consumables, lasers also have a low cost of ownership (on medium-volume production lines, investment payback can be less than three years).

Lasers are ideal when:

• the mark must be permanent, such as for anticounterfeiting, brand protection, etc
• product presentation is very important, eg, in the wine industry
• the cost of consumables could be very high.

3. Labelling

Depending upon the needs, there are several different types of labelling technologies that suit beverages:

• LPA (label printer applicators), or ‘print and apply’, print onto pressure-sensitive labels then automatically apply those labels to a product, carton or pallet.
• LA (label applicators) are automated labelling systems that apply preprinted, pressure-sensitive labels onto products.
• In-line labelling systems are an efficient way to apply front and back labels to products or wraparound labels.

*Mark Dingley heads operations at Matthews Australasia and is also Chairman of the Australian Packaging and Processing Machinery Association (APPMA).

Image: No matter how funky or innovative beverage products are, they need to be coded and labelled correctly.