Niche beverages take centre stage in saturated markets

During a webinar on global drinking habits from Euromonitor highlighted the importance of saturation in the European and North American beverage markets.

In these developed markets low overall growth is not simply a short term phenomena exacerbated by the financial crisis but rather a long term reality.

Saturation ​

Branded drinks accounted for almost two-thirds of liquids drunk in these markets in 2008. Euromonitor described this figure as a natural commercial ceiling and suggested that branded drinks may even see their “share of throat” decline in the next few years as consumers turn their back on bottled water.

In this commercial environment, Euromonitor said innovation and portfolio diversity and depth are crucial.

Richard Haffner, the Euromonitor head of non-alcoholic beverages research, told BeveragDaily.com that the packaged drinks market in Europe and North America is now strictly share game.

Relying on brand awareness is no longer enough. To achieve sales growth companies have to segment markets in new ways and blend across categories creating products like fizzy milk. They need to be in touch with changing consumer tastes more than ever before in order to think of new product concepts and ideas to persuade customers to buy their products.

Growth has dried up in big established categories and is now coming increasingly from niche products like iced coffees, soy beverages, and flavoured waters.

Niche success ​

For example, Euromonitor said that in 2009 ready to drink (RTD) teas and coffees garnered $1bn in new business.

Haffner said: “Another example of a niche category that grew in 2009 is Functional Water (the most common examples are fortified waters and sports waters). This category grew almost as much as RTD Tea and RTD Coffee. Functional Water grew, globally, by US$850mn in 2009.” ​As populations in Europe and North America become older, Haffner expects functional water to be a big success story.

With new niche product concepts and ideas becoming more important, how should companies seek to achieve innovation?

Haffner said the answer can lie overseas, in other beverage markets. By looking at what people drink elsewhere and what works in other markets companies can find inspiration for new products at home. Haffner cited the recent moves by Coca-Cola and Pepsi into coconut water, a Brazilian drink, as an example of how this can work.

Pepsi and Coke are also reorganising the structure of their businesses to better promote new product development and exploration of niche products. By buying up their bottlers, Haffner said the soft drink giants will find it easier to bring new products to market and introduce lower volume products.