In his company's 10 Key Trends in Food, Nutrition & Health 2016 report, Julian Mellentin, director of New Nutrition Business, said there is a “sea change” happening in beverages with the tide going out for large companies like PepsiCo and Coca-Cola. One thing that can change this, he said, is accepting and working with new trends.
“They are investing already in alternative beverage types, such as HPP organic juice (Coca-Cola’s investment in Suja) and coconut water (Coca-Cola owned Innocent’s launch of coconut water, the first plant water from this smoothie company),” he said.
BeverageDaily spoke with Mellentin to get his thoughts on the report and 2016 trends in the beverage market.
BeverageDaily: As you said in the report, many of the new companies will fail, but will the ones that succeed have a benefit over larger companies simply because of their smaller size and ability to be increasingly flexible? Will it always be such an uphill climb for the start-ups or will it get easier in 2016?
Julian Mellentin: The new players are likely to benefit from the more savvy bigger companies offering them seed capital and access to their R&D and distribution while also letting them stay independent. You can see this with General Mills and its acquisition of Annie’s [a California natural and organic food company] and many other brands, also its 301 Venturing Unit. And Campbell, which bought Plum [organic food for babies and children] but lets the company continue to run itself.
BD: Niche will be bigger in every type of food, but is there a particular importance of niche in beverages? Do companies need to start exploring a variety of flavors as soon as possible?
JM: Companies are already exploring every option and there is no shortage of flavour variety. This helps feed the fragmentation.
BD: It seems tea, coffee and other non-sweetened drinks are growing much larger. Do you see this skepticism of sweetened beverages soldiering on over the years? Is there a chance consumers, particularly those in the US, will warm to non-caloric sweeteners?
JM: No, artificial sweeteners are dinosaurs and things like stevia have taste and cost problems. And many consumers see sweeteners as “not natural” also by default.
The decades-long search for non-caloric sweeteners – both natural and artificial – now looks like barking up the wrong tree. Industry investments in sweetener alternatives may never yield a good return. Companies should be looking for ways to market less-sweet products that still taste good. In the case of juice companies, for example, this means launching plant waters or plant waters blended with juice.
In fact, the global market for non-sugar sweeteners has reached an inflection point – one that few in the beverage and food industries saw coming until very recently. And it is this: consumers just aren’t as interested in any artificial or even natural non-sugar sweeteners as many had hoped – the search for which drove investments by ingredient companies running into hundreds of millions of dollars.
Ingredient companies keep trying to come up with the holy grail of sweeteners – a natural one that will taste as good as sugar but with many fewer calories. Meanwhile food and beverage companies continue to work to fit the available (and unsatisfactory) sweetener options, sometimes in combination with one another, to their product needs. These twin challenges mean two levels of huge frustration.
Several once-promising alternatives have failed to live up to their promise: stevia, monkfruit, agave, erythritol. But beverage companies are trying to make them work to varying degrees while they continue the search for the ingredient that really could fill sugar’s big shoes.
The beverage industry will continue to look for the Holy Grail and search for a solution. Will they find it? No. There are no other real candidates. So the tide is going out, but it’s hard to convince the industry of that.
BD: Will plant-based beverages and flavored water be a long-term replacement for juice? Will juice companies need to figure out ways to cut down on sugar in their drinks?
JM: It's already happening.