Datamonitor's new report, Future Drinks Flavors, reports on the increasing consumer sophistication which is fuelling innovation in the drinks industry. The 'cult of the ingredient' means that specific definition of a flavour is becoming increasingly important to consumers.

Rising consumer sophistication is leading to a high rate of innovation in drinks flavors. Among the key drivers are the 'cult of the ingredient,' whereby consumer attention on specific flavors leads to familiar flavors such as orange being increasingly defined in different ways to give rise to numerous variants, stressing purity, provenance, or other related flavors, e.g. 'mandarin.'

Figure 1: The impact of the cult of the ingredient on familiar flavors - orange



Source: Datamonitor Analysis D A T A M O N I T O R

At the same time, consumers are also seeking to express individuality through choice of flavors. The ability to customize products in foodservice outlets such as coffee and cocktail bars is leading to greater diversity and growth in retail brands and a new wave of products that cut across category boundaries. Examples of cross-category products include the Tequila and rum-flavoured beers introduced by Anheuser-Busch, the makers of Budweiser. For manufacturers of soft drinks, these consumer attitudes provide an opportunity to add value and develop premium brands and counteract the threat of private label, which serves to lower overall category values.

Combination Flavors Popular in New launches

Datamonitor's new-product tracking database, the Worldwide Innovations Network (WIN), tracks new product launches in over 50 countries. Analysis of drinks launches featured on WIN found that combination flavors [where two flavors are used in combination e.g. lemon-lime or cranberry-apple] account for 50% of product launches. This is much higher in hot drinks than in soft or alcoholic drinks.

The cult of the ingredient is helping to drive inclusion of more flavors into brands. 35% of product launches on average use natural flavorings however this is much lower in alcoholic drinks, where the emphasis tends to be placed on purity of the brewing or distilling process. By contrast, alcoholic drinks use flavors more commonly associated with other categories and flavor trends in alcoholic drinks are heavily influenced by developments in soft drinks.

The main flavors (across all product groups in order of importance) are: lemon, orange, peach, apple, strawberry, grapefruit, raspberry and vanilla. Key upcoming flavors in drinks include (in alphabetical order) caramel, carrot, coriander, honey, lime blossom, lychee, mandarin, pomegranate, rose, starfruit and tamarind.

Flavored Tea More Accepted than Flavored Coffee

Flavored tea is significantly more developed than flavored coffee, which in many parts of Europe still meets with consumer resistance. Core consumers of flavored tea are health-conscious, primarily female consumers aged between 20-40. Many flavored teas incorporate flavors known to possess nutraceutical benefits. Key flavors are (in order of importance) mint, camomile, berry, apple, lemon and orange.

Flavored coffee consumption is dominated by instant coffee in continental Europe and roast and ground coffee in the US, which is the most developed flavored coffee market by far. In Europe, cappuccino is the single most popular flavor, although consumption of flavored coffee is minimal due to strong social traditions of drinking unflavored coffee. In the US, where flavored coffee is seen as an indulgence, the most popular flavor is vanilla, reflecting current flavor preferences in ice cream.

Exotic Flavors Becoming Important in Soft Drinks

Citrus flavors dominate soft drinks consumption. In the main category, carbonates, orange has been devalued by association as a children's drinks and a perception as unnatural and sweet, but lemon-lime is becoming increasingly popular. Exotic fruit flavors are becoming much more popular, both in juice drinks and also in combination with more familiar flavors such as orange in other areas of soft drinks. Overall, a number of manufacturers are developing more adult-focused soft drinks brands and using flavor as a differentiator. The growth of flavors such as cranberry, which features particular benefits to female consumers, is also encouraging the development of gender-specific brands as well.

In bottled water, there is considerable diversity of flavors. However in core bottled water countries such as France and Germany, there is little consumer understanding of the appeal of flavored variants.
Alcoholic Drinks: Fruit Flavors Proving Popular

There is a strong trend of innovation in soft drinks translating over to alcoholic drinks, particularly in fruit flavors. This is occurring as many alcoholic drinks manufacturers look to tap into the important young adult and female markets.

In pre-mixed spirits, there is a substantial difference in the way that the US and European categories have developed. The European categories are much less diversified, while the US category has a number of brands that reference actual cocktails served in bars. In liqueurs, the key trend is the development of brands that combine well with mixers. This is to encourage competition with white spirits consumed with mixers. In vodka, manufacturers are taking different approaches to meet the market. Lime is not yet as apparent as a vodka flavor as the flavor's general popularity would suggest, while there is some anecdotal evidence to suggest possible success of a ginger vodka brand.

Escapism in A Sip

"Manufacturers have become significantly more adventurous with flavors, and for good reason. Flavors stimulate not only consumer taste buds but also imaginations. For many, the idea of organic wild cherry or tamarind and mango summons positive associations and helps make brands more appealing and valued. In a sense, new and exotic flavors can provide a bit of escapism in just a sip," comments Ben Longman, Datamonitor consumer analyst and author of the report.

*'Future Drinks Flavours', £2995 or €4995/$4995. Datamonitor Sales ++ 44 20 7675 7261.

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