This month, Tom Vierhile from Datamonitor looks at the small but booming soft drink sub-category of  'flavour enhancers'; the 21st Century's answer to the squashes and cordials of yore. 

Nature is not the only thing that abhors a vacuum. Soft drink marketers do too, as evidenced by the flurry of new product activity in liquid 'flavour enhancers' in 2012 and 2013 as companies jockey for a piece of a market created from scratch by Kraft’s MiO brand in 2011.

Next year, however, is shaping up as a pivotal year for flavouring drops, as major players start targeting new beverage sectors and begin to ramp up their presence in this promising market.

Coca-Cola Co recently announced that it will debut three new product lines later this year, and will look beyond in the US market. The trio of new products follows the company's launch of Dasani Drops in 2012 and other major category launches over the past year including Kraft’s own debut of Crystal Light Liquid Drink Mix.

First up from Coca-Cola is Powerade Zero Drops, which claims to be the “first ready-to-drink sports (drink) brand to launch such an on-the-go product.” Each 3oz squeeze bottle is said to make approximately 24 8oz servings. The entry suggests that sports (and energy) drinks could be new breakout sectors in water enhancers.

Coca-Cola’s Powerade Zero Drops follows Kraft’s 2012 introduction of two similar lines aimed at consumers interested in more functional drink concentrates: MiO Fit and MiO Energy. Fit is the sports drink version of MiO with the addition of electrolytes and B vitamins, while Energy contains caffeine and typical energy drink ingredients like taurine, ginseng and guarana. These two lines combined with other flavor extensions within the base MiO line drove an 87% gain in total MiO sales in the US in 2012, according to Kraft.

The aim of Powerade Zero Drops - as well as Kraft’s MiO Fit and Energy - is to attract young male consumers to the water enhancer market. So far, this approach seems to be working for Kraft, which reports that MiO Energy “over indexes” with 18-to 24-year-old consumers, as well as the 25- to 34-year-old crowd. MiO Energy in particular helps put Kraft in a position to potentially take sales from the coffee market. Citing Nielsen data, Kraft says that 19% of energy drink consumers report “almost always” drinking energy drinks in the morning.

For some consumers, it appears, energy drinks are considered a viable alternative to that morning cup of coffee.

Coca-Cola’s other two liquid water enhancer introductions could also help broaden the liquid flavour enhancer market. Vitaminwater Zero Drops will hit the market in March, promising a naturally-sweetened, zero-calorie experience. Available flavours follow the Vitaminwater fortified water script, with options like “xxx” (acai, blueberry & pomegranate) and Revive (fruit punch). But, the introduction of new Minute Maid Drops, scheduled for a February launch in lemonade, raspberry lemonade, fruit punch and mango tropical flavours, could prove to be the real game changer.

Minute Maid Drops will be positioned as the only liquid beverage enhancer sold in the US that is made with real fruit, something that is identified by Coca-Cola as an important driver of purchase intent. Not that the amount of fruit here is necessarily going to make anyone abandon 100% juice beverages anytime soon: Minute Maid Drops have only 3% real fruit juice and just 5 calories per serving, but any juice at all is novel for the niche.

Plus, the entry of a major juice brand like Minute Maid into liquid water enhancers certainly opens the door for other major fruit juice brands like Tropicana, Ocean Spray and more, to join in with the trend and further expand liquid water enhancers.

Drop products may also offer consumers a new way to bump up consumption of healthy foods, like fruits and vegetables. According to Datamonitor’s 2013 Global Consumer Survey, 48% of consumers globally say they are trying to eat as much fruit as possible. This number also skews somewhat by age, with older consumers slightly more likely than younger shoppers to say this is a priority.

As exciting as the liquid water enhancer market is, soft drink makers have been reluctant thus far to introduce products based on their own signature soft drink brands. The only major soft drink brand to date to go the water enhancer route in the US is the Crush brand with the launch of Crush Grape and Crush Orange water enhancers, both marketed by a major US player in powder beverage concentrates, Chicago-based Jel Sert Co. Jel Sert uses the Crush soft drink trademark owned by Dr Pepper/Seven Up, Inc. under licence.

The major sticking point to date for soft drink branded liquid water enhancers is the lack of carbonation, although the consumer perception of that as an issue is interesting. When purchasing a sample of the Crush Orange Water Enhancer product at a supermarket in Florida a few months ago, I was actually asked by the checkout clerk if the product was carbonated. Obviously, it was not, but the possibility clearly piqued the interest of the clerk and quite possibly a sizeable number of other consumers that have spotted the product on store shelves.

With the growing popularity of 'sparkling' non-alcoholic beverages - both flavoured drinks and unflavoured waters - the possibility of a Soda Stream-like 'make-your-own' CSD from a soft drink-branded water enhancer is a market opportunity that future water enhancers may be able to exploit.

So what’s next for liquid water enhancers? With new product activity picking up, look for the importance of packaging innovation to grow. In particular, flavour-filled sports caps could be a development to watch. Brooklyn-based 4C Foods Corp is just launching 4C Cap-It, a liquid water enhancer delivered in “flavour-filled sports caps” that the consumer uses to top single-serving bottled water packages. To activate the flavour, the consumer presses down on the sports cap spout to release the liquid flavour, then shakes the bottle. 4C is not the only company giving flavoured sports caps a look, but many of the other innovations in this area tend to use powder flavourings, not liquids.

Another potential growth market is cocktail mixes, since there are anecdotal reports that MiO and other liquid water enhancers are widely used for this purpose. The timing may be right for a drop-type cocktail mix and this is definitely a category that would appreciate the flavour customisation benefits of this format.