September 2010 Management Briefing - Innovation in the Drinks Industry – Part I
Drinks companies, both alcoholic and non-alcoholic, have targeted their efforts at the developing markets of the world in recent years. Not only has the trend reaped rewards in terms of sales, but multinationals have been introduced to drinks types and flavours that are new to them.
As people migrate across the globe, the drinks industry has witnessed a slow influx of regionalised flavours into untraditional markets. White and green tea from Asia is now sold around the world, and ‘exotic’ fruits such as pomegranate, mango and lychee are becoming popular juice flavours in Europe and the US. And that’s before alcoholic drinks are taken into account, with imported flavours inspiring domestic innovation - lime flavoured beers, for instance, have proved to be popular in North America, with Miller Chill and Anheuser-Busch’s Bud Light Lime leading the pack.
“The world has become a much smaller place, and there’s a greater likelihood of cross-pollination of products than in the past,” says Gary Hemphill from US-based drinks consultancy the Beverage Marketing Corporation. “Marketers are increasingly looking at bringing products from one place to another. The product may not be exactly the same, but they can retrofit the tastes of one market to suit a new one.”
Health and functional drinks are especially taking off, and often rely on beneficial ingredients from emerging markets.
“If you look at brands like VitaminWater, they’re coming out with more diverse and exciting flavours,” says Gary Roethenbaugh from drinks consultancy Zenith International, adding that Japanese-created functional water only began crossing into Europe about ten years ago. Green tea, long hailed as a health ingredient in Asia, is probably the most widespread Asian flavour in the world, Roethenbaugh adds. “If I were to look at any one flavour that crosses all borders I think that’s the one.” And, it’s growing: according to Zenith International data, UK consumers bought 92m litres of green tea drinks in 2003, rising to 168m litres in 2007.
In Latin America, the diet-friendly açai berry and energy-boosting ingredients such as guaraná have been infiltrating the US market, and have moved to culturally similar European countries such as Spain and Portugal, Roethenbaugh notes.
Look for more of the same in future from Brazil. Its drinks manufacturers are able to take advantage of the diversity of natural ingredients grown in the Amazon region, with their many unique flavours and health benefits.
The açai berry boasts healthy antioxidant properties and, despite being consumed by Amazonians for centuries, its popularity in the US in drinks has only boomed over the last three years. Many US-based companies have started manufacturing new products which contain the berry, including mainstream US brands such as Odwalla, Campbell Soup Company’s V8, SoBe and VitaminWater.
Beverage makers have transformed the way the berry was traditionally consumed for the diverse demands of the European and US markets. “In the US and Europe, açai is consumed in a variety of ways – pulp, juice, smoothies, energy shots, energy drinks, and more,” says Rodrigo Bosco Correa, the marketing manager for Açai Roots, an exporter of açai products from Brazil to the US. “The market is strong for all these segments and there is a lot of room for expansion.
“Many açai-based products that you find in the US are not yet found in Brazil,” he continues, noting that, in Brazil, açai is most frequently consumed as a frozen pulp. “Although we have seen an increase in the variety of ways açai can be consumed, there is still a very big gap between the frozen pulp and the other options,” Bosco Correa says. ”Many brands in Brazil are now using açai for different things, but weakly compared to its possibilities.”
Other Brazilian ingredients such as guaraná, acerola and yerba mate - also popular in Argentina - have also made their way into the outside beverage market, notably through innovative CSDs and energy drinks.
Innovative alcoholic drinks may well go the same way. Cachaça, a uniquely Brazilian spirit made from fresh-pressed fermented and distilled cane juice, is the third most-drunk spirit in the world; however, it is not particularly well-known outside Brazil. Cachaça companies are hoping to change that, by elevating the spirit to new levels through fermentation and distillation innovations. For example, Leblon Cachaça, made in Minas Gerais in the heart of Brazil, uses traditional methods for making the spirit combined with European techniques including ageing the spirit in Cognac casks, under the guidance of their master distiller, Gilles Merlet, from Cognac, France. Another well-known company, Sagatiba Cachaça, produces aged cachaça in copper pot stills, like those used for whisky.
Meanwhile, emerging markets also have major domestic consumer bases to be tapped, if drinks companies are innovative enough to dovetail their offerings with local tastes.
Take India. It has huge diversity in tastes and preferred flavours, a major challenge for national and international drink manufacturers who often use regional flavours and multiple product lines to entice local consumers. According to Ravi Mehra, chairman of the flavours subcommittee at the Fragrances & Flavours Association of India, international beverage companies like Coca-Cola and PepsiCo have not risen to the challenge, marketing their international products through slowly developing a taste amongst Indian consumers. They have now realised there are regional drinks and flavours which could be more popular. “The only thing is that they need to be promoted regionally,” he says.
In addition to their popular mango-based drinks in India, both Coca-Cola and PepsiCo have been aggressively marketing their non-aerated lime drinks in 350ml packs costing around US$0.30. And, there are many locally popular drinks that could inspire drinks manufacturers to create popular Indian brands. For instance, ‘Panna’, made from unripe mangos, is traditionally consumed to avoid heatstroke during the long summer months; and salty ‘Jal Jeera’, made from mint and cumin, is also popular and considered to have medicinal properties. In the western state of Gujarat, almost all wedding parties begin with freshly-made soda drinks in a variety of flavours that could be used by corporate researchers; in the northern state of Punjab, plain soda is mixed with milk. ‘Rooh-Afza,’ a rose drink concentrate made by a century-old pharmaceuticals company Hamdard Laboratories costs US$2.25 for a 700ml bottle, and is popular throughout northern India.
Many of these innovations and potential opportunities are in the soft-drinks and juice sector and a similar picture can be found in China. Led by flavoured bottled tea drinks and low concentration juice blends, China’s drinks market is innovating fast and focused on healthy products.
Coca-Cola China recently launched a string of new drinks tapping into this trend, through its Beverage Partners Worldwide joint venture with Nestlé. The brand Yuan Ye, which translates as ‘authentic tea leaves’, includes jasmine-flavoured green tea and honey-flavoured jasmine tea lines priced at CNY2.5 (US$0.36) for a 48cl bottle.
Coca-Cola is also targeting the juice market in China through its 10V series, under its Minute Maid brand. The 10V series’ flavours includes kiwi, pear and pomegranate, a popular Asian fruit known for its rich antioxidants. Most importantly, according to the package, each bottle contains ten vitamins including vitamins C, E and B6. 10V series drinks are priced at CNY4 (US$0.58) for 42cl. Chen Jing, analyst at Beijing-based Beijing Orient Agribusiness Consultant Ltd, says that drinks advertised with healthy ingredients grabs the attention of Chinese consumers. “The hawthorn-flavoured plum juice is a good example," she says. "It is popular among Chinese for two reasons – for one it is a traditional summer drink, for another it is heavily advertised as a healthy drink for losing weight and helping drunk people to sober up.”
Master Kong, a subsidiary of Ting Hsin International Group, launched its own plum juice in April 2010. Other innovative brands include Coca-Cola’s Xue Fei Li, a carbonated plum juice, and Jiu Long Zai under Jiu Long Zai Foods, a food company based in Kaohsiung City, Taiwan.
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