Newest Beverage Industry Growth Trend Revealed
an "Under the Radar" report
August 2, 2017
Beverage giants PepsiCo (Ticker: PEP) and Dr. Pepper/Snapple Group (Ticker: DPS) are all-too-aware of consumers waning taste for sodas and increasing thirst for healthier beverages. Soft-drink makers responded years ago to changing consumer tastes with diet sodas. But, recently consumer unease with artificial sweeteners like aspartame, has led to declining sales. According to industry periodical, Beverage Digest, 2016 sales of Diet Pepsi declined the most ever, dropping a staggering 9.3%. Michael Bellas, CEO of Beverage Digest, noted, the beverage industry has undergone a seismic shift and this shift signals a fundamental change in what consumers want from their beverages.1
Today, consumers are looking for beverages to offer far more than just satisfying thirst. The beverage industrys product response has come to be known as functional beverages. The first and still No. 1 functional beverage market category is energy drinks. But, conscious of the precipitous declines in diet soda sales and the uncomfortable fact that most energy drinks are laden with sugar and caffeine, PepsiCo and Dr. Pepper/Snapple are introducing revamped drinks featuring natural sweeteners and energy stimulating plant-based extracts instead of caffeine.
PepsiCos Brisk Mate is illustrative. Brisk-Mate is an energizing iced tea that, instead caffeine, infuses its popular Brisk Tea brand with yerba mate a species of the Holly family grown in South America, known for its energy and mental stimulation properties.
PepsiCos Brisk-Mate is one of myriad of new products comprising an emerging functional beverage category identified by Euromonitor, a leading publisher of independent market-research. The emerging category is functional tea beverages. Euromonitor calculates functional tea beverages will achieve an impressive 10.3% CAGR (compound annual growth rate) through the year 2020 more than any other functional beverage category including energy and (bottled) water.2
The impressive growth potential of functional tea beverages is no surprise to early investors in two functional tea beverage start-ups acquired recently acquired for huge multiples of their revenues. Bai Brands is illustrative. The company started in the proverbial basement of CEO Ben Weiss home in Princeton, NJ in 2009. For more than year Weiss worked to perfect his antioxidant functional tea beverage. According to WebMD, antioxidants can play a positive role in reducing cell damage and are helpful in variety of conditions including arthritis, heart disease and even Alzheimers. Bai Brands received its big break when Costco began carrying its products. Then, building on its success at Costco, Weiss convinced other retailers to pick up the brand. In mid-2016, Dr. Pepper/Snapple Group Inc. purchased Bai Brands LLC for $1.7 billion.
On the very same day as Bai Brands was acquired, PepsiCo announced its $200 million purchase of Kevita Inc. KeVita makes five flavors of carbonated probiotic drinks. According to WebMD, probiotics are beneficial for overall health, but most particularly digestion.
But, the true holy-grail of functional beverages is the diabetes category. In its earliest stages, known as pre-diabetes, doctors and nutritionists agree that diabetes can be reversed with lifestyle changes. Not only can functional beverages play a credible and beneficial role for consumers with pre-diabetes, the addressable market potential for any functional beverage targeting the pre-diabetes consumer is enormous.
CEO Murray Fleming of Glucose Health, Inc. (Ticker: GLUC), which manufacturers a functional tea beverage now sold nationally in the Diabetic Supplies aisle at Walmart, cites numbers from the National Diabetes Statistics Report published by the CDC (Centers for Disease Control and Prevention). Fleming points to the 84 million Americans fully one quarter of the nation estimated in the CDCs 2017 report, to be pre-diabetic.
Building upon its success with Walmart, the company is expanding its product line-up. Just yesterday, Glucose Health, Inc. announced a new line of fortified iced tea mixes in the three most popular flavored iced teas sold in America lemon, peach and raspberry. According to the Companys news release launching the new functional tea berages, Glucose Health Fortified Iced Teas offer three compelling benefits for pre-diabetic consumers.
1. Clinically-Proven - Glucose Health Fortified Iced Teas are blended with Fibersol-2, a unique 100% soluble fiber, years of clinical studies published in peer-reviewed scientific journals indicate, have beneficial functional impacts on blood sugar, and digestive health.
2. Natural Ingredients - Glucose Health "Fortified" Iced teas are also blended with natural botanicals the plant-based extracts considered by many to be holistic remedies for diabetes and healthy blood sugar.
3. Price - Glucose Health Fortified Iced Teas offer true value for money retailing for $12 for a 60-day container just 20 cents per serving.
Whether Bai Brands, Kevita or Glucose Health, Inc., the under the radar functional tea beverage market category identified by Euromonitor is clearly an emerging growth trend savvy investors interested in the beverage industry would be wise to keep on their radar.
1 April 27, 2017, PepsiCo, Coke Lose Market Share as Americans Drink Less Soda, www.bloomberg.com
2 March 15, 2017, Storming Growth for Energy, Water and Tea in Functional Beverages, www.nutraingredients.com
Source: NWBB "Under the Radar"
August 2, 2017