The beverage category encompasses a truly wide range of products, such a range that at any given time, parts of the category could thrive while others suffer. The beverage industry is a microcosm of the larger food & beverage marketplace, and in similar fashion, the challenges processors face across many of the segments.
“Fluctuating market demand and economic dynamics are creating inconsistent production volumes, which can present operational challenges that result in higher labor and per-unit costs,” says Greg Gutowski, Meriden, Conn., plant manager for Universal Pure, a provider of high-pressure processing (HPP) services as well as beverage bottling and co-packing.
On the whole, the beverage category seems to slot right in with the overall “cautious optimism” that much of the greater food & beverage industry has adopted for the short-term future — a theme noted in numerous outlooks and reports, including our own annual outlook in January.
It hasn’t been all rainbows and roses in beverages. Some segments have had a rough go of late, for various reasons.
Although a significant portion of the juice and juice drink industry may have sought replacements for food additives that have been under attack by state legislators recently, there is concern over what ingredients could find themselves on the legislative chopping block next.
Still, there are bright spots, with functional beverages, mocktails and plant-based and dairy-free alternatives growing, Gutowski adds. At the operational level, however, processors must still battle external forces pushing on the bottom line and efficiency.
“Due to increasing costs for materials, transportation and labor, companies are implementing changes to increase profit margins, often through the use of cheaper ingredients and production automation,” Gutkowski says. “Manufacturers can combat unstable market dynamics by diversifying their capabilities, having the ability to process multiple packaging applications, along with adding automation to their processes.”
Function over form
Functionality continues to be on the minds of both consumers and processors. It has made its way into carbonated drinks, with numerous new soda brands putting on a full-court press to carve out market share from the mega companies by adding ingredients that boost consumers’ health.
Energy drinks continue to roll along as consumers look for a pick-me-up to get them through the slow spots of their daily routine. However, many of these consumers now demand more from beverages, something that can help them gain an edge in their productivity or health.
Consumers have been most attracted to beverages claiming to boost hydration(-- seven in 10 choose this feature in a Mintel Group Spotlight on functional beverages published in December 2023. They also seek drinks with attributes that help their immune systems, reduce inflammation or enhance brain power, the report adds.
“In terms of which drinks are consumed most frequently though, two other categories emerge as prominent,” Mintel’s report states. “Drinks that enhance weight management and sleep are among the most frequently consumed functional beverages, with almost 80% of regular consumers drinking them multiple times per week.”
Mintel also reports growing interest in natural ingredients over artificial additives — even before states like California instituted bans on some of these embattled ingredients and the FDA proposed revoking brominated vegetable oil as being safe for use in foods, especially beverages.
As a result, innovation has led some energy drink processors toward ingredients derived from plants, Mintel says, hoping that things like ginseng, ginger, sage and others can help them offer a perceived healthier alternative to caffeine. The tune is similar to that in the food industry overall: the cleaner the label, the better. But processors need to balance how far they go when eliminating artificial preservatives, explains Jenny Tuggle, marketing director for Universal Pure.
“Without the addition of preservatives or a kill-step for pathogens, limited product shelf-life narrows market and distribution possibilities,” she explains. “Limited product shelf-life not only presents challenges entering the retail market, but can increase product waste, directly impacting the bottom line.”
Sustainability push
Minimizing product waste is just one small component of being more sustainable, and not surprisingly, numerous beverage processors have rolled out initiatives and projects with sustainability in mind.
PepsiCo, for example, announced it was committing $300 million to build a new beverage processing plant in Vietnam that will be powered by renewable energy (it is also building a food processing plant as part of the same initiative). In the U.S. and Canada, the company announced the rollout of paperboard wraps and clips for product multipacks for brands including Pepsi, Pepsi Zero, Starry, Gatorade and others.
Anheuser-Busch invested $13 million into its Carterville, Ga., brewery to enhance its energy systems, dry-hopping, bottling and can-packaging operations, and another $22.5 million into revamping the cooling system at its Houston, Texas, brewery. That project was expected to reduce electricity consumption by nearly 2.2 million kwh per year, according to reports.
Coca-Cola Co. and USDA renewed a 10-year partnership to restore and improve watersheds on national forests and grasslands nationwide earlier in 2023, and global coffee companies such as Lavazza have continued to work to improve biodiversity and end deforestation in their own supply chains.
