Pass Me A LaCroix: How Specialty Sodas Are Disrupting the Beverage Industry

In our “Trending Foods” series of blog posts, we analyzed interesting trends in the food industry, such as the increasing popularity of protein-rich grains, the avocado craze, and the changing customer habits that are fueling new consumption patterns, such as the brunch and street food phenomenon.

In this post, we are going to analyze a few interesting trends in the beverage industry, which is another segment of the consumer space that is experiencing significant changes due to increasing health consciousness, changing consumption habits, and ethics-driven diets.

 

Craft Sodas Taking An Increasing Market Share

The first trend we analyzed is the growing popularity of craft sodas, which has created challenges for traditional beverage mass-producers. Like other trends in the food/drinks industry, the growth of craft sodas has been fueled by the increased health-consciousness of consumers, the desire for premium/quality products, and the preference for specific ingredients due to ethical reasons. From the increased use of “organic” and “local” ingredients, to the higher adoption of brown sugar at the expense of the more popular refined alternative, we have seen interesting trends shaping customer habits and opening new market opportunities.

At the same time, traditional sodas are under scrutiny and doubted by consumers due to their high sugar content and obscure ingredients lists, in a moment when consumer appetite for non-alcoholic consumption has risen significantly by people making healthier lifestyle choices.

We can use Sentieo to analyze the demand for craft soda. We’ll take a quick but in-depth look at which companies are exposed to the new trend and how they are trying to benefit from it. Sentieo’s Document Search allows us to quickly identify the companies that are very active in this segment, such as Reed’s Inc., which, according to its company presentations, aims to become “the Sam Adams of Craft Carbonated Soft Drinks.”

However, the growing popularity of these drinks is also creating an opportunity for smaller operators and for restaurant chains that offer their own crafted sodas — like BJ’s Restaurants (BJRI) and Bagger Dave (BDVB). This trend is a potential threat for mass producers and a great opportunity for smaller players and the restaurant industry. They can offer their own premium drinks and generate higher margins thanks to a direct relationship with customers.

Sentieo allows us to search company documents, but it can also show us customer interest trends. We can use Sentieo’s alternative data tool Mosaic to plot Google Trends data and track consumer interests. In this case, we plotted Google Trends data for the term “craft soda.” To make the trend more visible, we applied a 12-week moving average to Google Trends’ raw data below:

As we can see, craft soda’s popularity boomed between 2011 and 2016, but remained basically flat for the past two years. Companies’ activity in this field has basically followed the trend in consumer interest highlighted by Google Trends, with a solid growth between 2011 and 2016 and a more flat trend in the past two years. This is clear when we analyze the number of mentions of the term “craft soda” in company-related documents and transcripts using Sentieo’s Document Search tool:

Given the aforementioned adoption of healthier lifestyles, another acceleration of this positive trend is possible in the future, and Sentieo can help you keep monitoring these trends.

 

Flavored Water Quenches Consumer Thirst

A second trend worth analyzing is the increasing popularity of flavored water, which is considered as a healthier alternative to soda drinks thanks to the absence of artificial sweeteners, caffeine, and flavor enhancers. While the debate is open and everything obviously depends on how the flavored water is actually prepared (e.g. with or without sweeteners or nutritional enhancements), the evidence is that the changing consumer preferences are boosting this segment of the beverage industry.

The growing popularity of flavored water is truly a strong and current trend. We looked at Google Trends data in Mosaic and noticed a massive growth in the number of searches for “flavored water” on the search engine. As in the case of flavored water, we used a 12-week moving average of the Google Trends data to make the trend more visible. This is the result:

We can easily see how the searches for flavored water have been growing constantly since 2009, and actually skyrocketed in the first half of 2018. Companies have been increasingly active in this area as well, as the growing number of mentions of “flavored water” in company-related documents and transcripts shows:

The companies that have invested in this segment of the beverage industry include Del Monte Pacific Limited, Sodastream International, True Drinks Holdings, Keurig Dr. Pepper, and National Beverage Corp (FIZZ), which produces the soda that has become a national phenomenon: LaCroix sparkling water.

We found a recent press release from FIZZ within Sentieo which details the success of LaCroix:

Traditional Drinks Producers Face Mounting Competitive Pressure

The popularity of alternative drinks like craft sodas and flavored water threaten traditional beverage companies such as Coca Cola (KO) and Pepsi (PEP), especially if consumers find alternative sources for these drinks, as we have seen with craft sodas and the growing tendency of restaurant operators to produce their own drinks.

Sentieo helps us identify, analyze and compare industry trends quickly and effectively, in the beverage industry as well as in many other sectors. We used powerful and flexible Document Search, and alternative data from Mosaic to analyze some important underlying trends in the beverage industry. Sentieo can be used to run ad-hoc searches on a virtually unlimited number of topics, allowing us to gain important insights into any industry that are not available anywhere else.