Cold Fusion

Balanced product assortment, effective marketing drive beverage decisions.

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The opportunity for retailers is to grab as much share as possible of the category while it’s still growing.

“Smartwater is the fastest-growing brand, and private-label [water] is growing on distribution gains,” Allen said. “But … we know that brands bring people into your stores. In fact, 44% of all bottled-water households will only buy branded bottled water.”

To improve water sales, Allen encouraged retailers to offer single-serve packaging for the three main water segments: premium, popular and value waters. She also urged retailers to stock 12- and 24-packs of water. “Nearly 6 million shoppers shop in convenience stores and buy case pack water,” she said. “But only 1% of households buy case water in c-stores. It’s a real opportunity.”

Favoring Flavor

Millennials are helping change another aspect of the beverage landscape: They’re more willing to experiment with new flavors. They join the growing Hispanic demographic in a desire to sample bolder flavors. When you add millennials’ $1.7 trillion in spending power to Hispanics’ $1.2 trillion, the result is a “structural change” to the country’s palate.

“It’s the blending of America,” Modi said. “The white consumer is taking culinary cues from Hispanic, Asian and African-American consumers.”

This led Modi to suggest beverage manufacturers should focus less on low-calorie products and more on new flavors that appeal to this new desire for stronger flavors.

“We’re at a point in the United States where companies are taking ingredients out of their products” to make them seem more natural, Modi said. “Instead, there’s not enough flavor.”

The most obvious and successful evidence of this trend is in the beer and wine categories. One reason: By 2018, 80 million millennials will be legal drinking age, and 20% of millennials are also Hispanic, according to said Darren Tristano, executive vice president at data/consulting company Technomic Inc., Chicago.

For wine, the move has been toward mixing varietals to create new flavors and indulging the millennial consumers’ sweet tooth.

“The millennial doesn’t want to drink what their parents drink,” said George Ubing, national director, convenience channel, for E. & J. Gallo Winery, Modesto, Calif. For Gallo, the goal of turning wine into a more refreshing beverage has led to innovation. Leading the way are Barefoot lighter; more thirst-quenching line extensions Refresh, Moscato and Bubbly; and a Liberty Creek wine packaged in a Tetra Pak to target on-the-go lifestyles.

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