Canadian Vending

Features Healthy Vending Trends
Dispensing Strategies

NABbing A Profitable Future


June 2, 2010
By Michelle Brisebois

Topics

Non-alcoholic beverages (also known as NABs) have traditionally been
the life blood of the vending sector. Led by the bullet-proof
carbonated soda category, NABs were popular, easy to manage and
profitable.

Non-alcoholic beverages (also known as NABs) have traditionally been the life blood of the vending sector. Led by the bullet-proof carbonated soda category, NABs were popular, easy to manage and profitable. It also helped that consumers had a fairly small group of favourite brands for the industry to focus on. It basically came down to a choice between Coke and Pepsi with a few non-cola offerings thrown in to round out the pack.

Oh how things have changed.

Mintel reported in April 2010 that a study of 1,000 respondents during February of 2010 revealed that almost three in four consumers expect to spend the same or even less money on non-alcoholic beverages in the next year. The study also reports that nearly a quarter of consumers said carbonated soft drinks are the most vulnerable to cuts. Juices and coffee are the only categories expected to grow while teas, sports drinks, bottled water and carbonated beverages are expected to decline.

Advertisment

So what happened? Why is the mighty soda falling out of favour and more importantly, what might the future hold for the non-alcoholic beverage sector?

A recent article in Business Week reports that “in today’s economy, beverage companies will continue to struggle in generating top-line growth,” said one analyst. “Given flat demand, and little flexibility on pricing, it’s imperative for the global beverage companies to aggressively improve their cost structures. Otherwise, a number of industry players, particularly weaker ones, could be in financial jeopardy quite soon. For some, it could literally be a matter of survival.”

Business Week reports that both Coke and Pepsi are expected to continue their shift away from carbonated soft drinks and to focus more on energy, sports drinks, bottled water and other higher- margin products. “The focus on consumer health won’t go away,” he said. This statement seems to zero in on the crux of the issue – it’s about health not simply calories. If weight gain were the only issue, sugar free soft drinks have addressed that beautifully. The problem seems to be that while sugar may have been removed from diet sodas, a plethora of chemicals still made it into the mix.

Studies done by the Boston University School of Medicine found that adults who drink one or more sodas a day (both diet or regular) had about a 50 per cent higher risk of metabolic syndrome: a cluster of risk factors such as excessive fat around the waist, low levels of “good” cholesterol, high blood pressure and other symptoms.

Another theory holds that the substance that gives soda its caramel colour promotes resistance to insulin, which is needed to process calories. The theories go on and on and have been played out in the media.

The witch hunt culminated in the removal of soft drinks from many schools and consequently, kids got the message loud and clear. They see carbonated beverages as unhealthy and subsequently, a whole new group of emerging consumers turned instead to enhanced waters and fruit juices. Apparently, none of the traditional colas is the drink of the new generation. It’s actually something new.

Consumers of all ages want to ensure that their food and beverage choices have some value even if they are an indulgence. Dr Erik T. Donhowe, vice-president of Wild Flavours beverage and flavour business unit in the U.S., recently identified five trends as the key growth engines in the U.S.A. These trends include health and wellness concepts, organic products, healthy kids concepts, energy drinks as well as alcoholic beverages that have a healthy appeal by including fruit juices.

Pepsi is addressing the trend towards health conscious beverages choices by testing and launching Pepsi Natural. This premium cola is made with all-natural ingredients, including lightly sparkling water, natural sugar, natural caramel and kola nut extract. The cola gets its golden colour by using natural caramel and natural apple extract. Pepsi Natural has lots of bubbles and a “latte-inspired” foam that rises to the top. Pepsi is positioning it as a “brand-new cola experience.”

Pepsi also launched a nutraceutical water called Aquafina Plus Vitamins 10 Cal. The flavoured water is billed as the nation’s first low-calorie vitamin-enhanced water to feature a pure Stevia extract called PureVia that is an all-natural sweetener. As far as popular tastes go, trendy health beverage flavours include blueberry, and Acai berry – both are lauded as being rich in antioxidants.

What’s great about these new beverages is that they are much less generic than the traditional soft drinks are. You can now truly tailor your offering to your target group. Sports drinks will do well in venues that target athletes (or armchair athletes). 

Carbonated soft drinks will continue to be a major part of the NAB sector but it’s also clear that there is a shift afoot – a whole new innovative direction. This new direction offers us a chance to target specific consumer groups, potentially raise the average sale and stay profitable.

Now that’s something to drink to.