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    Features

    Global Overview of Naturally Healthy Beverages

    Euromonitor outlines key trends in a crowded and competitive market for health-positioned drinks.

    Global Overview of  Naturally Healthy Beverages
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    By Hope Lee, Senior Beverages Analyst, Euromonitor International06.02.17
    Not everyone’s understanding of the term “natural” is the same, however, consumers walking down supermarket aisles all have an eye out for products with labels or packaging bearing the term. Euromonitor International’s research findings show that the description of “natural” is a self-governed practice from the manufacturer’s perspective; there is no conclusive and scientific definition for the term “natural” as it relates to foods and beverages. 

    The lack of a clear definition may cause confusion or harm the believability of natural claims. In view of the mindful eating trend, manufacturers are compelled to explore new ingredients for product development, and nurture “the next big thing” following the great success of coconut water.

    Growth Categories: Natural Mineral Water
    Naturally healthy (NH) mineral water benefits from multiple possible consumption occasions, premium hydration, and being an alternative for hydration during and after sports activities, as consumers are conscious of the sugar content and artificial ingredients in sports and energy drinks. The fact that every NH mineral water brand has a specific, identifiable source allows the brand owner to build a marketable story, and consequently an association with trust and traceability. This fits well with consumer desire for authenticity, traceability, and transparency. Sales of NH still spring water are also expected to advance rapidly, which is likely to spur manufacturers to locate new natural sources. The Wonderful Co’s Fiji water has a distinctive clean taste, purity, and country of origin (product identity); Fiji water is a rising star in NH water, with global sales increasing by 56% over 2011-2016.

    China’s Water Opportunity
    The huge potential in bottled water in China has attracted plenty of players, and it is one of the most crowded consumer markets. However, water companies also face regulatory changes. A new pricing system requires large users of water sources to pay higher extraction fees. In addition, previously there was no clear definition as to how to name different types of bottled water. Thus, manufacturers often gave their brands various “fancy/marketing” names. In May 2015, the National Health and Family Planning Commission of the People’s Republic of China released updated National Standards for Packaged Drinking Water GB19298-2014. The new standards prevent companies that sell other still bottled water from naming their products commercially and stipulate that bottled water should only fall into two categories: natural mineral bottled water or other drinking water. This change put natural spring water (as defined by Euromonitor) into a marginal category.

    In terms of product naming, to meet the requirements of the new standard, the name given to a packaged drinking water product should be scientifically correct. It is not permissible to name a product by one, or several ingredients, except for water. The misleading practice of using creative marketing descriptions for water products will be regulated. The change will put pressure on manufacturers’ marketing strategies, especially if they wish to expand in functional water.

    Competing with Fortified
    Consumers are looking for diversity, which represents both an opportunity and a challenge for manufacturers. Marketers will need to make a strategic decision about the geographic region in which they plan to develop the NH or fortified/functional (FF) category, or one of each to complement each other. That said, NH food and beverage brands sometimes need to compete with FF products. This is the case for Danone’s Mizone (FF) and Evian (NH) in China, with Mizone being a more powerful brand there. In bottled water, The Coca Cola Company (TCCC) focuses on FF water rather than NH water with global brand Glaceau. TCCC is relaunching its Coca-Cola Plus zero sugar, fiber-enhanced soft drink in Japan and it will compete against NH high fiber drinks.

    Probiotics are increasingly applied to packaged food and beverages. Manufacturers need to make a decision about which unique selling proposition (USP) they want to use for a new product to better suit the targeted audience and market. Successful hybrid products with probiotic and natural claims are also being pursued such as KeVita Sparkling Probiotic Drinks (acquired by PepsiCo).

    The Rise of Hybrid Varieties
    Coconut and plant-based water is a naturally healthy hybrid between juice and water. It is becoming a serious business, luring many investors. Coconut water has more potassium than a banana, no added sugar, no fat or cholesterol, as well as no preservatives; it is seeing strong growth across several regions, with for example, the Middle East and Africa growing 17% in 2016 alone. Processing and packaging techniques have now developed further, allowing for an extended shelf life for coconut water. What has followed is the entry of pioneer brands and a marketing blitz to position coconut water as a healthy alternative within the juice and sports drinks categories.

    As with any emerging category, the current fragmentation seen will move along the consolidation lifecycle. The speed of consolidation is debatable; however, brands such as Vita Coco are moving rapidly to build scale and create a global footprint. Most coconut water players will continue to approach this market with pre-established distributors and this is unlikely to change in the near future.

    Teas Demonstrate Promise
    NH hot tea is predicted to generate a net increase of around $3.5 billion over 2016-2021, driven by China, India, Canada, the U.K., and Germany. China alone will contribute absolute growth of $1.6 billion over the period. Consumption of tea beverages is rising even in coffee-drinking nations. This contrasts with the declining situation of diet and regular cola brands.
    NH RTD tea is more commercialized than the hot variant and a large amount of unpackaged tea continues to be available in China and India. Individual major RTD tea brands’ sales far outweigh those of NH hot tea. NH RTD green tea will be the growth engine in RTD tea thanks to its widely recognzsed health benefits and the improved taste and flavor of green tea. Honey is used as a pleasant flavor added to green tea.

    Chinese and Japanese brands continue to hold prominent ranks. Lipton NH hot tea sales are 64% higher than its NH RTD variant. This is largely because hot Lipton is widely available globally but Lipton RTD tea is a minor brand in major RTD tea markets such as China, Japan, and Indonesia.

    Commercialization of TCM
    Globalization has created more opportunities for cross-cultural exchange and influences between traditions and food and beverages. Traditional Chinese, Indian, and Hispanic herbs, beliefs, well-being concepts, and treatments have progressively spread throughout the West. This situation has translated into gradual acceptance of food and beverages associated with these cultures.

    Traditional preparation of traditional Chinese medicine (TCM) is time consuming, thus the modern method and commercialization of TCM is to enable a product to have the same efficacy but also be convenient and easily consumed on the go.

    Revitalizing Juice
    Given the introduction or likely introduction of sugar taxes in many markets, lowering sugar content in beverages has become a compelling task for industry players. Re-blending, going organic, clean label and HPP are noticeable tactics to revitalize juice.

    Overall, major developed markets are set to see slow growth or decline in NH juice due to concern about sugar content and market maturity. The competition from other NH beverages and consumers’ desire for product diversity have also put pressure on NH juice. Nevertheless, superfruits continue to expand through different variants such as 100% juice, juice drinks, and nectars. While the U.S. will see strong growth of NH superfruit nectars, the U.K. and China are expected to see growth in NH superfruit 100% juice. Continuous progress of coconut water and other plant-based waters and NH RTD tea may somehow divert consumers’ attention from NH juice. Manufacturers are looking for new blends and new technology, such as HPP juice, to attract and retain juice consumers. Increasingly, vegetables are blended with fruit juice to reduce the overall sugar content in a brand as the concept of “drinkable salad” is spreading in the U.S. and the U.K. The emergence of protein and organic beverages coupled with marketing tactics such as clean labels have also helped generate a competitive NH landscape.

    Organic Juice: ‘Super Natural’ Credentials
    In most markets, organic juice is seen as a super premium and super natural juice. The global retail value sales of commercially packaged organic juice amounted to around $2 billion in 2016; unsurprisingly, sales are concentrated in developed countries. North America generates the highest share of sales, accounting for half the global value. It is expected that Russia, Brazil, and India will also grow rapidly in the next few years, while sales in China will remain negligible. Given the healthy image of organic food and beverages, and the importance of organic farming as a sustainable agricultural model, both volume and value opportunities exist for organic juice in the long term. General Mills has recently made investments to expand its organic sourcing.

    However, highly regulated organic agricultural methods and inadequate financial support for organic farming in some countries may limit the mass production of organic fruit and vegetables. While the EU has its own organic labeling rules and certification, other countries may have their own rules. This makes it difficult to sustain a globally viable brand with the organic certified label.

    Summary
    Ancient wisdom such as TCM offers a window of opportunity for manufacturers given that botanicals fit perfectly with the word “natural.” The popularity of coconut water will continue as major companies are investing heavily in the product. Organic juice is expanding rapidly, however, growth is likely to be limited by costly certification and conversion to organic farming.
    NH mineral water is a regulated category in most countries, and the process of application for such labels can be long and approval difficult to come by. Some TCM herbs may not be palatable to a Western audience and it takes resources to nurture a consumer base. Organic certification and farming is desirable; but to make it scalable and economically sustainable remains a challenge.


    For more insight, see Euromonitor’s newly released global briefing on naturally healthy foods and beverages: “Ancient Wisdom and Botanical Acquisitions: the Rise of Naturals,” or contact Hope Lee at hope.lee@euromonitor.com, @HLee_emi on Twitter.
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