Beverages 2016 The Shifting Beverage Landscape . - Beverage Marketing
The Packaging Conference Beverages 2016 The Shifting Beverage Landscape: What’s In Store? February 8, 2016
Beverage Marketing Capabilities Beverage Marketing Corporation utilizes an integrated model for providing information, analysis and advice to beverage industry clients Unique Beverage Industry Expertise for Providing “Added-Value” to Selected Clients Cutting Edge Insights: New Age Emergence, Multiple Beverage Competition, Specialty Beer Opportunity, Bottled Water Dominance, Hyper-Category Competition, Micro-Marketing Age -2- Copyright 2016 Beverage Marketing Corp.
Beverage Marketing Capabilities Introducing The Beverage Packaging Data MODULE The latest addition to Beverage Marketing Corporation’s DrinkTell Database with Market Forecasts! Visit our exhibit for a closer look! The Beverage Packaging Module is brought to you by: and -3- Copyright 2016 Beverage Marketing Corp.
What’s In Store Agenda I. Market Overview II. Key Trends III. Category Updates IV. Projections -4- Copyright 2016 Beverage Marketing Corp.
What’s In Store State of the Industry – The Good and the Bad Beverage Headlines Liquid refreshment beverage market grows for second consecutive year in 2015 after flat performance in 2013 Carbonated soft drinks experience another modest sales decline in 2015 Bottled water continues its solid growth trend led by single-serve water segment Niche categories continue to outperform traditional mass-market categories Wine and spirits lead alcohol growth in 2015, and beer experiences slower growth performance -5- Copyright 2016 Beverage Marketing Corp.
What’s In Store The economy continues to move in a positive direction with improved GDP growth and lower unemployment, but improvement has been slow Quarterly GDP Change 2010 – 2015 Unemployment Rate 2000 – 2015 10% 9.6% 9.3% 9.0% 8.1% 8% 7.4% 6% 6.2% 6.0% 5.8% 5.8% 5.5% 5.1% 5.3% 4.7% 4% 4.6% 4.6% 4.0% 2% 2010 2011 2012 2013 2014 2015 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: Beverage Marketing Corporation; Bureau of Economic Analysis, Department of Commerce, Department of Labor -6- Copyright 2016 Beverage Marketing Corp.
What’s In Store Beverage stock performance was solid in 2015 – consistent with the performance of the overall stock market – but market has been rocky first month of 2016 Stock Price Performance 2010 – 2015 2010 2011 2012 KO 15.4% 7.1% 2.8% PEP 7.5% -2.2% DPS 24.2% CCE 2014 2015 13.5% 6.3% 6.3% 2.5% 21.2% 14.0% 8.9% 5.5% 11.9% 10.3% 34.7% 30.2% 18.1% 1.1% 23.1% 39.1% 21.3% 1.2% COT 36.7% -29.7% 28.3% 0.4% -13.9% 57.0% Soft Drinks 14.6% 3.8% 8.6% 9.8% 11.6% 6.6% Beverages 15.0% 4.2% 10.1% 13.1% 14.1% 9.1% N/A 10.0% 10.5% 12.8% 10.4 3.9% Consumer Goods 2013 Source: Beverage Marketing Corporation; Google Finance -7- Copyright 2016 Beverage Marketing Corp.
What’s In Store Consumer sentiment surpassed pre-recession levels in 2015 for the first time Annual U.S. Consumer Sentiment Index 1995 – 2015 103.2 104.6 92.2 93.6 105.8 107.6 95.2 89.2 89.6 87.6 88.6 92.9 87.3 Pre Rec Level 85.6 63.8 66.3 72.6 84.1 76.4 79.2 68.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Thompson Reuters/University of Michigan -8- Copyright 2016 Beverage Marketing Corp.
What’s In Store Gasoline prices are almost a dollar a gallon lower than last year but to date have only had a modest impact on beverage consumption Lower gas and oil prices are a net positive for the beverage industry However, “thriftiness” under changing economic times is now the new norm Gasoline Prices 2010 – 2015 5 3.9 4 3.8 3.7 3.3 3 2.8 2.9 2.8 2.9 3.4 3.7 3.7 3.6 3.6 3.7 3.7 3.7 3.4 3.5 14Q4 – 15Q4: -25% Growth 3.6 2.9 2.8 2.3 2.6 2.2 2 1 0 10Q1 10Q2 10Q3 10Q4 11Q1 11Q2 11Q3 11Q4 12Q1 12Q2 12Q3 12Q4 13Q1 13Q2 13Q3 13Q4 14Q1 14Q2 14Q3 14Q4 15Q1 15Q2 15Q3 15Q4 Source: U.S. Energy Information Administration -9- Copyright 2016 Beverage Marketing Corp.
What’s In Store The U.S. beverage market has experienced overall mixed performance since declines during the recession, but has now achieved back-to-back years of growth Growth accelerated in 2015 over 2014 Volume Change U.S. Total Beverage Market 2010 – 2015P P: Preliminary Source: Beverage Marketing Corp. -10- Copyright 2016 Beverage Marketing Corp.
What’s In Store Post-recession annual beverage revenues have been consistently positive, but the differential versus volume growth is narrowing U.S. Total Beverage Market Volume and Wholesale Revenue (Millions of Gallons and Wholesale Dollars) 2010 – 2015P 3.7% 3.1% 2.7% 2.7% Change 2.3% 1.5% 1.7% 1.5% 1.1% 0.8%0.9% 0.8% 0.0% -0.1% 2010 2011 2012 Volume 2013 2014 Wholesale Revenue 2015(P) 10/15 CAGR P: Preliminary Source: Beverage Marketing Corp. -11- Copyright 2016 Beverage Marketing Corp.
What’s In Store In 2015, refreshment beverages led by bottled water and some niche categories are growing fastest U.S. Beverage Market – 2015P Volume Change 2.9% 0.5% 0.8% -5.2% Refreshment Beverages Traditional Beverages Beverage Alcohol Tap Water P: Preliminary Source: Beverage Marketing Corp. -12- Copyright 2016 Beverage Marketing Corp.
What’s In Store In general, traditional mass market categories have struggled while niche categories have experienced growth Bottled water is the primary exception of a mainstream category that has thrived The U.S. Liquid Refreshment Beverage Market 2015P 18.8% Volume Change 10.1% 6.1% -1.1% -2.1% CSDs Fruit Bevs RTD Coffee Energy RTD Tea Drinks 7.6% 5.8% 5.5% Value Added Waters Sports Bevs Bottled Water P: Preliminary Source: Beverage Marketing Corp. -13- Copyright 2016 Beverage Marketing Corp.
What’s In Store Wines and spirits have been driving beverage alcohol growth with beer experiencing more modest growth The U.S. Beverage Alcohol – 2015P 2.5% Volume Change 2.0% 0.8% 0.5% Beer Wine Spirits Total Beverage Alcohol P: Preliminary Source: Beverage Marketing Corp. -14- Copyright 2016 Beverage Marketing Corp.
What’s In Store Coffee continues to show healthy growth among traditional beverages thanks to success of single-cup brewers and popularity of coffee cafes like Starbucks and others The U.S. Traditional Beverage Market – 2015P Volume Change 1.9% 0.8% 0.5% -1.3% Milk Tea Coffee Total Traditional Beverages P: Preliminary Source: Beverage Marketing Corp. -15- Copyright 2016 Beverage Marketing Corp.
What’s In Store More non-alcoholic beverage categories grew in 2014 than declined, and niche categories generally outperformed large traditional categories 2015 Category Winners and Losers WINNERS* LOSERS** Bottled Water CSDs RTD Coffee Milk RTD Tea Fruit Beverages Sports Drinks Energy Drinks Valued-Added Water * Volume increases ** Volume declines -16- Copyright 2016 Beverage Marketing Corp.
What’s In Store More categories experienced improved performance in 2015 even when they declined 2015 Beverage Report Card IMPROVED Bottled Water WORSENED CSDs Energy Drinks Fruit Beverages Milk RTD Coffee RTD Tea Sports Drinks Value-Added Water -17- Copyright 2016 Beverage Marketing Corp.
What’s In Store Traditional Key Consumer Drivers Are Evolving Health and wellness Balanced nutrition Variety Flavors, seasonals, hybrids Convenience With product information -18- Copyright 2016 Beverage Marketing Corp.
What’s In Store Beverages with health and wellness attributes are growing at a rate faster than those categories without such attributes U.S. Health/Wellness Beverage Market vs. All Others 2010 – 2015P 38.3 38.4 38.3 38.2 38.4 Health/Wellness Market Growth 2011 – 2015P 37.7 21.0 2010 22.0 21.4 22.3 24.1 23.0 Millions of Gallons Billions of Gallons Year 2011 2012 All Others 2013 2014 2015(P) Wellness All Others 10/11 1.8% 0.4% 11/12 2.8% -0.4% 12/13 1.5% 0.3% 13/14 3.0% -0.4% 14/15P 4.5% -1.4% 10/15P CAGR 2.7% -0.3% Health/Wellness P: Preliminary Source: Beverage Marketing Corporation -19- Copyright 2016 Beverage Marketing Corp.
What’s In Store The beverage industry has committed to a reduction of 20% of calories from beverages by 2025 through the Balanced Calories Initiative Source: Beverage Marketing Corporation; American Beverage Association -20- Copyright 2016 Beverage Marketing Corp.
What’s In Store Beverage companies are moving to healthier product portfolios. Coca-Cola, for example, has expanded participation in high-growth areas through investments. Many of the categories feature healthy product attributes Source: Beverage Marketing Corporation; Coca-Cola Company -21- Copyright 2016 Beverage Marketing Corp.
What’s In Store Additionally, PepsiCo is expanding its healthier beverage options; today about half of its refreshment beverage volume comes from healthier products PepsiCo U.S. Beverage Volume Mix Today 1997 24% 49% 51% 76% Full- or mid-calorie refreshment, energy, indulgence Zero- or low-calorie beverages ( 40 calories per 8oz), active hydration, healthy juices Source: Beverage Marketing Corporation; PepsiCo -22- Copyright 2016 Beverage Marketing Corp.
What’s In Store Most emerging categories have health and wellness attributes and/or promise specific functional benefits Select Offerings and Categories of Today’s Emerging Beverages Functional Probiotic -23- Chia Cold Brew Shots Coconut Water Plant-based Water Kombucha Copyright 2016 Beverage Marketing Corp.
What’s In Store Craft beer continues to be the fastest growing segment in the beer category as new breweries now total 4,000 nationally; craft beer now accounts for about 11% of category volume -24- Copyright 2016 Beverage Marketing Corp.
What’s In Store Many big brands declined in 2014 Top 10 Soft Drinks Top 10 Beer Brands Top 10 Spirits Brands Pepsi-Cola Bud Light Bacardi Diet Coke Coors Light Captain Morgan Mountain Dew Budweiser Absolut Diet Pepsi Miller Lite Coke Zero Corona Extra Natural Light Busch Light Busch -25- Copyright 2016 Beverage Marketing Corp.
What’s In Store Bottled water has gained the most volume over the last 10 years while carbonated soft drinks have lost the most Decade Comparison 2004 – 2014 Which Categories Gained, Which Lost Volume? Category Millions of Gallons 2005/15P CAGR Bottled Water 4,163 RTD Tea 2.0% 274 Value-Added Water 3.6% 136 RTD Coffee 10.2% 66 Fruit Beverages Total LRB 14.7% 476 Sports Drinks CSD 6.6% 795 Energy Drinks 4.5% -2.9% -1,041 -1.9% -2,656 2,212 0.7% P: Preliminary Source: Beverage Marketing Corp. -26- Copyright 2016 Beverage Marketing Corp.
What’s In Store Carbonated soft drink volume declined for the 11th consecutive year in 2015 but remains the most popular beverage in the United States Despite the decline, category performance actually improved in 2014 from preceding years and worsened only slightly in 2015 U.S. Carbonated Soft Drink Market 2010 – 2015P CSD Market Growth 2011 – 2015P 13.8 13.6 13.3 Billions of Gallons 12.9 12.8 12.6 2010 2011 2012 2013 2014 2015(P) Year Change 10/11 -1.8% 11/12 -1.8% 12/13 -3.2% 13/14 -1.0% 14/15P -1.1% 10/15P 5-Yr CAGR -1.8% P: Preliminary Source: Beverage Marketing Corporation -27- Copyright 2016 Beverage Marketing Corp.
What’s In Store As the search for a good-tasting, natural sweetener continues, some brands have begun to use stevia but taste issues remain Stevia Sweetened CSDs -28- Copyright 2016 Beverage Marketing Corp.
What’s In Store One potential source of growth is craft sodas, which are beginning to emerge as a viable option for today’s consumers with new brands and companies entering the market, but the segment is unlikely to reach the same level as craft beer Craft Soda -29- Copyright 2016 Beverage Marketing Corp.
What’s In Store SodaStream has first-mover advantage in the home beverage dispenser market, while rivals such as Bonne O are close to coming into the market PepsiCo is now making its Pepsi and Sierra Mist brands available in capsules for SodaStream Keurig Kold -30- SodaStream Bonne O Copyright 2016 Beverage Marketing Corp.
What’s In Store Consumer health and variety demands negatively impact CSD consumption. CSD category performance is further impacted by other external factors that contribute to consumption declines Reasons for reducing CSD consumption: o Health o Variety o Economy Legislation and messaging from government and regulatory agencies Tax threats aimed at reducing consumption Negative commentary from medical studies and other organizations Steady drumbeat of negative press Source: Beverage Marketing Corporation -31- Copyright 2016 Beverage Marketing Corp.
What’s In Store Bottled water has experienced healthy growth each year since the recession The category is aided by its positioning as the ultimate health beverage The category now approaches nearly 12 billion gallons U.S. Bottled Water Market 2010 – 2015P 11.7 10.9 9.1 10.1 Billions of Gallons 8.8 9.6 2010 2011 2012 2013 2014 2015(P) Bottled Water Market Growth 2011 – 2015P Year Change 10/11 4.0% 11/12 6.2% 12/13 4.7% 13/14 7.3% 14/15P 7.6% 10/15P CAGR 6.0% P: Preliminary Source: Beverage Marketing Corporation -32- Copyright 2016 Beverage Marketing Corp.
What’s In Store While stable, PET water pricing continues to be historically aggressive and is likely to remain so at least through 2015 Every-day pricing has been as low as 2.49-2.99 for 24-packs at retail Advances in Supply Chain Costs High-speed bottle filling in a range of 15-18 million cases per year per line Stable to declining resin costs Continued bottle light-weighting Low fuel costs -33- Copyright 2016 Beverage Marketing Corp.
What’s In Store While branded water outsells private label in the retail PET segment, private label has made significant inroads over the last five years U.S. Retail PET Water Market Branded vs. Private Label 2015P 2010 Private Label 28.4% Private Label 46.6% Branded 71.6% Branded 53.4% P: Preliminary Source: Beverage Marketing Corporation -34- Copyright 2016 Beverage Marketing Corp.
What’s In Store Similar to craft soda, from a small base, enhanced waters of all types are now proliferating and gaining traction in all parts of the country These premium value, craft type waters are adding additional benefits to consumers’ water experience Enhanced Waters -35- PH Balanced Water Essence Water Cap-Activated Water Essentia Hint Activate Plant Water Trader Joe’s Copyright 2016 Beverage Marketing Corp.
What’s In Store The timeline for bottled water to become the #1 beverage category continues to contract, with late 2016 or early 2017 becoming a target date With today’s updated projections, bottled water (including flavored and enhanced water) could capture the top spot by 2016 The timeline for plain water to capture the top spot could happen by 2016 year-end Projected Water & CSD Growth Millions of Gallons 2009 – 2019P 16,000 Flavored Water Enhanced Water CSDs 14,000 CSDs: -1.1% CAGR 12,000 10,000 8,000 Premium Retail PET Waters 6,000 4,000 Bulk, HOD, Vended, Sparkling, Imported Waters 2,000 0 2009 -36- 2010 2011 2012 2013 2014 2015P 2016P 2017P 2018P 2019P Copyright 2016 Beverage Marketing Corp.
What’s In Store Cans, plastic and glass comprise more than 90% of the beverage packaging universe Over the last five years, plastic has seen the most growth due mostly to the success of the bottled water category Beverage Packaging Share by Package Type* Billions of Packaging Units 100% 240.2 Aseptic Pouches Paper 1.1% 6.0% Glass 15.2% Plastic 34.6% 249.0 1.3% 0.9% 5.0% 14.3% 38.3% 1.1% Beverage Package Types Growth 2009 – 2014 2009-2014 Type Aseptic -2.8% Pouches -2.5% Paper -2.8% Glass -0.5% Plastic 3.9% Cans Cans 41.8% * Includes Milk, does not include Beer kegs Source: Beverage Marketing Corporation -37- -1.1% 40.4% TOTAL 2009 CAGR(%) 0.7% 2014 Copyright 2016 Beverage Marketing Corp.
What’s In Store Packaging innovation has gained in importance as the marketplace has gotten more crowded as a means to distinguish both categories and brands -38- Copyright 2016 Beverage Marketing Corp.
What’s In Store Smaller packaging sizes have been a source of innovation and also help contribute to reduced caloric intake -39- Copyright 2016 Beverage Marketing Corp.
What’s In Store In the future, the marketplace will be characterized by numerous high-value, low relative volume opportunities Almond Milk Alc Pouches (2009-2014 CAGR) High Growth Coconut Water Hard Cider 20% Enhanced RTD Teas Malternatives SPFJ Organi c Juices Projected Value 250M SS Dairy Drinks 500M Craft Beer RTD Coffee Straight Whiskey 10% Sports Drinks Energy PET Water RTD Teas Vodka Sparkling Wine Imp. Beer Tequila Bulk/HOD Water 1B Table Wine 5B 10B Enhance d Water Fruit Drinks 100% Juice -5% -40- 35B 0% Prem CSDs Flavored Water Enhanced Fruit Drinks 25B Diet CSDs Mil k 50B Reg CSDs Soy Low Growth Copyright 2016 Beverage Marketing Corp.
What’s In Store Among refreshment beverages, the strongest growth is projected for bottled water, energy drinks and RTD teas and coffees CSDs, milk and fruit beverages will need to innovate and provide healthier options to rekindle growth 2016 Liquid Refreshment Beverage Projections LRB Category RTD Coffee 2016(P) 12.0% to 13.0% Energy Drinks 7.0% to 8.0% Bottled Water 5.5% to 6.5% RTD Tea 5.0% to 6.0% Value Added Water 4.0% to 5.0% Sports Drinks 3.0% to 4.0% Carbonated Soft Drinks -0.7% to -1.2% Fruit Beverages -1.0% to -2.0% TOTAL LRBs 1.9% to 2.3% P: Projected Source: Beverage Marketing Corporation -41- Copyright 2016 Beverage Marketing Corp.
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Beverage Marketing Corporation utilizes an integrated model for providing information, analysis and advice to beverage industry clients -3- Copyright 2016 Beverage Marketing Corp. Introducing The Beverage Packaging Data MODULE The latest addition to Beverage Marketing Corporation's DrinkTell Database with Market Forecasts!
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Beverage Marketing Corporation utilizes an integrated model for providing information, analysis and advice to beverage industry clients -3- Copyright 2016 Beverage Marketing Corp. The Shifting Beverage Landscape Agenda I. Market Overview II. Key Trends III. Category Updates IV. Projections -4- Copyright 2016 Beverage Marketing Corp.
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