When it comes to the hospitality industry, predictions can be a bit futile. The pandemic has repeatedly shuttered restaurants once they were starting to thrive again and supply-chain issues aren't going away. Industry pros may be on safer ground turning their attention to supermarkets and the retail market. Here, five experts talk about how brands are becoming more inventive with their non-alcoholic offerings; whether the meteoric rise of hard seltzers is about to come to an end; why adaptogens – natural substances, such as herbs or mushrooms, that can help the body manage stress – are suddenly proving so popular; how and why micro dosing is coming to soft drinks; and plenty more.
Jen Batchelor is the co-founder of Kin Euphorics, a functional, non-alcoholic beverage brand for adults.
Nik Sharma is an advisor to and investor in retail beverage brands including Haus, Lemon Perfect, Hydrant and Super Coffee.
Kayla Castañeda is the co-founder and CEO of Agua Bonita, which sells ready-to-drink cans of agua fresca, a traditional Mexican drink.
Chris Marshall founded Sans Bar, an alcohol-free bar in Austin, Texas, for which he has both a permanent site and a pop-up model.
Andrea Hernández is the founder of Snaxshot, a food-and-drink trend-forecasting company with an acclaimed newsletter.
One of the fastest growing segments of the soft-drink market in the past couple of years has been functional drinks – generally, non-alcoholic drinks with specific health benefits. Can we expect more of the same?
NS: ‘Adaptogens will remain huge, whether it's mushrooms, vitamin B or vitamin D. But most companies still struggle to make them taste great. So many of them have great benefits, but nobody wants to drink them. Gaining mass-market appeal will be a challenge, too – does it appeal to somebody living in the middle of nowhere, as well as people living in a yoga-posing, matcha-sipping world?’
JB: ‘I'm curious to see what happens with some of the cultured drinks. Drinking vinegars had a moment, but it wasn't really sustained. I'm rooting for them. Most other functional drinks are easier from a manufacturing and logistics standpoint, whereas anything fermented is a lot more nuanced.’
AH: ‘Kombucha has plateaued, but prebiotic seltzers are having a boom. Vena started off as an apple-cider vinegar seltzer brand and is now relaunching as a prebiotic soda. That won't slow down any time soon. CBD has been huge, but I'm seeing a lot of CBD-beverage brands launch non-CBD drinks, perhaps because of regulation. UK-based TRIP launched in the US as an adaptogen seltzer instead of a CBD seltzer. Drinks brand Cann released Unspiked, which is a line of non-THC beverages – basically flavored seltzer. It's clear CBD products are dying down and becoming devoid of meaning. But focus will emerge as the new energy – anything that leans towards bettering the mind and focus will thrive.’
KC: ‘Adaptogens are really prevalent in the no- and low-[alcohol] space, and are being marketed as an experience. [Singer] Katy Perry just launched De Soi, an alcohol-free drinks brand that leans entirely on that crux of adaptogens – promising to make you feel good and replace feelings produced by booze. A lot of other companies lean on the health benefits of adaptogens, but don't center it around the social aspect. Plenty could explore that space.’
What other kinds of soft drinks will emerge over the next 12 to 18 months?
KC: ‘More exotic flavors will continue to take center stage. Lots of curious folks are bored with traditional offerings, so yuzu and hibiscus are having a moment. Drinks brand Ruby offers hibiscus water in combinations like pomegranate and lime, and Sanzo is an Asian-inspired sparkling water. It's about more nuanced flavor profiles that people probably wouldn't be exposed to in any other area of their lives – the lack of travel probably has something to do with it. Drinks, especially with a social aspect to them, go hand in hand with experimentation and can be a huge dose of escapism. People are reaching for something that transports them as they sip.’
NS: ‘Nostalgic tastes are definitely here to stay. Every decade, there'll be a new wave of those nostalgic products and flavors. That demographic is just starting to make their own money and then find products that remind them of their own childhood. Olipop's Vintage Cola tastes exactly like Coca Cola, but has only two grams of sugar and is a probiotic.’
CM: ‘Anything complex, interesting and refreshing. Florals will be in the 2022 flavor wheel, so hibiscus, violet, elderflower – all of these are hopeful. We're leaning towards florals as if it were springtime. We're ready for renewal. [Drinks brand] Betera is doing florals really well, while Kin Euphorics' Kin Spritz has great fruity and floral notes.’
JB: ‘Palates are being refined. Bitter and tart are more associated with health, and people want their non-alcoholic drinks to taste of something unique. The no- and low-alcohol sector is definitely cognizant of that and is striving to create interesting flavor palates. In turn, we have to think about how this new innovative flavor palate is shape-shifting cocktail menus at large, both alcoholic and not. The flavor profiles from For Bitter For Worse are insane and one of the most underrated. I served its drink The Saskatoon at Thanksgiving and people went crazy for it – it's rich, with a nice mouth-feel, and can be used for sangria, mulled wine or negroni-style drinks.’
The meteoric rise of hard seltzers (that's hard sparkling water) in the US and elsewhere has been well documented. But, now that there are lots more competitors in the market, is the bubble about to burst?
AH: ‘Hard seltzer, in itself – liquor and seltzer in a ready-to-drink format – has stagnated. Lots of big beverage companies in the US reported losses, because they overestimated the demand and it slowed down heavily. [TV show] Saturday Night Live riffed on how even your dentist launched a hard seltzer in 2021. However, the “seltzerization” of other alcoholic drinks has a long way to go. Evolutions to watch include saké seltzers, like the UK-based Shima Drinks, and rum-based seltzer brand Casalú, which is from Miami.’
NS: ‘Truly Hard Seltzer and White Claw captured the market and owned the distribution to get hard seltzers into people's hands. People think they're drinking vodka sodas, but it's just malt liquor. US alcohol laws mean they can be sold in a normal grocery store, whereas other spirit‑based drinks can't. It's an unfair advantage. There's an opportunity for companies like Onda and Spritz Society to educate people on how the major players aren't vodka-based at all and are terrible from an ingredient standpoint. The fact is that people optimize toward convenience, so those companies need to find ways to get into people's hands and homes with more ease.’
JB: ‘The hard-seltzer space is so noisy. There won't be a winner-takes-all situation after White Claw and Truly Hard Seltzer. It'll get so diluted and there won't be one brand anyone is loyal to. Although people will wise up to the fact that they're just drinking pure alcohol with flavors, those cheap ingredients will keep them at a more accessible price point. My hope for the elevated alternative category is that it finds more ways to scale.’
The war on sugar
How is the speedy rise of the health‑conscious consumer affecting the soft-drinks industry?
NS: ‘In 50 years, we'll look at sugar the same way we look at cigarettes. Some people will do it, but we won't be happy giving it to our kids or speaking publicly about it. The current drive to cut sugar has helped companies start the process of innovation, even if they don't taste great. When Gatorade sees [functional drink brand] Barcode doing so well, it's forced to create something it should have 20 years ago. Even more than understanding sugar, people are making sense of sweeteners like aspartame, erythritol and stevia – they want to know what those are and their effects. For a long time, sweeteners were able to hide, because of their complex names. Brands try their best to avoid it. United Sodas of America, for example, says it doesn't use artificial sweeteners, just a tiny amount of sugar, erythritol and stevia, which is much better.’
AH: ‘With brands forced to signify excess sugar and calories on labeling, the days are numbered for sugary soda. That's why big brands are diversifying their portfolios – Coca Cola bought Topo Chico hard seltzer and launched its own seltzer water AHA, and Pepsi launched [caffeinated sparkling-water brand] Bubly. Even energy drinks are being reinvented as people are looking for “clean energy”. Equally, anything that has words like “diet” or “skinny” feels very archaic at this point.’
KC: ‘I don't think we'll ever see sugar become obsolete. There's still going to be some pushback against artificial sweeteners and people will choose real sugar over those. We'll see a trend towards lower sugar, but people are becoming more educated on their limits with sugar and what works for them personally.’
How can drinks brands, especially non-alcoholic alternatives, justify the high price points of their products?
NS: ‘The reason a lot of these products are so expensive is because the brands are in the early days and they're buying such a small amount of ingredients. We launched a functional beverage earlier this year, which probably sold for around $4 a bottle, but the cost itself was around $2.50 – just for goods, not including shipping, any internal expenses or overheads. One solution is to raise a ton of money, as Super Coffee did, in order to go mass market very quickly. Brands will have to get cheaper. You can't expect somebody who's used to paying $0.15 for a can of soda to suddenly pay $2 a can for something. With time, it'll get better.’
CM: ‘The US is headed for another little economic downturn. People are going to really struggle to justify buying a $35 bottle of botanical no‑alcohol liquor, which is why I think on-premises will be key. People have an opportunity to meet that brand in an environment that's fun and celebratory. With that being the first impression they have, they'll continue to feel that, and the experiential piece makes it worth the price point. It's a real hurdle, though.’
JB: ‘The non-alcoholic wines that are doing really well are those that make wines and de-alkalize them, which is a more expensive process than just making wine and bottling it. It's very expensive, because the technology isn't accessible. Unless there's an education around it providing perceived value for the consumer, people see the alcoholic version as worth more. Functional aspects come in here – we need to think about how to support mood, deliver what people want and use the best possible ingredients. That's the only way to get price parity, or create a price saving to make it more attractive.’
This article was first published in Courier issue 46, April/May 2022. To purchase the issue or become a subscriber, head to our webshop.