The beverage landscape is poppin’ with activity, but could it burst?
Quenching the thirst of Canadians is no simple feat. From functional ingredients to sugar-free to halal and kosher claims, consumers are asking for more—and less—from their beverages than ever before. For grocers and manufacturers, the sheer number of sports drinks, sparkling waters, kombuchas and sodas hitting the market has added layers of complexity to the category.
According to research firm Innova Market Insights, launches in the cold beverage sphere rose in Canada by an average of 15% between 2019 and 2023. Energy drinks was the fastest-growing subcategory over this period, rising by 95% over the five years, and among soft drinks and sports nutrition beverages, common claims made by new products included boosting immune health, plant-based ingredients and sugar free.
And health isn’t the only factor. During the research period, 66% of launches in the soft drink and sports nutrition categories claimed to be halal and 39% touted kosher bona fides.
“Canadian drinkers are more conscious about their beverage choices and are continuously assessing the permissibility behind them,” says Jenny Thompson, director, market strategy and understanding at Ipsos Canada.
While several experts note that interest in benefit-driven beverages comes from all slices of the demographic pie, Thompson says millennials and gen-Z shoppers are driving the trend of what she dubs “label literacy.”
“[Millennials and gen Z] tend to be more proactive when it comes to their health and are over-developed for consuming products that meet a nutritional or metabolic need,” she says.
Whether it’s health or religious observance or other factors guiding a shopper’s beverage selection, it can feel as if retail refrigerators are stocked with products that meet every need. But, is there a downside to having so much choice?
Brad McMullen, co-owner and president of Summerhill Market in Toronto, wonders if a category crash is coming. “I almost feel like it’s oversaturated at this point. I feel like there’s a bit of analysis paralysis because there’s just so many options,” he says. “There’s all these new items and for every item we bring in, we have to de-list one … It’s almost like a survival of the fittest situation at this point because the selection is so high.”
For new products, the battle for shelf space is as competitive as it gets. But, chances are the survivors will be catering to at least one of the following trends.
Fuelled by function
More than ever, Canadian beverage drinkers are after more than just refreshment. Active and health-conscious consumers are seeking products that promise health benefits ranging from immunity to energy to mood regulation.
“‘Better for you’ is the whole guiding principle,” says McMullen.
Thompson from Ipsos agrees, predicting beverage options “that pack added nutritional and metabolic benefits” will continue to grow.
READ: As Canadians seek something extra from their beverages, functional drinks are thriving
“Based on our data, we’re seeing growth for label claims related to ‘vitamin enriched or fortified,’” Thompson continues. “And anecdotally, the rise in adaptogenic beverages as [they] cross multiple beverage categories—both hot and cold— is one we’ll be keeping our eyes on.”
Indeed, brands such as Daydream Drinks and Rise—sparkling beverages infused with plant and mushroom-derived adaptogens—promise stress management and mood elevation benefits. But, while many shoppers are discovering the mental and emotional side of their drink choices, immunity enhancement is the in-demand health benefit of the moment.
According to Innova Market Insights, 57% of Canadian soft drink and sports nutrition product launches from 2019 to 2023 claimed immunity benefits.
Prebiotics are also a hot trend, with their potential to regulate digestion and metabolism, blood sugar and calcium absorption. Crazy D’s, Cove Drinks and Thirsty Buddha are among the many beverage producers prominently featuring the prebiotic label on their cans.
Absence makes the heart grow fonder
With all the attention paid to what’s in our drinks these days, it’s worth noting what’s not making it into cans and bottles is almost as important. From sugar to calories to preservatives, consumers are saying yes to products that proudly say no.
Nishat Gupte is CEO of Betty Buzz, a premium sparkling soda brand founded by actress Blake Lively that debuted in Canada at Whole Foods Market and Sobeys in 2024. Gupte says sell-through rates for its products, such as Ginger Beer and Sparkling Grapefruit, have been on par with the company’s U.S. sales and attributes this success to the beverages’ lack of artificial preservatives, colours and sweeteners.
Gupte and his company are encouraged by the response from Canadian customers and will soon introduce two additional flavours: Sparkling Oak Smoked Lemonade and Sparkling Apple Ginger Sour Cherry.
“The category is booming as the desire for healthy, delicious, creative food and beverage options continue to become a priority amongst consumers,” Gupte says.
Even when a drink makes little claim to being healthy, the value of missing ingredients can still be seen. Andrew Drayson, CEO and managing director for DD Beverage & Nutrition, says a focus on natural is what’s guiding the company’s strategy for its Bear n’ Beaver line of premium craft sodas that includes canned Root Beer, Cream Soda and Orange Creamsicle.
“If you look at craft sodas in the supermarket, they’ve got food dyes and high-fructose corn syrup,” Drayson says. “We use cane sugar, which is a premium, but it’s a better taste experience.
“We all know soda’s not super healthy,” he acknowledges, “but it’s a guilty pleasure and we want the consumer to enjoy a quality beverage.”
Kombucha continues
If any beverage could be said to be the opposite of a guilty pleasure, kombucha might be it. Well established among health-conscious consumers, good-for-you has always been its selling point.
And kombuchas show little sign of losing their popularity in 2024. Brands such as Artizen, from Perth, Ont., whose Orange Turmeric brew launched in February and joined the growing list of drinks that claim to support immune health, continue to innovate.
“Kombucha continues to be incredibly strong, sales-wise,” says Digs Dorfman, CEO of Toronto retailer The Sweet Potato. “I never expected the trend to last as long as it has, but ... Our refrigerated kombucha section seems to grow by a few feet every year.”
The mash-up
With the proliferation of beverage products growing each year, Summerhill’s McMullen wonders whether a new trend is about to emerge—one in which all the other trends merge together.
From kombuchas to flavoured waters, functional sodas, protein shakes and vitamin waters, “a lot of these products, I feel, are starting to cross-pollinate,” he says, citing sparkling teas as an example.
“I think maybe we’ve just run out of ways to make products that are better for you, so [manufacturers] are combining the attributes now to make something new,” says McMullen.
Whether new stones will be turned or existing products will be blended in new ways, for Gupte of Betty Buzz, it’s all about working with grocers to drive product trials and brand awareness.
“We work closely with [retailers] to ensure great in-store visibility, with beautiful displays and key point-of-sale materials.
“However, the proof is in the liquid and, ultimately, we know we are on to something because we see such high conversion rates when we conduct tastings,” he says.
In the competitive category of cold beverages, there’s no shortage of brands chasing Gupte’s proof of concept.
This article first appeared in Canadian Grocer’s June/July 2024 issue.
