Beverage companies rush to cater to changing consumer tastes

Brian Feldt
St. Louis Post-Dispatch

Excel Bottling Co. has for more than 80 years been known for its cane-sugar sodas, but over the last half decade the carbonated beverage has accounted for less and less of its business.

Increasingly, the Breese-based beverage company behind popular brands such as Ski and Lucky Club Cola has turned to other drinks such as beer, teas and flavored waters.

“I look at my own habits and the habits of my kids and we’re truly drinking more sparkling water than we were five years ago,” said Bill Meier, general manager and owner at Excel. “Five years ago, we did 100 percent soda. I can clearly envision a scenario in the next five years where 50 percent of what we make is soda, but the other half is alternative products.”

Beverage companies from all over – from global conglomerates to smaller companies including St. Louis-based Ronnoco Coffee – are diversifying their portfolios.

“What’s happening to companies in the beverage category is consumers are moving away from those carbonated beverages that aren’t particularly healthy and are looking to more healthy alternatives,” said Ronnoco CEO Terry McDaniel. “So we’re seeing all these new entries into the category because everyone is trying to catch that wave. Even the big beverage companies are trying to buy their way into the category.”

Battle of rivals: Look no further than the battle unfolding between rival soda makers Coca-Cola and Pepsi.

Just within the last 30 days, Coca-Cola in separate deals agreed to buy Britain’s biggest coffee chain, Costa, for $5.1 billion and took a minority stake in sports drink maker BodyArmor.

“Hot beverages are one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand, and Costa gives them access to this market through a strong coffee platform,” said Euromonitor analyst Maxine Vogt.

To keep up, Pepsi parent company PepsiCo, which also owns brands 7Up and Aquafina, bought SodaStream, which allows consumers to make fizzy drinks such as carbonated waters in their own homes, for $3.2 billion.

Even Anheuser-Busch InBev is broadening its offerings and now offers ready-to-drink iced tea and organic caffeinated sparkling water with brands such as Hiball and Alta Palla.

And Anheuser-Busch has long been interested in expanding its foothold in the nonalcoholic beer sector, which is gaining momentum. The company even created a new chief nonalcoholic beverage officer this summer to grow the segment, which today accounts for about 10 percent of its volume, a figure that could double over the next decade.

Pressure: With the big companies entering the market through new products of their own or via acquisition, pressure is being put on others to come out with their own new drinks.

Ronnoco, which has been based in St. Louis since 1904, has increasingly placed an emphasis on developing new product lines to complement its traditional coffee and tea offerings.

Over the summer, Ronnoco introduced new flavor-infused lemonades, sweet teas and cold brew coffees. This fall, the company will come out with new fair trade and vitamin-infused coffees.

“We’re fortunate that coffee and tea, the two largest parts of our business, are already considered healthy,” McDaniel said. “But variations of that healthiness is really what we want to capitalize on (and) … new products are critical to growth and success.”

At stores: The uptick in research and development is also leading to an expansion of the traditional drink aisle at local grocery stores.

As customers demand more variety in the sparkling and flavored water category, Schnucks has expanded that space in the aisle to add assortment, said Schnuck Markets’ Center Store Director Pam Hild.

Hild said as customers seek out “better for you” options like sparkling or flavored waters, an even broader variety is likely on the way at grocers across the country.

“We will continue to grow assortment and look for new opportunities to partner with our suppliers to bring the best and highest value to our customers,” she said.