Blog Entries

A most disruptive year

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Category: General Blogs  |  Tags: distributors

In this issue we present our second (now “annual”) ranking of the people who are shaking things up in the beverage world. A year ago we ranked our first Beverage Disruptors, a comprehensive list of the people driving the enormous degree of change that’s reshaping the beverage business.
 
Our first Disruptors feature received a good deal of acclaim; we were praised for its comprehensiveness of insight, and we were admonished a couple of times for individuals who did not appear on the list. In the ranking this year, our editors managed to identify practically an entire new roster of beverage disruptors (we have a handful of holdovers, those we believed continued to make notable innovations within the last year). 
 
This year’s list was no easier to produce than the inaugural list last year, but for different reasons. The challenge last year was to clearly define what we meant by “disruptor”; this year, the challenge was a way to limit the size of the list. Our editors identified so many individuals who fit the description of someone “changing the status quo” in the beverage business, I came to the realization that 2015 could very well be remembered as the most disruptive year in the beverage world in recent memory.
 
One would need to look no further than the disruptive change in the beer business in the past year. Last month I wrote that no single event would have as much impact on the beverage world in the coming months and years than the AB InBev deal to take over SABMiller, creating the largest beer company in the world. The effects of that deal alone will reverberate across not only the beer sector, but through the wholesale distribution tier, retailing and across other beverage categories as well.
 
Closely linked to the beer mega deal, is the fate of the craft beer business here in the U.S. and around the world. Craft beer has been cast in the role of causing disruptive change in the beer sector, but in the last year the craft beer sector itself was disrupted by a number of brewers deciding to sell their businesses to big brewers or to private equity firms.
 
The year started off with the news that Elysian Brewing was selling to AB InBev—an announcement that caught a lot of people by surprise. But that deal proved to be just the tip of the iceberg.
 
Many other craft brewers entered into deals: Lagunitas (sold a 50 percent stake to Heineken) and Ballast Point (sold for $1 billion) were among the most notable. The pace of buyouts picked up in the last month of 2015, as AB InBev purchased three craft breweries in the span of one week.
 
And disruptive change was not limited to the beer business. The liquid refreshment category continued to be reshaped as consumers continued to seek out alternatives to traditional sweetened carbonated beverages. The spirits business, too, saw notable innovation as craft distillers brought new ideas and products to market.
 
Yes, 2015 was a disruptive business year, with 2016 expected to be the same. And the Disruptors list goes on. Enjoy.  

2016 disruption forecast

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Category: General Blogs  |  Tags: disruptors

Since this is our annual Disruptors issue, I thought it would be useful to also take a look at what we can expect in 2016 in the way of beverage category disruption. 

There are a few overall trends that are behind most of the disruption the industry is currently experiencing. These include: a shift in many categories from mass-produced or mass-marketed beverages to hand-crafted, artisanal and local; a shift to beverages perceived to be more healthful and/or natural, and finally, a shift in beverage distribution. I’ll delve into each of these and explain why I think they will be the disruptions to watch in the coming year.

The shift from mass-produced, mass-marketed beverages to premium local, craft aka artisanal, is one of the most obvious trends the industry has been experiencing in recent years. The trend is far from over; 2016 will see a continued shift to craft beer and spirits and increasingly craft sodas. Authenticity is one of the big mega-trends behind this shift. Younger consumers today, armed with the ability to communicate with each other and fact-check over the internet, resent brands that they believe disrespect them by clouding the truth about things like ingredients or place of origin. 

Tied into this is the continuing concern about the healthfulness of products. As the story on energy drinks points out in this issue, and the ever-growing size of the trade show Expo West attests to, there is no end in sight to the demand for healthier beverages. Functionality is a part of this. I think 2016, for instance, will be the year that probiotic drinks finally turn the corner in the U.S. and start to really gain traction. Even some in the American medical community are warming to the efficacy of probiotics. You can expect in 2016 a thinning of the probiotic herd, however, as those offerings with real efficacy survive while the others that don’t deliver real benefit fall by the wayside. 

So expect continued rollouts of probiotic beverages in 2016. Also, disrupted by the health trend will  be older, bigger brands that aren’t able to adjust fast enough and alter their ingredients to be more natural. Also, plant-based beverages like almond milk should continue to benefit from the shift toward more healthful and natural.

The fact is, consumers are increasingly looking for simpler ingredient labels with words they easily understand and recognize. It’s no accident, for example, that one of the major disruptions occurring is the shift from sugary sodas to simpler offerings like naturally flavored carbonated waters. Expect that disruption to continue unabated in 2016.

And finally, there is distribution. Technology is changing the way consumers buy their beverages with companies like Amazon, Drizly, and others really beginning to disrupt traditional brick and mortar retailing. Still find delivery drones amusing? You may want to take them more seriously. Just think about the disruption when it takes just hours to get product delivered to the home by drone. 

Some other disruptions to keep an eye on in: marijuana-based drinks (just in their infancy), the continued shift to premium juices, and the individual packaging sizes in age-old categories like wine. There’s a lot of disruption to look forward to—or adjust to—in the coming year.  

The case for shochu, Japan's native spirit

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Category: General Blogs  |  Tags: spirits, cocktails, spirits pairing, shochu, Japan

I recall, a couple of years back, singing the praises of the Japanese spirit shochu and believing that it’s got so much potential here in the states, especially with a dominant consumer base that prides itself on trying new things (yep, it’s those millennials again). I believe that even more now that in just the past nine months I’ve taken two separate trips to Japan with the express purpose of touring shochu distilleries (most recently on a tour organized by the Japan Sake and Shochu Makers Association). And I’ve gotten a little more clarity on what sort of messaging importers and distributors of the spirit—which, at this juncture, are relatively few and far between—might be most effective in winning over a market that, for the most part, has never heard of it or, at best, confuses it with the Korean spirit, soju (the myriad reasons the two aren’t the same would be enough to fill a column or article of its own).

For one thing, younger legal drinking age consumers are supposed to like brands with authentic stories. You can’t get much more authentic than 100- or 200-year-old family businesses currently being run by nth generation descendants of the founders. And, for each generation including the current crop of sons and daughters taking the reins, it’s more than a career choice. It’s a sacred duty.

Then, there are those consumers for whom authenticity is more about ingredients than it is about folksy tales. And shochu’s got plenty of that as well, from the rice-based shochu of the Kumamoto Prefecture made from the pristine waters of the Kuma River to the sweet potato-based shochu produced from the starchy staple crop of the Kagoshima Prefecture. And the fact that the distinct flavors of these disparate bases assert themselves through the alcohol directly connects the consumer with varying terroirs of this far-away land.

If those concepts still prove abstract for consumers, there’s one very practical application for shochu brands that’s tangible for even the most pragmatic of drinkers: food. While the marketers of other spirits categories have been promoting culinary pairing for their products, there are very few that actually work with particular dishes (a notable exception, of course, is the match made in heaven that is bourbon and barbeque). More often than not, neat spirits or cocktails precede the first course or follow (or replace) dessert (again, there are exceptions, of course). With shochu, it’s distilled with food pairing in mind. After all, Japanese drinking occasions typically are sit-down affairs involving edibles, be they large mains or small plates. And shochu’s ideal culinary companions aren’t limited to Japanese cuisine. 

The gastronomic and authenticity angles are good preliminary approaches to making these spirits accessible to the masses. Importers still need to figure out how to apply meaningful branding that distinguishes one brand from another on the shelf. And they still need to win the hearts and minds of mixologists, chefs and other so-called taste-makers. But, to paraphrase Obi-Wan Kenobi (hey, there’s a new Star Wars movie opening as we speak!), shochu has taken its first steps into a larger world.       

Jeff Cioletti is editor at large of Beverage World and author of the book, The Year of Drinking Adventurously, now available at Amazon, Barnes & Noble and independent book stores across the U.S. 

Three that stand out

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Category: General Blogs  |  Tags: HIT List

For the past 10 years we’ve turned over our December issue to a review of the products and concepts across the beverage world that have been hot, innovative and trendsetting during the year, and with this issue we present our 11th Annual HIT List.
 
As 2015 winds down, we’re also reminded of the bigger themes that dominated the attention of the beverage world. The year was dominated by big stories, and here I offer three that to me stand above the rest:
 
Beverage world grows less sweet. We’ve chronicled at least for the last 10 years the volume declines of traditional (read “sweetened”) carbonated soft drinks. Diet soft drinks, especially colas, have been declining rapidly too, which prompted Pepsi this summer to take a rather radical step: it reformulated Diet Pepsi, substituting one non-sugar sweetener for another. PepsiCo chief Indra Nooyi explained it was making the move because consumer research said it should.
 
The steep decline in traditional carbonated soft drinks corresponds with an equally dramatic increase in bottled waters, which we chronicled in our May issue, which explained that it had become crystal clear that consumers are reaching for flavored sparkling waters in growing numbers, eschewing sweetened drinks both sugared and otherwise.
 
The sweetness issue has also affected the sales of traditional juices in a negative way, as Managing Editor Andrew Kaplan explains in our cover feature this month that opens our HIT List coverage. The juice category has been among the most innovative in developing products with less sugar that consumers will accept and actually pay premium prices to get.
 
Craft beer at a crossroads. Our April cover feature this year described a craft beer industry facing succession issues among some of the early founding companies and aggressive courtship from both private equity firms and big brewers. At the time we were hearing the first rumblings of craft brewers “selling out,” that is making the move off the stage of independent entrepreneur.
 
What followed was a succession of deals of all types, with money flowing, well, like water. All of which will serve to shape the future of beer’s most successful segment in 2016, not the least of which is the definition of craft beer itself.
 
Mega beer deal reshuffles the deck. Perhaps no single event this year had as much import on the beverage world than the AB InBev deal to takeover SAB Miller, creating the largest beer company on the planet.
 
Viewed in a narrow sense, the $107 billion deal, facing regulatory review in the U.S., Europe and China, was an inevitable business event to consolidate an industry with stagnating sales across the globe. In a broader sense, the deal will reshuffle the deck so to speak in so many ways in the coming months and years—from brands changing ownership, to beverage companies both alcohol and non-alcohol assessing in fundamental ways how their businesses will be structured and how they will compete. The beverage world is just beginning to come to grips with the real and imagined ripple effects.  
 

The ‘good for you’ debate

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Category: General Blogs  |  Tags: juice, coffee

Coffee’s path has been a rather torturous one when it comes to a question that has been stalking it for years—is it good for us to drink it?

The latest verdict, according to a massive new study in Circulation, a scientific journal published by the American Heart Association, is not only is coffee is good for you, it’s really good for you.

This study, whose results were released in November, followed 200,000 doctors and nurses for up to 30 years and found a six percent reduced risk of death overall from one cup a day, an eight percent reduced risk of death from one to three cups, a 15 percent reduced risk from three to five cups, and a 12 percent reduction in risk of death from more than five cups. And, what’s more, there was little difference whether it was caffeinated or decaffeinated, proving that it is the nutrients in coffee, not the caffeine, which is having this healthful effect.

This massive study confirms in a big way numerous other studies over the past several years that have hinted that coffee is not the unhealthy drink some once thought it was. 

Those who are old enough may recall the first warnings about coffee, way back in 1981. A Harvard study at the time tied the drink to a higher risk of pancreatic cancer. Further investigation eventually showed a tie-in between smoking and the cancers. Nevertheless, the damage was done. A stigma always hung over coffee until the publication of more recent studies, beginning around 2008, started hinting that it was actually good for us.

At this point in time, I think it’s no exaggeration to conclude that coffee is now firmly in the healthy camp. Imagine that—a drink many of us love that is also good for us!  Who woulda thought?

I’m writing this column having just written the cover story for this issue of Beverage World about the juice category, which seems to be undergoing a similar trajectory to coffee when it comes to that question—is juice good for us to drink? The big issue about juice, especially what have traditionally been its most popular types, like orange, grapefruit and apple, revolves around their high sugar content. These juices can contain a lot of natural sugar, leading some in the medical community to advise against consuming too much of them. James Tonkin, president of the consultancy firm Healthy Brand Builders spoke with me at length while I was researching my cover story. He pointed out that some experts believe sugar is sugar, and it doesn’t matter what form it takes—be wary of consuming too much of it. Others see the nutritive value of juice, and the fact that its sugar is natural, outweighing any negative effects. “Is it a good thing?” Tonkin asks. “I think that’s really the discussion right now.”

So, with the debate about coffee now receding into the past, expect the debate about the healthfulness of juice to now take center stage.