How will reduced spending impact the beverage industry?
Following the boom in ‘revenge spending’ which saw people splurge as COVID lockdowns eased, consumers are now facing a raft of financial challenges.
Shockwaves from the pandemic coupled with conflict in Europe have disrupted global supply chains, resulting in higher cost of goods and a decline in disposable incomes.
From inflation, to stagnating wages, to slowing GDP growth, consumers across the globe are anticipating this challenging economic environment persisting over the next twelve to eighteen months, significantly impacting their spending confidence.
Value for money has always been a major driver of consumer behaviour and is increasing in importance but, emerging from a pandemic, consumers are still looking to try new products and experiences.
While discretionary spend might reduce, ‘affordable indulgence’ - the trend for small, relatively inexpensive treats that consumers are still able to afford – is likely to make a comeback.
70% of European consumers are ‘very’ or ‘quite’ concerned about the impact of inflation on their household budget
One third of consumers associate high quality ingredients and products with 'good value for money' in soft drinks
Affordable Indulgence:Consumers want cost-effective ways to treat themselves and beverages can represent an inexpensive luxury. Products such as cold brew coffee offers a new, premium coffee experience.
‘Insperiences’: With reduced spending on social and leisure activities, at-home consumption is on the up. This is driving greater innovation in products replicating the coffee-shop experience, and premium beverages such as bubble tea kits and nitro cold brew coffee cans.
Bulk-buying: One in ten European consumers are buying coffee in bigger packs as a cost-effective and convenient way to enjoy their favourite drinks at home[1]. In the UK, 1 litre cold brew packs are the fastest growing format, achieving +237% volume sales YOY 2020-21[2].
Cost-effective Nutrition: Products that offer multiple benefits by leveraging familiar, elevated ingredients such as tea, coffee and botanicals are preferred by consumers over obscure ingredients with bold claims[3].
Turn over to see the latest launches >
Tchibo's hazelnut flavoured cold brew coffee is made from slow brewed arabica coffee and paired with oat milk. The range also features hot chocolate and salted caramel flavours.
Mokko's kit promises bubble tea for two in two minutes using hot water. It can be enjoyed hot or cold by adding ice cubes. It is currently available in UK retailer, Sainsbury's.
Aspire Drinks have launched two multivitamin green iced teas fortified with biotin and vitamin B6 in raspberry and cranberry flavours. Both drinks contain zero sugar and zero calories.
German brand 4BRO are known for their experimental iced tea flavours. Their latest ‘Bubatz’ edition is flavoured with dragon fruit, tea extract and elderberry and retails in a 1 litre carton.
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Brand owners are going to be under pressure to hit certain price points – whether through reformulation, new pack sizes or formats.
We’re also expecting to see increased scrutiny on unnecessary or wasteful elements of the supply chain. This may lead to growth in beverages that are cheaper/easier to ship such as powder or concentrate formats.
Consumer scrutiny of single-use plastic is also a factor, with over two thirds of consumers carrying refillable water bottles to reduce plastic consumption[4].
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