The Breeze With Beverage Digest
The Breeze With Beverage Digest
Episode 23: Sprite, Poppi, Alani Nu, BodyArmor. Unearthing Insights from BD's Fact Book 30th Edition
Beverage industry veterans Duane Stanford and John Sicher analyze the latest trends revealed in the Beverage Digest Fact Book, discussing the surprising rise of Sprite over Pepsi and the continued dominance of functional beverages.
• Non-alcoholic beers gaining mainstream acceptance as daytime alternatives to diet sodas
• THC beverages operating in regulatory "Wild West" environment likely to face increased scrutiny
• Sprite overtakes Pepsi to become America's third-ranked carbonated soft drink
• PepsiCo has a long-term strategy as a "total beverage company" too
• Functional refreshment drives growth in "gut sodas" like Poppy and Olipop
• Energy drinks remain strong despite economic pressures due to functionality and flavor variety
• Liquid refreshment beverage market shows bifurcated growth—water and energy drinks up
• Sports drinks category puzzlingly weak despite functional benefits and strong brands
• Coca-Cola implementing unified "sandwich strategy" with Body Armor and Powerade
• Economic pressures and potential tariff impacts creating uncertain environment for beverage industry
Visit our website to learn more about the Beverage Digest Fact Book, the Keurig Dr Pepper System Map Book, and subscribe to our digital newsletter for exclusive industry insights.
Hello, this is the Breeze with Beverage Digest. I'm your host, dwayne Stanford, the editor and publisher of Beverage Digest. The Breeze is where we bring you into the kinds of industry conversations we have every day at Beverage Digest. We dissect what's happening, connect the dots and ask the most important question what does this mean? I'm joined as always by beverage guru and former Beverage Digest editor and publisher, john Sitcher, who has consulted since then for companies ranging from Coca-Cola to Pure Circle. John, how are you?
Speaker 2:Good to see you, Dwayne. I'm just fine Raining hard in New York, but all is good.
Speaker 1:Oh beautiful, we've got a sunny day. Here in Atlanta we're supposed to have storms all weekend, but so far it's not coming, and I'm fine with that. I'm wondering have you tried anything interesting these days beverage-wise, anything that you've discovered?
Speaker 2:It's funny you ask that question. I went out to lunch twice this week, once with an old friend from the beverage industry and once with my wife, different places in New York, and both times I had an athletic for lunch. And two things. Number one I'm finding that I like these non-alcoholic beers more and more in the daytime. I'm drinking them often instead of diet colas. They're pretty low in calories, I love the taste of beer, but I don't want the buzz of beer during the day, and I'm seeing more and more places in New York Dwayne carrying these. You know, two years ago, a year and a half ago, if you asked for an athletic or non-alcoholic beer, people looked at you with their eyes glazed over. They had no idea what you're talking about. Today, more and more they say oh yes, we do, we have two. We have athletic and Beck's. Which would you prefer? It's pretty amazing how these non-alcoholic beers have proliferated and, as I said, I think they taste great.
Speaker 1:John, I know you're a Gen Z at heart. You love technology, not afraid of anything like that. But I thought only Gen Zs drank these things Sounds like you know it's kind of part of your routine too, huh.
Speaker 2:My age is a big secret, Dwayne.
Speaker 1:That's great. Yeah, those things, man. It's been interesting to watch that whole segment grow. And you know you're not a teetotaler, right? So you're one of those who kind of moves back and forth but you just don't want to buzz during the day, that's exactly right.
Speaker 2:I mean, the buzz during the day makes me a little bit tired, and if I have a glass of wine or a vodka on the rocks or a beer at night, that's fine, but not during the day. And I keep saying to myself are Coke and Pepsi or KDP? I think KDP has an investment, as you've written about, but do you foresee Coke and Pepsi getting into this non-alcoholic beer business? It really is in many ways a soft drink replacement.
Speaker 1:I mean, I certainly wouldn't rule it out. I mean, like you said, kdp has an investment in athletic brewing. So I mean, and Coca-Cola is trying all kinds of things and you know Pepsi's trying things. So you know, I wouldn would never rule it out. I uh, you know that was one of the topics of conversation. Uh, this, you know, I just got back from some trips to las vegas and chicago, went and hung out with some technologists beverage industry technologists at the bev tech conference in vegas.
Speaker 1:Then I went to Chicago and hung out and spoke as well to the Cold Vault Forum by CSP Cool event, you know, it was really interesting. I don't know how much. I mean I assume you probably spent some time with technologists, isbt. It's just such an interesting thing to immerse yourself in their world for a couple of days. Of course, one of the big topics was dyes and you know just, you know they dive really deep on the technical side into these things. I learned a few things myself, you know, when it comes to these petroleum-based dyes and the, you know the animal and plant-based dyes that are, you know, a subject of some regulatory activity now, as we all know. But you know, interesting stuff.
Speaker 2:Dwayne. Do they think, do the technologists think, that the federal government is going to eventually require these kinds of changes they're talking about? You know, the two things that I keep hearing about are the dyes, and I also hear some buzz among some former friends of mine in the soft drink business Actually I should say friends of mine from the soft drink business who have kept in touch about concerns about continued use of HFCS, which. Are you picking up anything on that?
Speaker 1:You know, I think, like most people, there's so much uncertainty as to how it will eventually play out, there's no clear line of sight. I think they're starting to realize that there is, you know, a lot of alignment on the issue some of these issues like Dye's and that there's alignment between Republicans and Democrats I mean two groups that typically would have been at odds and might have even been on opposite sides of these kinds of issues, are suddenly finding common ground on these. So I think that gives people a feeling like, okay, we could get some action here. But you just never know. You know the way these things have been going, I think you know, with the beverage industry. You know a lot of the dyes that are at issue. The petroleum-based dyes aren't as big of an issue in beverages as they are in food, but they're, you know, still important. You know, depending on the kinds of beverages you're talking about. And I heard different things. I heard, you know just different talk about, you know, almost in defense of petroleum dyes. But also, you know, I heard a thought or two from a speaker that was saying, hey, we might as well just phase these out and do plant-based and animal-based. There's plenty of those and there's good technology around it. So but I think you know obviously you've heard some concern from the industry about how fast this happens and you know they need time to adjust supply chains and you know they believe and they believe the science is on their side that these things are safe. But at the end of the day, as we always say, the consumers are going to decide. They're either going to want it or not and if they start to not want it and enough consumers don't you have no choice, whatever the science says. But to you know, meet them where they are. So you know that was interesting.
Speaker 1:You know, when I was at the Cobalt Forum THC big type of conversation we did a piece in our last issue that really delved into THC drinks with a lawyer. You know I've been seeing these Delta 9 and Delta 8 THC drinks pop up everywhere and you see them in convenience stores, but you also see them in all these nip and tuck little shops that you're like, is this legal? Like I don't understand how people are doing this and there doesn't seem to be any sort of regulatory action around it or enforcement. And I'm not saying they should or shouldn't and I'm not saying these are good or bad. If consumers want them, you need to figure out a way to give them what they're looking for, as long as it's safe and the science is on your side and all that.
Speaker 1:So I'm making no comment about that, but I do think it's sort of the Wild West now and I think that's going to start to. You're starting to see some regulatory action in the states and I think that's going to ramp up, because these things are really popping up everywhere and in dosages that could be really tricky for people that don't understand the dosages, and there's loopholes that are being exploited. I feel like there's going to be some sort of federal action or at least the feds, you know leaning on the beverage industry to self-regulate. Somehow Something's going to happen. Interesting on that.
Speaker 2:I think Right, you know. Going back to HFCS, it's my understanding that the worst thing about HFCS is its name. A lot of people wish it had never been called a high fructose corn sweetener. There was a movement a while back to change its name to corn corn sugar, which is really what it is. It's uh, it's a. It's a. It's a organic sweetener made from corn instead of beets or sugar cane, and it actually is. Molecularly is very close to uh cane and beet sugar. I was told by people when I was uh covering the industry. So I personally think hfcs probably safe. I don't think it's going to probably be. There's going to be any real action to ban and I also am not sure there's enough sugar in the US to replace HFCS.
Speaker 1:You actually sat in on a seminar that was really digging into the sugar supply, the way that it's sort of hedged by a certain percentage of sugar being produced in the US but you really have to have a certain percentage produced outside the US in order to make sure that you have a consistent supply.
Speaker 1:It was set up that way on purpose. A lot of talk about HFCS they're working on some new standards around HFCS that the bottlers are really needing A lot of activity happening on that but none of it really was expressing concern that that's unsafe. I didn't really even get a strong sense that they felt like somehow it would end up being regulated. So you know there was talk about, you know some new instead of just, I guess, granulated cane sugar. There were some syrup versions that they were talking about. So you know a new, instead of just, I guess, granulated cane sugar, there were some syrup versions that they were talking about. So you know a lot of activity there, but I didn't I didn't sense a lot of you know, concern about that, the way you saw with dyes.
Speaker 2:By the way, dwayne, congratulations on the new fact book. You know I think it and the accompanying data sheet are terrific and you know it's a real. They're wonderful resources. You know, as we, as people say in New York, I think it would be cost-effective at twice the price. And you know I think it's a terrific tool. It's been out. What about two or three weeks now?
Speaker 1:Yeah, yeah, we got it out in mid-April. Got it out, you know, a few couple weeks earlier than usual. Got to give a shout out to our team. Uh, they do a fantastic job. Lena zickus, uh, leads that up and, um, she's just done some fantastic work with the model and, uh, you know, I think it's probably the it's the best fact book we put out yet. Uh, dune Stanford, also part of that team, my son happens to be and just absolutely fantastic work. So, thanks for that shout-out, john. I really appreciate that.
Speaker 1:People look forward to that every year and just glad to be able to get it out there for them, which you know, speaking of which that's, you know, kind of our topic today. You and I kind of noodled some of the interesting things that came out of that book and you know some of the takeaways, and I think there was a few things that were top of mind for you when you read the book, same for me, and you know. So, hey, go ahead, why don't we go through a couple of those? And you know, we'll just we'll do the breeze on them and kind of see what we're thinking about. It Sound good.
Speaker 2:Sounds good to me. You know, one of the things that I saw in the fact book and the accompanying data sheet this year was pretty startling to me, having covered this industry for many, many years, and that was Sprite moving ahead of Pepsi. I mean, for most of the years that I covered the industry, pepsi was the number two brand. I think Diet Coke moved ahead for a year or two, but Pepsi historically has been the number two soft drink brand in America, but no longer. Last year, I guess 2023, dr Pepper moved ahead and 2024, sprite moved ahead. The data in the fact book, you know, with all the terrific case data for brands and trademarks, spells it out in detail. But it's pretty amazing to see brand Pepsi dropped to number four and Sprite moving ahead.
Speaker 1:Yeah, I mean last year. You know there was quite a bit of buzz about Dr Pepper moving ahead of Pepsi-Cola and these are regular. You know regular Coca-Cola number one, regular Dr Pepper, number two. Now regular Sprite full-calorie Sprite is number three and Pepsi-Cola regular full-calorie is number four. Big news last year Dr Pepper moving up. Now Sprite moves up.
Speaker 1:Of course, you know, look, those brands have done a great job over the last couple of decades, marketing themselves and growing their share of the pie, moving up the share ranking list on this volume basis. At the same time, you know Pepsi-Cola. A lot of the reason they jumped ahead is because Pepsi-Cola was declining. They declined mid-single for a little more than 4% this past year. Sprite declined about a percent on volume but obviously was able to move ahead because of that gap.
Speaker 1:I think from a trademark perspective, pepsi trademark is still number two and I think that is important in that it really points to kind of what PepsiCo has said for years. If you really pay attention, which we have over the last 10, 15, maybe even 20 years. They really believe in zero calorie products, they believe in drinks like sports drinks, they believe in teas, they believe in coffee with their Starbucks. They believe these are the products of the future, and they have generally and said this in various ways for those who are paying attention that carbonated soft drinks are not necessarily where they were going to put their focus, so it really shouldn't be a huge surprise that, on this full calorie sugar Pepsi-Cola basis that you know it's ending up this way, they've basically said it and telegraphed it telegraphed it. I think one of the problems, though, one of the friction in all this, though, is the fact that you have independent Pepsi bottlers out there, who are you know. Their whole business is centered around that brand. It's very important to their markets, and they are frustrated because there isn't the same level of investment. They're frustrated when that brand moves down the list, and there's all this news stories, because consumers out there love to think and talk about brands. It's one of the things that gets a lot of attention is, you know, when these lists are published, and so that's frustrating to them.
Speaker 1:At the same time, pepsico has stuck to their strategy that they want to have snacks and beverages together in the same company. They don't want to spin off the beverages. They don't want to refranchise the bottling network. That's their strategy. They've said it. It shouldn't be a huge surprise. But I think now people are starting to say wait a minute. We aren't seeing a clear case for why, why that should continue, and or the evidence that it is paying off in a way that would that makes sense for this major brand even on a full calorie basis, pepsi Cola to drop down the list and not get the same kind of investment. I think that's kind of the question that's being asked now. You are starting to see PepsiCo respond to that. I mean, the new leadership is talking about look, we're going to try to move these trends up, we're going to invest in these. You're starting to hear that. But I think over the next year or so you're going to continue to have this friction unless you see some resolution of that kind of conflict that we're seeing in the market.
Speaker 2:Well, you know, I think there are two very related factors. When I covered the industry Dwayne back in the late 1990s and early 2000s, it was really Pepsi that coined both the notion and the phrase total beverage company both the notion and the phrase total beverage company and they had not just a carbonated soft drink business but they had this big and thriving tea business with Lipton. They had a growing coffee business with Starbucks. They ended up buying after Coke passed on it. They bought Quaker Oats and got Gatorade. So they really believed in this total beverage idea and their theme to bottlers often was we bring you the best diversified portfolio of beverages. So I think that just by nature of that, there wasn't the singular focus on CSDs like there was at Coke.
Speaker 2:Secondarily and I know there are people who disagree with me I think that PepsiCo is right now too far away from being a pure play company. This beverage business is much more complicated than people outside the industry often understand. Pepsico is really four companies today. They're a beverage brand-owning company, a very large company-owned beverage bottler. They're a snack brand-owning company and a snack distributor. I personally think and I thought this back when uh Tryon was trying to basically persuade PepsiCo to spin off beverages. I think that PepsiCo's beverage business, including its CSD business, would be stronger if it was A separate from snacks and perhaps separate from bottling, but I'm not sure that's going to happen anytime soon. But I think that that kind of focus would help Because right now, you see, with the Pepsi side, you've got their carbonated soft drink business under pressure, which we've been talking about with Pepsi, and Gatorade's not growing at this point in time. Coffee seems to be weak I don't have the tea data right in front of me right now but Pepsi has got great beverage brands. I mean Pepsi, mountain Dew, gatorade, lipton, starbucks. I think more of a pure play corporate approach to that business, dwayne would probably end up producing stronger results that business Dwayne would probably end up producing stronger results.
Speaker 1:Yeah, and that's been the debate for a number of years now. One of the things that's happened of late is, you know, with this consumer environment, frito-lay is, you know, going through some of its own issues right now in terms of, you know, finding growth and figuring out how to adjust to this current consumer environment, and so it kind of exacerbates this notion around the strategy on beverages. So I think we're going to continue to hear about that, I think, over the next year and the next year or two. I don't think they're going to be spinning this off or doing anything like that anytime soon. I wouldn't bet on it. But I do think at some point that strategy has got to be clear to all players that it's working and that that's the best way to go, you know, and that all of that entire just amazing portfolio of beverages and snacks in food can both prosper. I think, you know, there'll be more and more questions about that. You need to see that in some way. Or go ahead and, you know, split it and maybe figure out a way to make sure that they all can prosper. I just think it's going to be a growing debate here. But you know, again, their strategy has been let's look to the future and really, you know, put ourselves in the best position to capitalize on the future. And you know, we could wake up five, 10 years from now. And it turns out this was, all you know, the strategy that pays off.
Speaker 1:Let's take a quick break from the conversation so I can tell the audience about a brand new product the Keurig Dr Pepper System Map Book. This just-released guide offers detailed territory-by-territory maps covering both Keurig Dr Pepper's company owned distribution system and the US distribution territory structure specifically for brand Dr Pepper. We also detail where flagship Dr Pepper is handled by Coca-Cola and Pepsi bottlers. Think of this as three guides in one. And don't forget, you can get equally detailed territory by territory maps of the Coca-Cola and PepsiCo systems as well in our the Coke and Pepsi Systems Resource Guide. Understand the critical Coke, pepsi and Dr Pepper distribution networks from the ground up.
Speaker 1:If you're interested in going deeper on the topics that we discuss on this podcast, I encourage you to subscribe to our Beverage Digest digital newsletter and archive. Here you will unlock exclusive insights that you won't read anywhere else. Plus, you'll get valuable data snapshots for the industry's most critical categories. See where growth is happening before anyone else. And let me tell you about our Beverage Digest Factbook, which gives you a detailed look at annual category, company and brand sales trends covering all channels dating back to the 1980s. That includes retail fountain, up and down the street, everything. And don't forget our Beverage Digest Future Smarts Conference, where top industry leaders discuss and debate the most critical industry topics all in a single day. This is your ticket to network with industry thought leaders and get set for your next critical deal.
Speaker 1:One of the big additions to the book this year is Poppy and Olipop. You know their percentage growth rates, you know their volume growth and Pepsi, of course, just bought Poppy, so that's going to be kind of a big thing to watch in 2025. And now it's reflected in the book. What are your thoughts on that, john? Just you know your latest thoughts on. You know I don't think we've talked yet on one of these podcasts about the Poppy acquisition.
Speaker 2:Look, I think it's smart. I think two things. Firstly, as to Poppy and Alipop, I think what these brands are showing is that carbonated soft drinks they've been declining for two decades plus. Now consumers like them, and what Olipop and Poppy are basically showing is that a low-calorie, low-sugar-added, good-t tasting carbonated soft drink with some functional benefits is something which is going to basically appeal to consumers, and so it gives me a sense of optimism for the carbonated soft drink business going forward, for the carbonated soft drink business going forward. But I'm not sure that that optimism would cover some of the legacy brands. I think that, whether Olipop and Poppy grow to very large brands, I think what they're showing is there is an interest in carbonated soft drinks. They've got to be low sugar, they've got to taste good and in many cases they have to basically say to the consumer we're going to give you more benefits than just tasting good.
Speaker 2:In terms of PepsiCo's acquisition, look, the big soft drink companies, coke and Pepsi are terrific companies. They've got great brands. They have not had a great track record with acquired brands. You look what happened recently with Coke and Body Armor, where it was growing, growing, growing, growing. They bought it and it's been in either steep or modest decline pretty much since then. Pepsi-co and Sobe. I think it's very, very hard for these companies basically, which thrive on their big brands their bottling systems are based upon high volume, big brands I think it's hard to basically buy a company like Poppy and keep it growing. But maybe they've realized they're going to have to do things differently right now, that if they want to get into this kind of business they're going to have to innovate or buy and they're going to have to figure out a way to focus and keep a small brand growing.
Speaker 1:So I hope so, but again, small brands of the big companies have not been a good story for many years. You know this idea of functional refreshment, like I think refreshment for some consumers just isn't enough anymore and also just function isn't necessarily enough. They want refreshment and function. They want beverages that taste good and that are refreshing and delicious but give them some kind of functional benefit good, and that are refreshing and delicious but give them some kind of functional benefit. And then they're also not so interested in functional beverages that don't have any taste and aren't enjoyable and refreshing to drink. So I think that's really kind of an emerging space that is really brands like Olipop and Poppy are really serving that. I think you know one of my questions has been you know this is kind of a discovery brand. There's a real heavy youth kind of generational push behind it. It's got a very good social media presence and play. It fits into health and wellness trends. I wonder what are the next steps to broadening that out to a bigger audience? Part of it is tying up with a company like PepsiCo to get it into more hands. But also, how do you keep consumers interested, because they kind of move on to the next thing and the next thing as you get bigger, you start you know people start to you know, question things like ingredients and all of that. You got to deal with that, but also the pricing, especially in this environment. I'll be really interested to see you know Pepsi's buying at a time that consumers are really, you know, energy drink consumers are still drinking energy drinks but they're cutting back on the frequency.
Speaker 1:At the lower end of the economic scale, you're starting to see some evidence that the middle and high Nick Mody talks about. You know some of the evidence he's seen of middle and higher income consumers starting to get under pressure, of middle and higher income consumers starting to get under pressure. The debt that they're carrying is higher. He talks about the fact that you know they're actually more and more people are basically taking out short-term loans with credit cards or these credit card programs that let you buy something and pay later, like almost a layaway for groceries. Very troubling sign to him. Can you maintain this premium pricing with these that make these beverages make sense? I was just at a Publix yesterday and you know Poppy was on sale. You know five for $10. You know they're two bucks a can but that's still priced way higher than carbonated soft drinks. But if you get the functional element, you can get that higher pricing. But where does that go? I think that's my big question going forward and we'll be watching that pretty closely.
Speaker 2:But, dwayne, on your pricing point, I think that Coke and Pepsi have actually helped because they've taken pricing up so much since COVID that I think that what would have been the differential between pricing of poppy and alipop, say, in 1999, if they existed in Coke and Pepsi? Consumers are now used to seeing carbonated soft drinks costing more, more, and I think that probably, even though poppy and Olipop may be priced at a premium to Coke and Pepsi, the fact that CSDs are now more expensive than they used to be probably helps Olipop and poppy.
Speaker 1:I think it's an absolutely great point. I think you're exactly right about that. As a matter of fact, on the Monster Call, the executives just made the very point about energy drinks. One of the things that they're encouraged about is that carbonated soft drink pricing has risen to a point where that gap between carbonated soft drinks and energy drinks have closed. But they believe energy drinks offer more functionality and therefore more value. So they see that as a very positive point going forward on the energy drink section. So I didn't think about it in terms of these gut sodas, but I think it's absolutely a terrific point.
Speaker 2:You really deserve credit for getting that data in the fact book, and I was not aware how many cases these brands were selling. They're still small, but they're not that small and they're really getting to a critical mass. So good for you for getting that data.
Speaker 1:Yeah, thanks, john. Yeah, I mean it really is. I mean it's a real segment and, you know, could even think of it as its own category, but, you know, I think you generally think of it with carbonated soft drinks. That's where we place it and I do think there's growth to go and I think it is going to be interesting about PepsiCo. But, speaking of energy drinks, let's go to our next one, john, and that's. You know we want to talk about energy drinks. They continue to grow. What were you seeing in the data that grabbed your attention?
Speaker 2:They are like Poppy and Olipop. They are in many ways exactly what consumers want. I think you've said that the diet versions are growing faster than the regular versions and consumers really like the functional benefit. You know our friend Robert Ottenstein, who's an analyst with Evercore. Isi, just put out a report recently. He did a survey asking are you drinking more energy drinks? Guess what? 59% said they are and the reasons they gave the top two reasons they gave were I found a drink with a flavor I enjoy and I am busier and need more caffeine. And I think what we're seeing is that Monster, red Bull, celsius, alani, new are basically giving the consumer a choice of energy drink so they get that functional benefit.
Speaker 2:You know, back in the day when I started covering energy drinks, it was Red Bull. It had a faintly medicinal taste which consumers, which everyone thought, translated into functionality and that's how the energy drink business started to grow. Now you've got lots of flavors, good taste, functionality. I don't see any stopping the energy drink category growth. I think we're going to see growth in energy drinks Dwayne for many, many years to come, and I think what Monster's done in two decades and building a global brand from nothing is truly remarkable.
Speaker 1:Yeah, I think Robert's data makes total sense to me. One of the things we've seen with Celsius and even Bang and Alani New, but really with Celsius, especially in the last couple of years, is them broadening the tent than broadening the tent. It moves beyond diehard energy drinkers, blue-collar workers to now white-collar workers. You see people drinking a Celsius with salad for lunch, professionals in office settings. We did see a slowing last year in energy drinks, you know, and a lot of that had to do with just all the economic uncertainty and you know there was. You know the companies talked about the fact that even the regular consumers maybe cut back on an occasion or two. C-store traffic was down last year. You saw some of that run through to energy drinks. You saw some of that run through to energy drinks. But this year, you know, energy's up kind of from where we saw in the second half of the year. It's still behind. You know the last couple of years of growth. It's still, you know, behind where. It was Monster, celsius. There was plenty of evidence in the US that energy drinks were still a little sluggish in the first quarter but both companies were very optimistic going forward. You know Monster even showed their growth for April to make the point that while Q1 were sluggish, energy drinks in April really were rebounding. I think it was, you know, close to 7% growth. They feel very optimistic about it.
Speaker 1:I think there's reason. I agree with you. I think there's reason for that optimism. I think there are, you know, reasons to believe that more and more people are drinking energy drinks. I mean you've seen some decline in coffee. I mean I think our fact book, you know, obviously shows that as well. And in some of those occasions, you know, people want caffeine from energy drinks, and especially the new functional drinks, the new Celsius and Alani, new. A lot of that's about caffeine I need, I want a can of caffeine in the morning. I love all these interesting flavors. I don't necessarily want other types of energy drink ingredients that you typically find, and you know I'd rather that than coffee, and so you're. I think you're seeing some of that impact in coffee as well you know, I think coffee basically got some.
Speaker 2:I think people, people do like the caffeine, the energy functionality, and I think what's happened partly is that coffee got some growth because people wanted the caffeine. But I think as energy drinks, as the energy drink companies have basically offered consumers more and more and more great tasting flavored products, I think that's pulled some of the share back from coffee and I think that that's part of the reason why we're seeing energy drinks basically getting some growth resurgence in coffee basically, or at least RTD coffee not doing as well as it was a few years ago.
Speaker 1:You know I wish I need to. If anyone has data out there on this, I would love to see it. But I sort of suspect from just watching young people in my life and this is totally anecdotal but they seem to really prefer coffee iced in cups and I rarely see them really like a can of cold brew or a can of iced coffee that, you know, maybe even doesn't have a bunch of calories and sugar. There's still something about it being in an ice in a cup, being in your reusable cup or whatever that I sort of constantly see. I'd love to see some data on that, but you know. So then it makes me wonder if that's true, to what extent do these, what do the companies do in terms of, you know, getting people to translate that love for iced coffee? More to just straight up RTD, I don't know. Just a question. So, john, let's push on to our next topic. So LRBs, john, what'd you think of, kind of where LRBs ended up this year?
Speaker 2:Again, shameless promotion. Everybody by the fact book. Lrbs were barely up in terms of volume, were barely up in terms of volume and five of the seven major LRB categories were down in volume. So you know that's a problem If you look at the LRB categories that were up, water was up and energy drinks were up. So if you step back, what does that say? It says to me that consumers are interested in inexpensive, refreshing, healthy beverages ie water and they're interested in beverages which have a functional benefit and also taste good and are lower in sugar, which is where energy drinks are, especially the diet energy drinks are. That's where they are today. So it's the. I want something which is healthy and doesn't cost much, or I want something, basically, which gives me the functional benefit that I want. That's where the growth is and I think that it's really interesting to step back. I think people basically should buy the fact book, step back, look at that LRB data and say to themselves what does this mean? Because I think the data is giving people a pretty clear message, dwayne.
Speaker 1:John, very flattering John.
Speaker 2:you get no compensation for the fact book right, I don't get a set which upsets me every day, Dwayne.
Speaker 1:John's not getting a cut of that, are you guys? But?
Speaker 1:John no, seriously, really really appreciate that. Yeah, I agree, five of seven categories down. You know, I think, obviously 2024, there was, you know, some ups and downs when it came to consumers. I mean, look, consumer sentiment this year is down to the lowest it was since COVID and that trend was starting last year. I think that's definitely having an impact. But, to your point, there are people who are still spending on beverages. You know, as usual with our economy, over the last decade or two, you've got, you know people who you know feel better, they're in types of jobs or work, or have you know, finances where they don't feel this pressure, and then you have, you know, part of the society that's more pressured and so you're going to have this bifurcation of how people are acting. You know, again, as Nick Mody at RBC has pointed out, the middle and upper. You know you're starting to see signs that they're having trouble too, but that all kind of puts pressure on these categories, puts pressure on these categories, and so you know it does.
Speaker 2:And the tariffs could too. I mean, you and I can't sit here in early May and predict how big the tariffs are going to be, how long they're going to last, but if, as some people suggest, they could be inflationary, that they could cost a lot of consumers more of their discretionary income, that could have a short-term negative impact this year on beverage growth. It's too early to tell, I think, to predict that, but I think it could have an adverse impact short-term.
Speaker 1:Yeah, and what's so interesting is that you know a company like Monster where you know there was pressure in the second half of last year against some lower income consumers, maybe cutting back on the numbers of cans that they drank in a given week.
Speaker 1:At the same time that was happening, you also had them put in a price increase late last year and you know the commentary on this recent earnings call was that they're absorbing that pretty well and consumers are responding okay to that. So it's really just such a tricky operating environment now that you really do have to I mean, look, you really do have to manage your way through this, you have to invest into it. I mean all of the things that we talk about and hear about and so 2025 is going to be one of those years where these companies really have to take into account a number of factors, a number of different conditions, with consumers at different income levels, and you know we'll see where that all ends up, but we'll be watching it closely for sure, john. Any parting thoughts, any final thoughts before we conclude this episode?
Speaker 2:The only parting thought I have is and we've talked about this in prior podcasts is I still scratch my head watching the relative weakness in the sports drink category. I mean, in many ways one would think that that would be a place where there's growth, there's good-tasting, low-sugar versions, there's a functional benefit. You've got some great brands like Gatorade is a great great brand, powerade, body Armor was a really hot brand for a while and there's just not much growth there and it's perplexing to me. But again, the data in that fact book tells a lot of stories. Dwayne and people need to look at that data and figure out ways to basically manage their way out of the holes that some of these brands are in.
Speaker 1:What do you think about the body armor rebirth? We wrote about that recently. Rebranding new logo. You know some new energy, some new spending. You know they're going to bump up their spending this summer compared to what they did last summer. Will it work?
Speaker 2:Look, you know, in the interest of full disclosure, I consulted for a couple of years to Body Armor until it was acquired by Coke and for a short term after that. I mean, I think Body Armor was a terrific brand, an innovative product. Again, I think it's very, very hard for a great big consumer product company, a great big beverage company like Coke or Pepsi, to manage small brands. I think it's very hard to manage two brands in the same category, which Coke is trying to do with Powerade and Body Armor. I'm hoping this graphics change makes a difference. Again, I think time will tell, but it's very hard for these companies to manage small brands. Coke does a great job with Coke and Sprite and Coke Zero. They haven't done as good a job with Body Armor since they bought it.
Speaker 1:Yeah, I mean I think one point I'll make, and I've made this point before I think Body Armor just fits into a company like Coke much differently than it does when it's standalone. I think there's just different objectives, there's a full portfolio of products. I mean I think there's just a whole set of realities there that are different. So I sometimes I hesitate to to almost judge it based on what happened before. So much has happened in sports drinks with um, with uh, rapid hydration products and powders and zero sugar. And you know I feel like you know Coke's been on this process for a few years of just totally making sure that they have those offerings to operate in the fastest segment, fastest growing segments of sports drinks. I'm not trying to be an apologist. I mean I think it's absolutely true. It's just much harder for big companies like Coke I mean we've seen it time and time again for them to kind of manage these brands in the same way that they were before. Some of that as it should be, some of that possibly you know a loss of focus and just too many competing priorities, and you know just all the things we talk about. I will say, I think, what I hear back from bottlers and executives within Coke and some of my conversations. There seems to be a lot of belief in Federico Moishant. He's the you know head of Body Armor and Powerade, which has been combined into a single strategy, single leadership within the company. They very clearly don't just see Body Armor as a singular brand. It's a strategy, the classic sandwich strategy with Body Armor and Powerade, to try to sandwich Gatorade in the middle. I talked about that in my last interview with him.
Speaker 1:I think you're probably with me on this. But let's see over the next two years. This is the time. You put the things in place with powders, you put zero sugar in place, you put rapid hydration in place, you've rebranded. You've had plenty of time now to get your sandwich strategy, your Powerade, body Armor combined strategy in place. Now is the time that you have to kind of deliver against that over the next couple of years. So I think it's going to be really fascinating to watch. But I also am just hearing a lot of you know positive feedback on the bottling side. So we'll see. Let's see how it plays out feedback on the bottling side.
Speaker 2:So we'll see. Let's see how it plays out. Well, I think that, look, I wish some success for that. I mean, I think Body Armor is a terrific product, as is Powerade, you know. If they can basically figure out marketing and messaging strategies for each of them that work and differentiate them from each other, I think they may have some success. Time will tell them from each other.
Speaker 1:I think they may have some success. Time will tell John. Awesome hanging out with you, as always, lots to talk about, lots more to talk about. We'll do this again soon. Thank you so much. Take care, dwayne, good being with you. The Breeze is produced by Beverage Digest. Visit our website to learn more about our products and subscribe to our newsletter.