Product, Service & Design Innovation
Evolving Consumer Palates Demanding Better-Made Beverages

The beverage industry is undergoing a rapid transformation, driven by innovation, new products and rapidly shifting consumer demands. Long gone are the days when the choice was either Pepsi or Coke; today, grocery stores carries dozens of products, with more new entities coming seemingly weekly. In some states, those choices will include beverages with cannabis, something unthinkable just a few years ago; along with naturally flavored waters and single-ingredient juices; a skyrocketing variety of kombuchas and adaptogenic teas, and even artificial milk. One thing is certain: The beverage space is only going to get more crowded, and health and sustainability could be the ultimate determining factors for success.

Here are some of the key sustainability trends that are shaping the future of the beverage industry.

Health consciousness on the rise

For decades, the beverage industry was dominated by sugary sodas and other highly processed choices, many of which used ingredients such as high-fructose corn syrup, hydrogenated oils, and a plethora of harmful chemicals and preservatives. Now, sugar and artificial are out, and simplicity is key in ingredient labels, where less is more.

“People want to know how much sugar is in stuff, and they don’t want sugar alternatives,” said Kristen Nelson, co-owner of Modern Coffee, a San Francisco Bay Area coffee retailer, at a recent beverage industry forum in San Francisco.

Across the country, demand for sugary beverages is falling, but so is demand for worrying sugar alternatives such as saccharin and aspartame. Consumers now prefer low-sugar or sugar-free alternatives — which has been a key driver of the massive growth in sparkling water and low- to no-sugar beverage options from soda giants and healthier restaurant chains such as Panera — or natural sweeteners such as stevia.

“There’s a move away from frappuccino-style drinks,” Nelson said. “If people are eating and drinking better, it is better for us and better for the planet.”

If brands don’t act on their own, they may lose customers. Moreover, cities are also taking action to address the growing evidence that sugar over-consumption contributes to obesity. Berkeley and Oakland, California have both passed soda taxes, and there is evidence that this has resulted in consumers choosing less sugary beverages.

Ingredients — and sourcing — are key

Milk or no milk is no longer the only choice at the coffee counter; cafes across the country are increasingly stocking plant-based alternatives — almond milk, oat milk, coconut milk, and much, much more. This ties to sourcing, too: Consumers not only want to know what is in a product, but where it came from and how it was produced — and there's no denying the appeal of certain newly legal (in some places) wonder ingredients, such as cannabis.

“The move is towards things that people can pronounce,” said Gary Robinette, operations manager at Manzanita Naturals, a maker of cannabis-infused sparkling beverages that now also offers all-sugarless varieties. “Everyone’s taste buds are shifting.”

Another shift is towards consumers preferring more local sourcing, wherever possible.

“Customers are always asking us, ‘Who made this? How was it made?’” said Kent Fortner, CEO of handcrafted, small-batch brands Mare Island Brewing and Road 31 Wine Co; he added that when he tells customers he uses homegrown hops for his beer, demand increases. He’s also seeing greater awareness of better farming practices, such as biodynamic and organic farming.

This is good for brands such as Rebbl, another Bay Area-based beverage company, that goes very deep to source key ingredients for its range of healthy, coconut milk- and adaptogenic-herb-based drinks from indigenous and local communities around the world — directly connecting consumers to social and environmental protection. The old model — hiding behind long, opaque supply chains that hide labor and environmental abuses — will not cut it anymore.

Sustainability matters

Another trend that connects to both the demand for healthier and better ingredients is sustainability. The alternative milk boom is partly driven by health concerns, but also by growing desire to reduce one’s impact on the planet, as evidence grows of the negative impacts of raising dairy cows.

Packaging is another area where consumers are increasingly seeking out brands that choose sustainability. Biodegradable six-pack rings, recyclability and less plastic are influencing consumer choice when picking products directly from shelves.

As we see greater attention to the growing climate crisis, the plastic pollution problem and other global sustainability challenges, beverage makers who do more to reduce their impact on the planet stand to gain, while those who stick to a tone-deaf, business-as-usual model will be left behind.