Key trends that will shape future success in the beverage category January Ross Smith Consumer Insight Director

Transcription

1 Key trends that will shape future success in the beverage category January 2017 Ross Smith Consumer Insight Director 1

2 A panel of 40,000 individuals, detailing their weekly beverage consumption behavior Record of Product usage USAGE DIARY Need States/Reasons for use Location Purchased/Consumed Demographics INSIGHT QUESTIONNAIRE Attitudes Lifestyle Health & Wellness

3 In weekly consumption, the 8 core categories have lost substantial share of beverage occasions over the last 30 years Hot Coffee Hot Tea CSDs Iced Tea Milk Fruit Juice Fruit Drinks Drink Mixes In 1987 these traditional categories were 95% of all beverage occasions In 2005 these traditional categories were 77% of all beverage occasions...as Bottled Water has seen huge growth In 2016 these traditional categories are 71% of all beverage occasions In 1987 Bottled Water was 1% of all beverage occasions In 2005 Bottled Water was 16% of all beverage occasions In 2016 Bottled Water is 21% of all beverage occasions 3 % Occasions Excluding Tap Water Total US Consumers Ages 1+ 12me Dec , June 2016

4 More recently, categories that offer function or a blend of needs are seeing the most growth GROWING CATEGORIES: 2011 VERSUS /- absolute drinkers RTD Iced Coffee + 4.1M Hot Tea + 5.3M Nutritional Supplements + 5.9M Iced Coffee M Sports Drinks + 2.7M Specialty Coffee + 8.7M Smoothies + 11M 118% 36% 45% 58% 9% 27% 3% % Growth in drinkers versus % 6% 6% 9% 10% 12% 13% 2015 Penetration 4 % Change in Drinkers US Consumers 1+ 12me December 2011 vs 2015

5 The smaller, newer categories are taking away drinkers from the Staple Groups. Milk is losing more consumers than it is gaining DECLINING CATEGORIES: 2011 VERSUS /- absolute drinkers Powdered Drink Mix M Diet/Mid Cal CSD M Fruit Drink -9.4M Fruit Juice - 12M Dairy Milk M -19% -9% -12% -8% -10% % Decline in drinkers versus % 22% 22% 42% 47% 2015 Penetration 5 % Change in Drinkers US Consumers 1+ 12me December 2011 vs 2015

6 6 macro themes influencing beverage consumption Population trends Hispanic growth 1 in 4 consumers by 2060 Centennials The new millennial Changing Families Evolving family dynamics Product trends We want more Functional future We want less Conscious betterment Involvement Origin, process and cocreation 6

7 Hispanic Growth 1 in 4 consumers by 2060 Hispanics and Asians are growing ethnic groups that will be pivotal to Milk success moving forward. Both groups are consuming less Milk per capita and need to be regained into the category. These groups have a different set of tastes and needs, which as a category we need to continue to adapt to. As a category, Milk needs to continue adaptation of its core product a natural product but also with strong taste credentials 7

8 As they grow in size generally in the population, multi-cultural Drinkers are now accounting for higher share of Milk Milk Drinkers by Ethnicity % Drinkers (Multi-Select) Asian Acculturated Hispanic African American Caucasian % Milk Drinkers Total US Consumers Ages me December 2011 vs 2015

9 Acculturated Hispanics have seen stability in the market while others have declined, but all groups are consuming less Milk Weekly Milk Penetration by Ethnicity % Drinking Weekly Caucasian Asian Acculturated African American Hispanic Acculturated African American Hispanic Caucasian Asian 37 Weekly Ounce of Milk per Capita by Ethnicity Ounces per Capita Caucasian Caucasian African African American American Acculturated Hispanic Hispanic Asian 9 Weekly Penetration - Milk US Consumers Ages me December 2011 vs 2015

10 With this growing Hispanic consumer group comes unique needs, behaviors and preferences Hispanic beverage choices are flavorful, natural, and functional Hispanics are much more involved with Organic beverages, Natural beverages, and are more likely to be Lactose intolerant Acculturated Hispanic consumers are more likely to be lactose intolerant Index 133 vs total population 40% of Acculturated Hispanics prefer to drink Organic beverages vs 27% of total population They are a young consumer group, growing up with the new norm of an extended/diverse beverage repertoire 31% of Acculturated Hispanics consumers are age <20 Why does this matter? With a growing consumer group with different food tolerances, there is scope for more shelf space for free from products We must adapt to changing population trends, and be ahead of the game with our offering for a growing younger consumer group *Films/Music/Games/Books 10 Kantar Worldpanel 12me June 2016

11 Centennials The new millennial As new generations come of age, we need to think about their (very) different consumption habits. This is a group that has grown up in different times they want more from their drinks, and want to be communicated to in different ways. Younger consumers are moving away from Milk we need to bring this back into the fore of their beverage consumption through more targeted communication around the benefits milk brings. Target younger consumers with DIRECT messaging, demonstrating the so what that Milk brings vs. the other drinks in their expansive repertoire 11

12 Although younger drinker penetration is vastly higher than the next closest age range, they are also leaving at the highest rate and are a risk. Older consumers are therefore becoming more important to the category Weekly Dairy Milk Penetration in 2015 % Drinking in the average week Ages Ages Ages Ages Ages 19 and U20 Under % Penetration Total US Consumers Ages me December 2011 vs 2015

13 What kids and teens drink in the average week has changed dramatically compared to kids and teens born in previous generations % of 17 year olds that drink the category in the average week % 77% 77% 24% 2% 0% 8% % 59% 58% 29% 7% 8% 17% Difference % Drinking in the average w eek Total US Consumers Ages me Decem ber 2006/ 12m e June 2016

14 Centennials have grown up online! an on demand segment % that own a smartphone % of consumers use a smartphone to use social media Total Consumers year olds 55% of consumers use a smartphone to play games Over 36million people like Starbucks on Facebook There are 7.4million public Instagrams posts with the hashtag #coffeetime 43% of consumers agree that My choice of drink brands is important I believe that what I buy says something about who I am (vs 30% of total consumers) Why does this matter? How we communicate with our consumers continues to evolve, and we must adapt with evolving technology do we have the instagrammable factor for the centennial consumer? *Films/Music/Games/Books 14 Kantar Worldpanel 12me June 2016 Kantar Worldpanel ComTech 1m e J une 2016

15 Changing Families Evolving family dynamics We re a nation of shifting households we need to think about a different household dynamic with different decision makers and numbers of people. That said, the core for milk remains family mealtimes: Parents are willing to spend more on and try beverages that they perceive as Healthy. Messaging around Milk s Health credentials will help gain popularity and trust with Parents. Milk ranks as the 3 rd most consumed beverage at Family occasions! It outperforms other major beverages play to the taste and meal accompaniment credentials of Milk at meals. Milk is a major player within the Family occasion. Continue to focus on Breakfast and especially Dinner, but use pack format to drive relevance to a new family dynamic 15

16 As we see more retirees, and younger consumers settling down later, we see a shifting household dynamic Growth in living alone The age at which people settle down has increased significantly Median age at first marriage 53% of beverage occasions in the average week are consumed alone or with spouse There has been a 6% increase in these smaller alone/spouse occasions since 2013 *Films/Music/Games/Books 16 Why does this matter? Smaller multi-serve options for these households so beverages don t go bad in the refrigerator More shared refrigerators/cupboards potentially one shelf in the refrigerator and limited space for large packs The influencers on purchasing decisions change drastically based on who you re buying for - young adults have prolonged independent decision making In the future after this prolonged independence, what will they give their kids to drink? Family-time beverages may look very different in a few years time Kantar Worldpanel 12me June 2016

17 but let s not forget that 4 out of 10 Milk occasions are consumed with Family! a key opportunity to win multiple consumers at one occasion. Milk is also the 3 rd most-consumed drink at Family Occasions With Whom When Consumed % Occasions Family No One I Was Alone Spouse/Partner Friends Work Colleagues Other Total Occasions Milk Occasions 17 % Occasions Total US Consumers Ages m/e December 2015

18 Mealtimes are key: Breakfast and Dinner Makeup Half of these Family occasions When Consumed % Occasions After Dinner Dinner Between Lunch & Dinner Lunch Between Breakfast & Lunch Breakfast Before Breakfast Total Occasions Milk Occasions Family Occasions 18 % Occasions US Consumers Ages me December 2015

19 We want more Functional future Across categories, consumers now expect more from their beverages beyond the core need-states. Consumers look now for beverages that help them concentrate, provide a healthier option, or keep them awake throughout the day. Beverages that provide a function are growing significantly in popularity. Consumers will pay more if a product provides a reason to do so it is key to explicitly communicate the benefits your category provides. Milk needs to explicitly communicate the benefits it provides over other beverages do not assume consumers know about the nutritional benefits Milk provides 19

20 Functional beverage needs are growing 10% of Occasions 9% of Occasions 6% of Occasions 6% of Occasions Make a Healthier Choice +24% To Wake me Up +8% As A Treat +13% Purifying Clean +23% 5% of Occasions 4% of Occasions 3% of Occasions 2% of Occasions Help Me Relax +16% Quick Energy +17% Lasting Easy to Energy +32% carry +13% Consumers are increasingly demanding beverages to provide energy and health benefits, however they still seek a treat! 20 % Growth in absolute weekly occasions Total Consumers Ages me June 2016 vs 2011

21 Consumers increasingly need to know what the beverage is doing FOR them Consumers want more but they will pay for it! 55% of consumers agree they will pay more for beverages that fulfill my needs With the growing needs for function in our beverages, in 2016 we have seen an influx of innovation in benefit beverages Beverages with protein as an attribute had 4.5 million more weekly occasions in 2016 vs 2013! (+9%) Why does this matter? It is more important than ever to communicate beverage benefits We have seen the of rise of superfoods and the kale effect what s the next big super-beverage ingredient There is already a lot of activity in functional innovation but is it becoming overcrowded? How do we continue to stand out with so many options? Do we need a stripped back back to basics approach to providing benefits the benefit comes from the purity *Films/Music/Games/Books Kantar Worldpanel 12me June Attitude statements apply to consumers age 13+

22 We want less Conscious betterment While consumers want more function from the beverages they consume, they do need to know what is in the product we need to be transparent in ingredients and health credentials. Health is no longer seen as diet, but natural is consumers want back to basics products. Be clear on the natural credentials of Milk it s purity, it s basic composition and its wholesome nature as consumers move away from less natural beverages 22

23 We are witnessing a more aware consumer, consciously trying to better themselves both in and beyond beverages, and seeking help to do so Health is no longer synonymous with diet but free from and natural are Diets more focused around back to basics - Paleo Alternative sparkling beverages are in strong growth while CSDs suffer better for you flavored bubbles such as Sparkling Ice, La Croix Increased concern about ingredients comes with more ways to track what we are putting into our bodies 14% of people age 16+ own a wearable such as an Apple Watch or Fitbit 23

24 Consumers are actively aware of WHAT they are drinking, and are taking steps to exclude the artificial % Preferring All Natural Beverages KEEP IT REAL! Over time more consumers are seeking natural beverages Bottled Water and Tap Water continue to gain share of beverage occasions, and innovation in Bottled Water has expanded into other categories Coffee With Sugar Coffee With Artificial Sweetener This preference for natural is seen in the way we drink our Coffee over time Why does this matter? No longer simply a consumer trend, but government enforced Simple ingredients and communication around beverage purity is paramount Water continues to be a huge opportunity, gaining share from other beverage categories We need to bring more occasions back from Tap Water, into packaged beverages 8.4 *Films/Music/Games/Books 24 Kantar Worldpanel 12me June 2016 Attitude statements apply to consumers age 13+

25 Involvement Origin, process and co-creation Consumers want involvement and to know where their products are coming from they are looking for a story, a location or a company they can trace their consumption back to. There is also the need for connection at a personal level the ability to customize if needed, to control how they consume and find information themselves if they need it. Tell the story of Milk and where it comes from be clear on the origin and provenance of the category in a transparent way 25

26 Consumers are involved in their beverages, care about where their products come from, and want to be involved! 1 in 3 consumers make a genuine effort to support companies that give back to the local community (5% more consumers than last year) We have seen an increase in Single Origin products, and also products clearly stating the made in label as a selling point 1 in 4 consumers say that they will frequently search online for information about brands or companies (6% more consumers than last year) 45% of consumers prefer to purchase beverages that can be made to their own taste preferences (6% more consumers than last year) Why does this matter? It s no longer enough to provide a nice tasting beverage that fulfills a need We need to think of news way to connect with and reassure our consumers, through involving them with the brand and values *Films/Music/Games/Books 26 Kantar Worldpanel 12me June 2016 vs 2015 Attitude statements apply to consumers age 13+

27 Consumers are increasingly engaged with the beverage making process. This was seen a couple of years ago with the boom of HPP Juices and one of the biggest successes of 2016 has been Cold Brew Google searches in the US on Cold Brew - evolution over time Index relative to highest point We also see craft, provenance and DIY dynamics move from categories such as beer and wine into non-alcoholic beverages 27

28 4 Points to Take Away Milk needs to continue adaptation of its core product a natural product but also with strong taste credentials Innovation and communication should focus on Milk as a natural product, the origins of which are easily available Target younger, Multi-Cultural consumers with DIRECT messaging, demonstrating the so what that Milk brings vs. the other drinks in their expansive repertoire Continue to focus on the Family Mealtime, but use pack format to drive relevance to a new family dynamic