The Hard and Fast Liquid Refreshment Beverage Category is Finally Shaking Up
In this quarter’s Food & Beverage newsletter, we are taking a deeper dive into the liquid refreshment beverage (LRB) category, which includes all non-alcoholic beverages. This segment contains the two largest beverage categories in US by volume, bottled water and carbonated soft drinks (CSD), each comprising of a market share of more than 30%. Today, total LRB sales is approx. $204 billion across the food service and take-home channels, up 13% year-over-year.
In 2021, we saw strong sales across several categories in the LRB segment even as the return to on-premise consumption failed to meet its projections. The at-home consumption channel carried the category and was able to offset the softness experienced by on-premise. Over the two year pandemic period, the CAGR for on-premise fell to -5.6%, while the CAGR for off-premise grew to 3.5%, resulting in a total CAGR of -0.2% and total volume CAGR of 0.7%. This signaled a strong recovery in the latter part of the pandemic period as LRBs in the US saw 13% year-over-year growth in 2021.
Post COVID-19, many food & beverage companies are still figuring out how to navigate the pandemic’s lasting impact to changes in consumer preferences. The return to normalcy, and consumer's focus on health and wellness, have left many LRB companies scrambling to innovate in order to adapt to current category trends, something that had had not been a recent focus for the larger players in the segment.
As consumers move away from high calorie and sugary options (CSDs, juice, sports, and energy drinks) towards healthier beverages, companies will need to be focused on investments in R&D and using M&A to fill portfolio gaps within fast-growing categories such as healthy hydration and plant-based functional drinks.