Blurring category lines - Adjust Your Focus

Taste, need, and occasion are exerting a greater influence on the millennial consumer than compartmentalised categorisation. Furthermore, the experience-seeking consumer is driving innovation in the retail packaged beverage shelf by pushing companies to create products with elements and ideas from the on-trade and foodservice channel.

Category blurring will have an enormous impact on future beverage category prospects and on the product mix. Crossover products are now a key element of corporate NPD strategy for major beverage companies across categories. This is already visible to an extent in the beverage aisle, with sparkling juice, water, and iced-tea brands competing with carbonates. Likewise, alcoholic-drinks companies are entering the non-alcoholic category, while they themselves will likely be disrupted by cold-brew coffee, cannabis drinks, and adult soft drinks.

In the future, dairy, food, and even pharmaceutical products will launch crossover products in the beverage space, competing on health or active lifestyle positioning. Crossover products – combining features of two or more categories – will continue to take a greater share of throat away from core beverage categories.

Simultaneously, start-ups offer a good source of ‘outside the box’ ideas. Several large beverage companies like Coca-Cola, ABInBev, and Diageo, among others, have either partnered with an external accelerator, or established an in-house programme, to encourage and source new ideas and brands in the emerging consumer start-up space.

With more and more companies venturing outside their core category, blurring category lines will also have significant impact on corporate strategy. For example, companies entering a new category will have to quickly learn the entire go-to-market process, from distribution to activation. Cross-category consolidation is likely to trend, as companies seeking growth in a new category or an emerging distribution channel acquire niche brands or emerging distribution channels to pre-empt competition and create the competitive moats.

For a fuller discussion, please see the recent publication Blurring Category Lines: The Next Generation of Beverage Companies. In a subsequent article on the blurring category theme, we will unbox elements of the emerging realignment in the beverage sector.