Beverage Industry

2006 Flavor Survey

February 1, 2006

2006 Flavor Survey
By CATHERINE PENN
Are consumers willing to pay more for the beverage flavors they adore?
The search for the next new flavor is a top priority in the beverage industry, according to respondents in Beverage Industry’s annual flavor survey. “It’s all about the flavor,” sums up one processor, as beverage companies seek the most interesting tastes that will enhance consumer choices and expand palate options.
Results of the survey break down into the flavor categories of: sub-tropical, tropical, berry, stone fruits, “plant,” North American (cranberry and blueberry), pomes, seeds, spices and all others (Asian, melon, dairy and tea). In addition, respondents indicated their preferences for natural and organic products, and shared their price pressure concerns and supplier demands.
Sub-tropical flavors
Sub-tropical flavors, in descending order of usage, are orange, lemon, grape, lime, fruit punch, grapefruit, passion fruit, guava, tangerine and pomegranate (see Figure 1).
This group includes the two most popular beverage flavors — orange and lemon. Orange is pretty much on its way to becoming both ubiquitous in the industry and the continuous top-selling flavor. Orange, lemon and lime are typically purchased at the same time.
Other top-selling sub-tropical single flavors this year will be passion fruit and lime. The top-selling blend for the months ahead will be fruit punch; however, most processors are expecting a price increase for fruit punch, which they intend to pass on to consumers. The expected price increase may impact sales. If priced too high, consumers will see lemon-lime and orange-pineapple drinks on the shelves as possible alternatives to fruit punch.
Most processors did not experience a price increase for sub-tropical flavors in 2005. However, in addition to higher prices for fruit punch, processors anticipate paying more for grape, grapefruit, lime and guava this year. These higher costs will be passed on to consumers.
Orange, lemon, lime, grape and fruit punch most likely are purchased by processors of juices, soft drinks and water. The main purchasers of grapefruit, passion fruit and tangerine are juice processors — with soft drinks manufacturers purchasing less frequently. Grape and fruit punch flavor orders are very likely to be accompanied by orange and lemon. In addition to orange and lemon, grapefruit buyers also add grape, cranberry, peach and fruit punch flavors to their requests.
Guava and pomegranate are mostly flavors for juice drinks, and are especially used by processors increasing their use of organic flavors.
Passion fruit, guava and tangerine flavor purchasing are closely connected with buying mango, orange, strawberry, lemon, berry, kiwi, raspberry and peach flavors. Pomegranate is likely bought with lemon, orange, cranberry and strawberry flavors.
Berry flavors
The most popular berry flavors, in descending order of usage, are strawberry, raspberry, berry, blackberry and boysenberry (see Figure 2).
Strawberry and raspberry typically are purchased for juices and soft drinks. In finished beverages, strawberry, raspberry and berry flavors most likely are accompanied by orange and lemon.
Strawberry will be the top-selling single berry flavor in 2006. It is No. 2, after orange, in the entire flavor spectrum for the beverage industry. This year’s market success will likely be tempered by the fact that 44 percent of processors are expecting a 6 percent price hike for strawberry flavor during the next few months. In addition, two-thirds plan to pass the extra cost on to consumers. So strawberry-flavored drinks will arrive with a question about whether consumers are willing to pay slightly more.
The importance of strawberry is underlined by a juice processor who explains that “old favorites — strawberry, vanilla and chocolate — are still big in our business.” The top-selling berry blends for 2006 will be strawberry-kiwi and apple-raspberry.
Blackberry and boysenberry are the least popular berry flavors. They mostly are purchased by juice processors, especially juice processors who are increasing their use of organic flavors.
For ingredient suppliers, blackberry sales could be increased by offering this flavor at the time raspberry is ordered. Boysenberry, being more remote, is often purchased with berry, orange, strawberry, blackberry, pineapple, raspberry, vanilla, apple, banana, cranberry, kiwi, lemon and peach flavors.
Stone fruits
In descending order of use, the most popular stone fruit flavors include peach, cherry and apricot (see Figure 3). Most processors use peach and cherry flavors, but apricot is more specialized and used by only 24 percent.
Purchasers of peach flavors also are buying lemon, orange and raspberry. Peach is less likely to be sold as a single flavor, but it is highly popular as a companion in the form of peach-mango and peach-apple. The most likely buyers of peach flavor are juice processors, soft drink manufacturers and water bottlers.
Cherry flavor has a wide application among processors that includes juices, soft drinks, coffee and water. It will be the fourth most-popular single flavor this year. Again, we find that popularity breeds price pressures. Last year, 45 percent of processors experienced a 12 percent price increase in cherry flavor. However, another price hike is not expected in the next few months — so perhaps price pressures on cherry flavor will evaporate.
Juice processors are the most likely buyers of apricot, although there is some interest from coffee-makers. In finished beverages, apricot most likely is accompanied by orange, peach, raspberry, strawberry, lemon, mango and vanilla.
“Plant” flavors
Plant-originated flavors include vanilla, root beer and ginseng (see Figure 4). The most frequent vanilla purchasers are processors of juices, soft drinks, coffee and dairies. Vanilla will be the third highest-selling flavor this year. In addition to being a popular single flavor, vanilla can also be part of a desirable couple. Top-selling blends this year include vanilla-black cherry, vanilla-caramel, vanilla-coffee, vanilla-hazelnut, and vanilla-orange cream flavors.
Soft drink manufacturers are the most likely purchasers of root beer, although this is not a particularly popular flavor in terms of usage. Even manufacturers buying root beer believe that cola, cherry and orange will be their best sellers this year. “We’re big fans of flavor extensions and innovations with flavors: It revitalizes the category,” explains a soft drink manufacturer.
Ginseng most often is bought by soft drink manufactures, juice processors and tea-makers. Compared to processors buying vanilla or root beer, ginseng purchasers are more likely to be price shoppers. However, this is not without reason. Last year, 56 percent paid 13 percent more money for ginseng than they expected. This price hike has not yet been passed on to consumers. Processors are uncertain about the price direction of ginseng during the next six months. Forty-eight percent think it will go up again and 45 percent hope it will stay the same.
Ginseng purchasing typically is associated with a processor’s plan to offer natural and organic flavors. Also, the data show that ginseng is most popular in the Northeast United States.
Tropical flavors
These flavors, in descending order of usage, include mango, tropical, banana, pineapple, coconut, papaya and acai (see Figure 5). Tropicals are typically purchased by juice processors; however, coconut is popular with coffee-makers.
Mango is the most popular tropical flavor, purchased by 54 percent of beverage processors last year. This year, 62 percent are expected to buy mango, and in finished beverages, all purchasers of tropical fruit flavors expect to add lemon and orange to their baskets.
The use of pineapple will grow slightly in 2006, with 42 percent of processors planning to use it. Purchasing pineapple flavor is closely correlated to buying orange, lemon, strawberry, peach, raspberry, fruit punch and grape flavors.
Banana and coconut flavors are each purchased individually. “Coconut in coffee is our fastest-growing flavor, but other tropical flavors — mango and guava — flopped,” is the experience of one coffee-maker responding to the survey.
Papaya purchasing levels will remain at 2005 levels this year. It is likely bought in combination with mango, lemon, orange, passion fruit, peach, strawberry and raspberry flavors.
For the most part, tropical flavors are preferred as blends rather than single flavors. Top-selling blends for 2006 that include a tropical flavor will be orange-pineapple and mango-peach.  
North American flavors
For the native American cranberry, the most likely destination is a juice drink. Two-thirds of beverage processors who buy cranberry flavor are price shoppers, yet 2006 will be a year when consumers pay more for a glass of cranberry juice, according to survey respondents (see Figure 6). Forty-seven percent of processors experienced a price hike for this flavor recently, and 46 percent anticipate another increase to occur in the next six months. Cranberry will be a popular flavor as both a single flavor and as a blend — as in cran-apple and cran-grape.
Blueberry also is mostly purchased by juice processors. Water bottlers, coffee-makers, and dairies are less frequent purchasers of this flavor.
Pomes
Pomes are simply apple and pear, and these flavors are mostly purchased by juice processors (see Figure 7). Soft drink manufacturers and water bottlers also have some interest in pome flavors. Although most processors did not experience a price increase for apple or pear in 2005, a price hike is anticipated in the next few months.
In finished beverages, apple often is accompanied by orange and strawberry, which are the two top-selling single flavors overall (apple is seventh in line). Apple will also be a popular blend in 2006 appearing as apple-raspberry, apple-cranberry and apple-peach. The data show that apple flavor is most popular in the Northeast United States and Canada. It is least popular in the Western United States.  
An order for pear flavor is likely part of an order for orange, peach, lemon, mango, pineapple, strawberry, apple, grape, kiwi and raspberry, according to respondents.
Seed-derived flavors
This category includes chocolate, cola — the darling of soft drink manufacturers — and coffee (see Figure 8). “My customers have their favorites and stick by them, but they do enjoy trying new flavors,” says one coffee-maker.
It is interesting to note (and chocoholics everywhere will understand) that chocolate has the highest level of “personal involvement” of any flavor purchasing activity. Three of four processors who buy chocolate say they are “personally involved” in the process, which compares to 49 percent involvement for all other flavors. Chocolate purchasers, in descending order of buying interest, are coffee-makers, dairies and juice processors. In finished products, chocolate is most often accompanied by vanilla and orange.
Most soft drink manufactures, 58 percent, experienced a 12 percent price increase in cola flavors during the past six months, which they did not pass on to consumers. This indicates that price pressures are brewing. If there is a price hike for cola flavor in the next few months, soft drink manufacturers say they will pass the increase on to consumers. Right now, however, manufacturers are split on whether cola flavor prices will fizz-up or stay flat.
Coffee flavor is typically bought by coffee-makers, soft drinks manufacturers and juice processors. An order for coffee flavor most likely includes strawberry and vanilla.
Cola and coffee are preferred as single flavors rather than blends, probably because they are so distinctive. Chocolate, on the other hand, loves company. Top-selling combos this year will be chocolate-caramel, chocolate-cherry, chocolate-coconut, chocolate-coffee and chocolate-raspberry.
Spices and other flavors
Cinnamon is mostly purchased by coffee-makers and juice processors. It is typically purchased along with vanilla and raspberry (see Figure 9).
Ginger is typically a solo purchase — usually bought on its own. Soft drink manufacturers are the most likely purchasers; juice processors are less frequent buyers.
Tea-makers are most likely to be price shoppers. Not without reason. Last year, 46 percent experienced a 13 percent price hike and 43 percent expect to pay even more this year. Consumers will be paying more for a cuppa this year because two-thirds of tea makers will be offloading the price increase. “We hope to expand in the flavored tea, area,” says one processor, hoping to offset the price increase for tea with favors. 
Buyers of kiwi flavor are likely juice processors, soft drink manufacturers and water bottlers. In finished beverages, kiwi is typically accompanied by orange, lemon, fruit punch, grape, peach, mango and strawberry. Kiwi is not a top-selling single flavor. As part of a twosome, however, strawberry-kiwi will be the No. 2 selling blend after fruit punch.
Melon buyers typically are juice processors and soft drink manufacturers. This flavor is typically purchased along with orange, lemon, strawberry, lime and mango.
Eggnog is mostly bought by dairies and coffee-makers. In finished beverages, it most often is accompanied by vanilla and chocolate.
Single flavors vs. blends
Sport and energy drink processors are the most likely to use blends — hot for 2006 in this category will be lemon-lime and mixed berry (see Figure 11).
Top-selling single flavors for juices this year will be orange, strawberry, apple and cranberry; top fruit blends will be fruit punch and kiwi-strawberry.
Top-selling single flavors for soft drinks are cola, cherry, orange and root beer. Dairies will stick to their tried and true friends — chocolate, strawberry and vanilla. Water bottlers are hoping a little lemon or strawberry or dragon fruit will excite consumers.
Natural and organic flavor trends
The data show that teas, juices and water have the highest percentage of natural and organic flavors (see Figure 12). In addition, during the past 12 months, juices, water, soft drinks and tea processors have deliberately increased their use of organic flavors.
On the other hand, processors focusing on sports and energy drinks have decreased their use of organic flavors during the past 12 months. However, the data suggest that these manufacturers plan to reverse this trend in the months ahead by going back to their organic roots.
Dairies have increased their use of natural flavors during the past 12 months and decreased their use of artificial flavors. Coffee-makers are using more artificial flavors and fewer natural ones now than they were 12 months ago.
Flavor suppliers
In terms of volume, four of five processors will be buying more flavors this year compared to 2005. One-third of beverage processors expect flavors to arrive in less than a week. Five percent expect delivery in 24 hours, 16 percent in two days, and 13 percent in three days. Most processors, 53 percent, expect to receive their shipment of flavors about a week after they place their order and 13 percent will wait two weeks.
Overall, 58 percent of processors prefer to use national (larger) flavor suppliers and this is positively correlated to processor size. Processors with less than $5 million in annual revenue use national suppliers 45 percent of the time; those with revenue more than $500 million use national suppliers 82 percent of the time. “We utilize U.S., European and Asian flavors and ingredients,” says a large soft drinks manufacturer.
Four of five processors with less than $5 million in annual revenue have one or two people involved with purchasing flavors. Most processors, 54 percent, with annual revenue from $5 million to $50 million have one or two people, and 28 percent include three to four in the decision. Suppliers selling to beverage processors with more than $500 million in annual revenue will be dealing with five to 10 people most of the time. However, 36 percent of the time suppliers will have to deal with more than 10 people when selling flavors to multi-nationals.
Methodology
The results of Beverage Industry’s 2006 Flavor Survey are at the 95 percent confidence level with a ±5.5 confidence interval. Processors were asked to identify all the beverage products they process, and many manufacture in more than one beverage category. In terms of drinks offered, 46 percent process juices and 37 percent bottle water. Soft drinks are manufactured by 27 percent of the sample and 27 percent process sports and energy drinks. Tea is made by 26 percent, 18 percent offer coffee, and 17 percent are dairies.
Also, processors were asked to identify the segment that represents their most significant volume, in other words the total will add up to 100 percent. In this way, juice processors are 24 percent of the sample, soft drink manufacturers 23 percent and water bottlers 17 percent. Coffee-makers are 11 percent, dairies are 10 percent, and 6 percent make tea. The remaining categories are energy drinks and sports drinks.
In terms of annual sales revenue, 35 percent report annual revenue less than $5 million and 10 percent have revenue up to $10 million. Twenty-two percent report revenue from $10 million to $50 million and 10 percent work where revenue is from $50 million to $100 million. Sixteen percent say revenue is $100 million to $500 million, and 18 percent report revenue more than $500 million.
In terms of location, 25 percent of the sample is from the Southern United States, 24 percent from the Western, and 23 percent are in the Midwest. The Northeast United States represents 21 percent and 6 percent are in Canada. BI