Beverage Industry’s 2004 Flavor Survey shows sustained growth and several rising flavor stars in an environment where flavor prices are — and are expected to remain — steady.

Beverage processors have increased their use of artificial flavors during the past 12 months. Last year, 32 percent of flavors were artificial; this year it’s 53 percent. Also, more drinks are blends. Last year, 36 percent of drinks were blends; this year it’s 44 percent. The good news for soft drink manufacturers is that cola is making a comeback.

There will be more tea to drink this year. Usage of tea has increased during the past 12 months, and 59 percent of beverage processors are planning to use more tea this year. Usage of grape flavor grew by 17 percent during the past 12 months and tangerine had 15 percent more buyers. Melon, blackberry and lemon have become more popular. Apple, strawberry, peach, cherry, cola, pineapple and mango usage has grown by at least 10 percent since last year’s study.

Current usage of lemon, orange, raspberry and strawberry is strong, with each being used by at least two of three beverage companies. These flavors will experience continued growth this year. Vanilla, lime and mango are also popular and usage will continue to increase this year. Cherry, fruit punch and peach are also hits, although usage will remain at current levels during the coming months.

Other flavors have fallen out of favor. Chocolate usage has decreased during the past year; however, because 60 percent of beverage companies will be increasing their use of chocolate in the months ahead, the trend will reverse itself. Likewise, decreased usage of pear, papaya and coconut will reverse as processors buy more. On the other hand, cinnamon and eggnog seem to be on a downward trend.

In terms of volume, three of four juice processors will be buying more flavors this year compared to last. Most juice processors, 56 percent, report consistent flavor prices during the past six months. One in three, however, experienced a 6 percent price hike, and 46 percent passed the increase on to their customers. Most processors are expecting to buy new juice flavors at the same price during the next six months, and in case of a price hike, 47 percent say they are price shoppers.

Most juice processors prefer to use national (larger) flavor suppliers, but one multinational juice processor says it likes "to use small to mid-size local flavor companies".

In terms of delivery, 86 percent expect juice flavors to be delivered in one week or less. Eight percent expect same-day turnaround, one in ten will wait a couple days, and 22 percent can take delivery in three days. Most will wait longer: 35 percent will wait one week and 22 percent will wait two weeks.

This year, orange flavor will dominate the juice sector. Orange has the highest usage rate and 53 percent of processors will be creating more orange drinks this year. More juice drinks also will be tea-flavored this year, in fact the increase should be dramatic.

Lemon and mango are very important juice flavors. Lemon will continue to have consistently high usage, while mango will be a growth flavor. Cranberry is especially popular as a blend, which will make it a growth flavor in the months ahead. Strawberry, grape, peach, fruit punch, raspberry and apple are popular juice drinks, and processors will continue to serve that established market this year. Lime, blueberry, passion fruit and kiwi juice drinks will be new entries with high expectations.

Processors sell single-flavored juice drinks 55 percent of the time. Orange, lemon, apple, vanilla, cranberry, grape and raspberry will be the top-selling juice drinks this year.

Blends account for 45 percent of juice drinks. Cran-apple, cran-grape, cran-raspberry, lemon-lime, orange-mango and tropical punch will be the top-selling blends in the months ahead.

Larger juice processors — those with annual revenue more than $500 million — use artificial flavors 85 percent of the time, compared to smaller juice processors — those with annual revenue less than $500 million — who use organic or natural flavors 54 percent of the time. This trend will continue as most of the smaller processors are increasing their use of organic flavors.

Processing requirements are also a flavor factor: one processor says there is a "need for more natural flavors that can be aseptically processed."

Juice processors will be buying flavors in greater volume this year in a market with pricing consistency. Should flavor suppliers increase prices, juice processors are likely to shop around.

More juice drinks will be flavored with tea, mango, cranberry, lime, blueberry, passion fruit and kiwi. Highly used flavors such as orange, lemon, strawberry, grape, peach, fruit punch, raspberry and apple will continue to quench the thirst of consumers.

Soft drink manufacturers are enthusiastic for the year ahead. Four of five will buy more flavors, despite the fact that 44 percent report a recent 8 percent price hike in flavors. Not interested in a repeat performance, 56 percent of manufacturers expect flavor prices to stabilize during the next six months. If not, most manufacturers are prepared to price shop for the best deal.

Larger soft drink manufacturers — those with annual revenue more than $500 million — prefer to buy flavors from national suppliers. Smaller manufacturers are more likely to use local suppliers. It is interesting to note that 50 percent of respondents from large manufacturers reported a price hike during the past six months, while small manufacturers reported steady prices.

In terms of delivery, one in three soft drink manufacturers expect flavors to arrive in less than three days; 43 percent are prepared to wait a week. One in four will wait two weeks.

Orange and lemon are the dominant soft drink flavors this year and most manufacturers will be creating new orange and lemon flavored drinks this year. Two-thirds of manufacturers add lime, vanilla, root beer and cherry flavors to soft drinks and will be making more of these drinks this year. Mango will be the rising star for soft drinks. Currently, 55 percent of manufacturers produce a mango-flavored soft drink and 57 percent will be creating more mango drinks this year. Strawberry usage, at 74 percent, willremain consistently strong. Likewise, peach and pineapple usage will remain at 63 percent.

Tea is another rising star. Currently, 53 percent of manufacturers use tea and 45 percent will be making more tea drinks this year. "Green tea is exploding," says one soft drink manufacturer. Grape, cola, grapefruit, raspberry and apple usage will remain pretty much at 2003 levels throughout the year.

Manufacturers report 61 percent of soft drinks are single flavors. Top-selling single soft drink flavors this year will be cola, lemon, orange, lime, root beer and vanilla. It is important to note that cola is making a comeback. Last year, manufacturers were hanging their hopes on orange as the No. 1 single-flavored soft drink — cola was second. This year, cola is expected to be No. 1 — lemon is second and orange is third.

Conversely, 39 percent of soft drinks are blends, and one bottler notes that "blends are increasing." Lemon-lime, orange-mango and berry blends will be the top sellers in the months ahead.

Soft drink flavors are artificial 72 percent of the time. This may change during the next few months as 46 percent of respondents from larger manufacturers — those with annual revenue more than $500 million — report they will be increasing their use of organic flavors in soft drinks. Smaller soft drink manufacturers will not be increasing their use of organics during the next few months, although their current usage of natural and organic flavors already is slightly higher when compared to usage among multinationals.

Sport and specialty drink manufacturers add a great variety of flavors to their drinks and 74 percent will be buying more flavors this year compared to last. During the past six months, 28 percent experienced a price hike in flavors. During the next six months, one in three expect to pay more for flavors. Overall, 47 percent of sport and specialty drink manufacturers are price shoppers.

Nine of ten large sport and specialty drink manufacturers — those with revenue more than $500 million — use national suppliers. Smaller manufacturers — those with revenue less than $500 million — prefer to buy locally.

In terms of delivery, 10 percent expect flavors the same day as ordered, 10 percent will wait two days and 13 percent expect flavors to arrive in three days. Almost half are prepared to wait a week, 16 percent will wait two weeks, and 7 percent will wait more than two weeks.

This year, orange and lemon flavors will dominate sport and specialty drinks. Orange and lemon are both high usage flavors and most manufacturers will be increasing usage this year. Lime, mango, vanilla and fruit punch are also high usage flavors — they are used by three of four manufacturers and most are planning to increase usage this year. Strawberry usage will remain very strong because 89 percent of manufacturers use it. Peach usage will approach that of strawberry during the next few months as 41 percent of manufacturers are planning to increase usage.

Cherry, tea, and passion fruit are growth flavors. About two-thirds of sport and specialty drink manufacturers use cherry, tea and passion fruit flavors; moreover, most will be increasing usage this year. Raspberry, kiwi, blueberry and cranberry are fairly important. Raspberry usage is currently at 86 percent, but usage will not grow this year. Most manufacturers use kiwi and cranberry and almost half will be increasing usage during the coming months. Two-thirds of sport and specialty manufacturers use blueberry and 39 percent will be adding more this year. Pineapple usage is at 66 percent and will remain consistent during the coming months. Usage of apple, grape, tangerine and blackberry will remain consistent. Usage of grapefruit flavor will decrease this year.

Large sport and specialty drinks manufacturers — those with annual revenue more than $500 million — use single flavors 55 percent of the time. On the other hand, smaller processors have a preference for blends. Very small sport and specialty drink manufacturers use blends 73 percent of the time. Top-selling blends for 2004 will be lemon-lime, orange-mango and tropical punch. Top selling single flavors in the sport and specialty drink category are lemon, apple, blueberry, grape, lime, orange and raspberry.

Coffee and tea processors have the highest flavor volume expectations for this year: 82 percent are buying more flavors this year compared to last. Three of four processors found flavor prices stable during the past six months; however, 38 percent are expecting an 11 percent price hike during the next six months. Fifty-seven percent of those processors plan to pass the price increase on to customers. Also, 61 percent of coffee and tea processors are not price shoppers. These processors are expecting to buy more and pay more for flavors this year.

Most coffee and tea processors purchase flavors from national suppliers. In terms of delivery, 7 percent of coffee and tea processors expect flavors to arrive the same day they are ordered, 11 percent will wait two days, and 19 percent expect flavors to arrive in three days. One-third will wait a week to receive flavors, 22 percent will wait two weeks, and 11 percent will accept delivery later than two weeks.

Vanilla, already a popular flavor, will be a rising star this year. Three of four coffee and tea processors use vanilla, and 71 percent are planning to increase usage this year. Raspberry is currently used by 81 percent of coffee and tea processors and usage will remain nearly the same. Two-thirds use orange flavor, and 45 percent are planning to make more orange-flavored coffee and tea this year. Three of four use lemon, but only 39 percent will be using more this year. Mango and peach are used by two-thirds of coffee and tea processors and 40 percent will create more mango and peach flavored drinks this year. Strawberry is used by 52 percent of coffee and tea processors.

Coffee and tea drinks are single flavored 54 percent of the time. Top-selling single flavors this year will be lemon and vanilla. Apple, caramel, French vanilla, grape, hazelnut, lime, peach and tangerine will also be popular coffee and tea flavors. "We are currently searching for new, unique, low-carb flavors for existing and new products," says one processor.

Overall, 45 percent use organic or natural flavors for coffee and tea and most respondents say they are increasing their use of organic flavors. One coffee processor explains that "the more natural the taste, the better the flavor will sell." Another would like flavor manufacturers to "label GMO-free when applicable and to develop more GMO-free natural flavors."

2004 will be a growth year for coffee and tea processors. The most important flavor will be vanilla and processors are willing to pay more for flavors if necessary to sustain the expansion.

Two of three dairies will be buying more flavors this year. In the past six months, 31 percent of dairies experienced a price hike in flavors. One dairy explains that "most of the increase in flavor cost was in chocolate and vanilla."

One of three dairies buys flavors from local suppliers and two-thirds buy from national suppliers. In terms of delivery, most dairies are pretty relaxed. One in four will wait two weeks for flavors and 27 percent will wait a week. Thirteen percent expect same-day delivery, 13 percent will wait two days, and 13 percent will wait three days.

As expected, chocolate, strawberry, and vanilla remain the most popular flavors for dairy drinks. Chocolate and strawberry usage will increase this year; vanilla usage will wane. Orange is currently used by 71 percent of dairies and usage will increase this year. Raspberry is also popular — used by 65 percent of dairies — but usage will not increase. Lemon and blueberry are used by most dairies and will become slightly more popular this year. Most dairies use banana and coffee flavors, but usage will decrease this year.

Dairies add single flavors to dairy drinks 75 percent of the time, which is the highest reliance on single flavors in the beverage industry.

Water bottlers add a great variety of flavors to water. Three of four will increase flavor usage this year compared to last. During the past six months, 44 percent experienced a 10 percent price increase, which most did not pass on to their customers. During the next six months, however, all bottled water respondents said they expect a price freeze on flavors. In case of a thaw, 56 percent say they regularly price shop for flavors.

Water bottlers are split 50/50 on using national and local suppliers. In terms of delivery, 24 percent expect same-day delivery, 24 percent will wait two days, and 12 percent will wait three days. One in four will wait a week for flavor delivery and 18 percent will wait a couple weeks.

Lime is the rising star for water bottlers this year. Currently, 83 percent of water bottlers use lime and most will add more this year. Tea is also a growth flavor. Two-thirds add tea flavor to their water and 60 percent will brew more tea this year. Lemon is the most popular flavor for water and it will continue to dominate. Mango is another growth flavor in water. Currently, 63 percent add mango and 47 percent will be adding more this year.

Orange, like lemon, is a dominant flavor. It is used by 88 percent of water bottlers and will remain at this level during the coming months. Grapefruit, kiwi and root beer are currently used by 58 percent of water bottlers and usage will grow this year. Strawberry is heavily in use — 83 percent use strawberry — and usage will remain at this rate during 2004. Bottlers will increase their use of cranberry, cherry and tangerine this year, and peach, already used by 75 percent, will hold steady. Pineapple-, apple-, and grape-flavored water products will decrease this year. Also, fruit punch and raspberry will decline.

Water bottlers use single flavors 63 percent of the time. Top-selling flavors for water this year will be lemon, lime, orange and vanilla. Flavor blends are used in water 37 percent of the time, and the top-selling blends will be lemon-lime, cran-raspberry and kiwi-strawberry. One water bottler reports "getting more and more requests for tangerine flavors and strawberry-banana."

Bottlers add artificial flavors to water 63 percent of the time. There does not seem to be a trend toward adding organic and natural flavors to water because two-thirds say they are not increasing their use of organic flavors.

Three of four distilleries will be buying more flavors this year. Two-thirds of respondents say they experienced a price hike, at an average of 14 percent, in flavors over the last six months, and half passed the increase on to their customers. For the next six months, distilleries are expecting flavor prices to remain the same — one in four, however, anticipate a price hike. Overall, 55 percent of distilleries say they regularly price shop for flavors.

The data show that distilleries prefer to use local flavor suppliers, which makes them unique in the beverage industry. Also, distilleries are very relaxed about delivery. One in four will wait more than two weeks to receive flavors, 9 percent will wait two weeks, and 27 percent will wait a week. No distillery respondent said they expect same-day turnaround.

Mango and vanilla are the most popular flavors among distillers. Mango will be the top flavor this year as 75 percent of distilleries will create more mango-flavored spirits. Vanilla usage will also grow, as 63 percent will be using more. Melon will remain at current levels.

Distilleries use artificial flavors 35 percent of the time, organic flavors 45 percent of the time, and natural flavors 20 percent. This year, 73 percent of distilleries will be increasing their use of organic flavors. One distillery is "looking for 100-percent certified organic flavor combos" from flavor manufacturers.

Two of three breweries will be buying more flavors this year compared to last. The data show that flavor prices have remained fairly constant during the past six months — 67 percent did not experience a price hike and breweries expect this to continue during the next six months. Breweries are not price shoppers.

Breweries are split 50/50 on using national vs. local suppliers. Most breweries will wait one week for flavor delivery and 25 percent will wait three days.

As expected, breweries use natural flavors most of the time, and one in three are increasing their use of organic flavors. One brewery says, "I anticipate the use of more natural and organic flavorings, and a gradual movement away from artificial flavorings."

Wineries are not expecting to increase their use of flavors this year. Almost all are price shoppers, but wineries reported price stability during the past six months and do not expect changes during the next six months.

Wineries are more likely to use national suppliers than local ones and do not expect delivery inside of a week. Top flavors used by wineries are peach, strawberry, grape and vanilla.

Beverage processors completed questionnaires via a URL link for Beverage Industry’s 2004 Flavor Survey, which has a 95 percent confidence level ±7 confidence interval.

Respondents represent beverage processors located in North America, with 29 percent of the sample in the West United States, 23 percent in the South, 21 percent in the Midwest, 20 percent in the Northeast. Seven percent represent Canadian processors.

By income, 17 percent report company annual revenue less than $1 million and 18 percent report annual revenue is between $1 and $10 million. Sixteen percent report annual revenue between $10 and $50 million, 9 percent between $50 and $100 million, and 12 percent report annual revenue up to $500 million. Beverage processors with annual revenue more than $500 million represent 28 percent of the sample.

In terms of job function, 41 percent are in sales and marketing and 19 percent are presidents/owners, which is the major category for smaller processors. Also, 16 percent are from R&D and 14 percent are from production. Other job functions include general managers, quality control, purchasing, operations and category management.