Our Beverage Industry, Uncapped: Paving the Way for Hybrid Drinks

There’s a whole lot to sip on.

If you’re a self-proclaimed foodie, you probably keep up with the latest beverage trends sweeping our nation’s grocery stores, restaurants, malls and gas stations. From the arrival of Taiwanese bubble tea to the release of the Starbucks Unicorn Frappuccino, America has sipped its way through a monumental amount of flavored drinks that make even the toughest taste buds dance. Without these innovative concoctions, however, the beverage category wouldn’t attract its coveted attention from millennial and Gen Z populations. By taking a closer look at our 2018 Food and Beverage study, we reveal which beverages are garnering the most attention from the market, and what generational factors are shaping it.

Tea, for whom?

While favorability for tea falls short in older generations, it’s abundant with an unlikely cohort: Gen Z.

In fact, they’re the only generation whose preference for tea surpasses their preference for coffee. This is likely due to the fact that younger individuals have more taste buds and are therefore more sensitive to bitter taste. However, Gen Z isn’t pursuing tea only for its taste. External conditions are also driving their preference for tea:

  1. Access to information about healthy and sustainable food options
  2. Wide awareness of food brands
  3. Busy schedules

Overall, Gen Z are informed, adventurous and conscious consumers that want to enjoy socially mindful, healthy products. Tea products often embody this profile: they’re manufactured by smaller brands, are crafted with traceable ingredients and can claim a variety of health benefits.

Teavana, for example, hopes to appeal to a generation that’s hyper aware of what’s going on in the food industry. The brand combines “premium ingredients, years of expertise and thoughtful practices to craft delicious tea”. Home to a wide variety of flavors and benefits, Teavana’s philosophy is closely connected to the desires of its target audience. Considering that many teas on the market are caffeinated, it’s easy to assume that Gen Z drinks tea for an energy boost. The reality is: they don’t.

We continue to raise the bar for innovation.

Indeed, if we focus on the beverages gen Z prefers for an energy boost, we find that they favor coffee less than other generations, but soda more:

Gen Z’s strong preference for soda as an energy source forecasts innovations appearing on shelves today aimed at this generation. Riding on the tails of Teavana’s success are several new strategically crafted drinks aimed at capturing both taste and function. The arrival of hybrid soda teas, such as Lipton’s sparkling iced tea, highlights just how much Gen Z is propelling change within the beverage category.

Even soda giant Diet Coke is planning to release an energy drink, laying down the grounds to seize millennial market share from traditional brands such as Red Bull or Bang Energy. The aggressive crossovers into new sections of the beverage category are set to prime our young generation’s palette for drinks that are a bit beyond traditional.

This poses a challenge to beverage companies both because Gen Z may outgrow hybrid teas and sodas if they age into a preference for coffee, and because the proliferation of innovations may prove hard to sustain. We can’t forecast how these challenges will play out, but right now, beverage innovation is focused on making hybrid drinks the ideal choice for Gen Z and millennials.

Author: Katie Hockstein