Innovative new beverage brands must recalculate their journey sooner rather than later to achieve success, says Beverage Partners International (BPI) CEO Moshy Cohen.
BPI CEO Moshy Cohen
As we head into 2023, global markets are facing a two-pronged problem. According to the International Monetary Fund, world inflation is expected to reach 8.8% in 2022 compared with 2021 prices. Less calculable but equally detrimental is the fluctuating energy market, fuelled by a variety of economic factors, including labour shortages, disputes and climate change, and later compounded by the 2022 Russian invasion of Ukraine. With inflation on one side and the energy crisis on the other, manufacturing costs are continuing to rise.
In the beverage world, these macro-economical factors are making it even more difficult for new entrepreneurs and brands to break into the industry. In a tough market, my advice for these new players is to be sure to consider more than just product development in your business plan. Your route to market (RTM) will be just as essential to the success of your brand as R&D.
A tough nut to crack
With the increasing cost of raw materials putting pressure on manufacturers, these costs are fed down the supply chain, leading to raised consumer prices. This, in turn, puts pressure on retailers. In the beverage industry, the response of the biggest brands is to run discounts and promotions in order to maintain their market share, even as product costs continue to rise.
This leads to a very competitive, aggressive environment, which puts an additional barrier in the way of new beverage brand launches. Within these charged conditions, retailers will fall back on known, established brands to drive store traffic, further holding back niche new brands from launching. When low-price promotions and discounts from the big brands become regular practice, this damages the smaller brands and retailers who are expected to keep up with these lower costs.
For innovative new brands and entrepreneurs that have great marketing ideas or high-end product concepts, attempting to share their ideas and start a business in this environment is virtually impossible.
The route to success
For the best chance of success, there are a number of factors that should be considered.
1. Think of your RTM at the same time as product development
We have to give the same weight of importance to RTM as product development and branding. A creative, well-thought-out RTM can make the difference between a successful brand and a flop.
2. Pick your market channel
Convenience stores are a key route to market for new brands, because consumers are willing to take a chance on a new experience when it is a single-serve purchase for indulgent, impulse consumption. This is why you find a wider product variety in convenience stores than you would in hypermarkets or supermarkets. The convenience sector also allows you to build a brand store by store, door by door, and creates a story to take to the supermarket chains showing the product has proved itself in the market.
3. Know the value of brands.
Consumers love brands, as we all know. The chances of creating a totally new, successful brand are low. If you can link your product concept to an existing brand platform – even from another category or industry – you reduce your risk significantly.
4. Online sales as a proof of concept
Consider using online sales for market tests to sharpen your proof of concept.
However, it is important to keep in mind that without a strong marketing push, it will be impossible to create traffic and give the concept a true chance, or to learn from the test.
In conclusion
Truly great new beverage concepts will continue to succeed. However, macroeconomic shifts, on a global scale, mean that the game has changed.
In this competitive beverage landscape, it is essential that beverage entrepreneurs and new brands think about RTM/sales and distribution in the very early stages of product development. It should be given the same level of attention that would usually be dedicated to R&D or branding.
Good luck!
© FoodBev Media Ltd 2024
