Niche concepts are gaining acceptance as some consumers shift away from past category staples.

Consumers should expect to see continued changes in the beverage industry in 2016, with better-for-you brands from large and small companies that communicate a story about purpose, ingredients and function. Sugary sodas and fruit juice beverages will continue to forfeit shelf space to drinks that promise energy, nutrition and satiety, all while being formulated with fewer, simpler ingredients, and less calories from sugars.

“Today’s consumers want healthier refreshment, variety and convenience in their beverages,” said Gary Hemphill, managing director of research, Beverage Marketing Corp. (B.M.C.), New York. “It’s no wonder bottled water will likely surpass carbonated soft drinks within the next two years as the largest beverage category by volume in the U.S.”

Most traditional beverage categories continue to struggle and lose ground to newer niche concepts, said Mr. Hemphill. This includes plant-based waters, raw/pressed juices and non-dairy probiotics.

“While the overall fruit beverage category has struggled in recent years, the super-premium segment is experiencing growth,” he said. “The products tend to be expensive, but they target a higher-end consumer who can afford them.”

When it comes to carbonated soft drinks, Indra Nooyi, chief executive officer of PepsiCo, Inc., Purchase, N.Y., summed up her view of the category when she told investors in
October 2015, it’s “a thing of the past,” according to the Associated Press. Ms. Nooyi said she expected the company’s snack and bottled tea businesses to drive sales in the future.

On target with tea

The PepsiCo c.e.o. is on target with ready-to-drink (R.-T.-D.) tea, as the category only continues to grow, with B.M.C. estimates showing a 6.5% increase in volume sales from 2014 to 2015.

“Tea is well positioned as a healthy refreshment beverage,” Mr. Hemphill said. “Growth is coming from higher end products. Additionally, there has been a solid track record of category innovations with variation in tea types as well as flavors.”

A category leader that fits this description is Steaz, a line of R.-T.-D. organic green tea and energy beverages marketed by The Healthy Beverage Co., Doylestown, Pa. The premium beverages are all based on brewed organic green tea, a naturally concentrated source of antioxidants.

Steve Kessler, co-founder of Steaz, attributes the growing popularity of R.-T.-D. tea to improved product quality.

“Fifty-some years ago, moms mixed up some tea powder and sugar and called that iced tea,” he said. “Then Snapple debuted the R.-T.-D. format ‘made from the best stuff on earth.’ Tea has been evolving since, and today is recognized as a better-for-you beverage choice.”

Whenever possible, Steaz sources Fair Trade-certified ingredients and is mindful of sugar content.

“The lightly sweetened products rely on organic cane sugar, while our zero calorie beverages include stevia,” Mr. Kessler said. “Most recently we introduced an unsweetened line, which allows consumers to appreciate the full flavor of brewed green tea.”

The unsweetened line contains no calories but features natural flavor (dragonfruit, lemon or passionfruit) and some fiber (4 grams per 16-oz can) from inulin, which adds some calorie-free natural sweetness and mouthfeel.

Green tea provides a small amount of naturally occurring caffeine. Steaz’s energy beverages derive additional natural caffeine from organic guarana and organic yerba mate.

Delivering energy and satiety

Without a doubt, consumers desire for energy is fueling the growth of R.-T.-D. tea, as well as R.-T.-D. coffee beverages, with protein-enhanced energy beverages poised to be the next popular energy drink platform. Relying on natural energy — protein for endurance and plant-sourced caffeine for alertness — the drinks complement clean label efforts. Protein also has established itself as a satiety-inducing macronutrient, fashioning it essential for weight loss and weight management regimes.

New York City-based Skinnygirl debuted Skinnygirl Protein Tasty Nutrition Shakes to help calorie-conscious women meet their daily protein goal. The shelf-stable 11.5-oz shakes come in two dessert-inspired flavors — chocolate brownie and vanilla bean sundae — and contain only 80 calories and zero grams of sugar.

Optimum Nutrition, Aurora, Ill., a sports nutrition company, is introducing the Trusource brand of dairy protein beverages (R.-T.-D. and dry mixes) exclusively to Kroger stores. Protein Java is a R.-T.-D. iced coffee beverage packed with 16 grams of protein and caffeine. Each 8-oz can contains 100 calories, 1.5 grams of fat and a mere 4 grams of sugar. The line also includes two protein powder mixes (one enhanced with caffeine) and R.-T.-D. protein water.

Premium coffee beverages

Coffee is about the energy jolt, and the R.-T.-D. coffee beverage segment long has been dominated by bottled Frappuccino, but is changing. Like tea, coffee is going high-end.

The Trusource line includes two protein powder mixes (one enhanced with caffeine), a ready-to-drink protein water and an iced coffee beverage.

During the five-year period from 2010 thru 2014, U.S. volume sales of R.-T.-D. coffee sold through all channels increased 48.1%, from 50.6 million gallons in 2010 to 89.7 million gallons at the end of 2014, according to the B.M.C. It is estimated the volume growth from 2014 to 2015 will be almost 19%, the largest-growing beverage format, though still an overall small segment compared to carbonated soft drinks and bottled water.

Chicago-based Mintel explained that although the R.-T.-D. coffee segment is small, its popularity with coffee drinkers is growing.

“Growth is expected to continue through 2020, with the chance for additional gains as consumers increase their R.-T.-D. coffee volume consumption,” said Elizabeth Sisel, beverage analyst at Mintel in the recently published U.S. Coffee 2015 report.

The category has great opportunity for growth as long as it continues to evolve to meet drinker preferences and needs. The report states that premium and artisanal brews, indulgent flavors and better-for-you formulations all have the ability to positively impact growth.

And, the hottest thing in coffee is cold-brewed technology. Also known as cold press, this type of coffee is brewed without heat for a long period of time.

Cold brewing, at a local, often artisan level, is paving the way for an entire new category within the R.-T.-D. coffee beverage segment. One example is the namesake signature drink from Mojo Cold Brewed Coffee Inc., Wenham, Mass.

Cold-brewed coffee is getting a functional twist with the introduction of Grass Fed Coffee.

Cold-brewed coffee is getting a functional twist with the introduction of Grass Fed Coffee, from the namesake company based in Los Angeles. Sold in 8-oz cans, the beverage is described as “premium butter coffee cold brewed, the evolution of energy.” Specifically, the beverage uses grass-fed butter imported from Germany, which is said to contain healthy fats, vitamins, minerals and antioxidants. The formulation also includes M.C.T. oil (medium-chain triglycerides), which is said to boost fat burning and energy while curbing appetite, and organic chicory extract, which is a source of vitamins, minerals and inulin fiber. With no added sugar, a single-serve can contains 80 calories, 13 grams of fat, zero grams of sugar and 1 gram of protein.

Better-for-you bubbles

While focusing on carbonated soft drinks may not be as much of a priority for PepsiCo as it has been in the past, consumers still crave bubbles. Entrepreneurial beverage developers recognize this and are concocting soda for today’s consumers.

“While traditional soda has lost more than $1 billion in the past five years, every other sparkling alternative category has been in double-digit growth over the same period,” said David Lester, chief executive officer of Obi, Santa Cruz, Calif. “Consumers haven’t fallen out of love with bubbles, but they are avoiding sugar, artificial sweeteners and genetically modified ingredients.”

Driven by increased demand for sparkling beverage options, Celsius Holdings Inc., Boca Raton, Fla., is growing its namesake “healthy energy drink” line with grape and
watermelon varieties. The R.-T.-D. collection has clinical data that show drinking Celsius before exercise may help burn up to 93% more body fat while providing healthy clean energy. Further, studies show that consuming a single 12-oz drink containing a mere 10 calories can burn 100 calories. The drinks are fueled by a proprietary blend of ginger, green tea, guarana, taurine, guarana, and vitamins B-complex and C.

“In recent months, the beverage category has reflected an increased consumer interest in sparkling drinks,” said Gerry David, chief executive officer of Celsius Holdings. “We invested more than a year of R.&D. into these new products to ensure their authentic flavor and function.”

The crafty trend

Along with the trend in sparkling comes the concept of “craft,” which is expected to gain traction in the non-alcoholic sector. Craft suggests small batch and authentic, often using local, natural ingredients. Such artisan beverages appeal to consumers seeking out simple products made by real people, not mass produced via automation.

Obi Probiotic Soda is an organic, low calorie soda that features live probiotics derived from kefir cultures and juices, and is sweetened with stevia.

This is exemplified by Obi Probiotic Soda, a low-calorie, live probiotic organic soda derived from kefir cultures and juices and sweetened with stevia. In development for more than five years, at the heart of Obi is its proprietary water kefir culture that contains 20 strains of live probiotics and lacks the acidic taste associated with many probiotics. Each 12-oz serving features 2 to 5 grams of natural (no added) sugar and only 10 to 20 calories.

“Our goal as a company is to make healthy choices fun and accessible for everyone,” Mr. Lester said. “We believe that’s the best way to make a material impact on diet-based disease
in the U.S. Consumers don’t want to choose between something that tastes good and something that’s good for them.”

While kefir cultures are known for naturally producing effervescence in beverages, Obi uses carbon dioxide to produce its bubbles.

“We carbonate our drinks,” Mr. Lester said. “Consistency is a key product attribute for mainstream consumers.”

This is true even with craft products.

The future is functional

Obi is a combination of nature and science, Mr. Lester said.

“Our understanding of probiotics has accelerated in the last five years,” he said. “Our bodies are made up of 90% bacterial cells and studies are now showing links to mood, neurological function, skin health and immunity, as well as (the more widely known) digestive health. I don’t think we’ve even scratched the surface of the potential for this category.”

Mr. Hemphill said, “The success of energy drinks has proven consumers’ openness and willingness to purchase products with functional benefits, such as probiotics. But it is challenging to find functional innovation that resonates broadly with today’s consumers.”

Formulators appear to be up to the task, knowing that beverages are no longer simply thirst quenchers. That’s a thing of the past. The future of the beverage sector is make every calorie and ingredient count in terms of purpose and function.