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Opportunities for Natural and Organic Beverages in Brazil: When Health Overcomes Convenience

September 8th, 2016

The global market of soft drinks is constantly changing in terms of new consumers’ demands and specific needs to be addressed. The health and wellness trend continues to drive the pursuit of beverages with a healthier positioning, clear functional benefits and the least possible addition of artificial ingredients. For a long time, reduced sugar beverages remained on top of this trend, being the most common type of product sought after by those looking for healthiness. Most recently, however, as consumers are increasingly aware of products’ composition and benefits/dangers of each one, natural and organic beverages have been shifting from a market niche to a more robust trend. Global business intelligence provider Euromonitor International shares an overview of this movement in Brazil’s non-alcoholic drinks market, presenting the main drivers behind it and how players have been taking advantage of such opportunity.

Brazil’s growth above global average on organic and naturally healthy beverages

In Brazil, organic beverages grew by 8.6% in constant retail value in 2015 – higher than the global 7.4% – despite of the higher unit prices per liter, unfavorable economic situation and shrinking available income for the majority of consumers, against the overall soft drinks scenario of 3.8%. Those which are naturally healthy (that is, naturally containing a substance that improves health and wellbeing beyond the products’ pure calorific value) registered a much higher growth of 18.7% in Brazil in 2015, majorly driven by increasing sales of premium coconut water, while the performance at global level reached only 3.2% growth. It is undeniable that Brazilian market offers incredible opportunities for organic and natural beverages, but there are different drivers behind the increasing consumption in terms of income levels.

Different drivers on high and low-income levels

On the high-end side, consumers are consistently shifting away from reduced sugar beverages – perceived as too artificial and with an unpleasant taste – towards organic and freshly prepared ones. These consumers are in general less affected by the current economic situation and, therefore, more likely to maintain purchases of premium and exclusive products. For them, health and wellness concerns are more relevant than convenience and they are only likely to opt for a packaged beverage if they perceive the product as really healthy. Taking the segment of juices as an example, these consumers are much interested in high-quality fresh fruits and vegetables for at-home preparation and in the increasing trend of high pressure processed juices. Two of the most important companies in the country offering these kinds of products are Green People and Urban Remedy. They offer homemade natural and functional juices, combining health attributes of fruits and vegetables with an efficient delivery system focusing on convenience. Although they have a more limited shelf life than traditional packaged versions of juices – of around 3 days only – and pretty high unit prices per liter of around BRL40 (US$10 approximately), it is expected that this trend will continue to gain relevance over the next years, especially among higher income consumers, for meeting their desires and needs in terms of healthy beverages.

When it comes to the low-end side, on the other hand, the scenario is different. For those more affected by the tough current economic situation, which have a more drastic reduction of available income, keeping their current consumption of packaged beverages is an increasing challenge. However, they are also worried about health issues and certainly do not want to give up on consuming beverages they have struggled so much to include in their baskets over the last years, such as juices, for example. For them, the migration to freshly at-home prepared beverages is a matter of cutting expenses, in a much deeper level than the pursuit of healthiness. These consumers can take advantage of the high local fruits/vegetables production in the country and their attractive unit prices per kg, especially if considering varieties such as orange, lime, passion fruit, pineapple and grape, Brazilians’ general preferred flavors.

Natural functional ingredients can be deeply explored by manufacturers

Still in line with the pursuit of natural and organic beverages, some local functional ingredients emerge as added-value solutions to increase consumers’ interest over packaged versions of many drinks’ segments. An interesting example is the market of energy drinks in Brazil, dominated by Red Bull with 42% off-trade volume share in 2015, in which manufacturers invest on fruit-flavored versions as to incentive daily consumption and healthiness perception. The brand has a special Editions line, with flavors such as lime, tropical fruits, cranberry and blueberry – mostly not well known by Brazilians.

While energy drinks manufacturers struggle to position their products as healthy and adequate for daily consumption, local functional ingredients such as guaraná, açaí and even so yerba mateemerge as natural attractive ingredients for this category. Two local brands have been ahead of this trend in Brazil: Organique, produced by Brasil Beverages, is an organic energy drink produced with these three ingredients, widely known to be energy boosters and whose taste is very attractive and familiar to Brazilians; and Waker, a natural energy drink produced by Brasil Mate with guaraná andyerba mate. Although these are still in the process of consolidation in the Brazilian market, the welcome they received is a strong indicator that consumers not only want products with ingredients they perceive as healthier, but also those they are familiar with – much more than fruits they have never even tried.

Manufacturers respond to this through innovation and democratization

To address these new consumer demands, manufacturers have been investing on the launching of new products, attenuating inhibitive unit prices and creating new consumption occasions for their products. Besides the emergence and consolidation of freshly prepared functional juices like Urban Remedy and Green People, that are positioned much more like a healthy snack or even a meal substitute rather than a common beverage, it is also possible to see organic packaged beveragesbrands attempting to position their products as more attractive, especially for higher and middle income consumers, increasing products’ penetration. Native organic juices, Fazenda da Toca andViapax Bio are some of the brands investing on increasing presence in distribution channels and offering new packaging types (200 to 300ml brick liquid cartons, for example, perceived by consumers as with a lower disbursement per unit). Taeq, a premium brand of healthy and organicproducts from Cia Brasileira de Distribuição, a major group of supermarket chains, is also investing on attractive prices and promotions to increase consumers’ interest over these types of products.

Packaged drinks to expect bigger challenges in the future

Despite of the unfavorable economic scenario, new brands and product types are still expected to come up over the next years, especially those which have a very clear healthy positioning. In this sense, natural and freshly prepared beverages will keep their growing relevance over the following years among middle and higher income consumers – whether because of the shrinking available income or the premium/healthy perception – and the most important drivers behind this trend are majorly the wide availability of fresh products in the country at attractive prices and the continuous pursuit of healthy products. As long as the clear healthy benefits are perceived and/or economically attractive options are available such as fresh fruits, vegetables and other natural ingredients, theconvenience of common packaged beverages is expected to remain in the second plan. For players offering naturally healthy and organic products, the key is to continue to invest in scalable production and efficient distribution, taking into consideration products’ characteristics and special cares in storage and transport. By getting these products, which are already perceived as truly healthy, to final consumers at fairly competitive unit prices, manufacturers will be able to combine wellbeing with convenience, offering the best of both worlds. Until then, healthiness and freshness should prevail over convenience.

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Angélica Salado

Angelica Salado is a research analyst from Euromonitor International and responsible for conducting local studies of alcoholic and non-alcoholic drinks, tobacco, healthy beverages, packaging and ethical labels in Brazil. She has more than six years of both qualitative and quantitative market research expertise. Angelica holds a BA in International Relations focused on Marketing and Business from ESPM SP (Escola Superior de Propaganda e Marketing).

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