NON-ALCOHOLIC BEVERAGES - T. Hasegawa U.S.A.

T RE NDING FLAVOR S AND INGR EDI EN TS

N O N- AL CO H O L I C

B E VE R AG E S

FLAVOR FLASH

¡°The non-alcoholic beverage category first and foremost relies on its most

important and often inherent functionality, satisfying thirst, to drive consumer purchase, but

consumers also look to flavored beverages as a treat. Innovation can marry both function and

enjoyment through distinctive flavor innovation, BFY ingredients and added functionality

beyond refreshment to engage with consumers ¡ª both existing and new.¡± ¡ª Alyssa Hangartner, Mintel

1

KEY TAKEAWAYS

3

2

KEEP FLAVOR INNOVATION

FRESH, BUT FAMILIAR

STACK FLAVORS AND

FUNCTIONS TO DELIVER ON

CONSUMER EXPERIENCE

Berry, citrus and tropical fruit

flavors top the list of preferred flavor

families, and while trending flavors

change over time, most tie back to

these foundations. Emerging flavors

that have familiar connections to

established flavors in the market

will see faster rates of adoption by

mainstream consumers. Mature

markets, especially, can leverage

combinations of nuanced and classic

flavors to keep things fresh.

TAP INTO

SOBER-CURIOUS TRENDS

Innovation in no- and low-ABV

options within alcoholic beverages

is rising to meet the ]growing

consumer group who is

cutting back on alcohol.

This presents an easy opportunity

for non-alcoholic beverages to grab

those occasions by inspiring

consumers to ¡°indulge soberly¡± with

mocktail recipes or new product

innovation with flavors on loan from

the alcoholic beverage space.

Beyond reformulation,

much of innovation falls into two

camps: flavor and function.

Both can enhance enjoyment while

targeting needs. Layer in features,

including flavors, carbonation

and functionality with ingredient

improvements like natural

sweeteners and natural flavors

to meet consumer expectations

for BFY beverages.

COVID LIFTS NON-ALCOHOLIC BEVERAGE SALES

In a year marked by increased at-home occasions, elevated consumer preparedness and health concerns, balanced with a willingness

to indulge, most non-alcoholic categories benefited from, or even despite, the events of 2020. Most telling to the non-alcoholic

beverage industry was the significant reduction in dining-out options, prompting consumers to shift much of their food and drink

spend to packaged products rather than abandoning their beverage rituals and preferences altogether in 2020. The largest nonalcoholic beverage categories that once struggled to make significant gains ¨C CSDs and juice ¨C found renewed interest, and other

smaller categories already flourishing pre-pandemic continued on a steady, if not amplified, trajectory.

39.4

$40M

35.4

36.5

$30M

$20M

18.9 18.8 19.4

14.2 14.8 15.5

9.5 10.1 10.8

$10M

3.3

3.7 4.5

12.9

6.5 6.5 6.8

14.2 15.4

3.5 3.7 4.0

$0

Still

Water

Sparkling

Water

Carbonated

Soft Drinks

Sports

Drinks

¡ö 2018

RTD Tea

¡ö 2019

RTD Coffee

¡ö 2020

Note: RTD tea, RTD coffee, juice and sports drinks are estimated values; sports drinks comprises both sports and performance drinks.

Source: Based on IRI InfoScan? Reviews; , ¡°Category Management Handbook¡±; US Census Bureau, Economic Census/Mintel.

Energy Drinks

Juice

GENERATIONAL DIVIDE POINTS TO GEN Zs SEEKING

EXPERIENCE AND ADDED FUNCTION

TAP INTO THE GROWING

INTEREST IN MOCKTAILS

Reflecting the increasing complexity of the non-alcoholic beverage industry in the past

decades, with lots of innovation and proliferation, there is a slight divide among the ages

in drivers of product choice: younger adults (Gen Z and Millennials) are more inclined to

seek thirst-quenching beverages than Gen X or older.

Non-alcoholic beverage brands have

played a standing role as mixers in the

alcoholic beverage industry, and it may

be time to borrow a few (non-alcoholic)

recipes. As consumers increasingly opt

for low- and no-ABV products and

traditional alcohol brands introduce

alcohol-free options, non-alcoholic

beverage brands have a large opportunity

to fill a gap in the market.

¡°WHICH OF THE FOLLOWING BEVERAGES HAVE YOU DRANK IN THE PAST THREE

MONTHS? PLEASE SELECT ALL THAT APPLY.¡± In percent

Still Water

81

Coffee

Soda

58

Tea

Sparkling Water

Protein Drink

53

49

27

30

¡ö Generation Z

55

30

Generation Z

18

14

¡ö Millennials

WATERMELON CHANNELS

SUMMERTIME AND PLAYFULNESS

Watermelon has a strong summertime

association and can be nostalgic for many

consumers who grew up with watermelonflavored candy and treats. More than half

of consumers have tried watermelonflavored non-alcoholic beverages and

enjoyed them. Nostalgia and playfulness

are both subsets of Mintel¡¯s Global

Trend Driver Experiences, which

is often at the core of product

choice; more than seven in

10 consumers enjoy things

that remind them of

their childhood.

Millennials

26% 17%

27

35

30

33% 33%

32

54

53

Energy Drink

62

58

58

56

Sports Drink

¡° I AM INTERESTED IN NON-ALCOHOLIC

BEVERAGE FLAVORS INSPIRED

BY COCKTAILS.¡±

62

58

52

Juice Drink

64

65

67

56

100% Juice

72

71

66

Milk

82

75

57

Generation X

¡ö Generation X and Older

INDULGENT FLAVORS ARE

HALLMARKS IN COFFEE AND

TEA INNOVATION

Baby Boomers

PRETTY IN PINK FLORALS

Even with BFY eating trends on the rise,

indulgence is still alive and well, and

consumers are making measured

decisions on products that will invoke

comfort and pleasure. While chocolate

and caramel are classic go-to indulgent

flavors, emerging sweet flavors,

including butterscotch, white

chocolate, toffee, chai and

roasted/toasted flavors

have grown directionally

in packaged products

between 2016 to 2021.

Flavor Lifecycles ¨C US, December 2020

found that 36% of Gen Z and 30% of

Millennials discover new flavors from

social media, speaking to the importance

of vibrant visuals to capture the interest

of these active social media users.

Cherry blossom has strong roots

in Asian cuisine and culture,

suggesting that the flavor

could follow the same

growth trajectory

found with other

popular Asian

flavor profiles

and ingredients.

HEALTHY INGREDIENT RENOVATIONS CAN, AND SHOULD, MOVE PAST TRENDY BEVERAGES

Consumers are increasingly more committed to making long-term healthy food and drink choices, and reducing sugar is front of mind,

posing a risk for traditionally super sweet, high-sugar categories. When sweeteners are needed, opt for natural sweeteners or a mix

between real sugar and artificial to preserve flavor quality. Natural flavors and plant-based ingredients are also of interest to many

consumers that will give your product an extra edge among less ¡°clean¡± alternatives.

¡°WHICH OF THE FOLLOWING BEVERAGES HAVE YOU DRANK IN THE PAST THREE MONTHS? PLEASE SELECT ALL THAT APPLY.¡±

33%

24%

36%

Protein Drink

31%

19%

42%

Sparkling

Water

29%

28%

17%

28%

26%

26%

24%

22%

22%

17%

15%

16%

15%

13%

37%

13%

33%

34%

35%

35%

34%

31%

10%

28%

Juice Drink

Sports

Drink

Energy

Drink

Tea

100% Juice

Coffee

Still Water

Soda

¡ö Naturally Flavored

¡ö Plant-based Ingredients

Data Source: Lightspeed/Mintel. Survey base is 2,000 internet users aged 18+ and conducted February 2021.

¡ö Naturally Sweetened

TROPICAL FRUITS EDGING INTO MAINSTREAM

Tropical flavors are a qualified standard in a non-alcoholic

beverage flavor portfolio today: they are a preferred flavor family

for nearly half of consumers and new products featuring a

tropical flavor have increased 30% between 2016-2020. Consumers

of all ages but Gen Z and Millennials in particular are fans of

tropical flavors and consumer interest from non-triers is greater

than non-interest, suggesting there is still room to grow.

¡° HOW WOULD YOU DESCRIBE YOUR EXPERIENCE WITH, AND

INTEREST IN, THE FOLLOWING FLAVORS OR INGREDIENTS IN

NON-ALCOHOLIC BEVERAGES?¡± In percent

Pineapple

61

Dragonfruit

10

31

Guava

33

13

29

13

25

EMERGING FLAVORS TIED TO POPULAR CITRUS

FLAVOR FAMILIES ARE ONES TO WATCH

Citrus flavors make up four of the top 10 non-alcoholic beverage

flavors launched in 2020, which shows that brands are leveraging

established familiarity of citrus to support emerging citrus

flavors. The range of citrus variety is diverse and leaves much

room for brands to comfortably innovate with connections to the

familiar, yet also a sense of novelty. Meyer lemon, grapefruit and

tangerine, and even lemongrass, deliver sour, tangy notes and

offer a twist on familiar flavor profiles that brands are tapping

into. International citrus flavors are growing directionally,

including calamansi, yuzu, blood orange and pomelo, pointing

to potential next citrus steps for packaged brand innovation.

10 3

60 14

16

14

20

9

¡°WHICH OF THE FOLLOWING NON-ALCOHOLIC BEVERAGE

FLAVORS DO YOU CURRENTLY DRINK? PLEASE SELECT

ALL THAT APPLY.¡± In percent

¡ö ¡°I have tried this flavor, and I liked it.¡±

¡ö ¡°I have tried this flavor, and I did not like it.¡±

¡ö ¡°I haven't tried this flavor, but I am interested in trying it.¡±

¡ö ¡°I haven't tried this flavor, and I am not interested in trying it.¡±

¡ö ¡°I've never heard of this flavor.¡±

Cola

47

Orange

44

Lemon

43

Lime

33

Cranberry

33

Raspberry

32

Vanilla

30

Chocolate

30

Coffee Flavored

28

Coconut

21

Caramel

18

None of the Above

8

GINGER BEER DOUBLES DOWN ON FLAVOR AND BUBBLES

The stages of flavor lifecycles are demonstrated through the evolution of the flavor ginger. The process of mainstreaming a flavor means

that it extends not only through the types of retailers, restaurants and brands but also continues to grow and evolve. Ginger, on its own,

shows signs of the beginning of a plateau within both CPG and foodservice innovation, yet consumer experience with the flavor is positive,

suggesting that it may be just needing a refresh, especially considering its ties to health and wellbeing.

MENU MATRIX OF NON-ALCOHOLIC BEVERAGE FLAVORS, Q3 2017-Q3 2020

EXPANDING

LEADING

Black Berry

Mint

Ginger Beer

Matcha Green Tea

+ INCIDENCE -

Watermelon

Honey

Pineapple

Tangerine

Pomegranate

Strawberry

Grapefruit

LAGGING

EMERGING

Ginger

+

PENETRATION

-

Source: Mintel Menu Insights

Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 2,000 internet users aged 18+ and conducted February 2021.

BOTANICALS SPRINKLE IN NATURAL FLAVOR

THROUGH EXPERTLY PAIRED COMBINATIONS

FLAVORS MAY CHANGE, BUT FLAVOR FAMILIES

REMAIN CONSTANT

When taking a look at what other flavor families were chosen by

those interested in floral, herbal and spiced flavors, it was berry,

citrus and sweet families that rose to the top. Botanical flavors

can increase the naturalness and overall wellness appeal of

beverages and very distinctive complementary flavors.

Trending flavors in non-alcoholic beverages will continue to

shift and evolve, but will still remain rooted to familiar fruit

flavor families. Asked to create the ideal non-alcoholic flavored

beverage, about half of consumers opted for fruit flavors: berry,

citrus or tropical, indicating classic flavors families remain the

starting point for product portfolio development.

¡°IF YOU WERE TO CREATE YOUR IDEAL NON-ALCOHOLIC

BEVERAGE, WHICH OF THE FOLLOWING FLAVORS WOULD

YOU INCLUDE? PLEASE SELECT UP TO FIVE.¡±

¡° IF YOU WERE TO CREATE YOUR IDEAL NON-ALCOHOLIC

BEVERAGE, WHICH OF THE FOLLOWING FLAVORS WOULD

YOU INCLUDE? PLEASE SELECT UP TO FIVE.¡± In percent

FLORAL

Berry

62%

Citrus

58%

Tropical

46%

Sweet

35%

Herbal

Citrus

Tropical

51

Sweet

49

Spiced

26%

Vegetable

49

47

Herbal

32%

Spiced

Berry

Floral

20%

Vegetable

Hot/Spicy

15%

Savory

Savory

15%

Hot/Spicy

Citrus

59%

Berry

55%

Tropical

52%

Sweet

37%

Spiced

27%

Vegetable

12 14 13 12

13 12 12 6

17 11 8 5

Hot/Spicy

Savory

¡ö Millennials

Specialty beverages, like sparkling waters or energy drinks that

have smaller and more nuanced user bases also have opportunities

to be creative with more unique flavors and ingredients.

22%

13%

11%

Berry

58

Tropical

52

Citrus

Berry

54%

Sweet

Citrus

53%

Herbal

Tropical

52%

Floral

Sweet

Spiced

47%

Herbal

32%

Floral

21%

Vegetable

20%

Hot/Spicy

¡ö Baby Boomers

INTEREST IN HERBALS AND FLORALS DRIVEN

BY NICHE BEVERAGE DRINKERS

SPICED

Savory

¡ö Generation X

¡° IF YOU WERE TO CREATE YOUR IDEAL NON-ALCOHOLIC

BEVERAGE, WHICH OF THE FOLLOWING FLAVORS WOULD

YOU INCLUDE? PLEASE SELECT UP TO FIVE.¡± In percent

24%

Floral

18

20 12 8

16

¡ö Generation Z

HERBAL

27

17

19

14 16

46

49

39

42

20

61

51

49

22

20

57

53

51

48

15%

22

21

31

18 19

Savory

12 14 14 16 11

13%

Data Source: Lightspeed/Mintel. Survey base is 2,000 internet users aged 18+ and conducted February 2021.

42

22 18

20 18 15

13 14 16 16 10

¡ö 100% Juice

45

56

14 17 21 18 13

Vegetable

Hot/Spicy

40

46

40

53

61

57

57

49

56

52

57

57

60

60

61

10 11 11 11 8

¡ö Juice Drink

¡ö Sparkling Water

¡ö Energy Drink

¡ö Soda

MAKE EMERGING FLAVORS

BOTH ACCESSIBLE AND

APPROACHABLE

THIRST FIRST

Non-alcoholic beverages tend to serve

two purposes: providing function, most

importantly hydration, and enjoyable

experience ¨C and in some cases a combination of both. Layering in attributes that

tick both boxes of experience and health

can create a multipurpose beverage that

can appeal to a broader audience.

Compared to other food and drink

categories, consumers are slightly less

likely to actively seek out new flavor

experiences in non-alcoholic beverages,

but that doesn¡¯t mean there isn¡¯t room

for innovation. For the majority of

the population, emerging flavors with

similarities to mainstream flavors,

or flavor combinations anchored by

a familiar flavor profile, will create a

sense of exploration that still remains

in their comfort zone.

¡° WHICH OF THE FOLLOWING ARE

IMPORTANT TO YOU WHEN SELECTING

A NON-ALCOHOLIC BEVERAGE?

PLEASE SELECT ALL THAT APPLY.¡±

67%

¡° WHICH OF THE FOLLOWING

STATEMENTS BEST DESCRIBES YOUR

INTEREST IN TRYING NEW FLAVORS?¡±

Satisfies my thirst

31%

Naturally flavored

28%

Gives me an energy boost

22%

27%

Combination flavors

52%

19%

27%

Carbonation

7%

22%

Adds excitement to regular beverages

¡ö ¡°I sometimes try new flavors.¡±

¡ö ¡°I rarely try new flavors.¡±

¡ö ¡°I go out of my way to try new flavors.¡±

¡ö ¡°I never try new flavors.¡±

22%

Naturally sweetened

16%

Keeps me full between meals

13%

Plant-based ingredients

CHANGING PALATES INDICATE THE NEED FOR BALANCE

While consumers can and often do discover new products and preferences at any age,

palates also mature as a consumer does.

¡° WHICH OF THE FOLLOWING STATEMENTS ABOUT NON-ALCOHOLIC BEVERAGES

DO YOU AGREE WITH? PLEASE SELECT ALL THAT APPLY.¡± In percent

46

38

36

35

34

29

25

23

28

25

20

¡°I prefer beverages that

are lightly flavored.¡±

¡ö Generation Z

38

¡°Many beverages

are too sweet

for me.¡±

¡ö Millennials

¡°I like indulgent beverage

flavors (e.g. dark chocolate,

cookies and cream).¡±

¡ö Generation X

¡ö Baby Boomers

Data Source: Lightspeed/Mintel. Survey base is 2,000 internet users aged 18+ and conducted February 2021.

POPULAR FLAVOR OFFERINGS

CITRUS

Blood Orange

Calamansi

Key Lime

Lemonade

Mandarin

Meyer Lemon

Mikan

Pomelo

Sudachi

Tangerine

Yuzu

BERRY

Blackberry

Blueberry

Boysenberry

Pomegranate

Raspberry

Strawberry

Wildberry

BOTANICAL

Agave

Bergamot

Cherry

Blossom

Early Grey

Ginger

Green Tea

Hibiscus

Honey

Hops

Lavender

Lemongrass

Mint

Orange

Blossom

Rose

Sweet Tea

TROPICAL

Coconut

Dragonfruit

Guava

Honey Dew

Kiwi

Lychee

Mango

Papaya

Passionfruit

Pineapple

Starfruit

Watermelon

SEASONAL

Maple Pecan

Peppermint

Mocha

Pumpkin Spice

Spiced Cranberry

Whipped Cream

White Chocolate

Chai

INDULGENT

Butterscotch

Chocolate Fudge

Funnel Cake

Orange

Creamsicle

S¡¯mores

Strawberry

Shortcake

Tahitian Vanilla

ORCHARD

Apricot

Pink Lady Apple

Plum

Tart Cherry

White Peach

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