Alcoholic Beverages

TRENDING FLAVORS AND INGREDIENTS

ALCOHOLIC

FLAVOR FLASH BEVERAGES

“Alcoholic beverages provide excitement, experience and relaxation for consumers and each of these drivers have become particularly salient because of COVID-19 and the subsequent recession. The category as a whole has seen a sales boost; yet to maintain momentum, brands must innovate for long-term growth.” — Alyssa Hangartner KEY TAKEAWAYS 1 2 3 DISRUPT CLASSIC, SIMPLE NEXT GENERATION DRINKING PATTERNS INNOVATION AND THE POWER DRINKERS WILL SEEK More than half of consumers OF SUGGESTION HEALTHIER OPTIONS are sticking to go-to drinks when Consumers love trying new Consumers under 35 are consuming alcohol, which limits experiences – including new flavors significantly more interested in flavor and new product exploration. and ingredients in alcoholic better-for-you options within Since alcoholic beverage drinking beverages. Brands will need to create alcoholic beverages. As younger occasions will likely remain convenient, easy solutions generations age and make up a largely at home, consumers will for consumers to continue exploring greater percentage of the need help finding ways to keep the new flavors and beverages consumer base, brands will need experience exciting. at home during limited access to offer solutions for these to restaurants and bars. health-conscious consumers.

SHORT-, MEDIUM- AND LONG-TERM IMPACT OF COVID-19 ON ALCOHOLIC BEVERAGES

LOCKDOWN RE-EMERGENCE RECOVERY (March-June 2020) (July 2020-December 2021) (2022-2025) STEEP INCREASE IN INITIAL SALES RECESSION IMPACTS DRIVE FOR HEALTHIER ALTERNATIVES HIGH-END PRODUCTS Closure of foodservice establishments, Pre-COVID-19, consumers were combined with the stress Initial increases in volume sales reducing alcoholic beverage associated with the early stages will subside and recessionary concerns consumption. Expect the category sales of the pandemic, drove steep increases will curb consumption and purchase to revert to pre-COVID volumes, in alcoholic beverage sales. of high-end offerings. yet consumers may seek out alternative means to reduce consumption other than abstinence, like lower ABV options.

Daypart and occasion have a strong influence on both drink and flavor selection.

Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 1,389 internet users aged 22+ who have consumed alcohol in the past three months – conducted May 2020. INNOVATE FOR THE NEXT GENERATION OF DRINKERS Promoting inherent health benefits and providing low-calorie and low-sugar options will be especially impactful with younger adults, who make up a large share of the legal drinking population and express strong interest in healthier innovations. Low-sugar options are already growing within the market, particularly through RTDs and “lower carb” options, and this innovation appeals equally across age groups. Low-alcohol options are another type of innovation that draws younger drinkers. POPULAR FLAVOR OFFERINGS

“ WHICH OF THE FOLLOWING ARE YOU INTERESTED IN WHEN IT COMES TO Açaí Honeysuckle ALCOHOLIC BEVERAGES? PLEASE SELECT ALL THAT APPLY.” In percent Almond Huckleberry

Low-Sugar 33 34 33 33 Amaretto Jalapeño Superfoods 30 29 25 16 Apple Kabosu Antioxidants 28 23 26 18 Apricot Key Lime Pie Organic Ingredients 26 30 24 15 Basil Lavender Electrolytes 22 21 15 8 Beer Varietals Limoncello Low-Alcohol 18 10 11 15 Blackberry Lychee Protein 20 18 15 6 Black Cherry Mandarin CBD 18 14 15 8 Black Currant Mango Hemp 16 10 12 5 Black Raspberry Maple Black Tea Margarita ■ 22-34 ■ 35-44 ■ 45-54 ■ 55+ Blood Orange Mezcal Blueberry Mikan WINE FALLS BEHIND SPIRITS IN SALES Bonito Mojito Before the pandemic, major categories were sustaining moderate growth, led by beer Bourbon Moscow Mule as a highly available and versatile option. Wine and spirits have also kept pace in terms of Caramel Orange Blossom growth but distilled spirits recently surpassed the wine category in total annual sales due to the rising popularity of gin and tequila. Each variety is impacted differently by changing Champagne Paloma consumer behavior due to the pandemic – especially spirits and wine which have ties to Chili Pepper Papaya celebratory and formal occasions, which are currently limited. Chocolate Passion Fruit $249B Total $235B Total $242B Total Cilantro Piña Colada $221B Total $229B Total $212B Total Cinnamon Pineapple 67 59 61 64 54 57 Cloud Emulsion Pink Lemonade 63 65 Coconut Lime Pomegranate 58 60 62 56 Coffee Prickly Pear Cosmopolitan Prosecco 102 106 110 112 115 117 Cranberry Raspberry Cream Rose 2014 2015 2016 2017 2018 2019* Cucumber Rum ■ Beer ■ Wine ■ Distilled Spirits Dragon Fruit Salted Caramel U.S. sales of alcoholic beverage types, at current prices. *Forecasted. Elderflower Sangria Source: Based on Bureau of Economic Analysis; Bureau of Labor Statistics, Consumer Expenditure Survey; Mintel. Espresso Strawberry Fireball Type Lemonade WINE-BASED AND BUBBLY SOARING INNOVATION IN Gin Sudachi DRINKS GREW CONSIDERABLY NEW ALCOHOLIC BEVERAGE Ginger Tangerine These beverages bridge wine consumption LAUNCHES MEANS Grape Tequila to other occasions and dayparts, and DIFFERENTIATION WILL BE KEY Grapefruit Vanilla spritzers are reminiscent of the popular Flavor innovation that branches out into Green Apple Watermelon hard seltzer segment. other flavor families or explores more Guava Whiskey Sour 371% emerging fruit flavors can help a brand Hibiscus Yuzu Spritzer stand out within an increasingly crowded 177% aisle of new products. Rosé Sparkling Wine 62% 4% Prosecco Beer 58% 7% Brut Champagne Wine 46% 34% Mimosa Cider 26 167% Sangria Source: Mintel Menu Insights. Flavored Alcoholic Beverages 46% Change in beverage types on U.S. menus, Q4 2015-19. Change in beverage launches, Q4 2015-19. Source: GNPD. REQUEST A SAMPLE TODAY 26 Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 1,389 internet users aged 22+ who have consumed alcohol in the past three months – conducted May 2020. PRIOR TO THE PANDEMIC, FOODSERVICE BROUGHT COCKTAILS BACK TO THEIR ROOTS Classic cocktails already resonate with Baby Boomers and are likely to continue to capture interest among younger generations as they develop their preferences and explore flavors through foodservice channels. Over a quarter of younger consumers have already found an appreciation for classic cocktails, which is a solid base to build upon.

146% 111% 110% 96% 90% 70% 49% 22% 15% Whiskey Sour Gin and Tonic Old Fashioned Moscow Mule Paloma Negroni Manhattan Sazerac Side Car

Percent change on U.S. menus, Q4 2015-19. Source: Mintel Menu Insights.

TROPICAL FLAVORS THRIVE AMONG SEASONAL BEVERAGES Overall, consumers are looking for an experience when it comes to alcoholic beverage flavors, and tropical-inspired fruit flavors channel fun, relaxation and joy in summer beverage occasions. Over a third of consumers expressing future interest in passion Pairing savory flavors fruit, tangerine and kiwi flavors. Passion fruit in particular has tripled in occurrences or floral ingredients to a fruit within new products launches and has grown 20% on U.S. menus since 2016. base can tone down sweetness “HOW WOULD YOU DESCRIBE YOUR EXPERIENCE WITH, AND INTEREST IN, THE while adding complexity. FOLLOWING FLAVORS WHEN IT COMES TO ALCOHOLIC BEVERAGES?” In percent

Mango Coconut Passion Fruit Tangerine Kiwi

■ “I have tried it and liked it.” ■ “I have tried it, but would not be interested in trying again.” ■ “I haven't tried it, but am interested.” ■ “I haven't tried it and am not interested.” ■ “I've never heard of this flavor.”

COFFEE WITH A KICK FLORAL FLAVORS PIQUE INTEREST AMONG GEN Z

Coffee as an alcoholic beverage flavor tends to appeal more to Floral flavors are of particular 200% younger males, in varieties like dark spirits and beer. Espresso interest to younger genera- Flower and Herbal as a cocktail flavor has doubled on U.S. menus since 2015. tions. These flavors have been 57% Elderflower “HAVE TRIED AND LIKED” OR “AM INTERESTED IN” growing directionally and have recently emerged within retail 45% Lavender RTD and cider brands. They are 69% 35% 57% 58% 58% typically combined with fruit Hibiscus 42% 44% flavors to add sophisticated 46% complexity, but hibiscus in Change on U.S. menus, Q4 2015-19. Male Female Male Female Male Female particular has also been show- Source:26 Mintel Menu 22-34 22-34 35-54 35-54 55+ 55+ cased as a stand-alone flavor. Insights.

SAVORY FLAVORS LAYER IN ADDED COMPLEXITY SEASONAL AND SMOKY FLAVORS Savory flavors can help balance the super sweet nature of some Craft cider, beer, spirit and seltzer brands have recently fruit-flavored beverages. Chili pepper in particular can layer introduced products with a secondary spicy to craft a on an additional sensory feature adding to the excitement and complex, sensorial flavor experience. experience of exploring alcoholic beverages. 41 40 37 24 33% 21 30% 30% 17 13 21% 19% 9 16% Seasonal Smoky Chili Pepper Basil Tumeric ■ 22-34 ■ 35-44 ■ 45-54 ■ 55+ ■ Any Prior Trial ■ Any Future Interest In percent. Interest by age group.

Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 1,389 internet users aged 22+ who have consumed alcohol in the past three months – conducted May 2020. ADVENTUROUS CONSUMERS ARE APPRECIATING ALCOHOLIC BEVERAGE SELECTION IS THE CLASSICS OFTEN SPONTANEOUS Foodservice establishments are often the first introduction for Flavor is the top driver when it comes to drink selection, closely consumers exploring the assortment of varieties and flavors that followed by occasion, and consumers are selecting their alcoholic exist within alcoholic beverages. Especially among consumers beverages based on the moment they are in. Physical and social who are proactively seeking out new flavors, classic cocktails environment, daypart and even season can all play a part in flavor hold significant favor. and drink selection. “WHICH OF THE FOLLOWING STATEMENTS ABOUT “HOW MUCH DO YOU AGREE OR DISAGREE WITH THE FOLLOWING ALCOHOLIC BEVERAGES DO YOU AGREE WITH? PLEASE STATEMENTS ABOUT ALCOHOLIC BEVERAGES?” In percent SELECT ALL THAT APPLY.” “Flavor drives my drink choices.” 79 14 8 “I stick to my go-to drinks when 40% consuming alcohol at home.” 56% “Occasion drives my drink choices.” 72 18 11 56% “I look for drink recipes 38% “I choose what to drink in the moment.” 70 17 13 that are simple to make.” 27% “Health drives my drink choices.” 41 26 33 “I prefer to drink 35% “I’d like to see more non-alcoholic options.” 32 34 34 classic cocktails.” 26% ■ ■ ■ “I find inspiration for drink flavors 41% Agree Neither Agree Nor Disagree Disagree from restaurants and bars.” 24%

■ “I go out of my way to try new flavors.” ■ “I sometimes try new flavors.” Base: 1,703 internet users aged 22+ who drink any of the alcohol types measured.

BRANDS CAN PUSH THE BOUNDARIES OF FLAVOR INNOVATION AND DELIVERING A CUTTING-EDGE EXPERIENCE TO THE CONSUMER, AS LONG AS IT COMES IN A CONVENIENT FORMAT 23% New flavor exploration sometimes requires effort, and less than a 58% quarter of consumers are proactively going out of their way for a 9% 17% new flavor experience with alcoholic beverages. Flavor exploration 2 often takes place when there is little9% investment and where unique flavors are widely available in a convenient format – in restaurants and bars. 81% of consumers are interested in exploring new flavors ■ “I sometimes try new flavors.” ■ “I go out of my way to try new flavors.” in alcoholic beverages, at least occasionally, suggesting innovation ■ “I rarely try new flavors.” ■ “I never try new flavors.” is worthwhile. Consumers learn about flavors through restaurants, but they prefer simple recipes and options at home. Base: 1,845 internet users aged 22+

TOP ALCOHOLIC BEVERAGE VARIETIES REFLECT SUGAR AND ALCOHOL REDUCTION INTEREST VARIETY AND CONVENIENCE VARIES BY GENERATION Occasion plays a large role in alcoholic beverage selection and While flavors still outpace other types of innovation with alcoholic alcoholic beverage brands have innovated to target a wider beverages, interest in BFY options are salient especially among the range of drinkers and occasions. Wine and beer are the two most most ardent drinkers. Interest in low-sugar options is strongest commonly consumed alcohol types and are the most likely go-tos among professed health-conscious Millennial and Gen X generations, across occasion. Wine has expanded to become a more casual who are looking to reduce sugar intake in their alcoholic beverage drink with sparkling and canned options. Spirits have experienced occasions. These consumers are less interested in reducing the a higher profile through cocktail innovation. alcohol in their beverages, as compared to Gen Z. In percent

Seasonal Flavors Beer 46% (e.g. Pumpkin, Peppermint) 39 39 41 25 Wine (Non Sparkling) 40% Low-Sugar 25 35 35 33 White Spirits Superfoods (e.g. Vodka, Tequila) 30% (e.g. Blueberry, Spinach) 31 29 25 17 Dark Spirits Antioxidants (e.g. Whiskey, Rum) 28% (e.g. Aloe Vera, Rosemary) 25 27 26 20

Champagne/ Organic Ingredients Sparkling Wine 19% 28 27 26 17

Premixed cocktails Electrolytes 24 22 15 10 (e.g. Jose Cuervo Margaritas) 14%

Alcoholic Seltzer Smoky Flavors 20 20 13 10 (e.g. White Claw) 14% (e.g. Mezcal, Smoked Maple) Premixed Wine-based Drinks (e.g. Wine Cooler, Sangria) 13% Low-Alcohol 23 13 11 16

Flavored Malt Beverage 21 19 14 7 (e.g. Mike’s) 13% Protein Cider (e.g. Angry Orchard) 12% CBD 16 16 14 9 Alcoholic Soda (e.g. Henry's) 9% Hemp 15 13 12 5 ■ Generation Z ■ Millennials ■ Generation X ■ Baby Boomers

Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 1,389 internet users aged 22+ who have consumed alcohol in the past three months – conducted May 2020. NOW “ WHICH OF THE FOLLOWING FLAVORS DO YOU CURRENTLY DRINK WHEN IT COMES TO ALCOHOLIC BEVERAGES? CONSUMERS ENJOY VARIETY WHEN PLEASE SELECT ALL THAT APPLY.” IT COMES TO CURRENT FLAVORS Strawberry 33% Just as there is inherent variety within alcoholic Lime 27% beverage types, there is not one flavor that significantly Lemon 27% rises above the rest when it comes to being a consumer Apple 26% favorite. The majority of top flavors fall into the fruit Peach 26% family, but three out of 10 consumers do not currently Pineapple 25% consume any of the flavors measured, speaking to the Black cherry 22% wide availability of options on the market, both flavored Orange 21% and nonflavored. Brands that rely on a flavored product Grapefruit 15% portfolio must offer an assortment as no single offering Ginger 13% is promised to be a “one size fits all.” Honey 13% 13%

13%

12% “ HOW WOULD YOU DESCRIBE YOUR EXPERIENCE WITH, NEAR 9% AND INTEREST IN, THE FOLLOWING FLAVORS WHEN IT TRIAL OF TIER 2 FLAVORS IS BUDDING, COMES TO ALCOHOLIC BEVERAGES?” In percent AND INTEREST IS STRONG Mango Flavors with well established connections to other Coconut food or beverage categories, like coconut, mango and Coffee Blueberry coffee, lead trial and seem to have sticking power, with Passion Fruit very limited abandonment. Further out flavors fall into Pear a familiar and somewhat tropical fruit flavor family Tangerine 9% aligning with most of the primary flavors. Tangerine, Kiwi Cucumber passion fruit, apricot and kiwi have strong levels of Apricot trial interest that exceed noninterest. Maple Lavender

FUTURE “ HOW WOULD YOU DESCRIBE YOUR EXPERIENCE WITH, AND INTEREST IN, THE FOLLOWING FLAVORS WHEN IT INTEREST IN EMERGING FLAVORS POINTS COMES TO ALCOHOLIC BEVERAGES?” In percent

TO OPENNESS TO EXPLORE Blood Orange Although there are some barriers to flavor exploration, Almond nearly a quarter of all consumers expressed future Dragon Fruit Açaí interest in most emerging flavors suggesting that Black Current consumers are open to experiment in this category. Hibiscus Fruit flavors continue to resonate well, but floral and Chili Pepper 9% herbal flavors still garner significant interest and Earl Grey Basil would work as a great complement to an existing Elderflower primary flavor. Combination flavors like elderflower Turmeric lemonade, chili lime or strawberry hibiscus can Yuzu deliver fresh and new flavor, while still remaining ■ “I have tried it and liked it.” ■ “I have tried it, but would not be interested in trying again.” ■ “I haven't tried it, but am interested.” ■ “I haven't tried it and am not interested.” anchored in a familiar base. ■ “I've never heard of this flavor.”

Data Source: Lightspeed/Mintel. Unless otherwise indicated, survey base is 1,389 internet users aged 22+ who have consumed alcohol in the past three months – conducted May 2020.

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