The shifts defining today’s beverage category: What’s driving change and how to keep pace

Retailer and supplier success in the beverage category relies on collaboration more now than ever before. Changing consumer tastes, evolving demands, and the influence of social media are constantly reshaping merchandising and assortment decisions. This fast-moving environment leaves little room for misalignment – especially when, as a recent Purdue University study found, 73% of shoppers cite out-of-stock items as a major barrier to a positive in-store experience.

One area of rapid change is in natural, organic, and functional beverages. Driven by experimentation, social media, and targeted advertising, this segment continues to grow, and is estimated to see 4.9% CAGR over the next four years. To keep pace, retailers and suppliers must work closely together to plan, adapt, and keep assortments relevant to consumer preferences. These shifts are showing up in both nonalcoholic and alcoholic categories, each with its own set of fast-evolving trends.

Changing taste in nonalcoholic beverages includes:

• Sugar reduction and natural sweetener use  
• Premiumization of staples like coffee and soda
• Enhanced water for nutrition and energy, sometimes called functional wellness
• Constant changes to Energy and water flavors to keep the category fresh

Changing taste in alcoholic beverages includes:

• Flavored beverages with spirits (referred to as ‘ready to drink’ – or RTD)
• Personalization and variety; customizable mixers
• Lower alcohol selections, inspired by ‘sober curiosity’ and healthier lifestyles

These fast-moving assortment changes can only be achieved through partnership and collaboration between the retailers and the beverage suppliers who work with them. Building a lasting and successful partnership hinges on several key factors. 

1. Joint business planning to ensure goals are aligned.

2. Data sharing and integrity are vital to the process. Data may need to be cleaned for use. Accurate and consistent product attribution is the key to success.
   
3. Open and honest dialogue on tough assortment decisions must be made to reduce or replace current selections and create space for additional items. There must be trust in the partnership.
   
4. Realistic timeframes for analysis and development of merchandising plans.
   
5. Plans for fast deployment of new merchandising concepts through to in-store execution.
   
6. Success tracking through POS data analysis helps uncover sales patterns and stocking issues in real-time. Retailers using POS-driven decision-making report up to 20% faster response times to out-of-stocks.

These factors must be included in a regular process cadence to stay current with demands. Any gaps will lead to falling behind on trends and consumer preferences. The most successful partnerships occur when beverage companies have the following pillars in place.

• People: A well-trained merchandising Center of Excellence (CoE) to manage the partnership engagement and effectively plan, complete, and execute the merchandising strategy.
• Processes: A methodology for tracking completion, implementation, and reporting results.
• Technology: The proper technology required to complete the plan
  • Assortment analysis tools and processes
  • Space Management software with generation capabilities
  • Merchandising automation software to handle the increased planogramming workload and maintain accuracy
  • Data cleansing tools to ensure that all data is accurate for merchandising and reporting purposes
• Data: Your planograms hold valuable metrics that can guide smarter decisions – if you know how to extract and use them. For example, building an in-house data pipeline can cost upwards of $100K per data source, with annual maintenance exceeding $500K. Later in the series, we’ll share ways to avoid these costly missteps.
• Partnership: Collaborating with an external consulting firm specializing in merchandising, automation, data cleansing, and training to support or establish a CoE and ensure continuity through personnel changes likely to occur over time.

If any of the pillars above begin to crack, the processes may fail and the relationship can be put at risk. Suppliers must continuously evaluate their people, processes, and technology to ensure that they remain strong. This is where a consulting partnership can be especially valuable, serving as an extension of the internal team, providing objective insight, specialized expertise, and a steady hand through market changes. The right partner doesn’t just troubleshoot problems; they help build resilience, streamline processes, and introduce new tools that enhance collaboration and decision-making.

One example we’ve seen work well across many categories is using virtual reality–based planning environments to bring merchandising, sales, and category teams together to collaboratively visualize and agree on assortments. This kind of immersive, shared space helps align stakeholders faster, surface potential issues early, and make decisions with greater confidence.

Success in retailer partnerships demands that beverage companies invest time, effort, and funding to work with retailers. While establishing a solid retailer relationship is difficult, damaging or losing it can happen swiftly without a steadfast commitment to work ethic, honesty, and integrity. Due diligence is required to achieve both the retailer and supplier goals.

We hope you now understand that in beverage categories, retailer and supplier success is now more reliant on collaboration than ever. The constant shifts in consumer tastes and demands, amplified by social media, make collaborative merchandising and assortment decisions imperative. In part three of this series, we’ll break down why beverage is a high-complexity category and explain how automation helps manage variation in fixture types, frequent resets, and resource-limited teams.