Innovation Opportunity In The Beverage Industry - Niche Marketing

We are fans of niche marketing. Innovating effectively means creating new products and services that will sell to a particular consumer. In today's crowded arena that market is often a small but growing group of consumers. An article in Food Navigator discusses this trend and explains some of the impetus for niche innovation driving the beverage industry.

Fragmentation in consumers' needs and preferences has stimulated the growth of American niche beverages, according to analysts.

The sale of flagships products has stagnated, forcing beverage companies to broaden their portfolios, said Stephen Rannekleiv, vice president for Rabobank's beverage, food and agribusiness research and advisory division.

The niche demand is a significant new trend in the beverage industry, he said, speaking in a company podcast. Another new trend is the desire for products that are better for the environment.

Large beverage companies, with their eye on emerging trends, are aggressively developing niche products. This is making it very hard for small to medium sized beverage companies to complete. Large companies however have the challenge of brand identity, developing an effective niche marketing strategy then sometimes means forgoing the flagship brand as Coke did when launching Dasani Water.

Alternately large brands can stick closer to home and explore niche markets complementary their flagship brand. Gatorade recently signed a deal with Tiger Woods to license his name on a new drink. Will Gatorade be attempting to increase market share among golfers or with the multitude of younger athletes who are Tiger fan? Gatorade isn't saying just yet.

Smaller and medium size companies, on the other hand are perfectly positioned to explore niche markets too small as of yet for the big players. While larger companies pile on the emerging trend in healthier drinks, smaller companies are free to explore niches within that niche.

Some promising trends that have been identified include beauty food. Already big in Japan the market for natural beauty enhancers is growing. Topical ointments and creams are available to the in the U.S. but beauty and enhancing food and beverages are limited.

Other areas of growth are children's health food, mood enhancing and functional foods and beverages that deliver specific health benefits. These categories are, as of yet too small for major beverage manufacturers to capture but are perfect for smaller and medium sized-companies.

Both large and smaller companies will do well to keep an eye on the growth of functional beverages. As Westerners continue to be exposed to a wide variety of food from all over the world, the health benefits of those foods become better known. An aging population in much of North America and Europe means more health problems and greater interest in ways that lifestyle can impact longevity.

Exotic fruits and regionally popular extracts are making their way into Western culture. Super fruits from South America should soon be joined by emerging exotics from Africa. Flavoe profiles are changing too. Unfamiliar flavors, to the Western palate at least are slowly making their way into the mainstream. Green tea is being followed by varietal flavors of popular fruits such as orange and grape.

All of these trends are becoming popular on the fringes, many will find a solid niche and some will become as popular as the once "hippie food" yogurt, spawning their own niches in time.