Behind the Frosted Glass

The US beverage industry is valued at $146B, and it accounts for some of our favorite ads, products, and opportunities for growth. Globally, this opportunity represented an estimated $1.58T in 2020. Drinks are big business with lots of opportunity.

So where is all that growth occurring? In short, ready-to-drink (RTD) and infused beverages have been stealing fridge space from the classics like domestic lagers, sugary sodas, and energy drinks with enough caffeine to be mistaken for schedule one narcotics. Take the number of soda consumers, for example, which dropped almost 20% between 2003 and 2014. And there’s reason to believe this shift (and others emerging in the marketplace) is due to health-centric behaviors and the products marketed for them slowly but surely making the old status quo less popular. That’s not to say the big beverage companies have anything to worry about, they’re doing fine. But all the cool kids (of legal drinking age) are moving their beverages of choice into newer categories of pre-made cocktails, healthier wines, and “wellness” drinks meant to calm rather than redline. More and more, consumers are looking for beverages that deliver on taste, quality, and make them feel good.

What this means for the investor is there’s new value to be found in those niche beverage categories like RTD cocktails, natural energy drinks, and infused beverages, where emerging brands are going punch-for-punch with the big names.

Let’s start with the RTD category.

You’ve probably seen the canned cocktails in your local grocery or liquor store, and the number of options is surprisingly large considering the youth of the space.

The global ready to drink cocktails market size was valued at $782M in 2021 and is expected to expand at a CAGR of 13.4% from 2022 to 2030. This is huge in comparison to the beverage market as a whole, which expects a roughly 1.5% CAGR. Here, you’ll find brands pushing canned mai-tais, margaritas, martinis, manhattans, and more. Additionally, the leaders are using quality ingredients, which inevitably changes the game for the entire adult beverage market. Traditionally, there is a sense of quality that comes with only the most familiar brands. But it isn’t uncommon to find mixologist-approved beverages available to store in your fridge and enjoy at your convenience. And you can grab this without the hassle of waxed-mustache-wearing bartenders trying to explain why your vermouth has to be refrigerated.

Iconic Brands (OTCQB: ICNB) is one company fueling (and riding) this trend, and they give us a great look of what’s happening in the market at-large. ICNB specializes in developing and launching beverages that will thrive outside of the traditional brand name beers and staple liquors. That means they’re capitalizing everything from low-calorie wines, wellness-minded seltzers, RTD cocktails, and similar emerging beverage types — something they call the “Better-For-You” option.

The company most recently launched an entire line of zero sugar wines, which shows that even the most traditional beverages can create newfound profit opportunities with some healthy rebranding. The Bellisima brand, which is featured in Iconic’s portfolio of premium drinks, touts everything from its use of organic grapes to attention-grabbing claims targeting the wellness-minded drinker. A traditional glass of rosé, for example, has enough sugar content to match a can of Coke, while Bellisima’s new drink has…none. From a consumer perspective, if the taste between both options matches, then the choice is simple.

According to Nielsen IQ, low-calorie wine dollar sales (including low-carb and low-sugar wines) rose 123.5% during the 13-week summer-selling season ending September 4, 2021. In the 52 weeks ending September 4, low-calorie wines soared 172% to an aggregate of $152.6 million in Nielsen channels. Overall, “better for you” wines nearly doubled in volume terms in 2020 and are expected to accelerate further and approach 3 million cases in the U.S. by year-end, according to Impact Databank. The conclusion: Better-For-You sells when it comes to alcohol. The cherry on top is the branding that aligns with these trends — the branding Iconic has mastered — is easier to sell at premium prices. And according to last year’s numbers, that clever branding is working.

Beyond the wellness wines, Iconic is making a name for themselves with a whitelabel line of RTD cocktails that restaurants can carry. The company already has a contract with Hooters, and more will surely follow.

Learn more about Iconic Brands

What do we know about this wellness trend outside of the adult beverage space? For one, the shift away from traditional soda drinks is giving a boost to niche beverages. People aren’t just drinking water, though. They’re still seeking out unique flavored drinks, they’re just continuing this trend of grabbing beverages aligned with wellness branding.

To see this, look no further than the growing popularity of recreational plant extracts, which are being incorporated into a variety of consumer products in the wellness space at-large. The recreational plant market is projected to grow from $28B last year to an astounding $197B by 2028, a CAGR of 32.04%, with much of this growth coming from legal plant extract’s consumer appeal. When it comes to drinks, distributors like Apple Rush Company Inc (OTC: APRD), for example, are smart to incorporate this into their own efforts.

Supporting this hunch, Nasdaq published an article on the future of investment opportunities in recreational plant infused drinks. Perhaps most notable from the article was Nasdaq’s expected valuation for the infused beverage market — a staggering $1.4 billion by 2023. Meanwhile, a report from Grand View Research said the global infused beverages market size is expected to reach $2.8 billion by 2025, expanding at a CAGR of 17.8% during the forecast period. Grand View Research points out that “strong demand for these beverages from millennials is also anticipated to drive the market growth.”

Now, Apple Rush is no newcomer. And all their eggs aren’t sitting in their shiny new basket. The company has been producing and distributing natural and organic juice beverages for five decades, having long-established themselves as an alternative to sodas. That has kept them operating firmly in the global fruit and vegetable juice market which is set to reach $257B by 2025, according to Grandview Research. But the infused drinks space was clearly too tempting to deny. And who could blame them? In 2017, infused drinks made up a $7M market, according to Brightfield Research Group. By 2021 that market had ballooned to $318M. The juice was clearly worth the squeeze for an established brand to evolve with this recent beverage market trend, specifically infused drinks.

So what have we learned here? When it comes to beverages, just about anything with a wellness-focused twist and healthy branding, or an eye on convenience is where the market is headed.