Will consumers stay thirsty amid this tsunami of beverages?

Nancy Kruse and Lisa Jennings swim with the gummy sharks to understand the rising tide of drinks, from dirty sodas to turmeric lattes.
Caribou's lavender beverages
Caribou Coffee's Lavender Lineup is an example of beverage innovation. | Photo courtesy of Caribou Coffee.

Lisa: Nancy, can we talk about my drinking problem?

My problem is this: It seems we are drowning in beverage concepts these days, from McDonald’s new CosMc’s and bubble tea, to dirty sodas and coffee, coffee everywhere.

I’m old enough to remember a time when restaurants thought really hard about building a menu around food. And then maybe they’d throw in a few beverages that might drive incremental sales as add ons—a fountain drink, shakes, or, if they were getting really wild, maybe a slushie or smoothie.

Now it’s the other way around. I hear more about beverage concepts that are introducing food snacks with attachment potential.

It’s the S’Mores Cold Brew with toffee sprinkles that’s driving folks into CosMc’s, for example, not likely the pretzel bites or even the Cookie Butter McPops (mini stuffed doughnuts that are no doubt the proverbial moment on the lips and lifetime on the hips).

Concepts like Swig, with its sought-after pebble ice, are growing like crazy, spreading the joy of customized sodas “dirtied” with things like flavor shots, cream and gummy sharks.

The Utah-born chain is giving the state’s residents a reputation for being soda addicts, apparently, but a report in The Salt Lake Tribune this week indicates Southerners like the sugary stuff more than Utahns. We see you, Texas.

Data, however, was based in part on self-reported consumption and, really, who’s really going to admit to their daily stop for a Dragon Fruit Recharger with Red Bull at Sonic. (I’m really trying to cut down.)

The world of non-alcoholic beverages seems to have blown open so far beyond the classic Coke-or-Pepsi options of my childhood, I feel a bit overwhelmed by choice. I find myself dreaming of a nice simple glass of Fresca.

What do you think, Nancy, is this good for restaurants?

Nancy: I’m so proud, Lisa, that you’ve taken the important first step in acknowledging that you have a problem. That’s so very brave of you.

I mean, I knew something was up. Your repeated, middle-of-the-night calls accusing me of stealing your Fresca were concerning; now I understand that it was really the Sonic Recharger talking. Stay strong, my dear!

If it makes you feel better, please know that you’re not alone in trying to navigate your way through the rapidly changing currents of the beverage space.

As Jonathan Maze reported, Subway recently abandoned Coke for a new partnership with Pepsi, a shift of titanic magnitude. The change was apparently driven by declining consumption of carbonated soft drinks and increasing consumption of water and juice drinks like those in Pepsi’s portfolio.

And I agree that you need a scorecard to keep track of all the beverage chains that are also competing for consumers’ drink dollars. It’s not just the usual coffee suspects duking it out. There are emerging brands, like, say, Scooters, a next-gen coffee contender, or Kung Fu Boba Tea or Sodalicious, a Swig competitor, or, yes, CosMc’s, the appearance of which is hardly coincidental.

I suspect that this reflects a larger lifestyle shift that has given rise to headlines like “How Alcohol Lost Its Cool” from Vice and “The Big Business of Not Drinking” from the Washington Post.

Both speak to declines in alcoholic beverage consumption among Gen Z and posit the reasons why. These last include, according to Vice, that no one likes to do the same drugs that their parents did (dubious, I think, given the rise of THC) and the cost of specialty cocktails (also dubious, given the cost of specialty coffees, teas and mocktails).

More convincing to me is the specter of being captured on social media in a falling-down-drunk state, the image of which can spread like wildfire and be equally difficult to eradicate.

But whether this decline represents a long-term shift in behavior or a fad that will fade is impossible to predict. It’s worth noting that just a couple of weeks ago, Ipsos Research reported that only one in 10 Americans took part in Dry January, hardly a ringing endorsement of the new sobriety.

Would you care to step away from your refrigerator and make a prediction here?

Lisa:  Well, Nancy, clearly our collective unquenchable thirst is an advantage from an operator standpoint.

I recently spoke with Sharon Arthofer, CEO of the four-unit concept Sip Fresh, here in Southern California. It’s a franchise brand that’s all about healthful fresh fruit juices customized in a way that creates an experience.

Workers are called “sipologists” or “sip-istas,” and they handcraft drinks to order, like sweetened lime juice with cucumber and fresh mint; or a Cha Cha Chamoy with pineapple juice, Tajin and chamoy garnished with a watermelon fan.

Arthofer, an early Wetzel’s Pretzels franchisee who also had a unit co-branded with Cold Stone Creamery, touts the simplicity of the beverage model. It’s low labor, can operate in tiny spaces as small as 400-square-feet, and requires no ovens, grills or fryers.

The concept is in malls, but is looking at university-adjacent sites, transportation hubs and entertainment and sports arenas. Six more are slotted to open this year.

And then you have restaurant chains that are building subscription programs around drinks, like Panera Bread’s Unlimited Sip Club and McAlister’s Deli’s Tea Pass. Dunkin’ and Starbucks know that Americans can be very habitual (read: addicted) with their coffee- and tea-drinking ways.

And, is it me, or has this been the Year of Magical Lemonade? It has always been with us, but suddenly variations on the classic combination of lemon juice, sugar and water are everywhere, frozen or charged with caffeine and muddled with strawberries, mango or watermelon.

This doesn’t illustrate my point, but it amuses me to leave you with this old clip of Arnold Palmer making an Arnold Palmer. That’s about as far as I want to stray from lemonade.

Where are you filling your 10-gallon Stanley cup these days?

Nancy:Do you mean my Winter Pink Stanley Quencher H2.0 Flowstate 40-oz. stainless-steel tumbler, the limited-edition one released in January exclusively at Starbucks units on premise in Target stores? The one that sparked near riots and that had me in line along with hundreds of doting grandmas and pre-pubescent TikTokers six hours before the store opened on January 3?

It was worth drop-kicking those nice grannies, since my iced Americano tastes ever so much better in my Stanley. Plus, it makes me doubly trendy: Technomic reported that the coffee drink was the fastest growing nonalcoholic beverage in the business, jumping a hefty 27.5% last year.

You know, Lisa, it’s not easy being a beverage trendinista, and I really need to stay hydrated as I cultivate my own personal stash of lavender, which appears to be the beverage flavor agent of choice this season. According to Patricia Cobe, Starbucks baristas were barraged with requests for the stuff, and the chain has responded with Iced Lavender Cream Oatmilk Matcha and ILCO Latte for the spring menu.

Caribou Coffee answered with a competitive blast comprising a whole lavender line that invites consumers to “find their bliss” with options like Frozen Lavender Matcha with Bubbles. This last scores bonus points for its inclusion of coconut-coffee boba jellies.

Just last week, a Food Institute report characterized Gen Z as the “skip the buzz” cohort that is not only moderating their alcohol intake, but also looking for beverages that are appealing alternatives to conventional carbonated soft drinks.

CosMc’s is addressing this shift, and not a day goes by that there isn’t an announcement of some new quaffable in my inbox. This morning, for example, I read about IHOP and Pepsi’s new limited time offer, the IHOP x Pepsi Maple Syrup Cola, which sounds fun, tasty and appropriate to the menu. When can I get the merch?

Of course, the bigger strategic question is the long-term outlook for this burgeoning beverage sector and when/if the bubble will burst. Pun intended.

In addition to the inevitable shakeout that will occur as the nascent segment ages and becomes overstuffed with undercapitalized concepts, I think we can expect beefed-up beverage options from established brands, which will use these players as de facto test markets and learning labs.

Whether or not the better-beverage segment survives and thrives in the long term will be something I’ll be watching with great interest. But first, I gotta get me some of that Magical Lemonade.

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