Our previous articles have focused on the food side of the food and beverage industry — primarily on how technology, new regulations, a shrinking workforce, and consumer preferences are affecting food processing. In this article, we tackle the other side — beverages — to explore the forces currently shaping this arm of the industry.
Our subject matter expert for this conversation was John Wisler. John has more than four decades of experience in the beverage industry, as a beverage technologist and now as a consultant at John R. Wisler Food and Beverage Consulting. He's done everything from working in General Foods' Kool-Aid division to consulting with the State of Colorado on how to manage marijuana edibles from a food processing standpoint. He was even involved in helping put Tang on the moon.
Wisler identified three main trends that he sees impacting the beverage industry, and which have implications for the equipment suppliers who support this industry:
- Niche beverage products
- Universities becoming involved in new product development
- Craft production, particularly for alcoholic beverages
The rise of niche products
The biggest force for change Wisler sees affecting the beverage industry is the rise of niche products.
According to a 2014 whitepaper by the FPSA Beverage Council, in the 1970s and 1980s, 80% of beverage volume came from a mere five products. At that time, most beverage plants focused on carbonated beverages, though there were a few non-carbonated, and a plant would typically make just one product. For example, a Coca-Cola plant would only make Coca-Cola. Wisler himself spent several years at Kraft, which had an entire plant dedicated to Capri Sun.
Today, the beverage market looks much different and those single-product plants are a disappearing breed.
Over the past several years, the industry has seen a proliferation of personalized, or niche, beverages. Wisler noted that whereas 40 years ago, you would walk into a grocery store and maybe see one small aisle for beverages, today there are two large aisles. And those aisles contain an abundant variety: premium juices and teas, sports drinks, protein-fortified beverages, vitamin-enriched waters, and ready-to-drink coffees, to name just a few.
These varieties of beverages are targeted at equally diverse varieties of people. As Beverage Marketing Corp.'s Gary Hemphill told CSP.net, “Most new beverage products are designed for a specific reason. They are much more targeted to either usage occasions or consumer demographics, so they're not marketed and introduced as products that can be all things to all people. The market is becoming more splintered and niche.” To that point, a 2015 article in Inc. named relaxation beverages (the opposite of energy drinks) one of the top eight industries for adventurous entrepreneurs.
The table below shows the top five trends expected to play a part in new beverage product development, as well as the percentage of companies that plan to develop products across five major categories in 2016.
|2016 Beverage New Product Development Outlook|
|Top five trends based on consumer need/interest:|
|Planned new product development|
One major consequence of the rise of niche products is that the production process needs to change. A plant can't be dedicated round the clock to kombucha or vitamin-enriched water. Unlike a Coke product, which can have a very long run, the runs on these products may be only a couple of hours.
These shorter run times have a huge impact on efficiency, and plants need to be able to produce different types of products without having to shut down completely for a changeover. As Wisler says, “You don't make any money when you're down for changeovers,” so one of the major questions beverage producers are asking today is: “How do I keep a line running when I have another product coming in right behind it so I don't have any downtime?”
Innovation and technology to the rescue
The need for a more flexible production line affects the type of equipment that goes into a plant. Wisler believes this will spur innovation in equipment applications of all types — from batching and filling, to sanitation, to separation of products, and so on — so companies can produce multiple products a single plant, but still keep the line running.
Wisler provides an illustration:
Suppose your process is to batch a product, process it, and then move it to the filler for cooling and packaging. Typically, you'd do this all beginning to end. Then you'd stop, clean and sanitize the equipment, and then start again with a new product. In other words, you'd have downtime between products. If your runs are short, you could have a lot of downtime.
One way to reduce downtime in this process would be to move the product to a surge tank before the filler and hold it there while you're getting ready to run the next product. Rather than running one product and then the other, you run both at once. In this model, you'd still have downtime, but that downtime would be minimized.
Achieving this second scenario will require innovation in equipment applications as companies will need to be able to separate a piece of machinery from the line, clean it, and get it ready for the next product while the rest of the line is still running. Wisler notes that one way to accomplish this is by having equipment on skids that can be moved into and out of the line depending on the product you're making. Of course, it depends on the plant size, configuration, and other factors, but the key is to be able to separate pieces out of a continuous line without any dead spots.
The role of equipment suppliers
For obvious reasons, equipment suppliers have a major role to play in helping beverage companies increase their efficiency and minimize downtime. Wisler says the technology is potentially there, but most of what he currently sees is retrofitting existing equipment.
Wisler emphasizes the importance of equipment suppliers understanding their customers' products and what they're trying to accomplish. When you separate applications as suggested above, there is the potential to set up more dead spots in the line, especially during rinsing and sanitation between products. He suggests that “equipment companies need to probe customers to understand what they're producing now and also the direction that new products are going.” Beverage companies and their suppliers may not always be able to do this, but thinking along these lines will help them develop equipment that is adaptable to a variety of products and will be able to move in and out of lines as necessary.
The case for robotics
Robotics can also help niche beverage producers eliminate downtime. There is an expense factor associated with automating your line, but Wisler suggests that for niche products, it's often worth doing to eliminate downtime and to decrease the chances of error.
For example, look at the flavor industry. Currently, many flavors are weighed, and if you have a product with a lot of ingredients and flavors, you potentially have a lot of weighings. If you do this by hand, there are many places where errors can occur, but if you do it mechanically, you eliminate many of those errors.
Companies spend a lot of money to figure out if people like a product and exactly what people like about it. With robotics, you can potentially use a much tighter specification, and the closer your product is to the target, the more likely you are to have satisfied customers.
New directions in product development
Another area Wisler sees changing is how companies approach product development. He notes that big companies are wanting to spend fewer and fewer resources on doing their own development and that universities are starting to establish product development labs to take the place of the more traditional industry development labs.
For example, Purdue (Wisler's alma mater) has a state-of-the-art Food Science Pilot Lab, with capabilities including aseptic and thermal processing and packaging, equipment design and development, shelf-life studies and sensory evaluation, and more. Purdue partners with companies to carry out custom research projects. The Rutgers Food Innovation Center is another example of universities partnering with food companies to test and evaluate product prototypes.
Wisler notes that this partnership is important because wherever you have a product, you also have a process, and if you don't have the right process, you might not make the right product. Different universities are specializing in different processes. For example, Purdue is currently known for its leadership in aseptic technology; other schools may specialize in microwave technologies.
Shelf-life is an area of research of particular interest to niche beverage companies. If you can extend the shelf-life or products, for example, by using a different processing technology or a different type of packaging, you can increase your product runs, which in turn can bring costs down and profits up.
Finally, the trend of moving product development to universities isn't advantageous just for big companies. It helps level the playing field for smaller companies and entrepreneurs who in the past didn't have the capability to do their own development. They can now conduct studies and have their products overseen by staff from the university. Using a university development lab is less expensive than using an industry lab and can allow smaller, craft producers to compete.
Speaking of craft producers…
Finally, Wisler is heavily involved in consulting with craft beverage producers, particularly for alcoholic beverages, where he sees craft producers having a lot of success. There's also a lot of opportunity here for equipment suppliers.
Over the past several years, there has been a huge proliferation of wine producers in the United States. Wisler notes that many people don't equate Indiana with wine, but the state actually boasts 80 wine-producing operations. Thanks in part to the work of Christian Butzke, a Purdue professor who specializes in wine-making and partners with the state's wine producers, Indiana can take credit for some of the top wines in the world.
The wine industry presents a huge potential for processing suppliers. Many of the operations are small, but they could be much more efficient if they had more equipment. For example, Wisler recently visited a company that does the fermentation and bottling for several vineyards. They have a mobile bottling system, so rather than needing to ship the wine to another facility, they just pull up the truck and bottle it right there.
The craft movement — for wines, beers, and spirits — is taking place throughout the United States. Wisler predicts that we will see more and more niche operations popping up, and that they represent an area of opportunity for equipment and technology suppliers.
Overall, Wisler's outlook for the beverage industry is positive. It's changing, but in some pretty amazing ways — new products, new development processes, new equipment. These changes won't happen all at once (e.g., big companies will still run single-product facilities), but they will happen. The beverages of the future will be even more personalized, and the way those beverages are produced will be more flexible and more efficient.