Fermentation on fire: US retail sales of kombucha and other fermented beverages surged 37.4% in 2017
Speaking to assembled kombucha brands, equipment makers, ingredients suppliers, and fermented beverage enthusiasts in Long Beach at the event - organized by Kombucha Brewers International (KBI) - SPINS director of sales Bobbi Leahy said sales grew in double digits across all channels.
However, they were particularly strong (+46%) in the conventional (MULO) and convenience channel, which combined, now account for 69% of kombucha and other fermented beverage sales [eg. switchel, apple cider vinegar etc] compared with 53% in 2014 as the fermented tea beverage becomes more mainstream, she added.
"We've only just started looking at the consumer panel data to determine switching behavior, but shelf-stable coconut water seems to be suffering a bit while kombuchas have benefited."
Within the natural channel, the top five brands (GT's, KeVita, Health Ade, Brew Dr and Live Soda) all notched up double-digit growth in 2017, while several new players also entered the category, including Suja, Bambucha Kombucha and Shen Zen Tea, while Suja, Farmhouse Culture, Goodbelly. Goodwolf, Lifeway and BluePrint Juice also entered the other fermented beverages segment, she noted.
"There has been a healthy influx of new players into the segment."
Overall non-alcoholic beverage sales were up a 'lackluster' 1.2% in 2017
To put this growth rate in perspective, the overall non-alcoholic beverages market grew "a lackluster" 1.2% in 2017, with growth driven by natural and organic beverages (+10.8% to $6.4bn) and specialty and wellness beverages (+1.7% to $25.2bn), while ‘conventional’ beverages edged up just 0.1% to $54.6bn, she said.
"Consumers are voting with their dollars. All the growth is coming from natural and specialty products, and space is being shifted from more conventional products to natural and specialty."
Within the natural beverage set, the fastest growing category in 2017 was shelf-stable performance beverages (+85.5%), followed by shelf-stable sparkling flavored beverages (+46.4%), refrigerated kombucha and fermented beverages (+37.4%), refrigerated RTD coffee (+35.6%) and shelf-stable RTD tea (+10.8%), said Leahy.
Kombucha sales remain strongest on the west coast
Within kombucha – sales of which are still strongest in the west coast (the top five cities for kombucha sales in 2017 were San Diego, Seattle, Portland, San Francisco and Spokane) - the top 10 brands now account for 96% of retail sales in the conventional channel and almost 90% of sales in the natural channel, with ginger (#1) and berries (#2) the top two flavor profiles.
Prices have softened a little in conventional and natural channels, with unit sales growth slightly outstripping dollar sales growth, and velocity up 1% and 5% respectively, added Leahy.
"How can you position kombucha as a healthier alternative to soda?"
What is kombucha?
But what, exactly, is kombucha?
It's typically defined as a fermented tea, whereby firms brew some tea, add some sugar, and then ferment the mixture with a kombucha culture or 'SCOBY' (symbiotic culture of bacteria and yeast), which creates, among other things, carbon dioxide (explaining why kombucha is a bit fizzy), alcohol, acetic acid (explaining the slightly sour, vinegary taste) and other organic acids such as lactic acid, propionic acid, glucuronic acid and gluconic acid.
Individual brands may also add herbs, adaptogens such as reishi and ashwaganda, botanicals, fruit juice concentrates, and other ingredients, before or after the fermentation.
The devil, however, is in the detail, with some companies making a virtue of the fact that their kombucha is 'raw' (a term not clearly defined in law), and others heat pasteurizing their products (in part to create a consistent product with an alcohol level below the legal threshold of 0.5% abv throughout the shelf life) and adding in well-characterized strains of probiotics afterwards, for example.
Some firms use micro-filtration techniques to filter out some yeast (to stop the product continuing to ferment in the bottle and increasing the alcohol content), while others (Brew Dr Kombucha, Aqua ViTea) distill off some alcohol after the fermentation.
Some brands such as Suja use a low heat, which they claim kills off residual yeast, but does not destroy beneficial bacteria remaining in the brew post fermentation. Still others now combine kombucha with coffee, honey, coconut water or other bases, generating an intense debate within the industry as to what, exactly, 'authentic' kombucha is, and who should decide.
Points of tension
One thing all stakeholders we spoke to at KombuchaKon were clear about was that they do not want regulators to come in and define the category, but instead want the industry to come to some kind of consensus such that it can present a united front to the FDA.
Kombucha Brewers International (KBI) - the non-profit trade association behind KombuchaKon - has been engaging with members to develop a working definition of kombucha, but has not yet nailed down a definition everyone is happy with.
Right now, KBI board member Zane Adams from Buchi Kombucha told FoodNavigator-USA, many members want kombucha defined as an unpasteurized, raw, microbiologically active tea fermented with a SCOBY, and think products that are heat pasteurized (with added probiotics added post fermentation), or those that use coffee or other non-tea products as a base, or tea powders and concentrates as opposed to brewed tea, or "who are not using a SCOBY at all," should not be considered 'kombucha,' or should be described as, for example, 'coffee-kombucha beverage,' 'kombucha drink' or 'kombucha beverage.'
However, no clear consensus was reached during a members' meeting at KombuchaKon on Sunday morning, he said.
"It's an open conversation as we want to come up with something that protects the integrity of the products we have now but does not stifle creativity in the future."
"The law that put 0.5% ABV in place came about during Prohibition and was not based on any scientific study or process, which is how this unintended consequence has occurred.
"The Cullen-Harrision Act which ended Prohibition 'legalized the sale in the United States of beer with an alcohol content of 3.2% (by weight) and wine of similarly low alcohol content, thought to be too low to be intoxicating.'
"Kombucha is a healthy food like all fermented foods. People do not look to kombucha to get intoxicated and in fact, many do the exact opposite and use it as a substitute for intoxicating beverages. So the exception is a technical correction to update this unintended consequence."
Hannah Crum, co-founder, Kombucha Brewers International
Sugar and alcohol
As to how different players are controlling sugar and alcohol levels in kombucha products (once above 0.5% abv, kombucha is classified as an alcoholic beverage and taxed accordingly), KBI members are deploying a variety of tactics, said Adams, although the KBI has been encouraging members of Congress to back a bill (the Kombucha Act) that would raise the threshold to 1.25%.
"There have definitely been some growing pains in the industry [over the sugar/alcohol issue], and we've been working with the TTB [Alcohol and Tobacco Tax and Trade Bureau - which took a close interest in the category in 2010, prompting a high-profile withdrawal of kombucha products in Whole Foods] and the AOAC to discuss ethanol [alcohol] testing protocols."
Whether 0.5% is a reasonable, or outdated and draconian, threshold, depends on your perspective, but as things stand today, said experts at analytical testing labs at the event, if you were to pull a random selection of kombucha products off the shelf towards the end of their shelf life at many retailers, you would likely find multiple products with an alcohol content above 0.5%.
Sugar levels have also been shown to differ from those stated on pack.
"Where people are often getting into trouble is when they are back-sweetening products [post fermentation] in order to appeal to a more mainstream consumer base, and the fermentation is continuing in the bottle," added one industry source at the event.
"There are lots of ways to maintain a flavor/sweetening profile that's acceptable while at the same time controlling the alcohol level, but not everyone is getting this right."
Is heat the enemy?
Similarly, heat is not necessarily the enemy that some purists claim, added another analytical lab source: "If you heat up to around 100 or even 130 degrees fahrenheit or so for 30 seconds, you can selectively remove 99% of the yeast without damaging the beneficial bacteria you might want to keep in the product, for example.
"Or you can filter out some yeast, or add micro-organisms back in that won't ferment and increase the alcohol level. You can also pick ingredients that add to the flavor and sweetness but are not fermentable, or not as fermentable."
He added: "I saw a lot of the same arguments going on in the early days in the craft beer industry, where you'd get a vocal minority of people rejecting everything that the big brands were doing, when in fact they could learn a lot from them when it came to quality control, even if they do a better job on flavor."
However, killing off yeast - even if bacteria is not impacted - is not ideal, said KBI co-founder Hannah Crum: "The yeast contain nutrition in living form - notably B vitamins, think nutritional yeast - so heat killing off the yeast does impact the nutritional profile of the product."
Read more on FoodNavigator-USA tomorrow about claims firms are making about kombucha - and other beverages - and how to avoid legal hot water.
*Total retail sales are likely much higher after you include data from retailers such as Costco and Whole Foods that don’t share their sales with the market researcher, she added.
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