NRN coverage of the annual National Restaurant Association Show
Younger consumers are driving significant growth in the non-alcoholic and boba beverage categories.
The National Restaurant Association Show corroborated a trend we’ve been seeing for the past year or two now – beverage innovations are a big deal, and perhaps more than they’ve ever been. Indeed, there were 133 exhibitors filed under the “beverage” product category at this year's show, versus 113 in 2023.
Consumers have no doubt proven they want more beverage options. Consider Tropical Smoothie Café and Smoothie King, which both experienced double-digit sales growth in 2023, while startups HTeaO and Swig surged into Technomic’s Top 500 for the first time. Even McDonald’s is putting more skin in the game, launching its spinoff CosMc’s concept, which primarily sells beverages like iced lattes, slushes, frappes, teas, and more. And, as we’ve extensively covered already, a bevy of coffee players are coming in hot; Scooter’s Coffee opened 195 new units in 2023, Dutch Bros opened about 160, and 7 Brew opened about 140 for a whopping 350% increase over 2022.
But there are two emerging subsets of the beverage category that have recently caught our attention, especially given their presence on the show floor – non-alcoholic spirits and boba. Driving both is a younger consumer set demanding less alcohol, yet more fun.
Non-alcoholic beverages
On the non-alcoholic side, burgeoning companies like TÖST Beverages, Mixoloshe, and Mockly generated much interest during the show. The Mockly crew said this year’s interest level has been “huge” – beyond expectations – as more operators look to cater to the growing number of consumers who refrain from alcohol.
Many of those consumers aren’t refraining from buzzy effects all together, however. THC-infused beverages were also a popular attraction at the show and in fact the lines to learn more about WYNK or try a Flora Hemp Spirits sample rivaled the Nathan’s Hot Dog line during lunch time. In a statement, Phil McFarland, general manager of WYNK, said the distribution of low-dose cannabis beverages into the restaurant and bar space has been steadily expanding as more operators want to offer the category to their consumers. Younger consumers in particular are demanding such options. About one-third of consumers ages 18 to 24 don’t drink alcohol, according to Mintel. Those that do drink, drink significantly less – about 20% less than millennials did at their age, according to Berenberg Research.
Adam Peabody, CEO of Flora Hemp Spirits, expects these numbers to continue to grow. As such, during the show, he said he received “a ton” of inquiries from operators trying to understand how to incorporate his company's products into their business.
“Everything’s driven by the consumer. It’s very easy to see the opportunity in this category because cannabis is being legalized and normalized. More people are trying it,” he said. “I think in 5 to 10 years it will be a 50/50 market share split between THC-infused beverages and the alcohol category. It’s a generational thing.”
Boba
There were also plenty of boba and boba adjacent (e.g. equipment suppliers) companies represented this year, and for good reason; the global bubble tea market is expected to grow at a compound annual rate of nearly 9% through 2030, according to Grand View Research. While beverage-forward concepts like Starbucks, The Coffee Bean & Tea Leaf, Dutch Bros, Caribou Coffee, The Human Bean, and McDonald’s CosMc’s have been more bullish about boba, even food-forward chains are jumping into the category, including Jack in the Box, Del Taco, and BJ’s Restaurant and Brewhouse.
This demand is, once again, driven by younger consumers who are more adventurous with their beverages and who want to have fun with them, a Bossen representative said. Bossen supplies boba tea and toppings and the representative described the show as “very busy.” A representative from Twang, which provides “inclusions” like boba pearls, also confirmed the growing interest for such creative additions to beverages, noting that such demand is driven entirely by younger consumers who are more exposed to global offerings and who also happen to like the social media-friendly visuals of such additions. Speaking of younger consumers, a 2021 consumer survey from CLSA found that 94% of those between the ages of 20 and 29 had purchased boba tea in the past three months.
Twang has been in business for about 37 years, by the way, illustrating that this boba trend is experiencing a bit of a comeback. The offering has been popular since the 1990s in certain regions in Asia, and made its way to the U.S. by the early 2000s. In 2014, Gong cha – which also exhibited at the show – opened its first domestic bubble tea franchise, located in New York City. There are now more than 225 stores across 19 states and the company expects nearly 1,000 stores across the Americas by 2026. Gong cha is one of several emerging chains specializing either entirely or partly in boba tea, including 7 Leaves Café, Tapioca Express, Boba Guys, Teaspoon, Kung Fu Tea, and Sharetea. Our bet is there will be more to come in the near term and we’ll certainly be watching both the boba and the non-alcoholic spaces.
Contact Alicia Kelso at [email protected]
