Move over, seltzer. Non-carbonated drinks are gaining attention

About 10 years ago, LaCroix’s sales began to soar. Soon, flavored seltzers were everywhere, from grocery store refrigerators to liquor store shelves.

But thanks to seltzer fatigue, the bubble era appears to be over. Right now, non-carbonated beverages are all the rage, from Liquid Death to Surfside Iced Tea.

“If you look at the regions where there’s more growth, where there’s more consumer interest than there was a few years ago, we’re seeing more of a shift to still beverages in both (alcoholic) and non-alcoholic beverages,” said Randy Burt, Americas director of consumer products at consulting firm AlixPartners.

Soda and other carbonated drinks aren’t going away. But that growth is slowing as Gen Z increasingly seeks foam-free options and beverage companies focus their innovation efforts on still drinks.

There is no need to look beyond the alcohol category. Sales of malt-based hard seltzers, including White Claw, fell 1.1% year over year in the 52 weeks ending April 26, according to data from market research firm Sarcana. Meanwhile, ready-to-drink premixed cocktails include Surfside, Sun Cruiser, Buzz Balls, Anheuser-Busch InBevs Cutwater spirits are available in both carbonated and still options.

Much of the driving force behind the switch from sparkling beverages to still beverages comes from Generation Z, generally defined as people born between 1997 and 2012. Over their lifetimes, soda consumption has fallen dramatically from its peak in 1998, reusable water bottles have become a staple accessory, and a slew of new beverages like soft drinks and dirty soda have entered the mainstream.

In general, Gen Z wants to try new products. While older generations show more brand loyalty to their favorite beers and cocktails, younger consumers think differently.

“We’re seeing a lot of orgy in consumption and alcohol around new products,” said Scott Scanlon, executive vice president of alcoholic beverages at Circana, citing the rise of White Claw and Truly about eight years ago. “What we’re seeing now is consumers jumping on the newest product, and that’s the Surfside, the Sun Cruiser.”

He sees a generational shift between Gen Z and their predecessors, the Millennials, who couldn’t get enough of soda.

Once Gen Z reaches drinking age, their alcohol preferences reflect generational disparities. Non-carbonated alcoholic beverages such as Surfside and Beatbox are stealing “throat share” from hard seltzers, whose growth has slowed.

“Gen Z is much more likely to order a tea-based drink during happy hour, and they are more likely to choose soda or seltzer as their default ‘better-for-you’ option,” Burt said. “I think this is part of the shift in health and functionality that you’re seeing, especially from a Gen Z perspective.”

For fans of some beverages, such as functional teas and coffees aimed at stress relief and immune support, it makes more sense to go carbonated-free, given the beverage’s non-carbonated base.

Additionally, some consumers do not consider carbonation to be a healthy option.

Carbonated water is slightly acidic, so if consumed in large quantities, it can wear down tooth enamel, especially if the seltzer uses citric acid for flavoring. Additionally, carbonated drinks can cause bloating and belching in some people. And there are associations that all kinds of bubbles can share with sweet soda.

Thanks to the rapid rise of surfside, alcohol is leading the trend.

Independent vodka distiller Stateside Brands is launching a hard iced tea brand in 2022. This ready-to-drink beverage uses vodka as a base and iced tea and lemonade as mixers.

At the time of its release, carbonation was used everywhere in the alcohol industry.

“The options were carbonated iced tea and carbonated lemonade, which wasn’t all that unusual, but we were like, ‘What the heck, who puts carbonation in iced tea?’ It seems disrespectful,” said Clement Pappas, co-founder and CEO of the U.S. side.

Consumers seem to agree. Based on Nielsen IQ data, by 2024 Surfside will be the fastest growing alcohol brand in the United States.

“I think there was a huge pent-up demand for non-carbonated options,” Pappas said. “There are very few, especially in ready-to-drink formats.”

Surfside’s customer base skews female. Pappas said many of the brand’s fans dislike carbonation. That’s because carbonation can make you feel bloated, especially after drinking too many glasses at once.

Stateside is doubling down on non-carbonated beverages with its newest brand, Super Lyte. Although the brand still uses vodka as a base, the mixer takes inspiration from classic sports drinks.

Surfside may have burst the carbonated bubble, but other non-carbonated alcoholic beverages have grown rapidly since then.

According to Scanlon, sales growth for Cutwater’s canned cocktails has nearly doubled in the last year. InBev’s majority-owned wine-based punch brand Beatbox has also seen a surge in demand for its drinks since the alcohol giant ramped up distribution. And BuzzBallz premix cocktails were launched in 2009, but have been growing rapidly since being acquired by Sazerac in 2024.

The established alcoholic beverage industry is also looking to take on Surfside, further increasing the profile of still beverages in this category. Twisted Tea Owner boston beer launched the Sun Cruiser in 2024, aiming to compete directly with Surfside.

So far, Surfside holds a larger portion of the overall market share, but Sun Cruiser has been growing more rapidly recently.

When it comes to non-alcoholic beverages, the shift to foam-free drinks is less strong, says AlixPartners’ Bart. Some carbonated beverages still show strong growth. pepsico company In addition to Poppi, we are also seeing strong demand for energy drinks such as Celsius and Ghost.

But there are signs that the soft drink landscape is changing.

Celsius, for example, expanded its line of carbonated energy drinks earlier this year, inspired by Gen Z’s focus on wellness and a general trend toward non-carbonated beverages in other categories. Carbonated beverage options typically dominate the energy drink aisle, allowing Celsius to stand out and win over customers who might stick to tea or coffee for their caffeine fix.

Kyle Watson, Celsius’ chief brand officer, said the brand’s existing non-carbonated peach mango green tea flavor has consistently been in Celsius’ top 10 and currently ranks No. 4 among all flavors.

This lineup expansion has allowed Celsius to increase sales from Gen Z and women, two key segments in the energy drink category.

“In the focus groups we’ve held so far, even brand ambassadors from all universities, many of them talk about how they don’t like drinking sparkling,” Watson said.

Watson said consumers want a “better flavor experience” when drinking “functional drinks, such as those touting high protein content, prebiotics, caffeine, and other benefits.”

Mr Watson said part of the appeal of the carbonated-free product was that it had a “really smooth” drinking experience, making it perfect with meals. About 37% of Celsius consumers consume energy drinks with meals, Watson said.

And Celsius has ensured that non-carbonated authenticity is front and center in the line’s packaging.

“With this expansion, we also wanted to further instill the attributes of non-foaming, non-carbonation, and a smooth, refreshing flavor profile into the actual can design,” Watson said.

Some other beverage brands are betting big on moving away from fizz.

“Our product is non-carbonated, which makes it very drinkable,” Hint CEO Michael Peng said in an interview.

Founded in 2005, the flavored water company has a loyal following, especially in Silicon Valley. But Peng says the brand has become “dusty” and growth has stalled. He expects sales to rise as consumers leave the bubble, along with new packaging and attractive new advertising campaigns. (Peng says Hint has some bright options, but it’s a much smaller part of the brand’s portfolio.)

Earlier in his career, Mr. Penge led Nestlé’s water and tea brands, including Perrier and San Pellegrino.

“I was on the other side of carbonation when soda consumers were moving away from aspartame and high fructose corn syrup and looking for healthier alternatives, moving towards Perrier, San Pellegrino, Polar and LaCroix,” he said. “All the sparkling (water) exploded. We’re now seeing exactly the same thing, just the opposite.”

Peng said Hint’s still-flavored water offers “easy drinking” and “pure hydration,” giving the brand an edge over ready-to-drink carbonated waters. He said it also has a “sensuous softness” that will appeal to consumers who don’t like the stimulation of carbonic acid.

For decades, aluminum cans with pull tabs commonly contained carbonated beverages such as beer, soda, and soda.

But these days, most new still drinks are coming in cans, similar to the seltzer and sparkling drinks that are taking over market share.

“Can is winning,” Ball CEO Ronald Lewis said on an earnings call earlier this month.

He would know. Ball is the world’s largest aluminum packaging manufacturer.

Celsius’ Watson credits Liquid Death with paving the way for consumers to embrace non-sparkling canned drinks.

When Liquid Death founder Mike Cessario started his company in 2017, he couldn’t find a single bottler in the U.S. that could put still water into cans. Still drinks require a quick injection of nitrogen to prevent cans from tipping over, which poses a problem for bottlers. The carbonation creates a high internal pressure that helps the can maintain its shape.

Cessario told CNBC that the key to getting consumers to buy canned water, an otherwise unthinkable proposition, was to position Liquid Death as a cool brand.

“We designed it to look more like beer than water, so it felt more relatable to people than just some weird bottled water in a can,” Cessario said.

Liquid Death has since released sparkling and flavored sparkling products, but returned to its still roots with iced tea in 2023.

For beverage companies, aluminum cans are typically cheaper than glass bottles and a more sustainable option than plastic bottles.

And for consumers, cans feel cooler, maybe even cooler, reminiscent of the last wave of trending drinks at the end of the soda boom.