As we approach the end of the year, we’re covering trends from key markets in 2022. We’ll recap the state of each industry over the past year, the ad strategies of its biggest players, and what we predict 2023 will hold.
According to the National Institutes of Health, 85% of Americans drink at least one caffeinated beverage daily.
Unsurprisingly, the big business of all-things caffeine is prompting ad spending for companies like Starbucks, The Coca-Cola Company and Red Bull.
That said, caffeinated beverage advertising doesn’t fit in a shoebox and varies by product type—a trend that’ll certainly continue in 2023.
Here’s how caffeinated beverage advertisers have spent through Q3 and what it means for next year.
MediaRadar Insight on Caffeinated Beverages Advertising
Through Q3 2022, coffee, energy drinks, soft drinks and tea advertisers have spent $942mm, representing a 4% YoY increase from last year. (Advertisers for caffeinated drinks accounted for 61% of the $1.55b spent by non-alcoholic beverage advertising through Q3 2022, which was down by 5% YoY.)
In Q1, spending increased by 16% YoY, thanks primarily to coffee advertisers increasing their budgets by 105% YoY from Q1 2021.
Ad spending in Q2 was up by 9% YoY, with all caffeinated drinks increasing from 16% to 36% YoY—except soft drinks—which makes sense given the summer heat rush. Advertisers for sodas decreased by 22% YoY in Q2, which aligns with societal shifts away from sugary drinks.
Spending remained relatively steady throughout the summer, increasing by a modest 3% YoY in Q3. During this time, energy drinks increased by 19% YoY, while tea rose by 60% YoY.
Coffee and soft drinks ad spending decreased by 9% and 5% YoY, respectively.
Caffeinated Beverage Advertising Trends in 2022
The rising price of coffee—prices at Starbucks are higher than ever—isn’t stopping people from buying another cup of Joe. Most coffee advertisers’ spending is increasing, too.
Through Q3, coffee advertisers increased their spending by 18% YoY (27% of the investment from the caffeinated drinks category).
This increase came as a result of big pushes from these advertisers during the colder months—Q1 and Q2 increased by 105% and 36% YoY, respectively.
One of this category’s biggest spenders, J.M. Smuckers (Folgers and Dunkin Donuts), increased spending by 111% YoY.
That wasn’t the headline, though. The most notable development came from advertisers working for Starbucks.
Starbucks’ advertisers held steady, with their budgets flat YoY. Yet, despite the plateaued budget, the world’s biggest coffee company continues to grow.
According to Rachel Ruggeri, Starbucks’ Executive Vice President and CFO, the company’s revenue increased by 15% last year, indicating that it doesn’t need ads to drive its bottom line.
Instead, it can rely on unwavering consumer loyalty.
David Reibstein, a marketing consultant and professor at the University of Pennsylvania, said, “As they [Starbucks] raise the price, they’ve got so much customer loyalty that they’re still able to keep those particular customers.”
While it’s hard to imagine any company dethroning Starbucks—big advertising budget or not—all industry players are feeling the pressure from the rising coffee-substitute market.
At the heart of this market’s growth is MUD\WTR, a new entrant making waves, primarily due to a willingness to spend big on ads. Through Q3, advertisers for MUD\WTR have increased their spending by 65% YoY.
Although MUD\WTR is less than five years old, its ad strategy is mature beyond its years.
With new Chief Marketing Officer Mike Fox, who’s held leadership roles at Facebook and Snapple, and recent product launches, MUD\WTR will continue to spend to gain market share from traditional coffee players and challengers.
One of those competitors is Four Sigmatic, a company that makes mushroom-based coffee alternatives, which has generated millions in sales since its founding.
Soft drinks continue their fall from grace, with ongoing health concerns steadily pushing people toward healthier alternatives. In fact, per capita soft drink consumption has declined yearly since 2008.
Recent spending from soft drink advertisers reflects this reduced demand, with advertisers responsible for nearly all of this category’s spend (98%) collectively decreasing their budgets by 15% YoY.
- PepsiCo was down by 12% YoY
- JAB Holding (Dr. Pepper) was down by 31% YoY
- The Coca-Cola Company was down by 11% YoY
While advertisers for these companies are seeing their budgets for these products drop, they’re not out of work (more on that in a minute).
The global energy drinks market is projected to grow at a compound annual growth rate of 8.1% through 2030 as people increase their focus on wellness, endurance and alertness—and millennials remain obsessed.
Advertisers for energy drinks have responded so far in 2022, increasing their spending by 10% YoY, thanks to increases in Q2 and Q3 by 16% and 19%, respectively. That said, spending decreased in October by 7% YoY and 15% MoM, which may speak strategies for the remainder of 2022.
While three major players accounted for most of the ad spending from this category, including PepsiCo, Red Bull, and Starbucks, the latter is the only one that’s made a sizable splash with ads. (Spending from PepsiCo and Red Bull was down by 7% and 3% YoY.)
For Starbucks, the increased spending comes following the launch of Starbucks Baya Energy, a move that could signal a shift in its strategy.
On launch day, Chanda Beppu, VP of America’s Channel Development, said, “We have always listened to customers and kept an eye on emerging trends to determine what to create next…Most recently, we’ve seen a steady increase in energy drink consumption.”
Combine that with flat spending to promote its coffee products, and Starbucks’ go-to-market (GTM) strategy could be evolving before our eyes. If this is the case, reallocation to its ad budget will likely follow suit.
While PepsiCo, Red Bull and Starbucks have accounted for the lion’s share of spending of late, shifting consumer preferences will introduce new brands and add some competition for ad inventory.
Celsius, for example, has demonstrated the power of influencer marketing and a strategy that targets health-conscious consumers instead of those drawn to extreme sports.
With the demand for soft drinks falling, advertisers promoting healthier alternatives are spending more than ever.
Through Q3, tea advertisers increased their spending by 15% YoY to $103mm, representing 7% of spending from this category.
Although these advertisers decreased their spending by 28% in the first quarter, the next two quarters saw 17% and 60% YoY increases, respectively.
As most of the U.S. enters the colder months, spending will likely continue its upward trend.
That said, if these advertisers follow their strategies from 2021, budgets will fall in Q1. This could present an opportunity for advertisers to take advantage of the increased inventory, and, potentially, lower prices due to less demand.
Regardless of the spending in Q4 and Q1, advertisers will remain in a position to spend as tea consumption steadily grows.
Same Companies, Different Products
Flatlining or declining ad strategies typically indicate trouble on the horizon for companies.
At first blush, Starbucks’ decision to hold steady with its ad spending tied to coffee would indicate that it’s falling out of favor with consumers.
The same goes for Red Bull’s 3% decrease in spending.
However, that couldn’t be further from the truth.
These companies are changing their strategies to meet shifting consumer preferences—often by promoting different products.
So, while it may seem like some companies are spending less, they’re really just reallocating their budgets elsewhere.
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