Sustainable Beverages: Bottled Solutions to Environmental Impact
Contents
Introduction
A demand-driven market
Market forces
Facts and Figures
Investment Opportunities and Market Segments
Market movers
Leaders & fast followers
Investors
VC / PE / Funds
Sustainable Beverages
An inevitable - and necessary - shift towards sustainability
Crack a bottle, refresh, and throw away.
It’s time to rethink how beverages are produced. An innovation revolution is spreading across multiple industries—an important one being the beverage industry—with businesses being pushed toward redesigning and rearranging supply chains.
In an attempt to adopt a circular economic model, beverage businesses have sourced more sustainable materials and searched for alternative packaging and recovery processes, as well as less wasteful supply chains.
Such campaigns have also been driven by consumer demand for more sustainable alternatives; however, some 40 billion plastic bottles are purchased every month globally.
Efforts persist and companies continue to innovate. For example, to produce their beers and reduce food waste, Seven Bro7hers Brewery uses wheat grains from rejected Kellogg’s Cornflakes, and Toast Ale utilizes excess bakery bread.
The beverage industry’s trend towards sustainability is fostering innovation and providing an opportunity to rethink what types of products can be convenient, accessible, cost effective, and eco-friendly. The growing consumer interest in sustainable alternatives provides a battleground for companies to increase their market share while being mindful of the environment.
Market Trends: Facts, Figures, Forces
Market Facts & Figures
While the COVID-19 pandemic caused multiple industries to completely shut down and thereby suffer a drastic drop in revenue, many used it as an opportunity to reimagine supply chains and address our climate emergency. One result is consumer-goods businesses shifting focus toward investment in sustainability:
More than half of all start-ups in the consumer-goods industry are considered “green.”
In the first half of 2020, sustainable beverage start-ups were involved in 58 investment deals totaling $283.5 million. 2021 saw an even bigger increase. Even though the number of such deals remained similar (59), the total amount of investment more than doubled, reaching $681.4 million in the first 6 months of last year.
Endless West, an innovative food and beverage (F&B) company known for their “molecular whisky” that’s produced with 94% less water using 92% less land, recently closed a Series C funding round of $60 million.
Leading beverage companies Coca-Cola, PepsiCo, and Nestle were, however, among the top 10 plastic polluters from 2018 through 2021.
Statistics via the 2021 Brand Audit conducted by Break Free From Plastic
market forces
Stricter regulations are shaping markets and nations are taking a stance toward eradicating plastics and reducing greenhouse gas emissions, impacting all sorts of consumer-goods industries. Currently, the European Union is holding quite a lead:
As of January 2021, the Plastics Own Resource taxes corporations based on the amount of plastic packaging waste they produce. The legislation was instituted in Europe, and now countries such as the US are seeking to implement similar legislation.
Under the European Green Deal, the EU Circular Economy Action Plan pledges to make all plastic packaging economically recyclable or reusable by the year 2030.
Increasing awareness of the climate crisis and corporate sustainability are directing consumers toward more educated decisions regarding the products they buy. Company leaders consider this as a very important factor in decision-making as they’ve begun to perceive sustainability as a major company strategy:
The Nature Conservancy conducted a study which found that 73% of consumers in the FB&A (food, beverage, and agriculture) industry believe that environmental sustainability should be a top focus for companies.
The same report shows that, on average, FB&A industry decision-makers are allocating 13.5% of earnings to environmental sustainability, and allocating 55% more of their resources to tackling sustainability issues.
A Deloitte survey shows that two-thirds of European CFOs report feeling pressured by stakeholders and investors to invest in climate action.
Investment Opportunities and Market Segments
Investment opportunities in the beverage industry can be found within the inputs, processing, and packaging of a product’s supply chain—as well as within the three market segments of packaged water and non-alcoholic and alcoholic beverages.
Packaged water
Inputs: As consumers look for healthier beverages and up-to-date offerings, companies are looking to incorporate the purest water. Refresh, in Australia, is selling highly oxygenated bottled water with Himalayan salt and 700% more oxygen than other waters.
Processing: Membrane filtration, a process that is slowly replacing physical and chemical treatment for potable water, represents perhaps the fastest growing segment of the bottled water equipment market.
Packaging: Alternatives to plastic-bottled water include boxed water by Flow, a Toronto-based company that raised $45 million in funding in 2020. Another example is Boxed Water is Better.
Other initiatives include Refill UK, a nationwide chain of water-refill stations available to the public. Per project estimates, if British citizens were to use the stations just twice a week, the UK could reduce its plastic bottle consumption by 14 million a year.
Non-alcoholic beverages
Inputs: Coca-Cola has met the goal of being “water balanced”—meaning the company returns 100%+ of the water it uses in its drinks—and has gone even further by treating and returning water to communities that are affected by its beverage production.
Processing: Ocean Spray announced a commitment to engage in “regenerative agriculture,” which aims to improve biodiversity and leave surrounding areas healthier and more sustainable than before cultivation.
Packaging: Tetrapak has become an important alternative to plastic packaging. The plant-based carton feeds a recyclable loop that generates new paper-based materials and is more gentle on the environment.
Alcoholic beverages
Inputs: New York City-based Air Co. Vodka is creating a “carbon-negative” vodka by using carbon dioxide from the atmosphere to produce ethyl alcohol. And Dairy Distillery, based in Ontario, Canada, is taking unused milk permeate from a nearby dairy to make its sugar-free and lactose-free spirit.
Processing: Endless West is the first company to create a “molecular spirit” called Glyph. Ageless and inspired by whiskey, the beverage is produced using significantly less water and land, while at the same time emitting around 87% less carbon dioxide.
Packaging: The Eco-Six Pack Ring is a compostable alternative to the plastic rings that hold beer six packs together. It is made from byproduct waste and compostable materials.
Clean as Air
Air Co. Vodka turns CO2 into vodka in Brooklyn distillery powered solely on renewable energy.
Impact
The search for alternative packaging materials has historically included aluminum cans, glass bottles, and 100% recyclable plastics. However, the environmental impacts of such materials have demonstrated a need for more alternatives with less negative impacts.
According to a life cycle analysis by Boxed Water is Better, replacing plastic bottles and aluminum cans with carton packaging could reduce the US carbon footprint “by the same amount as burning 2 million metric tons of coal,” and “save enough energy to power New York City for 1 month.” The analysis also notes that the carbon footprint of one aluminum can is equal to the carbon footprint of two carton containers.
In terms of recycling plastics, only 9% of plastic waste was recycled in 2019, while 22% was mismanaged. Even though many plastic materials are recyclable, the global economy lacks the necessary resources and innovation to recover plastics and process them into new products. Global production of secondary plastics only makes up 6% of total plastics production.
9% of plastic waste was recycled in 2019
Water usage is another area of opportunity, with beverage companies working to reduce their water consumption and minimize water waste. Water is a key component of the beverage’s industry supply chain, as evidenced by its footprint for a standard 125 ml coffee cup being around 140 liters of water. These water-saving strategies include implementing recycled water systems that allow for a company’s water waste to be re-used in surrounding communities.
Market Movers: Current and Future Heavy Hitters
Packaged water
Boxed Water is Better is a water company that offers a boxed alternative to plastic-bottled water that is entirely recyclable, down to the cap.
Flow Hydration provides alkaline water that’s sourced ethically and sustainably and comes in a 100% recyclable and 68–75% renewable packaging, with minimal use of natural resources.
Just Water is spring water containing naturally occurring minerals that is sustainably collected from Glens Falls, New York. Its packaging materials are 88% plant based.
Non-alcoholic beverages
Brew Dr. Kombucha uses an innovative alcohol extractor to remove trace alcohol from its fermented tea—which it then turns into distilled liquor—to reduce waste.
Guayaki Yerba Mate employs native workers to organically harvest the herbs needed for its mate. Their unique “Market Driven Regeneration” business model connects consumers in North America with indigenous communities in South America, supporting sustainable agriculture and reforestation projects.
Alcoholic beverages
While producing a typical bottle of vodka creates around 15 pounds of greenhouse gasses, each bottle of Air Co. Vodka removes one pound of carbon dioxide from the air through its entire life cycle.
Vodkow, Dairy Distillery’s signature product, is made using an innovative process that transforms unused milk sugar from dairy farms into a unique clear spirit that is both lactose and sugar free.
In 2022, Diaego announced plans to build a carbon neutral distillery in Canada to produce its Crown Royal Canadian Whisky brand. The distillery will be powered by 100% renewable energy and zero-waste to landfill.
Venture Capital/PE and Other Fund Investors
Sherbrooke Capital is a private equity firm focused on emerging consumer companies in the healthy, active, and sustainable living market. It offers close collaboration with management and cross-portfolio business opportunities.
Tate and Lyle Ventures raises investments in the food science and technology industry, providing an extensive portfolio—with funds totaling upwards of $30 million—of ingredients and solutions for F&B markets.
Great Oaks Venture Capital typically invests between $50K and $500K in seed and Series A funding, focusing on enduring businesses across the consumer, enterprise, and healthcare industries.
First Beverage Group or First | Bev solely invests in and advises beverage entrepreneurs and companies, typically with $1-$15 million in revenues. They work at all levels of the industry, from brand-building to technology.
Distill Ventures is an accelerator that relies on its network of experts to help build innovative alcoholic drink companies. Its investments range from £250,000 to £10 million (~$302,000 to ~$12 million).
Final Thoughts
The sustainable beverages sector presents a myriad of prospects for investing in companies at a variety of growth stages. The industry is quickly and consistently shifting to meet consumer needs and interests, while also addressing concerns about health and sustainability. Since the COVID-19 pandemic, companies have tried to innovate in their processes in order to provide products that are better suited to a more aware consumer base. However, for companies to take drastic measures—which are truly needed—governments will have to enact new policies that truly consider both bans on plastic and carbon emission caps.