Customerland

Impulse Buying and Brand Loyalty in Beverages

• Hunter Thurman • Season 2 • Episode 34

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How is consumer psychology reshaping the beverage industry? In this episode, we sit down with Hunter Thurman, CEO of Alpha-Diver, to discuss the findings of their BEV50 report. We’ll explore how psychological insights drive the success of the top 50 beverage brands in the U.S. and how factors like impulse buying and social endorsement influence what ends up in our shopping carts. Hunter also shares how Alpha Diver’s data sheds light on emerging trends, offering a fresh look at the evolving beverage market.

We’ll dive into how post-COVID shifts, like the rise of the YOLO mindset, are affecting consumer behavior, especially in the food and beverage sectors. We’ll talk about how emotional stress has boosted categories like salty snacks, quick service restaurants, and beverages, and why some brands are thriving while others fall behind. We’ll also compare current trends to pre-COVID years and examine how social media amplifies emotional responses, affecting consumer choices.

Curious about why healthier carbonated drinks like Olipop and Poppy are gaining traction against giants like Coca-Cola and Pepsi? We break down the consumer behavior driving this shift, focusing on sensory and experiential value over health benefits. Despite their higher price points, these new brands are making an impact in ways traditional ones are not. We’ll also discuss the challenges these brands face in turning interest into routine purchases, the concept of "loyalty conditioning," and the growing trend of non-alcoholic beverages. Tune in for insights that could change how you view the beverage industry.

Hunter Thurman:

If 10 new ones come on the scene, I think eight of them will be way too rational in their positioning, meaning they will misunderstand that the reason people are buying this is because of the functional benefits, the digestive benefits, the calorie counts, etc. I think the minority of them will recognize that maybe I'm spilling all the tea with this report and I'll make my listeners don't listen to this next part. Actually, I'm going to ruin my own prognostication.

Mike Giambattista:

Hunter Thurman is CEO of Alpha Diver. A diver and Hunter and his team have been colleagues and supporters and suppliers of content that we've been publishing here at the customer for the past few years. It's always insightful and maybe more than that, it's always just really, really interesting the approach that you guys take. But Hunter and I have had a handful of these conversations. This topic today is centered around their most recent report, which is called the BEV50, which looks at the top 50 beverage brands in the US, what's happening and why there, as it relates to consumer insights and trends. So that's an overview that I would be better off leaving in your hands. But, hunter, thanks for joining me today.

Hunter Thurman:

Yeah, always great to be here.

Mike Giambattista:

Thank you, Mike so just for context, maybe give us a little introduction as to what AlphaDiver is and does, and then we can dive right into this report.

Hunter Thurman:

Yeah, absolutely so. We are an insights and strategy firm. So for the past roughly 14 years we've been using psychology to understand why people do what they do, and at the core of what we do is create and maintain this database that we call the psych pulse. Basically, we're able to measure consumer psychology at large scale, at the population scale, and that's what fuels this database that shows us trends over time, it explains why people are engaging with the marketplace and certain categories and certain brands and the way they are, and, I think, maybe most importantly, it predicts what's coming down the pike. It gives us some foresight on where consumer taste and sentiment are headed. And so, of course, we use this database on a daily basis, and over the past few years we've started generating these reports.

Hunter Thurman:

The BEV50 we'll talk about today. Earlier this year we talked about the SNAC50. We do the QUIC50, which is QSR, and we do the TIPSI50, which is beverage alcohol. So those are the spaces where we draw from the database, but we're able to draw across a number of categories. Categories like beverage are so interesting because they're so discretionary. Consumer behavior and consumer choice can be so fickle and so elusive. I find this a very interesting topic to aim this data and aim this understanding at.

Mike Giambattista:

So you've been doing this for a couple of years, you're starting to gain a decent longitudinal view of how people are changing year to year and over a longer period of time, which is which is, as we said before we hit the record button, but instructive. But I thought I thought I'd just cherry pick a couple of these statistics and have you talk us through, because, uh, some of them on the surface are kind of like, yeah, I kind of expected that, what's news about that one? But then you peel back the layers a couple of levels and it becomes pretty eye-opening. So let's just start with. Let's see. I think number one was that impulse, as one of the primary psychological drivers, is still the dominant factor in making purchase decisions in the beverage category. Am I correct there?

Hunter Thurman:

Yeah, yeah, so you mentioned you know we've been at it a few years. We're fortunate that our database precedes or predates COVID. So essentially what we've done is we've looked at 2018 and 2019 as kind of a baseline. Then a lot of our work over the past several years has been 2020, since tracking every quarter, since what you find in psychology is that there are these really predictable drivers of behavior. People may be rational, which is often what we think.

Hunter Thurman:

We think we think we make rational, informed, comparative decisions, but more often than not, there are these other three. One is around social endorsement what would people like me choose? Another is around discovery, discovering and exploring. And then the fourth one, the one you mentioned we call impulse, and it's not necessarily impulse buys in the most conventional sense. It's really more about what will make me feel or look good in the immediate term. So it does certainly correlate with something that would be an impulse buy, but what we've seen is that since call it COVID, so really kind of 2022 to present, this drive of just do what feels good in the moment continues to grow.

Hunter Thurman:

It's not to say that it's the only you know decision factor people use, but all of the pressure that has been put on us. You know, we consumers, we people over the past, you know, many years, is creating this almost like this kind of YOLO mindset of you know look, I don't know what's around the corner, I don't know what's coming tomorrow, I'm just going to do what feels good. And categories like salty snacks, like QSR, like beverage, have now you know, if you look at 21 and 22 and 23, had some pretty epic success on the back of that, as you pointed out now. Now pricing pressure in the first half of this year is creating some kind of blips, but, by and large, consumers have been having this very emotional response to all the goings on of the past few years and reaching for a drink or a snack that just feels good right now is very core to human behavior and we see it a lot in our data.

Mike Giambattista:

Can you compare that to the pre-COVID years as to what that looked like? You know and I'm thinking of that, I'm sure wrongly, but let's call those the normal years.

Hunter Thurman:

Yeah, exactly Like back in the olden days, right, yeah, you know. So, when all this started and all the everyone started pondering like, well, covid, and what's going to happen? You know how's this? You know, remember when everybody was talking about the new normal and it was like the big cliche, I was a major skeptic, because I was.

Hunter Thurman:

My point of view was there are always stressors, you know. So, like I remember being a kid in the eighties and we would do like Soviet bomb drills where we got under our desk at the elementary school, like when the, you know, when the Soviets attacked we would get under our desk line of defense from the, you know, the atomic bomb. So the point is that was stressful, I mean if you were alive, you know, during the Vietnam war. That was stressful If you were, you know, during world war II, world war I, I mean if you were alive, in the great depression. It's like there's always and I'm talking kind of us history here there's always pressures and stressors. My point of view in like 20 and 21 was this is you know our current iteration of stressors and it's going to remain the same. And there are these cycles that we see that predate COVID.

Hunter Thurman:

What's happened since and I'm now a believer in, as I look at the data, you know and I think that you know social media it has been a big catalyst of it, is it?

Hunter Thurman:

People really have had an outsized response in the past few years? And you know we haven't been, we haven't been tracking data since before 2018. But when we look at what's going on now compared to then, people are having a much more emotional response to it. There's this line, you know, if you picture a graph and you see in our report, there's this line that represents this impulse, this feel do what feels good. It's continued to grow.

Hunter Thurman:

We've had to stretch the scale with every sequential report because it continues to increase. So the last few years, compared to the normal times, as you put it, they have had a tangible and real impact on people in an emotional way. And even things like pricing I mean all this discussion around pricing and inflationary pricing it's being talked about so kind of black and white Spending power, dollars in versus dollars out yes, that's true, but the reaction people are having is far more emotional. And even in the BEV50, and I think we're going to talk about some of it there's a very irrational response that people have and we're seeing that sort of irrationality continue to be a big factor in consumer behavior.

Mike Giambattista:

Well, we'll see some of the brands that are actually leveraging that disparity, but it'll beg the question and we'll get to that in a little bit. But of these other ones, why aren't they seeing that as an opportunity? Because there certainly is one with those kinds of gaps out there. Yes, the other thing that's worth talking about here is, well, a lot of it, frankly, but how these brand rankings have shifted, because they have pretty significantly and I don't know if we're going to have time in this conversation to go through it, but you know, when you're talking about some of the drivers, for instance, this impulse factor. Why is that? Because whatever those factors are probably translate beyond just the beverage world, and you could probably find analogs over in the snack world, or maybe even in the tipsy world, as you call it.

Mike Giambattista:

So, that's probably another conversation.

Hunter Thurman:

Yeah, I mean what you find is that, in general, the brands that are positioned and are activating and doing their marketing in a way that aligns with the predominant macro force, those are doing better. So I mean we looked at two years of sales data, two years of household penetration and two years of just sales volume, and the brand in beverage, in fact, and the brands that consumers think will help me feel good now. So you could argue that everything in the report is, quote an impulse buy.

Hunter Thurman:

You know, it's a bottle of liquid that you can consume, that has some benefit or whatever that is. So that's kind of a level playing field From a consumer perception standpoint. However, the ones that people think, oh, this will do the job I'm looking for, this will help me feel good or look good in the immediate term, those brands grew in both penetration and volume over a two-year longitudinal period. And the brands that they thought, aligned with something else like this helps me bond with my family or this gives me some new experience those either stagnated or declined. So I mean the results are real. These macro forces we sometimes call it the zeitgeist, you know the prevailing kind of emotional weather. They're very real in driving preference and in something, as we said a minute ago, that's so fickle as beverage, it provides a really nice foundation by which to understand what's actually going on.

Mike Giambattista:

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Hunter Thurman:

Olipop and poppy have had this meteoric growth. It's just in the past year, like a thousand percent growth, you know, depending on what metric you use, but just like meteoric growth, you know. And what's interesting is everybody said, oh well, carbonated soft drinks like Coke and Pepsi have been declining for the last 30 years steadily. These are healthier alternatives that are replacing them. But what we see in the data is that the why, the reason people are choosing particularly poppy, which edges out olipop a little bit in our metrics, but the both of them, the reason why people are choosing it is not rational, it's not. Oh, this has only 54 calories and this has prebiotics and this promotes gut health. It's actually totally experiential, it's know.

Hunter Thurman:

I was looking at an image of their like their cream soda and it shows this big, beautiful cream soda with foam kind of dripping down and lens, flares kind of flashing off the can. It's all about the experience. That's really what's driving so much interest in those brands and what we see when we kind of array the data is that the brands that people think are most associated with that really sensory. Either that impulse of like feels good now, or that experience exploration, you know, discover a new sensory experience. Those brands average in our report 13 cents an ounce. So at Walmart with roughly like pack sizes, those are roughly 13 cents an ounce. So, um, at Walmart with roughly like pack sizes, those are roughly 13 cents an ounce.

Mike Giambattista:

And just for reference, that's, that would be the higher end of the scale.

Hunter Thurman:

For sure. Yeah, cause brands like Coke and Pepsi and Sprite um, you know the big, established brands that are much more mature. They're 8 cents an ounce, so they're 61% less. Okay, like kind of quote. Normal soft drinks are 61% less and yet consumers are more concerned about the price of those than they are Olipop and Poppy the 13 cents an ounce.

Hunter Thurman:

So just to step back, I talked about that irrationality. The brands that people think are giving them this really cool sensory experience are more expensive. I mean, olipop and Poppy are like $3.49, $3.79 a can. A Coke is $0.80 a can. So surely everybody's freaking about the price of Olipop, right? No, they're not concerned about the price because the benefit, the value that they attribute to it, they perceive as kind of worth it. The brands like Coke that you drink every day and consume on a weekly basis for those that consume it, they're very routinized, they're part of everyday life those brands are experiencing much more price pressure. So even though they're 61% cheaper, they're under more price pressure and it just really demonstrates that kind of irrationality that I mentioned that I think a lot of manufacturers outside of beverage as well you talked about snacks and fast food and everything they're going to get in trouble with it, because if you're running Coke and you start just dropping the price, it's not going to help. It's not. What are you going to be? 75% less than.

Mike Giambattista:

Olipop, that's not the math.

Hunter Thurman:

Yeah, that's not the perceptual math that consumers are doing.

Mike Giambattista:

So I would love to talk about this a little bit further. My's a my words, not yours. But Coke and Pepsi appear to have been commoditized in terms of price. You kind of know what they, what you're getting. You know roughly what it costs. That's always going to be the case with those deeply established brands. Do you see, with newer products that come into this category, that there's a bump and that disparity exists between price and perceived value just because they're new and they're not commoditized? Or is there something different that Poppy and Olipop are doing to kind of achieve that or just take advantage of that disparity?

Hunter Thurman:

Yeah, yeah, well, I mean, I do, I, you know, I. I totally take your point about commoditization, you know, I think what we see is, you know, rather than commoditization, I'd call it routinization. And so what you find, I mean it's sort of like if you drive your car to work, if you commute to work every day, you really know the price of gas. If you drive your kid's soccer game on the weekends and that's it, you're like I don't know, I guess it's more expensive, it doesn't hurt as much. So what you find is those brands. It's not so much that they're commoditized or that people are bored with Coke and Pepsi, it's that it's much more routinized. There's much more. We talk about these concepts of interest and action. There's very high action. People consume them a lot. They're part of everyday life. They're much more adopted, you know, and routine, and that then leads to, you know, when it's something that's more frequent and more sort of common. You know, kind of along the lines of what you're talking about. You notice it. You know we've got much more data as humans about what it should cost. It's been around forever. So I think commoditization sort of oversimplifies it. But yes, they're in a different boat than Olipop and Poppy. You know Poppy comes out.

Hunter Thurman:

I remember the first one I bought. I was in a convenience store here in Cincinnati called UDF and I've been hearing about it and I saw it and I grabbed it and went to pay and the guy's like, you know, 389. I was like I almost put it back. I mean it was like one can. I mean literally it was the closest I've come to. If it weren't for the you know the shame of it, I would have been like I don't want to try this now. But when I tried it it was all about. I wasn't like, oh, how many grams of inulin fiber does this have? Read the label, it was like, ooh, what's this going to be like? What's the sensory experience going to be like? And when you're in that mode it's totally different. Like that experience for me was worth 389.

Mike Giambattista:

So at some point you crossed the emotional threshold, if you will, from being like, ah, I'm going to put this back here and at the risk of looking like a chump versus like paying for it and then having some expectation that this would be a really worthwhile experience. So, which begs the question, was it a worthwhile experience?

Hunter Thurman:

It absolutely so. I had very high interest in it. My interest in it got me over that price hump. It was a worthwhile experience in that I had the experience. I haven't been back. I have not routinized, I have not moved into more action for Olipop and Poppy. You know, perhaps because you know I had such sort of a high bar of like what's this going to be like? Because I had such sort of a high bar of like what's this going to be like? And it was like a reasonably enjoyable beverage experience. It did not move me down towards that action, that routinization space.

Hunter Thurman:

So for brands like that and we see a whole bevy of them I mentioned, they're the ones that people are not worried so much about the price. They're very interested. There's this whole cluster of them that people are very interested in. It's a tough spot to get out of. We see in beverage we do all these reports and the Bev 50 report is the only one where we have roughly a quarter of the list that's rotational. I mean the Snack 50, the QSR 50, it's very hard to get on or off the list. It's rare that a brand comes or goes Beverage. Every year there's 10 or 12 new ones. Next year there'll be 10 or 12 new Olipop and Poppy competitors that'll come on the scene. Most will be gone again for 2026. And so I wouldn't say it's easy to get up in that space. But brands like Prime can catapult up into that high interest space where everybody's trying, I mean sure, okay, I'll try it once for $389, but to get into that routine where Coke and Pepsi and the like are, it's really difficult.

Mike Giambattista:

Right. Do you expect that next year's entrance into this category, the new Olipops and Poppies, will experience that same kind of price value trend? Uh, gap, yeah, I mean yeah, I mean.

Hunter Thurman:

So you know, come on the scene. I think eight of them will be way too rational in their positioning, meaning they will misunderstand that the reason people are buying this is because of the, the functional benefits, the digestive benefits, the calorie counts, et cetera. I think the minority of them will recognize and maybe I'm spilling all the tea with this report and I'll make my listeners, don't listen to this next part, I'm going to ruin my own prognostication, but I think the ones that succeed will be the ones that recognize that it's really all about.

Hunter Thurman:

You know this, this sensory experience. You know, then, with that, when you're in that really high interest, the way you get someone to drink another poppy like if using me as an example, the way you get me to drink that second poppy or Olipop, is a very different set of marketing activities than trying to get me to drink one more Coke in a given week. It's interesting. I mean they're both potentially literal competitors and a lot has been made in the press about is Olipop eating into Coke and Pepsi, et cetera. But the math I'm doing, the decision criteria, couldn't be more different. I mean, they're like totally different sets of considerations I'm making. And so, again, the brands that managed to get past that high interest kind of you know, initial experience phase will be the ones that activate and go to market in a better way and understand that what got you there, you know what got you started won't get you to the that kind of promised land, as we call it, of more routinization.

Mike Giambattista:

And it is. It's an entirely different psychology behind deciding to make that you know to become a frequent purchaser of, you know to bond yourself with a brand that's new and more expensive our um principal or director of research, siggy Hale, who's a PhD neuroscientist.

Hunter Thurman:

He he calls it loyalty conditioning. He's like you know, those brands get up there poppy and et cetera and you can get trial, but but loyalty conditioning um is a very different set. It's a very different consideration that people make Um and that's not something Coke should be worrying about. It's something that Olipop should be worrying about.

Mike Giambattista:

Interesting and it'd be fun to unpack that in your next Tipsy 50 report because so many of those brands well, I'm guessing here they probably shift a lot more quickly than some of these CPG, snack and bigger beverage brands. So there's a lot in there that people are probably trying and deciding whether or not to bond with them, if they even can.

Hunter Thurman:

Yeah, yeah, that's right. It's a lot of similar dynamics in the BevAlc space, for sure.

Mike Giambattista:

Can we talk a little bit about without getting too deeply in the weeds and both you and I like getting deeply in the weeds, so we'll work this out here somehow. According to price. Let me read off the title. Consumers particularly associate these 20 brands with the price barrier In the subhead, brands most associated with price barrier indices and over on the far left, with a giant bar in the chart, is Frappuccino. Yeah, so this is again. We're not saying what are the most expensive. A giant bar on the chart is Frappuccino.

Hunter Thurman:

Yeah, yeah. So this is, you know, again, we're not saying what are the most expensive, we're saying what are the ones that, when consumers are thinking of buying it, price is the biggest barrier for them. And Frappuccino gets the dubious honor of being Starbucks. Frappa is the dubious honor of being number one, followed by Coke, pepsi, gatorade, sprite, some of the tea brands, and that's not to say we covered this. I mean, the average price of these brands is $0.08 an ounce. You go to the next or a following slide, the ones that they're least worried about, and those are brands Poppy, olipop, at the, you know $2.79 per can that I mentioned.

Hunter Thurman:

But like Electrolit, like Electrolit is, you know, a newer isotonic, you know sports drink, it's very similar to Gatorade, profile-wise, price-wise, it's competing with Gatorade, very literally. Gatorade, people are worried about the price. Electrolit, they're less worried about the price, and it's because Gatorade is out, you know, way out there, in that highly routinized, everyday, daily driver analogy that I use. Whereas Electrolit is newer and it's enjoying and benefiting from some of that, from some of that and and it. You know my, my coaching, especially in the, in the snack world, has been, you know, do not look at this, this pricing, as a zero sum, because you know these brands.

Hunter Thurman:

so just take electrolyte and Gatorade. I mean, it's already perceived as being less expensive, so one or the other slashing the price really may not drive the behavior that they slashing the price really may not drive the behavior that they think it will.

Mike Giambattista:

To reiterate to folks listening to this podcast we're going to have a link to all kinds of things in the transcript here, and I want to be cognizant that we don't just give everything away, because it's really interesting and really easy to kind of talk through. But having spoken with Hunter and his team over the past couple of years, this is literally the tip of the iceberg. There's so much more here, so I encourage you to reach out to them. One other thing I wanted to just touch on here was a new category that you're tracking this year which I find really interesting, and that is the non-alcoholic beer. I'm not a consumer of these things, but I happen to be aware of a handful of people who are passionate. I can't say they're passionate about non-alcoholic beer, but they're committed to it, so that's going to be an interesting one to track.

Hunter Thurman:

Yeah, the whole NA alcohol-free thing has been so interesting. I mean, of course we're looking at it within the tipsy 50 and we're looking at, like, the HD9 and cannabis beverages, and you know that's the newest thing. You talked about the fickle. You know the fickle nature of Bev Alk. Well, now there's like mushroom beverages and I think it's HD9, the cannabis and all that. I mean that's a whole other kind of wild west that's existing in that space. And, yeah, the NA beer.

Hunter Thurman:

There's been some theories and some hypotheses that they're interacting more with, like CSDs, like you know, if you imagine somebody who's interested in the, you know, the sober movement or not alcohol free or whatever you want to call it, which is sort of widely discussed and sort of, you know, sensationalized in the media. I mean, if you, depending on what articles you read, it's like, oh, younger consumers, you know, 21 plus, don't want to drink alcohol, I'm not sure that's the case, but certainly there's been interest in some of these categories. So somebody were in an, you know, at an occasion, a party or whatever, and they were going to drink an NA beer. Is that a replacement for a Coke or a tea? You know iced tea has been growing really dramatically. So we included that in this year's report just to start to get some of those interactions you know, just to understand.

Hunter Thurman:

Olipop has been interesting why dr pepper and pepsi are having the results they are. We've dug into there's been a lot around hydration so that that na beer thing is just sort of, you know, dropped to the backdrop a little bit. They're looking at it initially there's nothing like you know, there's no like smoking gun, like oh it's, you know right, like it's all its volume is coming from some brand or something. But it is something that I'm interested to look at and, frankly, the Bev Alk and the regular Bev, the non Bev Alk that we look at, it's funny how they've been interacting more and more and more as we've looked at this.

Mike Giambattista:

Yeah, that's an interesting statement right there. I mean side note that if you look at the alcohol industry overall especially in beers, it's, and a little bit in wines athletic brewing, one of the leading non-alcoholic beer brands, is almost the singular bright spot in the in the beer world right now, and um and there's and I can't say the same as strongly for the wine world, but it's uh, but low alcohol and non-alcoholic wines and their analogs are trending nicely too, so that one's gonna be an interesting one to watch yeah, it's a it's.

Hunter Thurman:

it's a whole interesting one to watch. Yeah, it's a whole other topic. Again, it's early stage so we've not dug as much into it, but when you think about the perceptual benefits and all the things I've been talking about, I think a lot of it has been that kind of experience. What will this be like? What is any beer or wine like? Obviously, it doesn't have the alcohol effects, but it'll be interesting to see the degree to which consumers adopt it and what they're comparing it to, what it's replacing and why they're engaged with it. That's something that we'll probably dig deeper to, even within these data, as we go into the BevAlc 50.

Mike Giambattista:

Well, we'll look forward to that report. Again, I want to encourage everybody who is listening to this. You'll see on the customer you'll see the episode of this version of Customer Land, but you'll also see all the links to the reports, to the synopses, to the highlights, and Hunter and his team have given us permission to post a handful of those tables so you get a sense of how deeply Alpha Diver really thinks about these things. So with that, Hunter, thanks a million. I really enjoy these conversations. They're always insightful and they're always interesting and I'm looking forward to the next few.

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