Top Five Reasons Why Kombucha Is More Than Hype.

Big-name retail chains such as Target, Costco and even Walmart have added kombucha to their product lines.
Grocery stores such as Sprouts and H-E-B, Wegmans are adding private-label kombucha to their shelves reflecting increasing demand.
Sports stadiums such as Safeco Field and Centurylink Field have added kombucha to their concessions.
Increased availability in bars and restaurants, alongside beer on tap.
Large multinational beverage conglomerates are buying (or consider buying) established kombucha brands.

Will The Global Kombucha Market Really Be Worth $1.8 Billion by 2020?

It’s a scene out of Shark Tank: “Where did you get that crazy valuation?”

I found a report from a few months back from the research firm, Micro Market Monitor, which suggests the Kombucha market will be worth $1.8 billion by 2020, after being worth half a billion in 2015. The math says that’s growth of 25% compounded annually.

Without a careful evaluation of its research methodology, I would be remiss in poking holes in the India-based research firm. However, after more than 20 years of working in the market research field, and seeing lots of over-hyped projections fall flat on their faces, I need to think aloud about the viability of such growth. I don’t necessarily think a number such as $1.8 billion is off –but it’s worth some thoughtful rigor.

For example: the U.S. soda (soda pop or pop depending on you region) is worth north of $97 billion, according to Statista. Figure 10x that for a global number. The Ready to Drink Tea (RDT) market is past $50 billion worldwide and growing at a slower rate that is projected for kombucha. What sort of clues can we gather from this data?

Soda and tea are driven largely by well-established global brands with bottling facilities in every nearly country. These companies such as Coca-Cola and Nestle have billions to spend on marketing. Both beverages have cracked every channel of distribution, often dominating shelf space in supermarkets and convenience stores. New competitors emerge—some with new angles such as less sugar or sparkling flavors—but fail to make a dent in the leaders’ revenues. The hope of many newcomer–which is true in any business–is that Coke, Pepsi, Nestle or Tropicana will snap up their brand in a lucrative buyout. And that’s a key: soda and (RDT) upstarts have a clear exit strategy the day they sell their first can or bottle.

Currently there are a number of kombucha brands that seemingly dominate the landscape and are featured on the shelves of such retailers as Whole Foods, Sprouts, and even Target. It’s likely these leaders will remain recognizable for a while but two—possible three—events could change the face of the market and prove the $1.8 billion market number wrong.

First relates to overcoming the scalable bottling issue. As many brewers have told me, the reason they cannot expand is that if they open a second plant in another state—one a few thousand miles away—they lose quality control. These same brewers are hesitant to work with copackers inexperienced with the temperamental nature of this fermented brew. Alongside that concern is the fact that kombucha (unlike soda or tea) needs to remain refrigerated for transport. Such a requirement adds cost for long-haul distribution.

Secondly, all it takes is for one buyout domino to fall for the industry to take off. When whatever research a company like Coca-Cola uses to determine precise market timing indicates go-time for a kombucha product launch, the Atlanta-based giant will probably buy an existing brand. After Coke, every major beverage brand (and some food brands) will start a feeding (or drinking) frenzy in the kombucha market.

In the wild card position is Starbucks. While I have not looked at every Starbucks, the ones I frequent don’t have kombucha among their cold bottled drinks. Adding a kombucha or two—or perhaps even having some on tap—will help obliterate a less-than $2 billion four-year forecast.