Article: Benefiting Beverages -- August 2009
Market analysts have long foretold of how consumers would move away from “low-in” foods toward items with a positive health focus, with added nutrients and functional elements. In spite of a troubled economy, the market for functional beverages continues to grow. While energy beverages rife with caffeine, taurine and other energy-boosting benefits target young consumers, the functional beverage market as a whole is much more diverse, with antioxidants, vitamins and minerals powering just a portion of the category.
For example, heart health was the impetus behind Tupperware’s Simple Indulgence Madagascar Spice Green Tea. It incorporates flavonoids claimed to help support a healthy cardiovascular system. While similar functional drinks are emerging onto the market, sports drinks and smoothies continue to lead the crowded market.
In fact, BCC Research forecasts the global market for nutraceuticals (foods, beverages and supplements) will reach $176.7 billion in 2013, for a compound annual growth rate (CAGR) of 7.4%. While foods will enjoy a CAGR of 6.9% (to reach $56.7 billion), and supplements will grow 3.8% (to nearly $48.8 billion), BCC Research predicts nutraceutical beverages will be the fastest-growing segment by far. The segment will have the largest share of the functional market by 2013: $71.3 billion, a 10.8% CAGR over its roughly $42.8 billion in sales registered in 2008. BCC Research defines nutraceuticals as those items fortified “with bioactive ingredients including fiber, probiotics, protein and peptides, omega, phyto-chemicals, and vitamins and minerals.”
In the increasingly competitive world of functional beverages, the mainstay remains sports drinks, long the darlings of this segment and proven to be one of the bright spots in the beverage category as a whole. For that matter, with the decline in popularity of carbonated soft drinks, manufacturers of those products have turned to functional beverages. Coca-Cola, PepsiCo and Dr Pepper 7Up have developed or acquired leading functional beverage brands to diversify their portfolios, with probably the most notable being PepsiCo’s acquisition of the sports drink Gatorade some years ago. In fact, sports drinks command a sizable market share within the category, and the segment is almost completely dominated by the Gatorade brand. However, while sports drinks have long been the best-selling functional beverages on the market, energy beverages have emerged as a strong competitor. For that matter, even the somewhat vilified carbonated soft drink has seen some functional innovation, as in the recent launch of Cherry 7Up with Antioxidants, with added vitamin E.
Such a hybrid drink is one of the areas to watch in this category. According to New Nutrition Business, hybrid beverages represent a significant trend, blurring the boundaries of the segment to offer more than one benefit, such as merging the benefits of green tea with fruit flavors or the hydrating qualities of soft drinks with functional or sensory benefits. Another such trend the research group has seen is the encouragement of “daily dosing.”
Mintel Group, however, finds the market for daily-dosage functional drinks has neared maturity, but believes opportunity may exist in larger formats. “Consumers may well look more toward longer, larger drinks that have thirst-quenching properties, in conjunction with health benefits. Likewise, multiple-serve formats are expected to become more popular in many markets, with consumers looking to regulate or select their own functional drink size from large cartons or bottles,” Mintel has found. Consumers likely would react favorably to the improved price-per-quantity found in the larger containers.
Functional beverages also may continue emerging in the foodservice arena. Jamba Juice may not be the rising star it once was, but with an improved economy, it could well see renewed interest, particularly if new efforts into probiotic-enhanced yogurts prove successful. After all, digestive health claims are well-established in consumers’ minds and have clinical research support.
Gut health and probiotic drinks continue to be a focal point for manufacturers of functional beverages, and the digestive health trend is moving beyond its initial dairy drink focus and into soy drinks, smoothies, fruit juices and energy drinks. Interestingly, these tend to have benefits beyond merely gut health and often claim to boost natural defenses or immunity.
While functional beverages with gut health claims do have research to support them, a number of nutraceutical drinks on the market have been formulated with ingredients with less substantiated research in support of their health claims, ranging from mood-altering natural and herbal extracts to free radical-fighting possibilities from antioxidants.
The latter, in fact, are particularly popular among manufacturers, though the claimed benefits are almost as diverse as the products themselves. MD Drinks of Canada claims its Function Carambola Punch Brainiac Beverage will boost memory and mental sharpness, thanks to “an antioxidant combo delivered directly to the brain.” Brainiac joins Urban Detox (for hangover relief) and House Call (a cold remedy, thanks to vitamins A, B-complex, C and E, and such antioxidants as N-acetyl-cysteine) in the MD Drinks of Canada line.
Similar to Brainiac, Jones GABA Flavored Tea & Juice Drinks from Jones Soda likewise aimed at mental acuity, though this four-SKU range also attempted stress reduction. The product’s name stemmed from the active ingredient in the line: PharmaGABA, a natural gamma aminobutyric acid (GABA), which is widely available in functional beverages in Japan. The Jones range featured four varieties, grapefruit, lemon honey, nectarine and Fuji apple, with the grapefruit variant claimed to be a calm- and focus-inducing nutraceutical beverage.
Granted, many parents would simply prefer the calm that comes from knowing their children are healthy, and several functional beverages have sought to assuage any fears of that variety. Mintel finds the number of children’s functional drinks and dairy products has more than doubled over the last three years and is poised for another increase in 2009. Latin America and Asia Pacific have seen robust activity in this area, with Nestle introducing Chamyto Light probiotic drinks in Chile to improve the immune system and promote digestion. The same company also introduced Milo Smart Plus + in India. While these beverages must be mixed with milk or water, they have been specially formulated for school children, with a formulation boasting iron and iodine, which claims to help brain development and concentration.
Nestle has made similar efforts in the U.S., with Boost Kid Essentials debuting late last year. It includes 25 essential vitamins and minerals, 7g of protein and antioxidants from vitamins C and E. Most unique about the product is its delivery method for probiotics, which the child consumes via a patented straw.
Mayfield Dairy Farms, meanwhile, had children’s mental acuity in mind when launching Right Start Low Fat Milk earlier this year. The pasteurized chocolate milk features DHA omega-3 to support a healthy brain.
With increased worries about obesity and the impact of its related health problems, consumers naturally are looking for weight-loss measures that can be incorporated easily into their lifestyles. Functional beverages are striving to incorporate ingredients that will accelerate that goal. Thalgo Roquebrune sur Agens has released an infusion tea with green tea, orthosiphon and brown algae focus, said to “encourage elimination and weight loss,” while General Nutrition Corporation (GNC) has introduced Wellbeing™ be-Fulfilled™ Weight Management Shake for Women. This meal-replacement shake, the company claims, has been clinically proven to enhance weight loss and support a healthy metabolism and lean muscle. The “balanced ratios” of high-quality protein, vitamins, minerals and healthy fats also supposedly help the consumer feel fuller for longer.
Antioxidants are well-established in the functional beverage segment. For its Vitamin Enriched Water brand, Live Young Forever (LYF) blended vitamins and the EGCG antioxidant, said to stimulate thermogenesis, a process critical to weight loss and fat burning. At the same time, LYF claimed another trend: the beverage is all-natural, using fruits and vegetable juice for color.
Eye of the Beholder
Functional beverages have relatively recently begun claiming beauty benefits in the U.S., though it is a trend well-established elsewhere. Mintel found the number of new soft drinks and dairy products with such cosmeceutical goals more than doubled in 2008 around the world, with a strong base developing outside of the pioneering markets of Japan and other Asia Pacific areas. Danone and Nestle have made significant strides in cosmeceutical beverages, with the latter initiating a high-profile launch just last year.
Late 2008 saw Nestle unveil Glowelle in the U.S., exclusively in Neiman Marcus retail and online stores. Incorporating a proprietary blend of antioxidant vitamins (A, C and E), with real tea, phytonutrients, and botanical and fruit extracts, the product purportedly hydrates the inner and outer layers of the skin and, it is claimed, protects the skin from damage caused by free radicals and nourishes the skin from within. Unlike similar anti-aging products on the market, Glowelle was introduced with a fairly high price point: $7.00 per bottle or $5.70 per powder stick.
In contrast, Danone’s Essensis beauty yogurt drinks and yogurts are priced comparably to the company’s other functional brands. Unlike those other Danone entities, Essensis claims to nourish skin from the inside, courtesy of borage oil, green tea antioxidant, vitamin E and proprietary probiotic strains. Essensis is not yet available in the U.S., however, and, in fact, was pulled from France due to lean sales in 2008.
Another manufacturer working to develop a mainstream cosmeceutical beverage, however, is Coca-Cola. Its Fuze Beverage division developed a line to provide healthy skin and other benefits and launched Fuze Slenderize Empower Pomegranate Acai Berry last year, with 138mg of vitamin C for healthy skin and vision, polyphenols, antioxidants for heart health, chromium for “obtaining energy from food,” super citrimax for metabolism and L-carnitine amino acid for an energy boost.
Most innovation in this area, not surprisingly, remains concentrated in the Asia Pacific region, with noteworthy launches incorporating such ingredients as collagen, hyaluronic acid, co-enzyme Q10 and amino acids.
Shot in the Dark
While the U.S. may lag somewhat in that segment of functional beverages, the country is a leader in energy shots. In something of a smaller-is-better phenomenon, which until recently seemed relegated to electronics and other segments outside of food and beverages, smaller sized energy beverages known as energy shots have seen tremendous growth over the past two years, to reach $350 million in retail sales in the U.S. alone, according to New Nutrition Business. This sales growth comes despite the fact that these quick, convenient bursts of energy sell at a 400% premium over their bigger sized mainstream counterparts, such as Red Bull and Monster. While the latter pair and their ilk have targeted 14-25-year-old males almost exclusively, “this new category in energy drinks...has been developed to meet the needs of all those people who are not served by the current market,” notes Research and Markets. Leading the U.S. energy shot market, for example, is 5-Hour Energy, which aims to reach mothers, office workers and “any mature consumer struggling with a demanding day” seeking a sugar-free pick-me-up. While 5-Hour Energy holds a commanding 70% share of the U.S. market, Research and Markets believes there are still opportunities, if not in the U.S., then certainly in other countries, such as Australia, parts of South America and the Middle East.
Considering the persevering growth of the market despite the worldwide economic slowdown, functional beverages should continue to see fortunes improve as economies do. That said, functional dairy drinks, particularly dosage drinks, have neared maturity in a number of markets, but Mintel’s “Yogurt and Yogurt Drinks--U.S.” report finds consumers are still looking for beverages (and foods, for that matter) with some degree of health benefit. According to the November 2008 report, 44% of all yogurt users are looking for “active yogurt cultures.” With increased awareness of other healthy ingredients, new opportunities are bound to emerge.
In its report, “Functional Drinks: Global Industry Guide,” Datamonitor described the growth of functional beverages in recent years. “Market consumption volumes increased with a CAGR of 6.9% between 2004-2008, to reach a total of 9.9 billion liters in 2008.” What area was responsible for much of that growth? Datamonitor finds, “Energy drink sales proved the most lucrative for the global functional drinks market in 2008, generating total revenues of $12.7 billion, equivalent to 47.3% of the market’s overall value.”
Datamonitor likewise predicts a bright future for functional beverages. “The performance of the market is forecast to accelerate, with an anticipated CAGR of 10.4% for the five-year period 2008-2013, which is expected to drive the market to a value of $44.3 billion by the end of 2013.” pf
www.PreparedFoods.com -- Type “functional beverage” (with quotes) for a number of videos and articles on the subject from Prepared Foods’ archives
www.cbsnews.com/stories/2002/07/29/earlyshow/health/health_news/main516698.shtml -- CBS News report “Functional Beverages: Are They Worth Your Money?”
www.beverageinstitute.org/nutrition/functional_ingredients.shtml -- Functional ingredients for beverages from The Beverage Institute for Health and Wellness
www.Datamonitor.com -- Datamonitor
www.Mintel.com -- Mintel International