In the mid-2000s, functional beverages were one of the industry’s fastest-growing segments, with sales sharply rising between 2004-2008. Although the sector’s recent growth has diminished, it still managed a compound annual growth rate of 5.5% between 2006-2010, according to Packaged Facts.
The New York City researcher considers functional beverages to include energy drinks; sports drinks and functional waters; ready-to-drink (RTD) tea and coffee; and yogurt drinks and smoothies. More recently, Packaged Facts says functional beverages posted sales of $23.4 billion in 2010, well ahead of its 2006 annual sales of $19 billion.
Another firm studying the market is Mintel, which breaks down the functional beverages category into various segments. Mintel reports that in 2010, fortified waters rang up $762 million in annual sales, an 8% dip from 2008. Even so, researchers noted category sales have grown as much 267% since 2004. Mintel forecasts the functional beverages category, as a whole, will grow 19% in current prices (7% when adjusted for inflation) through 2014.
“The sales downturn, which hit enhanced water harder than any other segment, was triggered by a convergence of negative factors, including growing concern over the high sugar content of many functional beverages; frugality motivated by the economy; and a flood of new product activity that peaked in 2008 and has made choice in the beverage aisle even more complex, just as more consumers are opting to cut back,” Mintel said in its report, “Functional Beverages: US May 2010.”
What categories are top performers? One is certainly energy drinks, according to Euromonitor International. The firm suggests that energy drinks account for more than $7 billion in annual global sales.
“[The energy drink segment] has the highest growth potential and the most acceptance,” says Claire Moulin, department research analyst at Euromonitor. “In addition, it continues to attract new consumers, most recently the older generations who are looking to replace coffee with something more appealing.”
To make energy drinks more appealing, manufacturers have turned to beneficial ingredient additions. Mr. Pink Beverages’ Ginseng Drinks promise to support an active and healthy lifestyle. Each bottle contains 100% of the daily value of vitamins B3, B5, B6 and B12, as well as 1,000mg of ginseng. Matrix HealthWorks, meanwhile, has turned to medicinal mushrooms for its NRGmatrix. Available online and through select retailers in the U.S. and Europe, the formula blends 100% organic medicinal mushrooms: cordyceps, reishi, antrodia, Agaricus blazei, maitake, shiitake and king trumpet. The citrus-flavored powder is naturally sweetened with stevia and monk fruit. Similarly, Eruption USA’s Effervescent Energy promises to be a natural energy powder supplement for any beverage. Found in Lava Lime and Magmaberry flavors, the line features CoQ10, vitamin C, and B vitamins.
“Energy drinks have been the focus of much industry discussion in recent years,” says Don Montuori, publisher of Packaged Facts. “That’s partly because of the controversy surrounding energy drink formulations as a result of the ‘bad boy’ image deliberately and very profitably cultivated by Red Bull, and then by ‘me-too’ energy drink marketers in its wake, in an effort to capture the attention of a youthful target market that is moving into prime consumption years. Mostly, however, the attention to the energy drink segment is because of the sales growth energy drinks and energy shots continue to deliver.”
Sloan Trends estimates that 51% of all consumers turn to functional beverages for an energy boost, an opinion that runs across demographic bases, led by 18-24-year-olds (representing 57% of category users). Curiously, that energy boost is not coming in the traditional caffeinated form. In fact, only 24% of those in Sloan Trends’ survey sought caffeine in their functional beverage choices. Instead, consumers expressed interest, respectively, in “antioxidants” (51%) and “green tea extract” (37%).
Time for Tea
New Nutrition Business (NNB) believes the RTD tea market has strong U.S. sales potential. Say NNB researchers: “The $1.8 billion RTD tea business has become an important area of opportunity in the U.S. Tea brands have connected to the health trend by improving their nutritional profile significantly in recent years.”
Hain Celestial Seasonings says its Kombucha Energy Shots feature a proprietary blend of energizing ingredients, including caffeine from guarana, ginseng and B vitamins. Similarly, Reed’s Inc. now offers Culture Club Kombucha in four ginger-based varieties: Goji Ginger, Cranberry Ginger, Lemon Raspberry Ginger and Hibiscus Grapefruit Ginger.
While refrigerated teas account for a fairly small $440 million in annual sales, NNB notes the sector’s 9% annual growth rate is “propelling the growth of the whole market.”
However, the segment is not without its challenges. Entries from both Campbell’s Soup and Pom Wonderful have struggled. However, the success of PepsiCo’s Trop50 was as simple as blending tea with other beverages. Trop50 has mixed lychee juice with white and green tea; peach with white tea; and raspberry with green tea. Each contains 35-45 calories per 8oz serving, provides a day’s supply of vitamin C and is reminiscent of efforts behind recent success in coconut water launches. NNB says U.S. sales of coconut water doubled in 2011 and should hit $110 million in 2012, and “according to market research, the demand is likely to continue.”
Coconut water appears to be following a route similar to that of tea, namely blending it with other beverages. Coca-Cola’s Odwalla brand added a 150-calorie Smoothie Refresher in Mango Lime Twist, Mixed Berry Shuffle and Pear Berry Jive varieties. Each provides 100% of the daily value of vitamin C and is formulated with coconut water.
A brand known for its teas has also entered the coconut water fray. AriZona Beverage Co. says its CocoZona boasts 100% pure coconut water from “young, green, Indonesian coconuts.” To appeal to consumers seeking a functional beverage, it features five essential electrolytes: calcium, magnesium, phosphorous, potassium and sodium.
The Republic of Tea attempts to merge tea with energy drinks in its new Be Active Teas collection. The line includes five organic, green rooibos-based teas: Get Restored, Get Hydrated, Get Limber, Get Burning and Get Active. Each is blended with organic green rooibos which, due to a flash-fermentation process, purportedly retains more of its antioxidant value. Each blend aims for a specific result, from energy and flexibility to metabolism, hydration and quick recovery from a workout. The whole range is all-natural, naturally caffeine-free and certified gluten-free.
Even Starbucks has joined the energy drink market with a line of natural beverages known as Refreshers. The carbonated beverages are high in antioxidants and are found in such fruit flavors as raspberry pomegranate, orange melon and strawberry lemonade. True to the company’s heritage, the beverages contain unroasted green coffee extract for an energy boost.
Functioning with Coffee
The potential for coffee would appear nearly limitless, judging by research appearing in the May 2012 issue of Food Research International. One article titled, “Functional Properties of Coffee and Coffee By-products,” notes coffee’s benefits have traditionally been attributed to caffeine. However, the authors explain, “It is now known that other compounds also contribute to the valuable properties of this beverage…by-products of coffee fruit and bean processing can be considered as potential functional ingredients for the food industry.” The authors note that the roasted coffee silverskin is a dietary fiber-rich ingredient and also is known for its antioxidative properties.
Bolthouse Farms has added a range of functional beverages, including smoothies and coffee blends. The company’s Orange + Carrot Blend promises 300% more vitamin A than traditional orange juice, and its Protein Plus Blended Coffee boasts 30g of protein and five B vitamins per 15oz serving. Its two new breakfast replacement drinks, a Strawberry Parfait Breakfast Smoothie and a Peach Parfait Breakfast Smoothie, each provide 10g of protein, 2.5g of fiber and 15% of the required DV of calcium.
Coffee is front and center in BYB Brands Inc.’s Bean & Body Coffee line. It recently added three new flavors (vegan, horchata and coconut) and contains antioxidants for immunity and to protect against free radicals. In fact, the company notes each 8oz serving contains twice the antioxidant levels of green tea.
Coffee fruit is central to Bai, a beverage from the company of the same name. The line promises a host of antioxidants and features such flavors as Mango Kauai, Tanzania Strawberry, Jamaica Blueberry and Kenya Peach. Yerba maté, meanwhile, is taking advantage of its reputation: that it is as “strong as coffee, has the health benefits of tea and the euphoria of chocolate,” and can be found in a sparkling beverage from Guayaki.
What else do consumers want? Elizabeth Sloan, president of Sloan Trends, suggests calcium is the most popular fortification in functional beverages. Admittedly, she includes milk in this group, but that is partially because consumers regard milk as a functional beverage.
Sloan says 50% of consumers are looking for the generic “added vitamins,” while 56% of consumers participating in a survey said they are looking for a beverage that provides their daily requirements of vitamins and minerals. While functional beverages might well seem like a segment more of interest to younger demographics, 70% of those between 55-64 hope to get their day’s worth of vitamins and minerals from their beverages. For that matter, 75% of consumers regard getting a serving of fruits and vegetables from functional beverages as “very important.”
Consumers looking to functional beverages for the relief (or prevention) of health conditions may well have to brace for ingredients seldom before found in beverages. The January 2012 issue of the Journal of Functional Foods explores the “Potential Use of Olive Mill Wastewater in the Preparation of Functional Beverages.”
The researchers explain, “The biological activities of phenolic compounds from olive mill wastewater (OMW) have extensively been studied and [have] shown a spectrum of highly interesting bioactivities...[B]ased on the available studies, phenolic compounds of OMW are highly bioavailable and safe. Owing to the numerous reported biological activities of OMW, the inclusion of OMW phenolic extract in beverage preparations may have a significant impact on the health of the population through the reduction in incidence of cardiovascular and chronic degenerative diseases.”
As such, the future of functional beverages may well prove even more interesting and diverse than its past.