Functional & flavorful: How beverages are evolving to meet consumer demands

Functional beverages are outpacing traditional drinks as consumers demand products for different need states and day parts, a panel of experts shared during a Positive Nutrition Broadcast session (now available on demand here).

Gut health, hydration and mood-boosting functional drinks are leading the way in overall volume growth at a time when traditional beverage growth is declining, said Howard Telford, senior industry manager of soft drinks at Euromonitor International.

“If you would look at the inherently functional categories — so things like energy drinks, sports drinks, enhanced functional water, coconut water, powder mixes certainly as well — combined, that is really no more than about 15% of retail volume in North America, but that has been the main source of volume or consumption growth for the last five years,” Telford elaborated.

‘Walmart’s modern soda set is a precedent setter for the future of soda’

Functional beverages are fragmenting the traditional drinks category, giving life to new segments like Walmart’s “modern soda” set, explained Amy Taylor, president and CEO at US-based stevia-sweetened soda company Zevia. Zevia’s sodas are part of Walmart’s modern soda set.

“Walmart’s modern soda set is a precedent setter for the future of soda, and it is really the result of two years of insights based on exchanges between us and Walmart to start to define an emerging category or subcategory within carbonated soft drinks,” Taylor said.

This year, cold-pressed juice and wellness shot maker Suja Organic expanded into the functional carbonated drink category with its re-launch of Slicer, shared Jamie Berle, director of brand marketing at Suja Organic. Slice re-launched with three flavors — Grapefruit Spritz, Lemon Lime and Orange — and taps into consumer demands for the true-to-soda taste.

“Some of the competitors in the set do not necessarily approach innovation with that soda-first flavor experience as well as the level of carbonation is extremely challenging with some of these functional ingredients added. It is extremely challenging to mimic that traditional soda experience, and that is something that we are really focused on with Slice,” elaborated Berle.

Formulating for functionality comes with challenges

Functional beverage brands must address formulation challenges to deliver a great-tasting product, explained Ingrid Damen, global business development director at DSM-Firmenich.

For instance, formulating with electrolytes often requires flavor maskers and “the right flavor balance,” Damen explained. Additionally, each ingredient in a formulation ─ whether it be colors, flavors, botanicals, etc. ─ can impact the pH of the product and shelf stability, she elaborated.

Over the years, food and beverage manufacturers alongside ingredient companies expanded their understanding of various ingredients, Telford noted. Stevia “is a different ingredient now than it was 10 years ago,” and the products that are available today taste better than those first iterations, he added.

Functional beverages ‘are not a category that FDA recognizes’

Many functional beverages — especially energy drinks — have their roots in the supplement space, but beverage brands must follow the laws pertaining to beverages or risk legal liability, Rend Al-Mondhiry, partner at Amin Wasserman Gurnani said during an opening presentation.

Beverage brands must ensure that they use Generally Recognized as Safe (GRAS) affirmed ingredients and back up any claims about functional benefits, noted Al-Mondhiry.

“Functional beverages — even though they have grown as a category — they are not a category that FDA recognizes. It is more an industry creation, but when categorizing a product as a beverage, the rules that apply to conventional foods need to be followed,” said Al-Mondhiry. “One thing to keep in mind is that, according to FDA, structure-function claims should be based on the nutritive value of the product or its ingredients.”

Additionally, CPG companies need to exercise caution when making claims like “good-for-you,” “wholesome” or “nutritious,” as they “are healthy claims when they are made in a nutrition context,” Al-Mondhiry said.

The FDA also updated its definition of healthy at the end of the year, which puts specific limits on sugar, sodium and saturated that brands must follow. The compliance date for the new definition is Feb. 25, 2028.

Trump admin: ‘There could be more rounds of scrutiny coming with any ingredient’

Brands are bracing for the impact of further food regulations that could require them to reformulate their products, especially as Robert F. Kennedy Jr. is confirmed to head HHS.

Zevia is safeguarding itself from possible additive regulations by developing clean-label products, Taylor noted. “We have no artificial sweeteners, flavors or colors at all,” she added.

“With the new administration, I think there could be more rounds of scrutiny coming with any ingredient considered questionable,” Taylor elaborated. “Our observation is that the greatest challenge from a macro level is simply the consumption of too much sugar. Too much sugar impacts gut health, liver health, kidney health and some of this has links to cancer and heart disease.”