On-demand webinar: Functional drinks 'account for the value growth' in US beverage market
“Within food and beverage when I use [the term functionality], what I'm essentially referring to are products that are actively claiming to do something to help address or to solve some problem in your routine or to provide a targeted benefit to the addition of ingredients like vitamins, herbal extracts, minerals, or other nutraceuticals,” said Howard Telford, head of soft drinks at Euromonitor International. “And functionality is increasingly the area of growth within the wider non-alcohol category in the US.”
Euromonitor shares what is popping in functional beverages
Consumers are increasingly looking for functional claims to improve gut health, reduce stress and anxiety, and improve vision among other functional claims, and CPG brands are responding with a host of energy drinks, sports hydrations and nutrition, kombucha, sparkling prebiotic drinks, and other products, Telford said. Functional claims have also become a crucial aspect of beverages outside the normal scope of better-for-you, he added.
“When a functional claim or positioning isn't necessarily central to the consumer's mission, it's becoming more important even in the flavor-focused refreshment categories for brands to have a functional USP or ingredients that change the occasional -- boost the occasion -- from just pure indulgence to a sort of refreshment with benefits.”
Functional ingredients like adaptogens, prebiotics, and many others have started to pop up in a host of beverage categories, but CPG brands might have even more room to innovate around ingredients that have yet to hit the market, given the number of edible plants out there in the world, Telford said.
“There's a famous author called Howard McGee who wrote a book on food cooking, and he observed something like 300,000 edible plants on Earth, of which we cultivate and consume only about 2,000. And so, as we see more beverages containing things like plant-based fibers, like new mushrooms and adaptogenic herbs, and this explosion of new claims that we've seen being addressed through beverages, we may only really be scratching the surface in terms of the sorts of positioning and creative positioning we can expect from beverages over the longer term.”
Flavor, functionality, and format come together
Consumers are demanding more out of their products, including unique flavor experience.
New flavors “invite consumers to stay longer with the brand, and they invite consumers to be more loyal with the brand over time,” said Demir Vangelov, board member of Starco Brands and former CEO of Soylent.
“I think early in the days when there was this big distinction [between] plant-based versus functional versus maybe animal-based, people were willing to trade off, and they were thinking okay, maybe plant-based it's so hard to make, the taste is hard to work, so maybe we will sacrifice a little bit of taste and then focus on function.”
While agreeing that “taste is king,” Jen Wu, managing director and partner at L.E.K consulting, also sees the format of the beverage as crucial for both consumers and CPG looking to grow their functional beverages. For instance, some functional beverages require refrigeration, which limits where they can be bought and make it a less desirable on-the-go refreshment, she added.
“There are shelf-stable kombucha, but a lot of the leaders are still primarily in refrigerated, and what that does to the brands or products is it limits them inherently because for beverage, retail is just one of the many channels,” Wu said. “So, if you have a shelf-stable product that unlocks more opportunity for distribution both on vending but also trial when it comes to concerts, sporting venues, and all the different areas that consumers consume beverages.”
Low, no sugar are key claims for functional beverages
Consumers also are increasingly looking for beverages with lower or no sugar. To address this demand, Perfy created a clean-label superfood soda with fewer grams of sugar over traditional sodas infused with l-theanine, turmeric, and ashwagandha for functional benefits,
“When I was formulating Perfy, I went to the R&D team with [and said,] ‘I don't want to do a zero-sugar drink.’ I love those and I respect them, but for me, I wanted to do something with two-to-five grams of sugar and 20-to-30 calories to give the pancreas enough to process, so it didn't secrete insulin and drive insulin resistance.”
Other consumers are still looking for flavorful and functional beverages with no sugar to address a medical condition like diabetes, which influenced the creation of Swoon, brand founder Jennifer Ross said. And consumers across the board are becoming more savvy on what types of sweeteners they are consuming and its impact on their health, Ross added.
“People are conscious of how much sugar but also what are the sugar substitutes. They don't want aspartame; they don't want sucralose; some people don't want sugar alcohol,” Ross said. “People are just across the board getting smarter and really looking at the nutrition label.”
