Healthy and portable - the functional beverage success story

Related tags Sports drinks Pepsico Powerade The coca-cola company

Functional waters have exploded onto the global drinks scene in
recent years and become the fastest growing functional beverage,
according to new data from market research firm Euromonitor.

The category increased by a massive 806 per cent in value terms between 1998 and 2003, albeit from a very low base, attracting both companies involved in sports and energy drinks, as well as those involved in standard waters, due to its high growth and profit potential.

Growth was strongest in the US, principally driven by the entrance of multinationals including PepsiCo, launching Aquafina, and The Coca-Cola Company with its NutriWater, products enriched with vitamins, minerals and electrolytes.

But the heavy marketing has not been successful in all markets. In France, for example, they failed to take off as consumers look for purity in mineral waters, and are distrustful of fortified waters, according to Euromonitor. This was underlined when Danone withdrew its Activ brand from France and several other markets. In the UK, functional waters have been criticised for their unpleasant taste.

Functional juices also helped the strong growth of the overall beverages market, which is expanding by a compound annual growth rate (CAGR) of almost 11 per cent. Sales in functional juices were up by 73 per cent between 2003 and 2008, with the US also a particularly important market for this product. Calcium-enriched juices are well established here, and are viewed as mainstream, with no price premium and a wide choice of brands, including private label products.

But there has been some notable innovation in this area, with Minute Maid's vitamin ACE and zinc-fortified juice, and more recently, its Heart Wise juice which incorporates plant sterols to lower cholesterol.

Germany is also an important functional juice market, due to the long-established tradition of ACE and multivitamin juices. More recently F-ACE juices, which include added folic acid, are also showing good growth, notes the report.

Sports drinks still reign supreme in the beverage sector however, driven by key brands such as PepsiCo's Gatorade and Aquarius and Powerade from Coca-Cola. They have quickly become mainstream, consumed not just by sports enthusiasts, but just as much as any other soft drink. And their health positioning is also giving them an edge over drinks such as carbonates which are seen as having a negative impact on health.

The success of the beverage market also has much to do with the convenience factor, shows the new report. Drinks that can be consumed on the move tap easily into key consumer demand patterns of health, convenience and portability.

Equally important is the dominance of major drinks multinationals PepsiCo and Coca-Cola, which are able to invest considerably in the development, marketing and distribution of these products. As a result, drinks such as sports drinks and fortified juices are mainstream items, sold at standard prices through mass distribution channels such as supermarkets.

Significantly they are not niche positioned, or targeted at consumers with specific health issues, but are a mainstream alternative to drinks such as carbonates, with the added appeal of health benefits. This will help the global beverages market continue to grow a further 37 per cent between 2003 and 2008, according to Euromonitor.

More information on the report can be accessed here​.

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