What to watch in functional beverages

By Rachel Arthur

- Last updated on GMT

Consumers want to see tangible effects from functional beverages. Pic: iStock
Consumers want to see tangible effects from functional beverages. Pic: iStock

Related tags Value added Coffee Drink functional beverage beverage

Functional beverages are tapping into consumer interest in health and wellness, but consumers are increasingly discerning and demand drinks deliver on their promises. 

Drinks with energy positioning are particularly popular with consumers and one of the reasons for this is the immediate and tangible effect they have for consumers, said Esther Renfrew, market intelligence director, Zenith International.

Renfrew was speaking at Zenith’s 12th InnoBev Global Soft Drinks Congress in Verona, Italy.

Get the proposition right

Some beverages have inherent functionality – whether it’s in terms of hydration benefits or natural vitamin content, for example. But the definition of functional beverages, for Renfrew, is set upon drinks with added functionality, such as added ingredients and associated health benefits, and functional positioning. 

The functional beverage market accounts for around 7% of total beverages by volume, according to 2015 figures.

“We can see functional beverage volume is sizable and it’s growing,” ​said Renfrew. “Back during the economic downturn we saw functional drinks really suffer, they were too expensive for consumers, but now it’s picking up, taking a fair share of the total beverage category.”

But the real interest is in value, with functional beverages accounting for around 13% of the beverage category in terms of value.

Evidently, consumers are willing to pay for added value, but Renfrew warns that brands must deliver what they promise.

Consumers are definitely much more educated, they are looking at understanding products, there’s increased scrutiny not just from consumers but EFSA and the like, and much more access to information,” ​said Renfrew. “That makes it challenging but also exciting, if you can get that proposition right. If your proposition delivers it is possible to increase margins.”

The message on what the brand delivers must also be clear, she added.

“The brand needs to be credible. There needs to be a clear message as to what that brand’s offering – if there’s too much on the brand it becomes confusing for the consumer, so simplicity and clarity in your message is important.”

Energy boost

One functional beverage category proving particularly popular is energy. And cross-categorization is evident in this sector: there’s energy water, juice and energy, tea and energy, sports and energy, milk and energy and coffee and energy.

For a start, energy is a key demand for today’s busy lifestyles. But for consumers, the immediacy and tangibility of an energy boost is important too: they feel that the drink they are consuming is having an impact.

“An immediate energy boost which makes you feel ready to tackle the day, or helps you with the lull period at work, or whatever it may be,” ​said Renfrew. “So it has tangible results, and that’s very important because consumers want to know what they are drinking is going to aid them.”

What can we learn from water?

The water category is a great example of how functionality can add value to a sector: taking a plain product and offering extra benefits.

In fact, the proportion of functional beverage launches within water is bigger than in other categories such as juice, dairy or RTD tea.

“The water category is a growth market, but it’s a low price point [in general],” ​said Renfrew. “So operators in the water industry are thinking how to move from commoditized product and adding value for consumers. So now you’re seeing a much wider range of functionality.

“And consumers are looking for something more exciting than just plain water. They understand the need for healthy hydration, but are also want something with benefits.”

Functional beverages in this category range from protein infused water (for example, US brand trimino), to energy water (such as Rockstar’s energy water), and even to water designed for pregnant women (Bump Water, in the US, which contains folic acid and other vitamins).

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