Functional drinks get top spot in US health and wellness beverages

By Rachel Arthur contact

- Last updated on GMT

Consumers want hydration and more from beverages, in order to cope with busy lives. Pic:getty/romolotavani
Consumers want hydration and more from beverages, in order to cope with busy lives. Pic:getty/romolotavani
Functional and fortified beverages were the best performers in US health and wellness beverages in 2016, with strong continued growth testament to consumers’ interest in the category. Meanwhile, the sustained growth of energy and sports drinks – which account for a large chunk of the category – continues to boost the sector.

In fact, energy and sports drinks – which are typically functional by definition – accounted for some 70% of all functional and fortified beverage retail value sales in the country, according to market research company Euromonitor International.

Yet the category can expect to face challenges in sustaining growth: with a diminishing pool of potential new consumers, potential impact of sugar taxes on SSBs, and consumers’ interest in natural ingredients.

But as categories continue to blur, sectors such as fortified or functional RTD coffee and bottled water can be expected to grow and provide fresh opportunities for FF beverages, with energy remaining the key reasons for FF beverage growth.

Defining ‘functional’

In 2016 the fortified and functional beverage category registered lower current retail value growth of 5%, compared to a CAGR of 6% over the period 2011-2016. This still, however, means it is the best performer in health and wellness beverages.

Functional beverages attract attention from consumers for their promise to offer something more than ‘ordinary’ beverages. However, there is no universal definition in that all types of beverage are ‘functional’ in the most basis sense that they help the body to function.

In identifying fortified and functional products, Euromonitor focuses on products where health ingredients (typically those with health claims) have been added.

“Fortified and functional beverages provide health benefits beyond their nutritional value and/or the level of added ingredients wouldn’t normally be found in that product,” ​says Euromonitor in its US fortified/functional beverages US report.

“The defining criterion here is that the product must have been actively fortified or enhanced during production. As such, inherently healthy products such as 100% fruit/vegetable juices are only considered as "fortified/functional" if additional health ingredients (e.g. calcium, omega-3) have been added.

“To be included in our criteria, the health benefit needs to form part of positioning/marketing of the product. There is one exception to the inclusion of fortified products in this category: products to which vitamins have been added to replace vitamins lost during processing are excluded. These products would not typically be positioned on the basis of containing added nutrients.”

Energy continues to energize the category

Energy remains a key factor in functional and fortified beverage growth, with consumers forever on the search for a convenient pick-me-up.

The Gatorade Co. remains the leader in functional beverages in the US marketplace, maintaining a 23% retail value share.

“The company’s current retail value growth of 5% to reach $6.3bn in 2016 underscored its ability to grow with the category itself,” ​says Euromonitor.

“With an eponymous brand which promotes itself as a wellness brand, Gatorade’s beverages are fortified with replenishing electrolytes and nutrients for those who engage in rigorous physical activity.”

Outside the key sports and energy drinks market, category blurring is taking place with other on-trend beverages.

“With many energy drinks bleeding over into their more naturally healthy-positioned cousin, RTD coffee registered 24% growth in current value sales in 2016,”​ continues Euromonitor.

Take for example the growth of Starbucks’ DoubleShot Energy+Coffee and Monster’s Java Monster: which draw on both the RTD coffee and energy drink categories. A coffee base can be fortified with vitamin B, ginseng, taurine, guarana and other functional ingredients commonly found in energy drinks.

Natural positioning, along with a move away from the traditional artificial flavor of many energy drinks, can help hybrid beverages achieve popularity.

“Energy boosting remains one of the leading reasons for functional and fortified beverages growth, as both of these categories appealed to consumers constantly in search of a convenient pick-me-up. Their functional and fortified stature makes the products even more appealing than their caffeine content alone.” 

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