Soft drinks and energy drinks have dominated the non-alcoholic beverages market for decades. Today, as consumers increasingly want beverages that are just as convenient, but have less sugar and more health benefits, functional drinks are stepping into the spotlight. 

All over the world, there has been a slow decline in traditional soft drinks and energy drinks, as consumers are seeking healthier alternatives without all the sugar and caffeine. High-sugar soft drinks have also been the ready target for many government initiatives, nutrition experts, and weight-loss programs. In order to meet these new and changing expectations, beverage companies have responded with an explosion of functional drinks. 

Functional Beverage Market

The market for soft drinks has flattened in recent years. While new products, packaging, and flavours have kept sales relatively consistent, manufacturers are well aware that consumption occasions are in a state of decline. In other words, while many customers use a traditional soft drink or energy drink habitually, on certain occasions or times of day, those habits are staying the same or decreasing over time. The industry has been particularly hard-hit by Covid-19, with the reduction in high levels of activity that stimulate demand for caffeinated and energy drinks, and increasing awareness of health and wellness. Functional beverages represent a way to create beverages that are:

  • Healthier for the consumer
  • Have a wider range of consumption occasions
  • Appeal to new and different demographics

Functional beverages dominate the functional foods market, with an estimated value of US 93.68 billion in 2019. This growth is driven by consumer demand for products with a health benefit, investment and expansion of offerings by soft drink companies, and innovative technologies that provide more and better choices in non-alcoholic drinks. 

Opportunities in Functional Beverages

While traditional soft drinks and energy drinks have seen a decline in sales due to Covid-19, the pandemic represents a huge opportunity for functional beverages. There is an increased demand for healthier beverages, and functional ingredients are perfectly poised to meet these needs. The market growth in 2020 is dominated by:

  • Kombucha and fermented beverages, up 15.7% over the previous year
  • Enhanced water, up 12.8% over the previous year
  • Energy and other functional beverages, up 11.7% over the previous year
  • Coconut and plant waters, up 10.1% over the previous year 

Market Spotlight: Enhanced Water

Enhanced water now accounts for more than 16% of water sales, and is exploding in popularity. In the past year: 

  • Oxygenated water is up 42.6%
  • Alkaline water is up 36.4%
  • Electrolyte water is up 11.4%
  • Nutrient water is up 9.2%

Most water is made “functional” by methods that include electrolysis, exposure to a magnetic field, irradiation with light, treated with ultrasonic waves, or the addition of different minerals. 

  • Oxygenated water is marketed as enhancing athletic performance and offering a wide range of health benefits, despite repeated scientific studies debunking this claim. One small study of 25 trained male runners did find that oxygenated water doesn’t affect athletic performance, but does increase lactate clearance, speeding recovery times, but those results have not been replicated in other studies. 
  • Alkaline water is praised as being beneficial for everything from ageing to cancer, but, again, there is no scientific evidence to support those claims. However, alkaline water may be helpful for those suffering from acid reflux
  • Electrolyte water is enhanced with many of the electrolytes found in athletic and energy drinks, but without the sugar and caffeine of traditional energy drinks. It’s a convenient and efficient way to replace electrolytes lost during exercise. 
  • Nutrient water is water enhanced with vitamins and minerals. Vitamin C is a particularly popular additive in functional water, although most people meet their vitamin and mineral needs with a balanced diet. 

Market Spotlight: Prebiotic Beverages

Prebiotic foods enhance the effects of the body’s own beneficial bacteria and are surging in consumer interest around the world. Prebiotic functional beverages are often dairy-based, but food scientists are pursuing plant-based alternatives. Fruit and vegetables are promising areas of growth in prebiotic beverages, but cereals such as barley husks, rye bran, and oat fibres have all shown promise as sources of beneficial bacteria. Nanoscientists are working on new lines of synbiotic beverages that improve absorption, stabilize active compounds, and improve the characteristics of these beverages.  

Functional drinks represent a tremendous growth opportunity in the non-alcoholic drinks market, and for new innovations in functional ingredients and food science. For those people seeking jobs in food science, technology, functional ingredients, and nutrition, beverages are on the cutting edge. 

Grapefrute shares a passion for science, innovation, and quality. We are an FMCG recruiter that loves the industry as much as you do. Contact us for more information about our staffing and recruitment services, or visit our site for current job openings in beverage product development.