The functional drinks segment of the beverage market is growing and increasing in popularity. This is especially evident among younger consumers, who are making more mindful choices about the products they consume[1].
There are many types of drinks you can find in this diverse segment, and it is important to analyse how the overall beverage market is changing in relation to this trend.
What are Functional Drinks?
Functional drinks are a category of beverages that go beyond basic hydration and taste. Functional drinks are formulated to provide additional benefits beyond simple nutrition, such as providing mood enhancement or energy properties[2]. This segment of the drinks market is on the rise and estimated to be worth $30 billion in Europe alone[3] as Millennials and Gen Z’s mindful drinking habits are leading the industry forward.[4] Growth in products such as fermented, probiotic kombucha, or tea-infused carbonated drinks are all evidence of this popular and growing trend.
Natural and Comforting Beverage Ingredients
As mindful beverage consumerism enters the mainstream, natural and comforting drinks with clean ingredients are becoming more common.
Using botanicals, many product owners reap the benefits of their naturally occurring nutrients, minerals, and antioxidants. Consumers reach out to botanicals and herbals for their perceived benefits, such as relaxation.
Fruit and herbal extracts in functional beverages also add the sweetness and flavour that many consumers look for. They are naturally low in calories but give a feeling of comfort and well-being as a healthier alternative to sugary drinks.
Clean Labels Demand
A clear ingredient list and clean labelling can build trust among consumers. Younger generations are increasingly aware of their health[5] and the health of the planet[6]. Products marked as ‘sustainable’ are growing 5.6 times faster in value terms than their non-sustainable counterparts[7]. By emphasising transparency in the production process, you can retain loyal customers looking for healthy and sustainable products.
It is not always easy to make sure that ingredients are sustainable and clean, but with Finlays’ integrated supply chain, we know exactly where all our products come from and can help you produce clean labels.
Functional Drinks are The New Non-Alcoholic
The growing trend of ‘mindful drinking’ has led to the introduction of alternatives to traditional, sugary alcoholic drinks. For example, hard seltzers as well as low or zero-alcohol spirits and beer have become more popular in recent years. The functional beverage industry is encroaching into this space as preferences change and less alcohol is consumed in favour of natural and healthy functional drinks[8].
Examining the Market Growth
In the five years between 2016 and 2021, the market value of hard seltzers grew +165% CAGR and have a predicted value of $17bn by 2026. For low and zero-alcohol spirits, sales increased by $60mn over that same 5-year period, reaching more than $140mn in 2021[9].
Despite this strong performance, the producers of hard seltzers are now also looking for further growth, combining functional drinks such as iced tea with their original products. Hard tea is increasingly combining alcohol with an array of different flavours and many brands are aiming to expand into this healthier alternative to alcoholic drinks[10].
Consumer Preferences
With the pandemic having fuelled short-and-long term stresses for many people[11], beverages that can promote relaxation are now even more appealing[12]. The link between gut health and serotonin, which is associated with sleep quality, and digestion, is becoming clearer[13]. We are also likely to see more products that promote cognitive function through gut health, particularly as customers are already opting for natural and clean products more frequently[14].
Types of Functional Drinks
The taste of functional drinks varies, as well as the types of functional beverages available. However, here are some of our favourites:
Sports Drinks & Natural Caffeine Powder
For the more athletic members of the population, sports drinks serve an important function, providing energy and nutrients to promote recovery.
Caffeine powder is a component in many sports drinks and Finlays is a global bulk caffeine powder supplier. Finlays supply between 95% and 98.5% purity[15] caffeine powder that can be combined with natural flavourings and herbal infusions for sports drinks.
Enhanced Water and Carbonates
Water is great, but can be enhanced with natural tea aromas. Carbonated water blended with natural tea aroma is a wonderful way to tap into the carbonated drinks market. With more people seeking healthier drinks[16], flavoured water combines water with tea aroma and extracts to create new flavour combinations, whilst also being naturally low-calorie.
Functional Coffees
Who needs hazelnut lattes and coconut milk flat whites, when you can drink cold brew coffee?
Cold brew is perceived to be up to 67% less acidic than regular coffee[17], and at Finlays, we have a unique brewing process that gives our cold brew products a natural flavour.
Concluding Thoughts
Evolving consumer demands present an opportunity for savvy brand owners to produce a range of drinks and become a key player in the booming functional drinks market.
Finlays is the ideal partner, providing transparency with our integrated supply chain and sourcing high-quality, ingredients, packaged and sent direct to you. Look at our Functional Beverage range and contact us for more information.
NOTES AND REFERENCES
[1] Finlays Global Beverage Trend Report 2023, page 6: https://www.finlays.net/wp-content/uploads/2022/11/Global-Beverage-Trends-2023.pdf
[2] Mintel, March 2022, Tea can take functional benefits to the next level – Mintel. ii GlobalData Plc, survey of 10,023 European consumers, Q2 2021. iii Mintel GNPD 2021, global energy drink launches 2016-2019. iv Global Consumer Survey, 2020 survey of 26,097 consumers in 30+ countries globally. v Mintel GNPD, 2022
[3] Finlays Functional Beverages Page: https://www.finlays.net/product-solution/functional-beverages-europe/
[4] Globaldata Plc, survey of 50,420 millennials across 40+ markets globally, 2022
[5] Finlays – European Trend Report: Intro page. https://finlays.turtl.co/story/europe-trend-report-final/page/2/1?teaser=yes
[6] Piscitelli, A., D’Uggento, A.M. Do young people really engage in sustainable behaviours in their lifestyles?. Soc Indic Res 163, Results Section (2022). https://doi.org/10.1007/s11205-022-02955-0
[7] Finlays Opinion – https://www.finlays.net/opinion/clean-label-beverages/– NYU/Stern, 2019, quoted in the Harvard Business Review
[8] The Growing Market for Functional Alcoholic Beverages – https://clarkstonconsulting.com/insights/functional-alcoholic-beverages-market/
[9] Globaldata Plc, survey of 50,420 millennials across 40+ markets globally, 2022
[10] GlobalData, 2022 Q3 global consumer survey
[11] WHO – World mental health report: transforming mental health for all, page 16: https://iris.who.int/bitstream/handle/10665/356119/9789240049338-eng.pdf?sequence=1
[12] GlobalData 2021, global survey of 111690 consumers in 40+ countries worldwide
[13] Ketchum 2022, https://www.ketchum.com/consumer-mental-health-and-nutrition-trends-food-mood-connection/ / https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5526216/
[14] Ketchum 2022, https://www.ketchum.com/consumer-mental-health-and-nutrition-trends-food-mood-connection/ / https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5526216/
[15] Finlays: Leading Supplier of Caffeine Powder – https://www.finlays.net/product-solution/caffeine-powder/
[16] GlobalData plc, 2022 survey of 21,600+ consumers
[17] Mintel Report (2019)
