To Your Health

Functional beverages are increasingly addressing consumers' concerns about a multitude of 21st-century health-and-wellness issues

While water was the first truly functional beverage, the first branded, claim-making functional beverage was probably Gatorade, which emerged in 1965 at the University of Florida to rehydrate the school's Gators football team, and is now an iconic Coca-Cola brand.

The functional beverage market has long since expanded in this new century to become a varied, growing drinkscape that encompasses almost every imaginable lifestyle, health and wellness aspect from energy to weight to anxiety to sleep — and even to air travel. Functional beverages are good for what ails you — or what you don't want to ail you. And we're only at the Functional Beverage 101 stage, according to market watchers like Sean Seitzinger, partner at Symphony Consulting of Chicago-based Symphony-IRI Group.

Trend tracker Mintel, also based in Chicago, expects the functional beverage market to accelerate between now and 2014, but that growth likely won't reach the record high rates observed between 2004 and 2008, when sales grew at an impressive 25 percent rate. According to the Mintel report “Functional Beverages: US May 2010,” functional beverage sales declined more than 2 percent in current prices, from $9.2 billion in 2008 to $9 billion in 2009, a slump largely attributable to a deepening recession in 2009, limited discretionary incomes and historically low levels of consumer confidence.

The current major impediments to market growth are seen as Food and Drug Administration (FDA) intervention in the market, along with growing consumer distrust of the veracity of beverage claims. Also, frugality in consumer shopping behavior — a trait acquired during the recession, but likely to continue amid the fragile economic recovery — is likely to lead to the sidestepping of higher-priced functional beverages in favor of lower-priced beverages that often offer comparable benefits.

The functional beverage category ranges over a wide variety of products: energy drinks; functional juice and juice drinks; enhanced water; relaxation drinks; functional soy, rice and almond-based drinks; coconut water; functional tea; and functional yogurt drinks and smoothies, among others.

Energy drinks still represent the biggest segment of functional beverages. According to the Mintel report, energy drinks grew from $956 million in sales in 2008 to $1.026 billion in 2009, an increase of 6.3 percent. Energy shots played a key role in this climb, and their sales are expected to continue to grow as consumers look for added energy without the sugar and calories commonly found in energy drinks.

Industry players in the functional beverage category generally fall into four categories: traditional nonalcoholic beverage companies like PepsiCo and Coca-Cola; major food companies like Nestlé, Kraft Foods, General Mills and Campbell Soup Co.; smaller-scaled private companies, some of which specialize in one subcategory or segment of the functional beverage market, like Traditional Medicinals and POM Wonderful; and growers' cooperatives like Ocean Spray and Sunsweet Growers.

Functional beverages are a fairly recent category, and the rationale behind various manufacturers' choice of niches indicates the breadth of targeted markets. Tim Lucas, CMO of Toomball, Texas-based Purple Stuff, which manufactures cognitive-performance sodas, says, “We picked the cognitive-performance/no-stress relaxation function because it was a way to make a healthy drink desirable to the youth who drink sodas laden with caffeine and HFC and high calories.”

Founded in 2008, Purple Stuff “picked the niche of youth, but by making our product cool, purple and fun, it has mainstream appeal and takes business from many categories in the CSD (carbonated soft drink) business,” notes Lucas. “We chose the youth category, as we have years of experience with young people who are soda consumers.”

Purple Stuff's message stands out in this crowded category, affirms Lucas, “because we row our own boat. Facebook creates an emotional branding with consumers by interacting socially with them and applying their input to the story and desirability of Purple Stuff.”

Boca Raton, Fla.-based Celsius, billed as “Your Ultimate Fitness Partner,” debuted in 2005, and marketing and innovation VP Irina Lorenzi says the brand was “first to market with a clinically proven calorie-burning beverage,” and that “Celsius repositioned its product line to become more focused on the fitness market.” Its line includes nine flavors of beverages, stick powder packets and shots.

Lorenzo goes on to note that Celsius “exceeds the criteria that are necessary for a functional beverage to be successful,” while listing segment consumers' key criteria: The drink must taste great, users must feel it works, they must believe it works from evidence of scientific studies or consumer testimonies, and it must be available at retail.

Celsius grew from 6,000 store locations in 2009 to more than 30,000 store locations in 2010, Lorenzo says, citing distribution at Publix, Ralphs, Fred Meyer, Price Chopper, Winn-Dixie, Hannaford, Shaw's, H-E-B and Raley's, among others.

Bai, manufactured by Princeton, N.J.-based Bai Brands LLC, entered the ready-to-drink (RTD) beverage category in August 2009, according to founder and CEO Ben Weiss, who cites Bai's two InterBev 2010 Beverage Innovation Awards: Best New Functional Beverage and Best New Functional Ingredient.

Bai's lineup of thirst-quenching drinks is powered by coffee's “superfruit,” whose antioxidant properties, combined with essential nutrients, produce what Weiss calls “mind-awakening beverages that are just the right match for a healthy lifestyle.”

Weiss says he picked this particular niche because “I have worked in the specialty coffee market since the early nineties” in exotic places around the globe, “and when I learned that local farmers from these regions have always used the whole fruit of the coffee bush to make high-energy foods and beverages, I knew I had stumbled upon coffee's untold secret.”

He believes that “a focus on flavor is the future of functional beverages,” and that “functional drinks must appeal to all the senses, so color is important, too.”

Doubtless, the category will see substantial changes, growth and maturation from its current status of Functional Beverage 101.

Kids' Stuff, Too

Functional beverages are being marketed to youngsters as well, with products like Healthy Kids organic nutritional from Irvine, Calif.-based Orgain, which were recently introduced at Natural Products Expo West in Anaheim, Calif., and contain 10 organic fruits and vegetables, organic complex carbohydrates, 25 vitamins and minerals, and 8 grams of organic protein.

Gluten-free, all-natural Healthy Kids provides a convenient nutritional boost for children ages 1 to 13, and is available in vanilla and chocolate flavors. It contains 200 calories in each 8.25-fluid-ounce Tetra Pak carton with a sealed straw, and will hit stores in May.

Another kids' functional drink at Natural Products Expo West, Children's Oxylent, from Santa Cruz County, Calif.-based Vitalah, is formulated for children over the age of 4. Children's Oxylent is best taken with meals or snacks, and is guaranteed to be free of gluten, lactose, caffeine, and artificial flavors and colors. Each box contains 30 stick packets

“We use only the highest-quality ingredients such as Albion chelated minerals,” says Vitalah CEO and founder Lisa Lent. “There is a full spectrum of micronutrients, including vitamins A, B, C, D3 and E, as well as calcium, zinc, chromium, magnesium and more.”