Functional Beverage Market Grows Aggressively

Because of the convenience and pleasure they offer, functional beverages are one of the most aggressive growth segments in the health and wellness foods arena.

By Kantha Shelke, Contributing Editor

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Sports drinks and energy drinks are one of the fastest growing segments within the beverage sector. Every day, it seems, innovative newcomers arrive to chip away at the mainstream consumer beverage market.

Traditionally, ready-to-drink beverages were a source of refreshment. The recognition of the keen and growing interest of consumers in ingredients and flavors for performance enhancement helped create the new sports/energy beverages market.

Sports drinks and energy beverages often are regarded as one and the same. The two, however, are different. Sports drinks are primarily designed for rehydration; energy drinks are created for their functional effects.

The latter, introduced in Europe roughly a decade ago have only been a significant player in the U.S. market for a few years now and can boast a number of ingredients promising to boost mental and physical capacity. The categories do share several traits, notably the same target demographic and an increased focus by major beverage manufacturers.

According to ACNielsen, sports/energy drinks together account for about 6 percent of the non-alcoholic beverage category yet have been the primary growth drivers. The segment experienced almost 20 percent growth in 2004.

Exercise clubs and gyms recently entered the increasingly lucrative ready-to-consume food market and are creating high-margin, scientifically based energy drinks and foods. The notion that scientific-sounding foods and beverages are more trustworthy than mainstream foods presents a huge opportunity for savvy companies to create targeted functional energy and sports drinks that do more than refresh, rehydrate and energize.

Inside and Out and Good For You

Physical fitness trainers and nutrition experts such as Elizabeth Gabbay, who trains performance-driven entertainment stars such as Beyonce, credit the tremendous growth in these segments to the recent and significant shift in consumer attitudes towards healthy lifestyles. “There are more consumers today than ever before who wish to look good outside and feel good inside,” she says. It appears sports/energy drinks will continue to expand with the increasing focus of health and wellness in consumers’ choice of lifestyles and diets.

Gatorade was the first sports drink and remains the most popular of sports beverages today. This success is augmented by both sound science and market dominance.

Energy beverages first became popular in Austria as physical and mental “pick-me-ups.” The Red Bull line of beverages by Red Bull GmbH, Pacific Palisades, Calif., was the first to make a splash in the U.S. and became thede facto standard for taste and physiological effects.

The two beverage segments appealed initially to young and active rather than simply “athletic” males but recently have become more popular with women and teenagers. Notably, those under the age of 34 and especially teenagers and children 12 and younger identify closely with sports drinks. With a growing audience base, manufacturers have had to change their beverages significantly in terms of taste, ingredients and packaging to maintain consumer loyalty.

Gatorade, a division of PepsiCo, Purchase, N.Y., successfully connected with the younger base by introducing All*Stars, small multi-packs in kid-friendly flavors of berry, watermelon and strawberry flavors.

Women and Children First

Despite the appeal of energy and sports beverages to wider segments of the population, the perception persists that the drinks are largely youth-oriented products. Manufacturers, therefore, use clever marketing strategies and create line extensions to flank core brands and maintain category growth.

Astute marketers recognize females represent the future of both these categories. Female teens reportedly have one of highest rates of consumption of sports and energy beverages. This proportion is expected to grow as weight-loss remains a critical issue. Women’s consumption of energy and sports drinks also is likely to increase as more and more women opt to lose weight through physical activity.

Another untapped demographic is the Hispanic population. Gatorade set the stage with Xtremo, featuring tropical flavors and targeted advertising to the rapidly growing Hispanic populace. The leading brand in this demographic is Powerade from Coca-Cola, Atlanta, which captured a significant portion of Latino attention through Spanish-language advertising and reformulation to include fortification with B-vitamins.

Aging seniors also are prime candidates for energy drinks, such as Ensure Energy Drinks with lutein from Ross Products, Columbus, Ohio. There are also successful entries from the Irvine, Calif.-based Met-Rx (Met-Rx Protein Shake), and Mead Johnson, Evansville, Ind. (Boost Breeze Nutritional Energy Juice Drink).

New Ingredients

Innovative companies, such as SoBe (South Beach Beverage, now a division of Pepsico, N.Y.) firmly cemented energy drinks as a means of introducing adrenaline and other edgy ingredients to a relatively adventurous consumer base. Although Coca-Cola and Anheuser-Busch, St. Louis, entered the fray with KMX Energy Drink and 180 energy drink, respectively, they were not received as well. The ingredients today’s consumers actively seek are primarily guarana, ginseng, taurine and B and C vitamins.

The public’s growing concerns about health and obesity in conjunction with the growing number of diabetics and carb- and calorie-conscious consumers motivated beverage manufacturers to address the caloric and glycemic properties of their beverages. This, plus the waning success of diet carbonated drinks, fed the development of a number of non-glycemic sweeteners such as sucralose. It also helped create a wave of flavor extensions for an interesting new shift in taste: Consumers are increasingly opting for less sweetness.


The success of this expanding niche beverage market isn’t totally free of controversy. Some of the energy drinks contain ingredients that generate concern for their potential for abuse or misuse. For instance, energy drinks are growing increasingly popular as cocktail mixers among the younger crowd. Mixing stimulants with alcohol can create a false sense of alertness and control that could lead to disaster.

Also, overdoses of stimulants such as ginseng and caffeine can have adverse effects on blood pressure. Joanne Larsen, R.D., notes that the changing perception of energy drinks as an “anytime” beverage can lead to consumers drinking more than one beverage daily, and recommends careful reading of the label.

Eau de “V”

In between the sports drink and the energy drink categories lies enhanced water. Call it “plain water with a twist,” the twist being a little flavor, vitamins and minerals, plus a fortification or three. One success story in this class of beverages is the Glacéau “vitaminwater” line. Launched by Energy Brands Inc., Whitestone, N.Y., in 2000, the popular beverage comes in 14 flavors, each of which includes nutraceutical combos such as extra vitamin C and glucosamine for joint health or gingko for memory. All flavors include B vitamins, vitamin C and minerals yet provide only two and a half calories or less per ounce.
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