FUNCTIONAL BEVERAGE MARKET ANALYSIS

The global functional beverage market size was valued at US$ 176.37 Billion in 2022 and is anticipated to witness a compound annual growth rate (CAGR) of 8.6% from 2023 to 2030. The functional beverage market is an important part of the overall health industry and will continue to grow in the near future. Growing consumer demand for health-enhancing products is fueling growth of the functional beverage market. In addition, a growing trend toward veganism is driving demand for plant-based beverages. Organic foods and other non-GMO products have also influenced consumer buying behavior. This in turn again fostering market growth.

Global Functional Beverage Market: Regional Insights

Regionally, North America is expected to dominate the global functional beverage market over the forecast period owing to the high demand for healthy drinks in the region due to growing health and wellness trend. According to Mintel, the functional beverage industry in the U.S. is the largest in the world. In terms of sales, the global functional beverage market was valued at $110 Billion in 2020. Also, continuous launch of new product is another key factor augmenting regional market growth. For instance, in September 2020, Coca-Cola rolled out its first Coke-branded energy drink in the United States. The energy drink was launched with four flavors, including Coca-Cola Energy, Coca-Cola Energy Zero Sugar, Coca-Cola Energy Cherry, and CocaCola Energy Cherry Zero Sugar.

Asia Pacific is another key market that is gaining fastest growth in the global market over the forecast period. High prevalence of chronic disease such as osteoporosis, arthritis, and cardiovascular disease, coupled with the rising demand for convenience beverages and the changing lifestyle among Indians are propelling regional market growth. According to the International Diabetes Federation, India was home to 77 Billion diabetes patients in 2019, the second-largest in the world. By 2030, the number is predicted to reach 101 Billion.

The Indian functional beverage market recorded a revenue of US$ 1.29 billion in 2019, and it is expected to reach USD 2.2 billion by 2025, growing at a CAGR of 9.18% over the forecast period (2020-2025).

Figure 1. Global Functional Beverage Market, By Region 2023

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Global Functional Beverage Market Drivers:

Growing demand for plant-based and lactose-free products is augmenting market growth

Due to growing vegan population and increasing instance of lactose intolerance population there is a high demand for plant-based and lactose-free products. This is augmenting functional beverage market growth. In January 2020, 28 Black has released a taurine-, gluten-, and lactose-free premium energy drink manufactured in Germany. This energy drink is available in four flavors, Acai Berry, Classic, Sour Mango Kiwi, and Sour Cherry.

Increasing number of merger and acquisition in the market to uplift market growth

For instance, in June 2020, Nestle SA acquired a majority stake in Vital Proteins, which a maker of collagen bars, beverages, capsules, and powders. Hence, growing focus of key players to adopt various growth strategies in order to expand their market presence is propelling market growth.

Global Functional Beverage Market Opportunities:

Incorporation of traditional ingredients in the functional beverages is expected to offer potential growth opportunities. For instance, in December 2019, Los Angeles-based Better Booch, a maker of kombucha tea, recently released its eighth flavor: Hola Horchata. Also, Irvine, California based Good Culture LLC is rolled out Wellness Probiotic Gut Shots.

Emergence of CBD infused functional beverages is expected to bring bright market opportunities in the near future. For instance, in July 2019, Good Day, an innovative new beverage brand, announced the launch of its line of premium CBD-infused beverages designed to maintain balanced throughout every part of the day: Cold brew coffee for a boost of easygoing energy, Citrus sparkling water for mental and physical refreshment, and Chamomile herbal tea for enhanced relaxation and stress release.

Global Functional Beverage Market Trends:

Growing health and wellness trend with infusion of coffee in ready-to drink beverages

Rising health and wellness trend is augmenting demand for variety in functional beverages which is expected to augment market growth in the near future. For instance, in February 2019, also launched two new RTD coffee drinks, eyeing up a new world of texture and functionality for coffee consumers with its Cold Whipped Lattes and Coffee Protein Smoothies.

Emergence of personalized beverages is a recent trend

Some of the other trends in the functional beverage market include the proliferation of specialty products in health stores. Personalized beverages are also expected to gain traction in the future. Ultimately, the trend is expected to expand the scope of the market.

Global Functional Beverage Market Restraints:

Ingredient-level health concern

There is concern associated with the consumption of functional beverages as energy drinks, fortified juices, RTD tea, and RTD coffee among consumer due to the health issues regarding the use of ingredients and their levels in the drinks. Also, there have been growing concerns regarding the addition of caffeine content, artificial ingredients, and sugar in most of the RTD tea and energy drink products

Varying regulations and labelling framework

Varying regulations offers a significant challenge to the globalization of functional beverages. Regulatory issues is a key hurdle factor for the growth of the functional beverage market. Moreover, there is a lack of proper approach to the term “functional beverage” that has led to the consumer confusion, inconsistent product claims, and also lawsuits against some companies for misleading consumers. However, implementation of proper regulations for functional beverage market will offer positive growth environment for the market.

Figure 2. Global Functional Beverage Market, By Product Type 2023

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Global Functional Beverage Market Segmentation:

The global functional beverage market report is segmented into type, distribution channel, and geography

Based on type, the market is segmented into Energy Drinks, Sports Drinks, Fortified Juice, Dairy and Dairy Alternative Beverage, and Other Types. Out of which, Energy Drinks is expected to dominate the global market over the forecast period and this is attributed to the increasing adoption of healthy lifestyle among consumers. The energy drinks segment of the market studied recorded a revenue of USD 39.28 billion in 2019, and it is expected to reach USD 57.27 billion by 2025, registering a CAGR of 6.43% over the forecast period (2020-2025).

Sports Drinks segment is also expected to witness significant growth in the near future and this is owing to the growing participation of people in sports activities. These drinks are consumed by athletes to stay fit and hydrated while restoring electrolytes, carbohydrates, and other nutrients. The sports drinks segment of the market studied recorded a revenue of USD 25.77 billion in 2019, and it is expected to reach USD 37.76 billion by 2025, registering a CAGR of 6.53%, over the forecast period (2020-2025).

Based on distribution channel, the market is segmented into Supermarket/Hypermarket, Drug Stores and Pharmacies, Convenience Stores, Online Retail Stores, and Other Distribution Channels. Out of which, Supermarket/Hypermarket is expected to dominate the global market over the forecast period and this is attributed to their wide retail space catering to variety of products. The supermarkets and hypermarkets segment of the market studied recorded a revenue of USD 49.99 billion in 2019, and it is expected to reach USD 73.69 billion by 2025, registering a CAGR of 6.73% over the forecast period (2020- 2025).

Convenience Stores segment is also expected to witness significant growth in the near future as they offer great service and competitive prices. The convenience stores segment of the market studied recorded a revenue of USD 27.12 billion in 2019, and it is expected to reach USD 36.67 billion by 2025, registering a CAGR of 7.57% over the forecast period (2020-2025).

Global Functional Beverage Market: Key Developments

In February 2018, Yakult Danone launched a new version of signature probiotic drink in India. There is 50:50 joint venture between Yakult Honsha and Danone.

In February 2018, The Yakult Danone expanded its product portfolio with the introduction of Activia® Dailies. The product is intended to add probiotic low-fat yogurt drinks to consumers’ daily diet.

In January 2020, Coca-Cola announced its own branded energy drinks for the US market. These are expected to come in four flavors: Coca- Cola Energy, Coca-Cola Energy Zero Sugar, Coca-Cola Energy Cherry, and Coca-Cola Energy Cherry Zero Sugar.

In March 2020, PepsiCo entered an agreement to acquire Rockstar Energy Beverages, which is a popular energy drink maker. Through this deal, PepsiCo Inc. made a debut in the UK energy drinks market.

In November 2019, PepsiCo    signed  a          joint     venture agreement to develop and sell fortified coconut water products under the newly created Phenom brand name; with this partnership, the company is aiming to capture the rapidly growing functional drinks market.

In March 2020, PepsiCo announced the launch of a beverage joint venture in Thailand with Suntory. This new venture is called Suntory PepsiCo Beverage (Thailand) Company Limited. This joint venture has served as the operator and distributor of PepsiCo beverage brands, namely Pepsi-Cola, Mirinda, 7UP soft drinks, ready-to-drink Lipton teas, Gatorade sports drink, and Aquafina hydration drinks.

Global Functional Beverage Market: Key Companies Insights

The global functional beverage market is highly competitive. This is attributed to continuous launch of new technologies due to ongoing R &D and efforts by value chain participants. Moreover, key players are adopting various business growth strategies in order to expand their presence on regional as well as global basis. Some of the key players in the global functional beverage market are PepsiCo Inc., Red Bull GmbH, The Coca-Cola Company, Danone SA, Monster Beverage Corporation, JAB Holdings Company, General Nutrition Centers Inc., The Hain Celestial Group Inc., Fonterra Co-operative Group, and Amway Corporation

*Definition: Functional beverages are a class of beverages that are designed to promote specific health benefits. These drinks can help with hydration, energy, digestion, stress management, and other functions. They are also marketed as a way to counter obesity.