What’s Next in Functional Beverages?
The beverage industry is in the beginning stages of a new era. For the last several years, beverage brands have been “skating on ice” trying to meet the everchanging consumer demands for functional better-for-you packaged beverages that provide convenience. It really has become this “cat and mouse” game with beverage consumers becoming more selective in their purchases, thus forcing beverage brands to make adjustments.
Fact is, the beverage industry isn’t so much about invention as it is about innovation…
- Invention is creating a new thing.
- Innovation is creating something that has a lasting impact on the world.
The golden rule of CPG industry innovation is to build on previous innovations [incremental innovation]. If the market leader has X product features, then new product development seeks to create a new offering that has X+1 (or X+2) new product features. That might seem odd to anyone outside of the CPG industry, but do something too closely related to the market leader and people won’t take notice, but do something too novel and they’re confused. The path to wild success in the CPG industry is hitting that midpoint.
Right now, consumers are looking for packaged beverages that provide added functionality to their lives and/or enhance their overall wellness. While the “COVID-19 Effect” didn’t exactly start these beverage industry trends, it did accelerate them in many cases to a level that wouldn’t have been possible without that external shock. With that said, what are four trends in the beverage industry that could have market share reshuffling power in the near term?
After such a taxing last two years, consumers have started to prioritize their emotional state at an increasingly higher rate. Instead of the normal use occasions for functional beverages that typically surround eating, work, or workout schedules, you’ll begin to see new product development and marketing targeted towards a creating a desired vibe throughout the day.
Stress Support = Many consumers today find themselves overly stimulated, highly stressed, and unable to concentrate during the day. That’s why you are seeing beverage brands start launching functional drinks for stress support that address the issues of the modern consumer.
The market is heating up in two “formulation” approaches;
- Adaptogen beverages that include CBD
- Adaptogen beverages that don’t include CBD
Sleep (Relaxation) Support = If you haven’t noticed, CPG sub-category growth is closely correlated to things that are happening in society. The severe lack of sleep caused by the “COVID-19 Effect” or what became known as coronasomnia increased the consumer interest in sleep (relaxation) support beverages. You even saw PepsiCo create an offering in the nascent category last year called Driftwell.
Sexual Wellness = With the stigma around this topic fading away, I expect beverage brands (especially direct-to-consumer focused) to create compelling strategic narratives and move the sub-category away from “shady truck stop” offerings.
Energy (without the Plus) is Boring
I can’t talk about sleep (relaxation) support without mentioning an inverse trend, right?
Whether it’s ready-to-mix, packaged ready-to-drink (RTD), or foodservice beverages, consumers are continuing to seek more energy throughout their days. Americans are constantly in this animalistic “pursuit of more” by attempting to maximize our productivity. The simple fact that energy products give consumers a possible mechanism to achieve “more” within their daily lives should allow market participants to understand just how far this category can grow.
As life gets more complex, human nature will also look to create consolidation through desired effects for convenience.
- Is that “energy plus protein” for the morning occasion?
- Is that “energy plus focus ingredients” for those long days at the office/class?
Regardless, just being a great tasting energy drink or RTD coffee product that provides a boost of energy isn’t enough anymore.
If you’ve consumed enough of my content over the last few years, you’ll notice I will continuously mention personalized nutrition in one way or another. In my opinion, personalized nutrition is the future of functional CPG. What gets most “non-believers” tripped up about personalized nutrition is they only think about it in terms of getting to the stage of true personalization at n=1. Yes, this will be extremely hard to conceive and even harder to project from a mass commercialization standpoint. The closest seems to be Nestle Health Sciences, as it has a compelling set of current assets and massive capabilities to be bold towards this futuristic trend.
With that being the basis of the future, personalized nutrition has to start somewhere and the most logical place is with meal replacement powders and ready-to-drink (RTD) beverages. For those that might not be aware, the boring meal replacements of yesteryear focused on;
- Performance Nutrition = contains ingredients that seek to optimize fats, carbohydrates, and protein for sport or gym performance
- Adult Nutrition = contains ingredients that seek to optimize fats, carbohydrates, and protein for counteracting performance loss from aging
The boring meal replacements of yesteryear were created to form a false dichotomy that thought younger consumers only wanted to optimize for sport or gym performance and older consumers wanted to fight back “father time.”
Today’s modern wellness lifestyles are interested in achieving more in life. Convenience will also play a huge role in this trend, as consumers will be interested in getting their required daily nutrients in the most efficient way possible.
Alcohol Wants into the Hottest Party Around
Alcohol can never be healthy or functional, right? I think viewed through a binary lens you could say yes, but “healthier than conventional X alcoholic beverage” or “more functional than conventional X alcoholic beverage” is a real possibility.
That being said, consumer interest groups have already been attacking “healthier for you” alcoholic beverages that included added functionality like Molson Coors Vizzy Hard Seltzer. It’s still up in the air if the FDA and/or FTC decides to limit the product claims and marketing of said claims, but the product development train has already left the station.
Expect to see more alcoholic beverage offerings with live cultures, hydration bases like coconut water, antioxidant-rich fruits, adaptogens, and/or other natural ingredients to play into the “healthier for you” and functional CPG trends.
Final Thoughts | Bonus Trend: CRISPR
The ability to utilize CRISPR and other gene-editing techniques in agriculture could be a gamechanger. While early genetic modification (or GMOs) focused on creating more resistant crops to increase yields for the global food supply, CRISPR technology can achieve consumer-centric advancements like removing the bitterness from a nutrient-dense green vegetable or the pit in a cherry.
I know instantly talking about this subject matter, a lot of you are saying that’s not natural and thus dangerous. I totally hear you, but consider the positive product development aspects of being able to pack more nutrition into beverages without sacrificing on taste [which taste is always king…even in functional beverages].
CRISPR and other gene-editing techniques will be a huge part of our future life, which will inevitably include the beverages we drink, so I hope this bonus trend piqued your interest to explore more…