Functional Beverages: Overtaking The Supplement Industry
In 2003 Datamonitor stated
“Despite comprising the largest segment of the nutraceuticals industry,
supplements are set to see a slowdown in growth over the next five years.
While manufacturers surveyed
agreed the supplements category is an important segment of this market,
slightly more believe that functional beverages will be "very" or
"quite" important five years from now than believe the same of
supplements.
Indeed, 86% believe that
functional beverages will be "very" or "quite" important in
five years' time, compared to 73% for 2003. Source: Datamonitor,
"Functional Food, Beverages and Supplements - Inside-Out Health and
Beauty" (DMCM2100)
Mintel (2005) projects that the
wellness/functional beverage sales industry will grow from $10 Billion in 2004
to $12.8 billion in 2009.
Survey respondents believing functional categories are/will
be "very important" or "quite important", 2003-08
Datamonitor, "Functional Food, Beverages and Supplements - Inside-Out Health and Beauty" (DMCM2100)
Functional Beverages: Market Overview
Statistics reveal that the fastest growing beverage segment in the
United States between now and 2008 are projected to be wellness/functional
beverages. This segment is on track to account for 85% of incremental beverage
sales growth going forward.
The better-for-you functional beverage category is
making tremendous headway with consumers according to Euromonitor International. Approximately $40 billion in beverages
were sold in the better-for-you functional beverage category in 2005, with that
number expected to grow to more than $43 Billion this year (2007) and more than
$53 Billion in 2010 in the United States alone.
“Americans have a growing
interest in beverages that do more than just taste good and refresh,” said John
Sicher, editor of Beverage Digest. The
idea of a beverages function to merely quench thirst is a thing of the past as
beverages are the ideal delivery system for dietary supplements and
nutraceuticals targeting a variety of health and wellness conditions. Consumers are not only more willing to
experiment with beverage products than with food products but they are willing
to pay a premium price.
Consumers know their health is important and / or
in trouble. Drinks with added health
benefits are becoming the most popular globally as consumers increasingly
desire beverages that claim to enhance their health and wellness.
The Japanese have one of the world’s highest per capita expenditure levels of
functional foods and beverages $119 per capita in 2006, compared to $95 in the
US according to Euromonitor.
The Enhanced Water Industry: Overview
As we see the enhanced water
segment growing we see a new beverage category emerging. As Allen
Gibson beveragestocks.com said The Nike of the enhanced water world
could be waiting in the wings.
Japan
set the pace and now the enhanced fortified water segment is recognized as
being the fastest growing category in both the U.S. and Europe. Companies such as Gatorade (maker of Propel)
and Energy Brands (VitaminWater) have reported annual rates of sales increase
of approximately 200% over recent years.
Consumers
want their water to be more… YES! -- a whole new water category has arrived and
is growing…waters that promise health benefits beyond mere hydration. Water that is specifically designed to answer
consumer’s growing desire for lifestyle enhancing products that will help them
address their top medical wants and needs…obesity, weight loss, heart health,
cancer, digestion endurance and have more energy.
Enhanced
waters have a broad appeal because everybody knows they need to drink more
water but are tired of plain water. While a flavored water maybe considered enhanced, which is enticing to
this group, they do not offer health benefits. It is the nutritionally fortified waters that have the greatest appeal
as consumers want to target specific health concerns. This is part of a more
general trend towards personalized nutrition.
Consumers
are buying products that make specific health claims rather than claiming to be
healthy in general. As reported in
BrandWeek magazine in February 2007, John Sicher, editor of Beverage Digest,
stated that "The next phase of growth in the water business is in
enhanced, flavored waters. There's a
huge opportunity for growth." Beverage Marketing Corp. projects those U.S. sales of enhanced waters
for 2006 will represent a 49.6% average annual rate of growth over the
preceding five years.
Enhanced
water may be still considered a niche market now, but that's what experts
called plain water 10 years ago. Sales
for the entire category are forecast to double to $5.6 billion by 2010, says Nutrition Business Journal. It is
already the fastest-growing market segment according to research by Beverage
Marketing Corp. (BMC) in New York.
Functional Waters Are The Latest 'Must-Have' Lifestyle Products.
Both
the beverage-drinking patterns and overall health of U.S. adults have change
considerably over the past several decades. In the 1970’s Americans got 6-8% of their daily calories from drinks,
but today 21% of their daily calories come from beverages. Not counting that what comprises that 21% may
be a major cause of the alarming obesity epidemic.
Rising waters sinking sodas…There was a time, and
not so long ago, when the beverage industry was defined by soft drinks
--typically carbonated soft drinks laden with sugar and colorants. The shift in the industry has been so
dramatic that the lines of once- firmly defined categories, such as soft
drinks, are becoming blurred. Consumers are increasingly
turning to bottled water over soft drinks, and even over juices which without
the fiber present in the fruit to slow down the absorption of glucose have far
too much sugar.
“Fortified,” “functional,”
“nutraceutical”, whatever the category name, these nutritionally supplemented
waters carry the most motivation for consumers to drink them. Besides, just as a telephone can no longer be
just a telephone, health conscious consumers want more from their water.
According to Euromonitor
International, from year 2005 to 2010 sales are expected to increase over 100%
industry experts believe it will happen much sooner.
In fact they are fast making
serious inroads into the beverage category and reclaiming premium price points.
Fortified waters have a broad appeal because they do not contain the calories
consumers are trying to avoid. Additionally everybody already knows they need
to drink more water and now they can have the added nutritional benefits as
well. This is part of a more general
trend towards personalized nutrition, whereby consumers are buying products
that make specific claims rather than claiming to be healthy in general.
According to New Nutrition Business Magazine, a key factor for success in the
enhanced marketplace will be keeping water free of calories. They believe
“Fruit 2.0’s meteoric sales rise from $15 to over $100 million in three years
had more to do with the brand’s combination of taste and zero calories than
with the vitamins in the product. That was a hard lesson for the makers of
“Clearly Canadian”, one of the pioneers in the enhanced water field, whose
sales dropped significantly after consumers started counting calories.
We are expecting this trend
to grow increasingly.” quoting Gary Roethenbaugh of Zenith International who
further predicts that wellness functional waters will continue to eat into the
soft drinks and juices market. "Enhanced waters are also likely to steal
some of the market from sports drinks and energy drinks because the consumption
occasions are very similar," he notes. "And as healthier lifestyles
become more prevalent, both the bottled water and enhanced water categories
should benefit. The real losers are likely to be carbonated soft drinks and
traditional juices."
Customer
loyalty to brands in the standard bottled water market is low, but is shown to
be higher in the enhanced market. Firms
such as Danone and Nestlé have developed calcium-enhanced waters in Europe,
while in the U.S. companies such as Glaceau offer a variety of nutrient
enriched waters. Large firms such as
Pepsi and Coca-Cola have turned to flavored waters in an attempt to distinguish
themselves.
Let the branding begin…
As competition has become
fiercer in the bottled water market, companies have increasingly turned to
enhanced waters for added sales and brand distinction. A big appeal of such products for
manufacturers, and investors, are the enhanced profit margins they offer, as
well as the chance to develop brand loyalty among consumers – something which
plain bottled water hasn’t achieved.
If you can deliver an efficacious
product that delivers real health benefits to the consumer, there should be
lots of room in a growing market that is not dominated by the majors like the
soda market is, at least not yet. The
Nike of the enhanced water world could be waiting in the wings. By Allen Gibson beveragestocks.com
A
key to any brand’s success in this market will be developing consumer loyalty.
To do that, suggest the experts, you must get the consumer to associate your
product with specific health benefits as well as creating positive feelings and
experiences. The rise of nutraceutically-enhanced water offers an obvious
opportunity to do just that. Leading firms are seeking to differentiate
themselves as soon as possible in order to capture market share.
The
Japanese beverage market is head of the curve on this trend. They are marketing
drinks for anything from stress busting to enhancing beauty. Firms in the U.S.
are catching on and adding healthy ingredients to their domestic and
international products. For instance, Danone and Nestlé have marketed
calcium-enhanced waters in Europe.
The
enhanced fortified water segment is recognized as being the fastest growing
category in both the U.S. and Europe. Companies such as Gatorade (maker of Propel) and Energy Brands
(VitaminWater) have reported annual rates of sales increase of approximately
200% over recent years.
Currently
the enhanced fortified water segment, while accounting for 4% of the total
dollars sale of total bottled water, contributed 10% of total category
growth. Though the water companies for
the most part do not break out sales of enhanced waters, the size of the United
States market is estimated to be close to $2 billion and growing exponentially.
With such big growth, it’s
no surprise that the major players are piling in. Coke and Pepsi have
top-selling distilled waters and both are now expanding those brands with
enhanced water lines called Aquafina Essentials and Dasani NutriWater. Then
there’s Energy Brand’s “Glaceau VitaminWaters,” with a dozen drinks in a
rainbow of colors, each with a name that promises more than just water- like
"determination," and "focus.” Other brands diving in include
Gatorade, FUZE, Long Life Beverages, Speedo and even pharmaceutical company
Baxter International, whose “Pulse” has a women's formula, for instance,
"to reduce the occurrence of symptoms associated with menopause."
The company, which produces
bottled water brands including Vittel and Nestlé Aquarel, wants to expand into
flavored water and functional beverages this year. Nestlé Waters is looking to
bolster its presence in the enhanced water category after a solid performance
from its core business in 2006, its chairman and CEO, Carlo Donati, said (6
March 2007).
"To maintain profitable
growth, we will now expand our presence in the sector of 'water +' and more
added value healthy beverages," Donati said. "In this way, we will
contribute of making Nestlé a major global player in nutrition, health and
wellness."
Present
Customer loyalty to brands in the enhanced bottle water market is considerably
higher than loyalty to standard bottled water. Companies such as Gatorade
(maker of Propel) and Glaceau (maker of VitaminWater) have reported annual
rates of sales increase of approximately 200% over recent years. Enhanced water offerings include Tropicana
Fruit Squeeze, Aquafina Alive, Gatorade Propel, Aquafina Flavorsplash, and SoBe
LifeWater. Gatorade Propel has been
notable for its strong sales growth, surpassing $100 million in annual revenue
as just a few examples.
Fortifying With Fiber
Functional ingredients and innovative technologies
are transforming today’s beverages into sophisticated Nutraceutical value-added
delivery systems. The future of the beverage industry seems bright with
emerging categories. In fact according to Forbes fiber is one of the nine
essential nutrients. In addition to helping to address many of the major diseases of our
time -- including diabetes, heart disease, and cancer -- fiber helps to
increase satiety, reduce hunger, and actually decrease caloric intake.
Ingredient suppliers are helping beverage makers
transform mass market beverages into healthful drinks and condition-specific
formulations with double and even triple-digit growth. According to Stagnito’s New Product Magazine
(September 2006) New Product Development Survey: 64% of those polled focused on
healthy, and 60 % on convenience, 53.8% on vitamins and minerals, 52.3% on ethnic, 43.1% on fiber 35.4% on low
calorie.
FiberWater contributes significantly to your daily
fiber intake to ensure that you live healthier.
FiberWater provides (six) 6 grams of a proprietary fourmulation of seven (7) fibres.
Look at how much food you would have to eat equivalent to that same six (6) grams.
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