Functional Drinks Market

The global Functional Drinks Market is valued at USD 201.2 Billion in 2022 and is projected to reach a value of USD 358.8 Billion by 2030 at a CAGR (Compound Annual Growth Rate) of 7.5% between 2023 and 2030.

Premium Insights

There has been a recent inclination towards appealing flavors. According to a survey, more than 40% of the consumers in the U.S. are likely to try drinks based on flavours and there is a growing emphasis on the relevance of immune system support, particularly given its link to general well-being. Younger generations, such as Millennials, seek functional advantages in their diets. To fulfil this expanding demand, Activia released their latest invention. The new Activia+ Multi-Benefit Probiotic Yoghurt Drink containS billions of live and active probiotics, which aid with intestinal health.5, plus are a good source (20% DV) of Vitamins C, D, and Zinc, which help the immune system.

Consumers are seeking for healthy and simple probiotic solutions today more than ever. According to a recent probiotic products projection analysis, the probiotic market is predicted to increase at a compound annual growth rate of 7.71% between 2022 and 2025, with 30% of customers searching for drinks supplemented with immune-boosting components. As the creator of the country's natural probiotic juice, GoodBelly is entirely focused on offering the finest quality probiotics in appealing and inventive formats, and these new product lines are a logical extension of the brand's expertise. For instance, to increase foot print in the UAE market, Dubai Energy Drink launched a stevia-based drink.

The rise in demand for immunity-boosting beverages owing to the COVID-19 epidemic is anticipated to increase demand for functional beverages such as electrolyte mixes. Because of the pandemic, consumers have become more conscious of improving their immunity, and it is expected that established immunity-boosting products will see unprecedented demand due to the growing importance of preventive healthcare, particularly in the minds of consumers. According to the Food Safety and Standards Authority of India, sales of immunity-boosting foods have soared by an estimated 20-40% since the country went into lockdown owing to the epidemic.

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Key Highlights

• North America is expected to witness significant growth between 2023 and 2030
• By type, the energy drinks category is expected to expand the fastest between 2023 and 2032.
• By distribution channels, the supermarket/hypermarket category is predicted to record the fastest CAGR between 2023 and 2030

Economic Insights

Functional drinks play a crucial role in revenue generation for the beverage industry as a whole. Changes in trade agreements and tariffs between countries can impact the import and export of functional drink ingredients and finished products. Also, natural disasters, political unrest, and health crises can disrupt supply chains, affecting the sourcing and availability of ingredients and finished products. Fluctuations in fuel prices, transportation costs, and logistical challenges can impact the distribution and pricing of functional drinks. The prices of functional drink ingredients can be influenced by factors like weather conditions, crop yields, and global commodity prices. Rising fuel prices can lead to higher transportation and energy costs for functional drink manufacturers. The cost of transporting raw materials to production facilities and distributing finished products to retailers or consumers can increase, putting pressure on profit margins.

Health crises like the COVID-19 pandemic can affect production facilities, workforce availability, and consumer behavior, leading to short-term fluctuations in demand and supply. Consumers' growing interest in sustainable products is driving companies to adopt eco-friendly practices throughout the supply chain.

Top Market Trends

1. Growing Demand for Healthy Hydration Products: The increasing consumer preference for health-oriented beverages has necessitated the inclusion of probiotic food products on the required list. In addition, sale-promoting taglines, such as "ready to drink" and "on the go," as well as other convenience factors, such as convenient packaging, all serviced by beverages, increase the demand for probiotic drinks, including kombucha. Consumers are beginning to favor functional beverages over fruit juices and carbonated beverages. Concerned drinkers frequently eschew vilified categories, such as carbonates and juices, in favor of 'healthier options,' such as soymilk, probiotics, and other functional beverages, as consumers are increasingly aware of the health implications associated with soft drink categories. The education of consumers has been the driving force behind the increasing demand for healthful hydration beverages. The success of the trend of healthy hydration can be attributed to the rising popularity of fermented beverages with natural ingredients and probiotics.
2. Prominent Participation of Players to Augment Growth: Due to rising awareness of the health benefits of functional beverages enriched with important health-enhancing components, such as vitamins, amino acids, and others, the global market for functional beverages is expected to experience a significant increase over the next year. Increased marketing efforts by market participants to promote functional beverages and the introduction of numerous new products are anticipated further to fuel the global market growth of functional beverages. To maintain their market dominance, the leading companies such as PepsiCo Inc., The Coca-Cola Company, and Fonterra Co-operative Group are emphasizing on introducing new products and expanding their product portfolio. Functional beverages are non-alcoholic and contain health-promoting constituents such as fruit or vegetable extracts, botanicals, minerals, vitamins, amino acids, and others. Functional beverages can improve immune health, vitality, memory, cardiovascular health, and weight loss.

Market Segmentation

The global Functional Drinks market can be categorized on the following: Type, Distribution Channel, and Regions. Based on Type, the market can be categorized into Energy Drinks, Sports Drinks, and Nutraceutical Drinks. Additionally, by Distribution Channel, the market can be split between Hypermarkets/Supermarkets, Specialty Stores, Online, and Others. Likewise, based on Region, the market is segmented into North America, Europe, Asia Pacific, Latin America, and Middle East & Africa.

Based on Type

Energy Drinks to Accommodate Maximum Market Share Due to Higher Caffeine Content

In 2022, energy drinks dominated the market. Caffeine provides stimulation, and taurine is essential for skeletal muscle development and cardiovascular function and is the primary constituent in energy beverages. Due to their high caffeine content, sophisticated economies like the United States and Canada favor energy drinks. In contrast, sports drinks are more prevalent in developing nations due to the growing prevalence of physical and sporting activities. Between 2023 and 2030, the sports drink market is anticipated to proliferate. The factors contributing to the segment's growth include the increasing popularity of fitness and healthy lifestyles, the proliferation of fitness centers and gyms, and the commercialization of sports events in countries such as China and India. Energy drinks provide immediate energy increases and physical and mental stimulation, whereas sports drinks are useful for reviving energy during athletic activity.

Based on Distribution Channel

Online Bookings to Express Dominion Owing to Better Integration of Technology

Between 2023 and 2030, the online distribution channel is anticipated to grow fastest. Increasing internet penetration in rural areas and a high adoption rate of online purchasing among youthful and working consumers contribute to the segment's growth. During the forecast period, the growing adoption of technology and the introduction of new user-friendly purchasing applications will increase demand for the online segment. Additionally, online purchasing is convenient and inexpensive. Shortly, the increasingly chaotic lifestyle and the rising number of working women in developing nations will increase the demand for functional beverages.

Based on Region

Asia Pacific to Lead Global Sales Owing to Changing Lifestyles and Increasing Popularity

The high prevalence of cardiovascular disease, osteoporosis, and arthritis, combined with the growing demand for convenience beverages and the changing lifestyle of Asian consumers, is the primary driver for the growth of sales of functional energy drinks, fortified/functional plant-based, and malt-based hot drinks. Moreover, due to the high prevalence of diabetes in countries such as India and China, consumers are becoming more aware of the importance of a healthy diet and active lifestyle, prompting them to favor natural sweeteners such as stevia beverages. According to the International Diabetes Federation, India will be one of the seven nations comprising South East Asia in 2022. Diabetes affects 90 million persons in South East Asia; by 2045, this number will rise to 151.5 million.

Therefore, companies such as PepsiCo Inc. and Coca-Cola are committed to eliminating artificial ingredients and reducing the sugar content of their products.

In 2022, the market in North America was growing rapidly. The rising prevalence of cardiovascular diseases, arthritis, and osteoporosis, along with the rising demand for convenience beverages and consumers' changing lifestyles, are the primary factors fueling the sales of fortified plant-based drinks and energy drinks. In addition, the regional market for functional beverages is expanding rapidly due to the growing awareness of nutrition-focused diets, particularly among millennials. Countries such as Canada and the United States adhere rigorously to health-conscious diets that include functional beverages.

Competitive Landscape

Numerous international and regional actors compete fiercely on the global market. Major corporations engage in strategic alliances, mergers & acquisitions, and joint ventures to acquire a market advantage. In addition, manufacturers concentrate on capacity expansions and R&D for new product development to offer consumers products that are on trend. In May 2021, PepsiCo introduced Soul boost, an effervescent water product infused with functional constituents. The novel beverage comes in two varieties: Ease and Lift. The Ease variant is used to promote relaxation, whereas the Lift variant is used to promote mental endurance.

The key players in the global Functional Drinks market include - PepsiCo Inc. (U.S.), The Coca-Cola Company (U.S.), Monster Beverage Corporation (U.S.), Red Bull GmbH (Austria), GSK PLC (UK), Nestlé S.A. (Switzerland), Dr Pepper Snapple Group (U.S.), National Beverage Corporation (U.S.), Meiji Holdings Company Ltd. (Japan), Koios Beverage Corporation (Canada) among others.

Recent Market Developments

• August 2022: Coca-Cola India introduced Limca Sportz, a glucose and electrolyte-based beverage, as a new n-fizz product. Limca Sportz, which is water-based, aids in the rehydration of athletes, exercisers, and those participating in high-intensity activities.
• May 2022: Koios has introduced six new variants of its functional beverage Fit Soda. Cherry Slushee, Strawberry Snow Cone, Mimosa, Pumpkin Spice, Sweet Tea Lemonade, and Blueberry Lemonade are among these varieties. This effectively doubles the number of Fit Soda varieties currently available
• March 2022: Cherry Blossom Sparkling Water is National Beverage Corporation's newest flavor. This Cherry Blossom flavor of LaCroix blossoms with the cherry blossom flower's joy, aroma, and tranquil essence.

Segmentation of the Global Functional Drinks Market