Functional Beverages Market Size, Competitive Landscape and Market Forecast - 2029

Global Functional Beverages Market is Segmented By Product Type (Energy Drinks, Functional Juices, Functional Water, Dairy Alternative Beverages, Others), By Distribution Channel(Supermarkets/Hypermarkets, Convenience Stores, Online Sales, Others ), By Region (North America, South America, Europe, Asia Pacific, Middle East & Africa) – Share, Size, Outlook, and Opportunity Analysis, 2022-2029

Market Overview:

A functional beverage is classified as a conventional liquid food marketed to convey product ingredients or supposed health benefits. Functional beverages contain nontraditional ingredients like raw fruit, minerals, herbs, probiotics, and some artificial ingredients. It provides health benefits beyond their nutritional value and it positively affects on body and mind.  The rise in the number of fitness enthusiasts and growing consumer inclination towards a healthy lifestyle is expected to be the key growth drivers of the functional beverages market. Increasing demand for innovative products, like plant-based and lactose-free beverage products, drive the market study, while the inclusion of CBD-infused functional beverages is expected to be the opportunity to the future market. The global functional beverages market is valued at USD 128,000 million in 2020 and is forecasted to reach USD 208.3 billion by 2029, growing at a CAGR of 7.5i% during the forecast period (2022-2029). However, the threat from other alcoholic beverages, like wine, is one of the major hindering factors to the Functional Beverages market.

 

Market Dynamics:

Increasing demand for healthy hydration products

The progressive inclination of consumers toward health-oriented beverages has involved probiotic food products as a requisite in the list. In addition, the sale promoting tag lines, such as “ready to drink,” “on the go,” and other convenience factors, such as favorable packaging altogether served by beverages, further augments the demand for functional beverages. Consumers have started to prefer functional drinks over fruit juices and carbonated drinks. 34% of 18–24-year-olds consume energy drinks regularly. 24% of consumers say they eat or drink products that contain probiotics. With consumers now increasingly aware of the health implications associated with soft drinks categories, concerned drinkers are frequently shunning vilified categories, like carbonates and juices, in favor of ‘healthier choices, such as soymilk, probiotics, and other functional drinks. Consumer education has been the key factor behind the rising demand for healthy hydration drinks. The trend of healthy hydration owes its success to the growing awareness toward fermented drinks with natural ingredients and the increasing acceptance of consuming probiotics. Awareness of digestive health is another important trend to watch in the coming year. Consumers are turning to drinks with pre-and post-biotics that help fortify their gut health. Drinks that incorporate both prebiotics and probiotics are increasing in popularity. Drinks that incorporate fiber are also adding to the promotion of digestive health.

On the other hand, risks associated with energy drink consumption and availability of the healthy substitute are likely to hold back the growth of the functional beverages market during the forecast period.  For instance, the major health issues associated with energy drink consumption are primarily related to caffeine content. Excess consumption of caffeine can cause hypertension, palpitation, dieresis nausea, central nervous system stimulations, and vomiting.

Market Segmentation:

The energy drinks segment is anticipated to expand at a CAGR of 7.5%

Energy drinks provide instant energy along with providing mental and physical stimulation. The main ingredient, which helps in providing stimuli, is caffeine. Taurine is another major component, which is essential for cardiovascular function and skeletal muscle development. Various manufacturing companies are focusing on innovations and launching organic energy drinks with different flavors, which meet up the nutritional demand of consumers, which further garner the growth of functional beverages through the energy drink segment. In 2020, PepsiCo launched a new functional beverage, Driftwell, which it claims is designed to help consumers relax, unwind and de-stress. It contains L-theanine, an amino acid commonly found in tea leaves that is said to promote relaxation without drowsiness, as well as magnesium, and it has a spa-water-inspired flavor with hints of blackberry and lavender.

Based on distribution channels, supermarkets and hypermarkets held the highest market revenue share of XX% in the year 2020. Supermarkets and hypermarkets accommodate a variety of products including functional beverages, grocery products, and merchandise under one roof. Hypermarkets allow customers to satisfy all their shopping needs. Supermarkets and hypermarkets focus on maximizing product sales to increase their profit margins. Supermarkets effectively display a variety of functional beverages products of different brands. In North America and Europe, supermarkets and hypermarkets are the most preferred retail outlets for the purchase of consumer goods. The convenience stores segment is expected to grow with a CAGR of XX% during the forecast period. In 2021, Plant-based beverage Koia, announced that their products will be nationally distributed in 7-Eleven convenience stores in the United States. Over 60% of consumers come to 7-Eleven for beverages, making it critical for the company portfolio to match their needs of living healthy lives

Geographical Penetration:

The Asia Pacific is expected to be the fastest growing region during the forecast period

The high incidence of cardiovascular disease, osteoporosis, and arthritis, coupled with the growing demand for convenience beverages and the changing lifestyle among Asian consumers, is the major driver for the growth of functional energy drinks, fortified/functional plant-based, and malt-based hot drinks sales in the region. Furthermore, due to the high prevalence of diabetes in countries like India and China, consumers are becoming more aware of the importance of a healthy diet and active lifestyle, promoting the consumers to prefer natural sweeteners, such as stevia beverages. According to the International Diabetes Federation, India was home to 77 million diabetes patients in 2019, the second-largest in the world. By 2030, the number is predicted to reach 101 million. As per the recent findings of the N L Dalmia Institute of Management Studies and Research, the consumption of energy drinks in India is projected at 20-22 million cans. About 65 percent of the drinkers are between 13- and 35-year-old age group, with males being approximately 65% of the overall market. Thus, companies like PepsiCo Inc. and Coca-Cola are committed to removing artificial ingredients and reducing the sugar content in their products.

North America is expected to hold a market revenue share of XX% in the year 2020. The product market in North America remains largely unaffected by changing consumer attitudes, in spite increase in preference for more natural ingredients. In addition, the market growth in this region is driven by an upsurge in demand from young adults and athletes. The United States had about 140,000 athletes, coaches, and umpires out of a workforce of 114 million in 2019. That's about 1,228 per million population. In the United States, Red Bull, Bang, Powerade, Monster, and Gatorade account for 51% of the functional beverages market.

Competitive Landscape:

The functional beverages market is fragmented. The functional beverage market is competitive and comprises numerous regional and international competitors. Players are also extensively focusing on providing consumers with innovative offerings while including functional benefits in each of their products. Furthermore, while engaging the consumers with innovation and expansion strategies, key players are capitalizing on the market revenue. In 2020, OWYN announced a growth investment round led by PowerPlant Ventures. With the investments, PowerPlant Ventures joined Clearlake and Halen Brands as Partners to Accelerate the Growth of OWYN, the company’s leading Plant-Based Protein Beverage and Functional Nutrition Brand. In 2019, 7-Eleven had introduced a new sugar-free energy drink with L-Theanine, called Triton. The drink contains caffeine and the amino acid L-theanine, both sourced from green tea leaves. It also contains B vitamins, ginseng, taurine, guarana, and amino acids. In 2019, GacLife launched a line of seven daily health beverages that aid in sleep, skin health, energy, relaxation, and detoxification.

COVID-19 Impact: Positive impact on the functional beverages market

The pandemic has accelerated an already growing trend of health awareness in public. People are looking for food and beverages that can boost immunity and decrease the chances of contracting the virus. The pandemic has accelerated the substitution of sugary drinks and soft drinks with functional beverages to curb the effects of COVID-19. Surveys have found that a majority of people say that their health consciousness has increased significantly due to the COVID-19 pandemic and that they plan to change their diets as a result. In June 2020, 80% of consumers said they were planning to eat or drink more healthily because of COVID-19. Research suggests that vitamin C and omega 3 are the ingredients most associated with immune health. The pandemic has increased the visibility of functional beverages, especially in online stores and health store websites. The pandemic is expected to accelerate the online market for functional beverages in 2022 as consumers become accustomed to buying their products online. Social distancing guidelines are likely to remain in effect for part of 2022, so online sales are expected to remain high.

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