Functional Beverages - US

Published by: Mintel International Group Ltd.

Published: Sep. 1, 2009 - 130 Pages

Table of Contents

SCOPE AND THEMES

What you need to know

Definition

Data sources

Sales data

Consumer survey data

Advertising creative

Abbreviations and terms

Abbreviations

EXECUTIVE SUMMARY

Market at a glance

Slowing growth in energy drinks and enhanced water impacts the overall market growth

Functional brands face intense competition both within and beyond the category

Supermarkets still lead in FDMx sales, other channels gaining

Youth drives market, but youth population to grow more slowly

Increased scrutiny of functional foods and beverages may hinder growth

Coca-Cola and PepsiCo lead, but smaller companies have managed to gain

Pace of new product activity peaked in 2008

Advertising focuses on performance

Key research findings

MARKET SIZE AND FORECAST

Key points

Figure 1: U.S. FDMx sales and forecast of functional beverages, at current prices, 2004-14

Figure 2: U.S. FDMx sales and forecast of functional beverages, at inflation-adjusted prices, 2004-14

COMPETITIVE CONTEXT

Key points

Ongoing recession negatively influences premium-priced functional beverages

Figure 3: FDMx prices for select non-alcoholic beverages, 2008

Interchangeable options create competition among functional beverages

Regular beverages’ inherent good-for-you profile creates competition for functional beverages

Competition from supplements and functional foods; high prices inhibit growth

SEGMENT PERFORMANCE

Key points

Figure 4: FDMx sales and forecast of functional beverages, at current prices, by segment, 2004-14

Figure 5: FDMx sales of functional beverages, by segment, 2007 and 2009

SEGMENT PERFORMANCE—FUNCTIONAL JUICE AND JUICE DRINKS

Key points

Still a default choice, fruit juices lose share to functional innovators

Sales and forecast of functional juice and juice drinks

Figure 6: FDMx sales and forecast of functional juice and juice drinks, 2004-14

SEGMENT PERFORMANCE—ENERGY DRINKS

Key points

Energy drinks cool down

Energy shots heat up, have more room for growth

Sales and forecast of energy drinks

Figure 7: FDMx sales and forecast of energy drinks, 2004-14

SEGMENT PERFORMANCE—ENHANCED WATER

Key points

Enhanced water epitomizes category’s strengths and weaknesses

Low- and no-calorie versions haven’t stemmed the decline

Sales and forecast of enhanced water

Figure 8: FDMx sales and forecast of enhanced water, 2004-14

SEGMENT PERFORMANCE—FUNCTIONAL SOY, RICE AND ALMOND-BASED DRINKS

Key points

Steady sales from a solid base

Value-added products have limited impact on segment

Segment promotion shifts to protein

Sales and forecast of functional soy, rice and almond-based drinks

Figure 9: FDMx sales and forecast of functional soy, rice and almond-based drinks, 2004-14

SEGMENT PERFORMANCE—FUNCTIONAL TEA

Key points

Increased competition from the broader tea market

Increased competition from other functional beverages

Recession hits RTD functional tea; Bagged/loose form presents an opportunity

Sales and forecast of functional tea

Figure 10: FDMx sales and forecast of functional tea, 2004-14

SEGMENT PERFORMANCE—FUNCTIONAL YOGURT DRINKS AND SMOOTHIES

Key points

Except for probiotics, high-priced yogurt drinks suffer

Fruit smoothies hold steady

Smoothie shops have indirect impact on RTD smoothies

Sales and forecast of functional yogurt drinks and smoothies

Figure 11: FDMx sales and forecast of functional yogurt drinks and smoothies, 2004-14

RETAIL CHANNELS

Key points

Other channels likely to continue gaining share from supermarkets

Figure 12: U.S. sales of functional beverage, by retail channel, 2006 and 2008

Wide choice of functional beverage retail channel purchasing options

Figure 13: Choice of retail channels to purchase functional beverages, by age, May/June 2009

RETAIL CHANNELS—SUPERMARKETS

Key points

Supermarkets have untapped potential in functional beverages

Figure 14: U.S. sales of functional beverages at supermarkets, 2004-09

RETAIL CHANNELS—DRUG AND OTHER

Key points

Mass and drug strong in emerging segments

Mass merchants win on price and, in some cases, selection

Drug stores dispense (energy) shots

Figure 15: U.S. sales of functional beverages at mass and drug channels, 2004-09

RETAIL CHANNELS—NATURAL CHANNEL/SPINS

Functional beverage sales in natural channel

Figure 16: Natural product supermarket retail sales of functional beverages, at current prices, 2007-09

Figure 17: Natural product supermarket retail sales of functional beverages, at inflation-adjusted prices, 2007-09

Natural channel sales by segment

Figure 18: Natural product supermarket retail sales of functional beverages, by segment, 2007 and 2009

Brand performance: Functional beverages in natural channel

Despite decline, GT Kombucha continues to surge

Other brands with notable growth

Figure 19: Manufacturer brand natural supermarket sales of functional beverages, 2007 and 2009

MARKET DRIVERS

Key points

On balance, rising obesity rates a negative driver for functional beverages

Figure 20: Percentage of population aged 20+ who are overweight, obese or extremely obese, 1988-2006

But, manufacturers can ride the ongoing consumer trend toward wellness

Figure 21: Reasons for watching/controlling diet, 2004 and 2009

Youth drives market, but youth population to grow more slowly

Figure 22: Personal incidence of drinking energy drinks among teens and adults, by age, 2003-08

Figure 23: U.S. population of teens aged 12-17, 2004-14

Figure 24: Population aged 18 or older, by age, 2004-14

Hispanics are becoming increasingly important to functional beverages

Figure 25: Population, by race and Hispanic origin, 2004-14

Increased scrutiny of functional foods and beverages may hinder growth

COMPANIES AND BRANDS

Key points

PepsiCo and Coca-Cola lose ground

One-brand companies do comparatively well

Figure 26: FDMx functional beverage sales of leading companies, 2008 and 2009

BRAND SHARE—FUNCTIONAL FRUIT JUICE AND JUICE DRINKS

Key points

Mainstay brands lose share in an increasingly difficult market

New generation of fusion brands gains share

Functional line extensions meet with mixed success

Figure 27: FDMx brand sales of functional juice and juice drinks in the U.S., 2008 and 2009

BRAND SHARE—ENHANCED WATER

Key points

Market share consolidates in declining segment

Segment leaders hit hard by economy and health concerns

Low- and no-calorie versions of leading brands have some success

Line extensions from brands outside the segment fizzle

Figure 28: FDMx brand sales of enhanced water in the U.S., 2008 and 2009

BRAND SHARE—ENERGY DRINKS

Key points

Red Bull remains the leader, but others closing the gap

Energy shots give users and segment a boost

Figure 29: FDMx brand sales of energy drinks and energy shots in the U.S., 2008 and 2009

BRAND SHARE—FUNCTIONAL TEA

Key points

AriZona asserts its dominance

Snapple struggles to keep up

Figure 30: FDMx brand sales of functional teas in the U.S., 2008 and 2009

BRAND SHARE—SOY, RICE AND ALMOND-BASED DRINKS

Key points

Silk plays the role of segment leader, now focuses on ‘feeling of strength’

Enhanced wellness soymilks generate limited appeal

Strong showing for private label

Figure 31: FDMx brand sales of functional soy, rice, and almond-based drinks in the U.S., 2008 and 2009

BRAND SHARE—FUNCTIONAL YOGURT DRINKS AND SMOOTHIES

Key points

Specific functional claims, probiotics drive select yogurt drink brands

Smoothie brands gain by holding steady

Figure 32: FDMx brand sales of functional yogurt drinks and smoothies in the U.S., 2008 and 2009

BRAND QUALITIES

Functional beverage category built by challengers

What’s outside counts too

Glacéau Vitaminwater

AriZona

INNOVATION AND INNOVATORS

Pace of new product activity peaks in 2008

Figure 33: Number of new product launches in U.S. functional beverages, by product segment, 2004-09

Functional claims diversity expands at a rapid pace

Figure 34: Functional claims made by new U.S. functional beverages, 2004-09

Multiple benefits

Cardiovascular health

Digestive health

Immunity

Brain

A functional beverage for every imaginable function

ADVERTISING AND PROMOTION

OVERVIEW

Performance and accomplishment at the core of most brand promises

Figure 35: Measured advertising spending for select functional beverage brands, 2007 and 2008

Ocean Spray Cranergy gives busy moms a boost

Figure 36: Ocean Spray Cranergy, television ad, 2009

DanActive promises to keep users productive by strengthening immunity

Figure 37: DanActive, television ad, 2009

Red Bull takes performance to the extreme

Figure 38: Red Bull, television ad, 2009

Glacéau Vitaminwater makes performance playful

Figure 39: Vitaminwater, television ad, 2009

Juicy Juice targets moms’ emotions

Figure 40: Juicy Juice Brain Development, television ad, 2009

Silk shifts message to the positives of soy protein

Figure 41: Silk, television ad, 2009

FUNCTIONAL BEVERAGE PURCHASES: INCIDENCE, FREQUENCY AND TYPE

Key points

Purchase incidence for functional beverages continues to grow

Figure 42: Purchase incidence of functional foods and beverages, by gender, May/June 2009

Younger adults considerably more likely to buy functional drinks

Figure 43: Purchase incidence of functional foods and beverages, by age, May/June 2009

Orange juice tops the list of functional beverages tried

Figure 44: Types of functional beverages purchased in past three months, by gender, May/June 2009

Younger adults drink a far broader array of functional beverages

Figure 45: Types of functional beverages purchased in past three months, by age, May/June 2009

Children are a moderate factor in the purchase of some functional drinks

Figure 46: Types of functional beverages purchased in past three months, by presence of children, May/June 2009

Frequency of functional beverage consumption

Increasing frequency among light users may be best opportunity for growth

Figure 47: Frequency of functional beverage consumption in the past month, by age, May/June 2009

ATTITUDES TOWARDS DIET, HEALTH AND LIFESTYLE

Key points

Americans hold the best intentions for healthy eating…

Figure 48: Attitudes towards diet and health, 2003-04, 2005-06, 2008-09

…but actual behaviors and results tell a different story and define the opportunity for functional foods and beverages

Figure 49: Attitudes towards healthy lifestyle, by gender, May/June 2009

Responses by age point to lifestage opportunities

Figure 50: Attitudes towards healthy lifestyle, by age, May/June 2009

REASONS FOR DRINKING FUNCTIONAL BEVERAGES

Key points

Many reasons for consuming, but taste rises to the top

Figure 51: Reasons for drinking functional beverages, by gender, May/June 2009

Motivations differ by age

Figure 52: Reasons for drinking functional beverages, by age, May/June 2009

FUNCTIONAL BEVERAGES OPINIONS AND INTEREST

Key points

Government involvement welcomed, likely to increase, impact uncertain

Recession appears to be curtailing category growth

Figure 53: Opinions towards functional foods, by gender, May/June 2009

Figure 54: Opinions towards functional foods, by age, May/June 2009

Functional beverage drinkers seek out only a handful of ingredients

Figure 55: Role of functional ingredients in functional beverage purchase decisions, May/June 2009

Desired benefits in functional beverages

Figure 56: Desired benefits in functional beverages, by gender, May/June 2009

Figure 57: Desired benefits in functional beverages, by age, May/June 2009

ATTITUDE TOWARDS FUNCTIONAL BEVERAGES

Key points

Family-size packaging could help functional brands win share

Concern over sweeteners a drag on functional beverage growth

Match and mix

Figure 58: Attitudes toward packaging, innovation, and sweetener in functional beverages, by age, May/June 2009

Figure 59: Attitudes toward packaging, innovation, and sweetener in functional beverages, by presence of children, May/June 2009

More functional food and beverage users increasing consumption than cutting back

Figure 60: Incidence of using more or less functional food/beverages compared to a year ago, by age, May/June 2009

Reasons for using more functional beverages compared to a year ago

Figure 61: Reasons for using more functional beverages than a year ago, by gender, May/June 2009

Figure 62: Reasons for using more functional beverages than a year ago, by age, May/June 2009

Cost tops reasons for consuming less, too much sugar comes in second

Figure 63: Reasons for using fewer functional beverages than a year ago, by gender, May/June 2009

IMPACT OF RACE AND HISPANIC ORIGIN

Key points

Few dramatic differences across groups

Figure 64: Purchase incidence of functional foods and beverages, by race/Hispanic origin, May/June 2009

Figure 65: Reasons for drinking functional beverages, by race/Hispanic origin, May/June 2009

Figure 66: Desired benefits in functional beverages, by race/Hispanic origin, May/June 2009

Figure 67: Attitude toward packaging, innovation, and sweetener in functional beverages, by race/Hispanic origin, May/June 2009

APPENDIX: TRADE ASSOCIATIONS

Abstract

The explosive growth of the functional beverage market over the first few years of this decade might well be described as a youth movement. Many of the biggest successes—Red Bull, Vitaminwater, AriZona, and a handful of others—are brands that have connected powerfully with teens and young adults: a group of consumers open to beverage choices different from those their parents reached for a generation earlier.

The key to success for many of these functional beverage brands has been a combination of brand imagery, youthfulness, and taste. That these products promise specific functional benefits has also been part of the mix, certainly, but often in more of a supporting role. A brief review of discussion on Vitaminwater’s Facebook page, for instance, reveals that most brand users choose their favorite varieties based on flavor, not the benefit promised or vitamins included.

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