Rising Health Awareness Fuels Global Growth of Functional Beverages Market

The shift towards functional beverages from traditional fruit juices and carbonated drinks, a growing trend in the beverage industry, is being driven by a heightened health awareness among younger consumers. This trend is underscored by consumers' willingness to invest in these beverages, even at higher price points, in pursuit of the various health and lifestyle benefits they promise. Functional beverages have gained traction by offering an array of advantages, including increased energy, enhanced hydration, improved cognitive function, boosted immunity, and improved sports performance. Notably, these beverages often feature attributes that align with consumers' desires for healthier choices, such as clean labels, natural and organic ingredients, reduced or eliminated sugar and calories, and vegan or plant-based formulations.

Beyond the traditional categories of digestive health and energy-boosting, the market for functional beverages is expanding to include mood-enhancing and relaxation-inducing options. Among middle-aged and elderly consumers, there is a rising interest in functional beverages that promote cognitive health, leading to increased popularity of stress-relief and sleep-enhancement beverages across various age groups. Consequently, global functional beverage sales are poised for substantial growth, projected to surge from USD 131.47 billion in 2022 to USD 147.7 billion in 2023, increasing by 12.4%, according to Global News Wire. Looking ahead, the market is anticipated to continue its ascent, reaching USD 224.99 billion by 2027, with a steady compound annual growth rate (CAGR) of 11.1%.

Source: Tridge, Global News Wire

Currently, North America commands the largest market share globally, largely attributed to heightened awareness of the health benefits offered by these beverages and a robust demand across the region. The United States (US), in particular, is witnessing a burgeoning number of ready-to-drink (RTD) and ready-to-freeze (RTF) beverage manufacturers, further fueling market growth. The US functional beverage market, valued at USD 50 billion and projected to achieve a CAGR of 5.8% between 2023 and 2026, as per Euromonitor, holds a substantial 27% share of global sales.

Among the various beverage categories, energy drinks and sports drinks stand out as the most popular, amassing impressive sales figures of USD 18.2 billion and USD 11.3 billion, respectively. However, there's a growing concern surrounding the caffeine and sugar content present in these beverages. While caffeine has traditionally been a key component of energy drinks, there's a rising awareness of its potential adverse effects. Consequently, an increasing number of companies are opting to replace caffeine with L-theanine, an amino acid known for providing sustained energy boosts and cognitive benefits minus the drawbacks often associated with caffeine.

Moreover, there's a noticeable trend among energy and sports drink manufacturers towards reducing or entirely eliminating added sugar to enhance the health profile of their products. A notable example is Pepsi's recent revamp of its Pepsi Zero Sugar soft drink in Jan-23, featuring a new sweetener system that not only preserves the beverage's refreshing qualities but also elevates its flavor profile. Monster Energy has also joined the zero-sugar movement, introducing Monster Energy Zero Sugar in 2023 as part of this broader shift towards healthier formulations. These efforts reflect a growing commitment within the industry to offer consumers healthier beverage options.

Source: Monster

Additionally, both European and Asian markets are poised for significant expansion. In Europe, heightened consumer demand and an increasingly health-conscious population are the driving forces behind this trend. As a result, the Europe, Middle East and Africa (EMEA) region is poised to grow at a CAGR of 7.8% reaching USD 58.3 billion in 2028. Meanwhile, in Asia, bolstered by rising per capita incomes, the functional beverage sector is primed for substantial development. Many functional beverage companies have launched creative products that have garnered strong interest among consumers. For instance, Milkis, a soft drink crafted by Lotte Chilsung, a prominent South Korean beverage company, harmoniously blends carbonation, milk, and corn syrup to create a refreshing, fizzy, sweet elixir. These regional dynamics collectively underscore the industry's potential for robust growth in the coming years.

The functional beverage market is poised for ongoing advancements over the next five years, with a pivotal role played by novel product introductions and innovative offerings. These upcoming releases promise consumers an even broader array of choices, spanning fresh flavors, innovative formats, and unique attributes. As awareness surrounding functional ingredients and the availability of these beverages continues to rise, their adoption is expected to expand further.

For further reading, follow the links below:

1. Zero-Sugar Market: Clean Eating and Health Oriented Diets

2. The Thirst for Alcohol-Free Beer Continues to Grow Globally as Health Consciousness Rises Among Consumers