Beyond Booze and Coffee: The “Functional” Beverage Market Continues to Grow

“Functional” beverages are big business: The global functional beverages market size reached USD 175.5 billion in 2022 and is expected to hit USD 339.6 billion by 2030. This constitutes a compound annual growth rate (CAGR) of about 8.6% from 2023 to 2030 (source).

What exactly is a functional beverage?

A functional beverage is a (typically) non-alcoholic drink manufactured and marketed to highlight specific product ingredients or health benefits. This includes sports and performance drinks, probiotic and dairy beverages, plant milks, energy drinks and other caffeinated beverages, meal replacers, “smart” drinks, ready-to-drink teas, fortified fruit and vegetable drinks, enhanced waters and more.

Functional beverages often include nutrients and bioactive compounds – nutritive substances like minerals, vitamins, amino acids (AA), and omega-3 (ω-3) and omega-6 (ω-6) fatty acids in different percentages are included in the preparation of the beverage. These are designed to improve health performance and are touted to have beneficial effects on one or more functions of human body – immune defense systems, mental energy, cholesterol management, and other benefit associated with specific organs such as heart, liver, and eyes – as well as their inherent nutritional values. Wellness-aligned ingredients like CBD, adaptogens, and nootropics, some claiming to enhance mood or reduce stress and relax the consumer are also common.

Antioxidant compounds are another important group of elements added in the functional beverages. These typically fall into the category represented by “naturally functional beverages,” i.e., foods that naturally contain nutrients and bioactive compounds (as opposed to added or produced) that are beneficial to the improvement of health and wellness of consumers.

Functional Science

Proving the concrete effect of functional beverages, however, is close to impossible. Many of the ingredients mentioned above have been used in traditional medicine for thousands of years – turmeric, ginger, mushrooms, and ginkgo, for example, are a common part of global diets and remedies. The newer, lab-made “nootropics,” also known as “smart drugs” that are growing in use, as well as the many of the wellness ingredients like CBD and adaptogens, have promising but limited research behind them – especially as they relate to and mix with other ingredients.

Many brands don’t reveal the dosages of their active ingredients – usually to protect their recipes and IP – instead of sharing them as a proprietary blend. This too makes it hard to know exactly what you’re getting in your drink. Beverage brands therefore cannot make specific claims about a product’s ability to prevent or cure any disease or condition without getting flagged by the Food and Drug Administration (FDA).

This hasn’t discouraged their use, however, as consumers continue to look for alternatives to traditional drinks like coffee and alcohol.

The Functional Beverage Market

What are the key takeaways of the functional beverage market in 2024? Both the US and global functional beverage market is growing. Energy and sports are leading the way. Consumers are looking to gain multiple benefits like hydration, energy, and protein from their drinks – and new flavors and functions are being introduced every year. 

The functional beverages market therefore offers new product opportunities for companies to meet consumers’ expectations. This opportunity for retail and convenience stores to add functional beverages to their shelves, and to cater to new areas of the beverage market that are yet untapped.

Proper labeling is also important to ensure customers know just what they’re getting. As the functional beverage market continue to grow, so is NCCO here to help you grow right along with it.

Who we serve: Convenience Stores

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