Opportunities and Risks in the Functional Beverage Market, 2021

October 8, 2021  •  David Pring-Mill

In the 21st century, the beverage industry has been testing out new products and approaches. Instead of moving large volumes of proprietary syrups and sugary water, the industry has been trying to: 

  • Sell beverages with a purported healthy or “functional” benefit, often in smaller pack sizes and with premium pricing.
  • Substitute known flavors and brands with products that could be characterized as “less unhealthy.”
  • Churn its portfolio regularly and ruthlessly, in order to capitalize on high growth trends, get out at the outset of a sales decline, and jump to the next trend, meeting the consumer wherever they are, both in terms of trends and channel.

Arguably, all of these maneuvers are aligning the beverage industry closer with public health, but at the very least, the industry is becoming more closely aligned with the ever-changing interests of the consumer.

This is fundamentally different from the old business model of making the exact same product, marketing it relentlessly, distributing it broadly with a high degree of control, and pointing to that consistency of both product and consumption as indicators of quality/success.

If consumers are sincere in their expressions of wanting to live healthier and more sustainable lifestyles, then the massive non-alcoholic beverage market, which could be worth $1.60 trillion by 2025, will continue to produce more variety as well as ripple effects globally.

This is a big opportunity. It requires best practices, careful analysis, and long-term vision.

“Opportunities and Risks in the Functional Beverage Market, 2021” is an up-to-date, in-depth, strategic report from Policy2050. It focuses on the category opportunities and risks in the functional beverage space during the time of COVID-19.

Key Benefits of this Report

As multinational consumer goods companies internally review their portfolios of brands and products to achieve financial goals and resilience during and after the pandemic, they will increasingly look at “health/wellness” and “functional” claims as potential growth drivers.

An understanding of the global market trajectory of functional beverages could prove immensely valuable, even for companies in other CPG categories and for retailers scrutinizing consumer trends that might drive footfall and impulse purchases.

Policy2050 reports differ from many other business information products because all of the data is scrupulously sourced, cited, and arranged under an actionable, strategic framework. Policy2050 presents data from different sources, so you can see how it compares, and more importantly, we tell the story behind the numbers. We connect the dots so that your organization can win.

Unlike the adjusted forecasts, modified pre-COVID research, and largely speculative reports on the market, the entirety of this report was written during the pandemic. It is grounded within the altered consumer behaviors, supply chain disruptions, portfolio reductions, category swings, and socioeconomic ripple effects resulting from the pandemic.

The report shows how some counterintuitive approaches are actually supported by data, and how the timing is perfect for an industry reorientation around public health.

This report analyzes the statements and activities of many beverage industry executives in the United States while also applying a global lens to functional beverages, drawing upon strategic examples from around the world. All in a quest to answer the following: What are the most compelling opportunities? What are the greatest risks, and how can these risks be mitigated?

In the highly concentrated yet diversified global beverage industry, functional beverages have become the most important category, so much so that it’s hard to define the category. Functional claims are now associated with nearly every type of beverage, new and old.

And yet, there are still distinct opportunities that will probably see high growth, sometimes followed by sharp declines. That has been the recent trend in the beverage industry. The most important thing is getting to wherever the consumer is, and getting there on time, with optimal flavor and function.

Policy2050 delivers candid evaluations of industry developments and addresses consumer trends with the level of precision that is deserved. After all, predispositions and behaviors that are sometimes depicted as pervasive actually vary between demographics and might even have nuances or seasonality. Consumer surveys sometimes reveal wishful or aspirational lifestyle considerations, but what is the context and what does the sales data really indicate?

This report contains approximately 30,000 words of qualitative and quantitative insights, structured as follows:

  • Executive Summary: Relevant and actionable insights are presented upfront.
  • The Category Opportunities section: Here, the report highlights new, evolving beverage categories and companies. It opens with a massive opportunity that has, thus far, been mostly overlooked. This section delivers intelligence that could potentially be used to outperform competitors. Many of the ideas contained within this report are easily extractable for the purposes of presentations.
  • The Risks section: Here, market dynamics are analyzed in-depth. Significant financial and legal risks are given the appropriate amount of consideration. Pandemic disruptions are assessed, and a wide-ranging list of functional beverage category risks is provided. Beverage companies can easily refer to this section for any internal SWOT analysis.

Above all else, Policy2050 reports aim to identify, analyze, and solve problems in ways that benefit society just as much as the bottom line. This overlap is increasingly essential to build and maintain brand equity, as many companies have found out in recent years.

This report will provide comprehensive answers to the following key questions:

  • How can multinational beverage companies factor in public health and sustainability concerns while pursuing category creation in the form of at-home/functional beverage machines? What are the pros and cons of this white space?
  • How can multinational beverage companies and startups alike shift the unique value proposition of certain beverage categories from energy to relaxation, and from indulgence to lifestyle alignment?
  • How might the pandemic act as a driver of beverage innovations, such as the powdered category, probiotics/prebiotics, and sugar-free options?
  • What specific qualitative and quantitative insights might be relevant to a beverage company attempting to export the Asian beauty drinks category to the Western market? What are the precedents in water categories?
  • What are the pandemic-related risks that could interfere with functional beverage manufacturing, marketing, and distribution?
  • How can beverage startups most effectively gain market share?
  • How should beverage brands support their functional product claims and respond to public criticisms or controversies?

Some of the executive quotes throughout this report have been very lightly edited for clarity.

For additional qualitative and quantitative insights, check out the Policy2050 companion reports:

“Consumer Trends, Diversification & Strategies in the Global Beverage Industry, 2021”

“Functional Beverage Market in Russia, 2021”

Target Audience

  • beverage companies of all sizes
  • health food manufacturers
  • grocery retail, ecommerce, distributors, and digital partners
  • investors and investment banks
  • public health organizations
  • government bodies and regulating authorities

Companies Mentioned in this Report

Companies mentioned in this report include:

  • Keurig Dr Pepper
  • The Coca-Cola Company
  • PepsiCo
  • Danone
  • Nestlé
  • Red Bull
  • Glanbia
  • Suntory
  • Karma Water/Karma Culture
  • Hint
  • SPI West Port
  • Super Coffee
  • Zenify/Phi Drinks
  • Moment
  • O2 Active Recovery
  • Olipop
  • Whole Foods Market
  • Innova Market Insights
  • Bringg
  • Molson Coors
  • Diageo

Methodology

Policy2050 excels at identifying the strategies and patterns within complex data that is gathered through exhaustive secondary and primary research. This process includes publicly available sources, such as annual reports, academic journals, consumer surveys, trade publications, industry symposia, and podcasts, along with interviews and inputs from a wide network of market experts and internal knowledge. Strategic perspectives are leveraged from across the value chain and from relevant tech vendors causing disruptions or reconfigurations in markets.

Information is filtered and validated through this lens of expertise and scrutiny, or contextualized to expose differences in results and industry disagreements. Perceptions of current trends, as reflected in reporting, often translate into actions and investments with consequences. The many hyperlinks included throughout this report help to ensure that important figures, strategic statements, and other market characterizations are easily and fully traceable.

All of this analysis is delivered within an actionable framework that outlines best practices, proposes innovations or adaptations, and extracts insights from case studies. Infographics and imagery are used to express key concepts and enliven this comprehensive overview where appropriate.

Media Kit

The compressed file above contains a copy of the press release alongside infographics, which can be freely used by the news media with attribution. The online press release is visible here.

Inquiries can be directed to david.pringmill@policy2050.com.

  1. ← Previous Article Consumer Trends, Diversification & Strategies in the Global Beverage Industry, 2021

    Next Article → Functional Beverage Market in Russia, 2021