Major players in the functional beverages market are Danone, Clif Bar & Company, Universal Nutrition, Cloud 9, The Coca-Cola Company, Monster Beverage Corporation, Arla foods, National Beverage Corp, Cloud 9, and Nestle. The Global Functional Beverages Market is expected to decline from USD 128.66 billion in 2019 to USD 125.39 billion in 2020 at a compound annual growth rate (CAGR) of -2.54%. The decline is mainly due to the COVID-19 outbreak that has led to restrictive containment measures involving social distancing, remote working, and the closure of industries and other commercial activities. The entire supply chain has been disrupted, impacting the market negatively. The market is then expected to recover and reach USD 158.28 billion in 2023 at CAGR of 8.08%.
The functional beverages market consists of sales of functional beverages and related services. Functional beverages are non-alcoholic drinks which contain non-traditional ingredients such as vitamins, minerals, dietary fibers, probiotics, and added fruits. Function drinks include energy drinks, sports drinks, enhanced fruit drinks, and functional bottles water.
North America was the largest region in functional beverages market in 2019. Asia Pacific was the second largest market in 2019. In September 2019, Celsius Holdings, the maker of fitness drink Celsius announced the acquisition of Func Food Group, a Finland-based functional food and beverage company for USD 24.6 million. The deal is expected to help Celsius to gain critical access to European Nutritional market by expanding the company's product portfolio. Func Food Group is leading producer of functional beverages and food that aid well-being.
The functional beverages market covered in this report is segmented by type into energy drinks; sports drinks; nutraceutical drinks; dairy-based beverages; juices; enhanced water; others. It is also segmented by function into health & wellness; weight management and by distribution channel into brick & mortar; online.
The wide availability of cheaper substitutes such as green tea, coffee, and fresh juice is hindering the growth of functional beverages market. The prices of functional drinks are comparatively higher than that of carbonated drinks and other available substitutes. Thus, the availability of substitute products is negatively impacting the growth of the market. For instance, dry beverage mixes, which offer functionality are cost effective and have low transportation costs. The ingredients in dry beverage mixes provide high nutrient replacing the need for functional beverage with low costs. Availability of cheaper substitutes thereby restrains the growth of the market.
The manufacturing of low-calorie natural sweeteners and the use of natural color & ingredients are promoting the growth of functional beverages. Major players dealing in the industry are adopting various strategies in order to meet consumer requirements. For instance, in October 2019, Drink Nutrient, functional beverage company launched a new line of beverages that are capable of providing 13 essential vitamins in a single-serve and easy-to-drink pack. The new line of the company's functional beverages includes Vitamins Booster+, Nutrient, and Vitamin Coffee, which is GMO, gluten, acrylamide-free and contains no artificial ingredients.
Increasing awareness of health is anticipated to propel the demand for functional beverages over the forecast period. Functional beverages help to enhance various body functionalities including the management of heart rate, digestive health, immune system, and weight management attributing to the presence of vitamins, minerals, herbs, and amino acids. The consumers are increasingly shifting towards the consumption of functional beverages that contain ingredients to address these specific health issues.
According to Packaging Strategies journal epublished in August 2018, a major change in the beverage industry is moving toward functional beverages as consumers strive to improve health. Additionally, the rise of clean-label, organic, and non-GMO products are impacting the buying behaviors of the consumers. Therefore, the consumer preferences for functional drinks over carbonated drinks and fruit juices are projected to drive the demand for functional beverages over the forthcoming years.
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Ankur Gupta, Head Marketing & Communications