Function-Forward Beverages Drive the Next Wave of CPG Growth

As consumers continue searching for convenient, lifestyle-integrated formats for their nutritional routines, functional beverages are gaining greater share of the wellness market.

The total CPG beverage market is estimated to be $250 billion, growing at a CAGR of around 2%, reported Ben Lerman, vice president of brand growth consulting at data insights firm SPINS. Beverages making functional claims, however, are growing much faster than the beverage category as a whole. 

Energy drinks, for instance, grew 14% year-over-year in 2025, and ready-to-drink protein products grew at 13%. More than half (52%) of the beverage market today consists of products marketed for health or wellness; this is substantially higher than the total retail marketplace, where products with health and wellness claims account for 33% of sales.

“The category of health and wellness beverages is very fragmented, and there’s a lot of churn,” Lerman said. “There are thousands of new brands coming to market every year, but just a very small percentage of them grow past a million dollars by their second year in market.”

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The soda category grew at 4%, which Lerman attributed to the better-for-you soda boom. “This segment used to be a drag on the overall beverage category, and is now growing twice as fast as the total beverage market … Modern soda was a catalyst for a broader wellness boom in the beverage space, starting by taking a digestive health benefit and adding it to a product that’s very familiar with strong household penetration. Consumers are now coming to the soda category expecting health benefits, and we’re seeing launches of creatine sodas, protein sodas, and immune support sodas, alongside the prebiotic sodas.”

The fastest-growing health claims in the functional beverage space were mood support (+42.2%), cold and flu (+22.5%), digestive health (+16.1%), protein support (+15.7%), cleansing and detox (+15%), and immune support (+9.2%). Unlike the supplements category, where people seek out specific, branded ingredients, beverage shoppers are more likely to look for on-pack claims, said Lerman.

While Gen Z and Millennials over-index on functional beverage consumption, interest is relatively even across people in their 20s and those in their 40s, Lerman noted.

Contrary to generations past, younger consumers, namely Gen Z and Gen A, are no longer driven by habit, according to Keurig Dr Pepper’s State of Beverages 2026 Trend Report published in May.

“Increasingly, beverage choices signal identity, mood, and values. As a result, occasions are becoming more social and intentionally curated, with drinks helping to define experiences, express individuality, and bring people together in new ways,” Tim Cofer, CEO of KDP, noted in the report.

These younger consumers are more likely to have several beverages in rotation, and explore more unique flavors, all to set a mood and strike a balance between functionality and indulgence, the company reported. Gen Alpha and Gen Z (Gen A/Z) consumers widely report that a drink represents who they are (58%); have, on average, five functional needs fulfilled per drink occasion; and are inclined to buy drinks from brands that personalize recommendations (51% versus 29% of Millennials).

While older generations focus on restriction for wellness, such as Millennials’ preference for reduced sugar (48%) and caloric intake management (51%), Gen A/Z is more interested in what the drink can deliver, with 71% reporting they’re looking for function-forward beverages, KDP reported.

Natural Flavors & Sugar Reduction

Functional beverages with zero sugar or modest amounts (5-9 grams) are growing in market share and outpacing higher-sugar counterparts, according to SPINS.

The top-five growing sweeteners in the functional beverage marketplace, based on product sales tracked by SPINS, are allulose ($54 million, +53%), agave nectar ($312 million, +51%), erythritol ($1.6 billion, +26%), coconut sugar ($22 million, +26%), and natural low-calorie sweeteners ($3.58 billion, +21%).

As specialist companies continue to advance systems that more effectively rebuild sugar’s full sensory profile, consumers’ expectations on the overall taste and sensory attributes of better-for-you products will continue to rise.

“We’ve reached a point where low-, no-, or no-added sugar is embedded into the product design from the start,” said Leanne Pinsonneault, senior food scientist at Cargill. The company has seen the strongest demand from modern soda products, but high expectations are also prevalent in the protein, energy, sports nutrition, and hydration beverage categories, “where functional ingredients add complexity and increase the need for more advanced sweetness solutions.”

Formulators often use multiple sweeteners, in combination with flavor modifiers, to deliver the best sweetness profile for a specific beverage, delivering “significant flavor-modifying benefits that extend to other ingredients within the formula, while also improving solubility, dissolution, and stability,” Pinsonneault said.

Precision fermentation has allowed companies to advance the purity and sensory performance of low- and no-calorie sweetening systems, Pinsonneault noted. “It allows us to produce the most desirable and rarest stevia compounds — those with the best sweetness quality and a temporal profile closer to sugar — in a scalable and resource-efficient way.”

High-purity options minimize dependence on flavor modifiers and are sourced in a price-stable way, she added. “So much work has been done to improve the taste of stevia. It’s light-years away from where we started.”

Consumers are receptive to lower amounts of sugar rather than complete avoidance in the soda category, and sugars can have a nutritive role in performance-based sports drinks, Pinsonneault said. It’s not all or nothing.

“Brands tend to underestimate the complexity of these formulations. Removing sugar impacts not just sweetness. It also affects acid balance, mouthfeel, and flavor expression. Functional ingredients can further complicate this by introducing bitterness, metallic notes, or astringency. The higher the inclusion level, the greater the challenge … There may never be a single silver bullet, but today’s toolbox is far stronger than many people realize.”

Hydration/Electrolytes

The hydration/electrolytes market is fragmented, as new brands attempt to break away from simple narratives and one-size-fits-all offerings.

Emerging use occasions such as daily wellness, preventing heat exhaustion, children’s health, and recovery are becoming prevalent in a category that is mostly sports-based formulas. While sales often spike in the summer, the use of hydration products isn’t dropping as much in colder months as in years prior, SPINS reported. While ready-to-drink formats remain extremely popular, other product formats have seen substantial year-over-year growth, such as ready-to-mix powders and tablets (+95% and +11%), liquid shots (+16%), and even gummies (+100%).

More care is being taken with sugar inclusion. Beyond flavor, sugar helps transport electrolytes, and a simple carb boost during rigorous workouts is helpful. While products with zero sugar, 20-25 grams of sugar, and 25 grams or more are the top three sellers, the fastest-growing hydration products are in the 0.5-5-gram and 15-20-gram ranges (+23.3% and +16.6%, respectively), SPINS noted.

It’s estimated that nearly half of U.S. children don’t hydrate adequately, and the market is responding with accessible, appealing kids’ hydration products. Liquid IV’s Kids’ Hydration Packets, launched in 2023, feature about half the calories, sugar, and sodium found in the product for adults.

Other notable recent launches include Zarbee’s Kids Hydration, featuring prebiotics and zinc, which is positioned as a clean-label alternative to legacy products like Pedialyte with no artificial dyes and natural sweeteners. Cure Hydration Kids is a pediatrician-formulated, plant-based ORS-style drink mix with no added sugar and Non-GMO Project Verification.

While Gatorade still dominates the estimated $39 billion global hydration drinks market, the legacy brand is feeling pressure to shake things up in order to maintain relevance as more brands emerge and gain traction. In April, the brand announced it would undertake a major shift in messaging and product launches to expand beyond the sports category.

“Mild to moderate dehydration can build gradually across the day for most people, often without realizing it, and thirst is not always a reliable signal,” said Damian Browne, senior vice president of R&D at PepsiCo Beverages U.S.

“Built on 60 years of research studying hydration’s effects on athlete performance, Gatorade remains committed to that purpose and is applying the same rigor to help people better understand and meet their hydration needs across a broader range of activities and moments,” the brand stated. Gatorade said it will roll out a refreshed product label design and more offerings tailored to different use occasions.

The company will invest more in consumer education on how hydration supports bodily functions like temperature regulation, nutrient delivery, joint lubrication, energy, and cognitive focus.

Gatorlyte Longer Lasting, a new, first-to-market electrolyte blend for long-term support over travel days, demanding work shifts, or sustained physical activity will begin rolling out this year. The company said it would also create new formulas with lower sugar and no FD&C colors to respond to clean-label demand.

Protein & Fiber

“It’s silly to think of protein as a hot new trend in beverages,” Lerman said, but it continues to accelerate year after year, and the market continues to offer novel tastes, textures, and sources. Nearly 40% of households are buying protein drinks each year, “with 74.3% of those buyers making repeat purchases.”

Refrigerated, ultra-filtered milkshakes like Fairlife have grown substantially in recent years, as consumers perceive them as a better-tasting, whole-food alternative to whey protein isolate powders. They often contain a mix of whey and casein, with the latter protein providing sustained amino acid release, long-term satiety, and overnight recovery.

Moreover, these drinks appeal to desires for milk proteins that are closer to whole food, blurring the line between sports nutrition and everyday dairy. The Coca-Cola company announced in March that it would invest $650 million to expand the production capacity of Fairlife’s facility in Michigan, adding two new production lines across 245,000 square feet, with the goal of the new lines beginning production in 2028; the company grew 28% year-over-year in 2025. 

Yogurt brand Oikos is leveraging its conventional dairy legacy to create more pleasing, flavor-forward ready-to-drink protein drinks. Oikos protein shakes are available in strawberry, chocolate, vanilla, salted caramel, and mocha latte varieties, featuring 30 grams of complete protein, 5 grams of prebiotic fiber, 1 gram of naturally-occurring sugar, no artificial sweeteners or carrageenan, vitamins A and D, and 160 calories. The mocha latte variety also features 95 grams of caffeine, comparable to a cup of coffee.

Meanwhile, formulators are looking to fit more concentrated protein into smaller packages, with the emphasis on convenience and palatability. Earlier this year, Mel Robbins launched her first commercial product, Pure Genius Protein Shots. The shots come in a TSA-friendly, 3.38-ounce bottle, packing 23 grams of complete protein per serving. Each shot has 100 calories and is available in blueberry lemonade, strawberry guava, and pineapple flavors.

The inspiration came from Robbins’ learning that women are under-consuming protein by about 50%, the company reported. “It’s about making it easier for people to prioritize their health, particularly women. If you’re busy taking care of everyone else, you’re probably not doing the best job taking care of yourself.”

Year-over-year, beverages containing fiber grew 41% in 2025, according to SPINS. “Aside from produce and vegetables, about a third of shoppers don’t know where else to go to improve their fiber intake, so there’s a real opportunity for the industry to educate consumers, and make fiber something they enjoy putting into their diet,” said Jessica Maniscalco, senior retail insights director at SPINS. Tea, coffee, and ready-to-mix powders have topped fiber-fortified products in sheer sales gains, she noted.

As demand skyrockets for fiber-fortified drinks, manufacturers will be more pressed to consider how fibers integrate into a matrix, and how blends can be tailored to unique health benefits, rather than washing the marketplace with “good source of dietary fiber” claims, noted Matthew Amicucci, Phd, co-founder and chief science officer of One.Bio, during a panel discussion at Natural Products Expo West.

“Every fiber has unique functions. Solubility and texture, prebiotic selectivity, and tolerability are always important things to consider, and certain fibers are more stable than others depending on the pH and temperature,” he said.

When tailored correctly, fiber should be more than a number on a label, or a number consumers see in their bloodwork once per year; it should deliver tangible feelings of energy, satiety, and more,
Amicucci added.

“When you eat more fiber, you should feel better almost immediately,” concurred Jeni Britton, founder of Floura. “If we focus too much on the metrics, performance, and optimization, it might kind of defeat that purpose and cause more anxiety than it’s worth … Our industrial food system is designed to strip all of the fiber from our diets, and we’re still struggling to get it back in.”

A whole-source fiber, a rapidly fermented fiber, or a synthetic fiber like dextrin each has important advantages and drawbacks. Whole-source fibers, used in 90% of fortified products on the market, present a clean-label choice with FDA-approved health claims, but are very viscous and gritty.

Rapidly fermented options like chicory, inulin, agave, and FOS solve textural challenges and offer prebiotic benefits, but about 30% of the population complains of bloating or gas after even moderate doses.

Synthetic dextrins are clear, neutral in taste and texture, and easy to formulate with, but, “because they’re synthetically derived, there isn’t that evolutionary understanding in our microbiome to break them down, resulting in few if any prebiotic benefits,” said Amicucci.

Beyond soda, fiber fortification is proving successful across many other mainstream categories. Beyond Meat, for instance, launched Beyond Immerse this year, a line of functional 12-oz drinks featuring 10 or 20 grams of protein, 7 grams of fiber, plus antioxidants and electrolytes, in peach mango, lemon lime, and orange tangerine varieties.

Even in more whole-food-based products, brands are placing greater emphasis on fiber content. The juice brand Naked, for instance, launched a line of smoothies with 9 grams of fiber and 40% less sugar than its standard smoothie offerings, in tropical greens and strawberry lemon ginger flavors.

Energy & Cognition

The global energy drinks market was valued at $85.25 billion in 2025, according to Grand View Research, growing at a CAGR of 8.1%. Amid other market drivers, “the rising preference for healthier formulations, such as sugar-free, low-calorie, and natural ingredient options, has broadened the consumer base beyond traditional users.

Market experts noted that consumers no longer think about energy and cognitive performance generically, and this space is segmenting into distinct contexts, such as everyday cognitive support, sports-related applications, and energy profiles with a stronger cognitive/nootropic focus.

“About one quarter of consumers researched globally report that they have energy drinks before a workout or exercise, during a workout or exercise, or after working out or exercising. Many consumers globally also report having energy drinks during more sedentary activity. Sedentary activities can include taking a break or traveling,” Grand View reported.

Augmenting a conventional energy drink experience with add-on ingredients like citicoline, L-theanine, adaptogens, and mushrooms is moving the needle from stimulation to optimization.

Bloom has expanded its Sparkling Energy beverage, which combines caffeine with L-theanine and prebiotic fiber, demonstrating the high-volume, mainstream success of a “calm energy” product positioning.

Similarly, Liquid Death is rolling out a line of energy drinks that combine a moderate 100 mg dose of caffeine with L-theanine, vitamins B12 and C, and magnesium, with no corn syrup, aspartame, or artificial colors.

Once supplement-native nootropics are appearing in beverages to offer cognitive support claims at a greater frequency. Nutrabolt’s C4 is rebranding its Smart Energy line of energy drinks, featuring InnovaBean, a plant-based, green coffee bean source of caffeine, and Cognizin, a patented form of citicoline, to support focus and attention.

Cognizin is also featured in recently launched Happy Panda energy drinks, which further enhance the natural caffeine experience with electrolytes, B vitamins, and L-theanine.

Neutonic is another energy drink brand centered around productivity. Along with 120 mg of natural caffeine, each ready-to-drink can features 400 mg Rhodiola rosesa, 400 mg of L-theanine, 200 mg of Panax ginseng, and 100% of the daily value of B vitamins per can. The brand has since expanded to include capsules, powders, pouches, and toothpicks.