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Products perceived as naturally healthful may have an edge in this competitive category.
July 1, 2014
By: Sean Moloughney
Editor
As more consumers recognize the health impact of their soda and sugary drink habits, and make the switch to more natural, healthy options, the market for nutraceutical/fortified beverages will continue to accelerate. According to a report from research firm MarketLine, the U.S. functional drinks sector had total revenues of about $25.2 million in 2012, representing a compound annual growth rate (CAGR) of 6% between 2008 and 2012. Strong performance is expected to accelerate, with an anticipated CAGR of 8.8% for the five-year period 2012-2017, leading to a market value of $38.5 million by the end of 2017. According to IRI, a Chicago, IL-based market research firm, energy drinks totaled $10.18 billion in U.S. sales for the 52 weeks ending May 18, 2014 (among supermarkets, drugstores, mass market retailers, gas/C-stores, military commissaries and select club and dollar retail chains). This figure includes the $1.17 billion energy shot dietary supplement category. Product marketers should be aware that FDA issued an industry guidance this year “Distinguishing Liquid Dietary Supplements from Beverages.” According to this document, “The most obvious representations about a product’s use are claims made for the product in its labeling and advertising. However, a product’s name, packaging, serving size, recommended daily intake and other recommended conditions of use, and composition, as well as marketing practices and representations about the product outside its labeling and advertising, can also be important determinants of whether the product is represented as a conventional food (and, thus, may not be marketed as a dietary supplement).” According to Mintel International, six in 10 U.S. consumers of energy drinks and shots are concerned about the safety of the products. In light of these concerns, especially among populations that might be sensitive to large amounts of caffeine or other ingredients, brand marketers will have to bolster consumer confidence to retain existing customers and attract new ones. Still, the total energy drinks and shots category grew a modest 4.2% over the previous year, according to IRI; shots specifically grew 6.4%. For the same time period, IRI data show sports drinks totaled $5.73 billion, growing 2.4%. Ready-to-drink (RTD) canned/bottled tea sales grew about 2.2% to $3.05 billion; meanwhile, loose tea bag sales grew 6.5% to $1.29 billion. Refrigerated kefir/milk substitutes/soy milk grew nearly 20% to $1.23 billion. Plant Power Following the rapid success of coconut water, one of the biggest market trends from a beverage formulation standpoint, according to Tom Vierhile, innovation insights director, Datamonitor Consumer, has been the proliferation of plant waters such as artichoke, maple, cactus and others. “There has already been quite an array of launches there, and the idea seems to be that this is a new way to differentiate offerings in a very crowded market.” Driving this trend, at least in part, seems to be a desire among consumers for products that are authentically natural, he added. “In Datamonitor Consumer’s 2013 global consumer survey, we asked a pair of questions that really fleshed out the draw of ‘naturally healthful.’” The first question asked how appealing consumers found a “product that is naturally high in nutrients”; 46% of consumers globally said that was “very appealing.” In the same survey, Datamonitor asked about the appeal of a “product that had added nutrients”; only 6% of consumers said that was “very appealing.” “That suggests that there is a huge halo effect for products perceived to be ‘naturally healthful,’ along the lines of Greek yogurt or coconut water, versus products where nutrients and vitamins are added ‘after the fact,’” Mr. Vierhile said.
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