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.

Artichoke is one of latest unique plants added to RTD formats. For example, Arty Water Company, Newport Beach, CA, launched its namesake artichoke water, which is described as “the world’s first premium artichoke beverage” made from California artichokes and flavored with lemon, apple, mint and a touch of monk fruit for sweetness. With essential vitamins A, C, E, B1, B2, B3, B6 and B9, along with vital minerals sodium, potassium, calcium and iron, Arty Water contains less than 50 calories per 8-oz. bottle, is vegan, low-glycemic, lactose-free, gluten-free and cholesterol-free, providing “nutritious, multifunctional hydration,” according to the company.

Canada’s Troll Bridge Creek Inc. has also debuted its Kiki Tree Life Energy Maple Sweet Water in Maple, Maple Blueberry, Maple Cranberry and Maple Strawberry flavors. Made with 100% Canadian maple syrup, the beverage is high in vitamins and minerals, and free from additives, preservatives and fat, the company said.

True Me Brands LLC, Scottsdale AZ, released its True Nopal Cactus Water made with fruit of the prickly pear cactus, which claims to provide “natural rehydratation,” refreshing taste and less calories/sugar than coconut water.

With more consumers looking to avoid sugary beverages, this emerging category is expected to grow with more unique launches in coming years, Mr. Vierhile predicted.

Nutrient Notes
Demand for protein among virtually all consumer demographics is at an all-time high. With the popularity of greek yogurt and other high-protein foods, consumers are also looking for convenient beverage options that fit their on-the-go lifestyles.

The Monster Beverage Company, Corona, CA, has debuted its Muscle Monster Energy Shake, which contains 25 grams of protein, seven vitamins and minerals and 500 mg of calcium. “It is a big deal when one of the top energy drink brands goes into a high protein drink like Muscle Monster has,” Mr. Vierhile noted.

Protein isn’t reserved for just shakes and smoothies either. For example, Protein2O, Melrose Park, IL, introduced its protein enhanced water in Berry Splash and Lemon Splash flavors. According to the company, this lightly-flavored water is enhanced with electrolytes to improve hydration and contains 15 grams of protein to build and restore lean muscle.

Lifeway Foods, Inc., Morton Grove, IL, recently introduced Lowfat Kefir with Oats, which is high in protein, fiber and probiotics—three nutrients in high demand. The new kefir drink includes 1.5 grams of soluble oat powder, an ingredient shown to foster growth of healthy gut bacteria, help manage normal levels of cholesterol, regulate blood sugar and support satiety. The product is available in Cinnamon Apple, Blueberry Maple and Vanilla Plum flavors.

With growing interest in products derived from whole foods, kale, chia, oats and grains, for example, continue to present new opportunities.

As for energy formulations, demand for green coffee bean has skyrocketed. “It comes down to what consumers understand as energy,” said Jackson Zapp, vice president of sales and marketing, Applied Food Sciences, Austin, TX. “A lot of people don’t know what taurine/guarana is, but they know coffee.” Since that consumer education hurdle can be difficult to overcome, many companies are looking to simplify their product formulations.

“We’re seeing a lot of customers interested in organic and naturally sourced botanical ingredients for energy,” he added. The company recently introduced PurCaf, a certified-organic botanical energy solution sourced from green coffee beans. “Our company has studied green coffee bean for years.”

Natural sources of plant-based caffeine can have balancing effects to neutralize the negative side effects (jitters and nervousness) typical of synthetic sources because they are combined with other compounds from the plant.

“It’s clear that organics are booming and energy drinks are here to stay,” said Mr. Zapp. “PurCaf intersects both of these exploding markets.” The company has made sustainable harvesting a core principle, he added. “We’re definitely on the cutting edge in purity, sustainability and functionality.”

Formulation Innovation
Overall, the fast-growing functional beverage market is transforming radically, driven by innovation in the category, according to Michael McBurney, PhD, FACN, vice president of science, communications & advocacy, DSM Nutritional Products, Parsippany, NJ. “New ingredient forms serve the needs of consumers who want beverages that are clear, meet their taste standards and fulfill their nutritional needs.”

Building off its Omega Infusion brand of omega-3 enhanced water, Oceans Omega a wholly owned subsidiary of Mycell Technologies LLC and a supplier of water-soluble omega-3 EPA and DHA ingredients for the fortification of food and beverage products, launched its omega-3 fortified liquid health dietary supplement shots last fall. Currently sold under the Omega Infusion brand, these 2-oz., single serving, and zero-calorie health shots contain 250 mg of ultra-pure omega-3 EPA and DHA. They are available in Peach Mango, Raspberry Lemon and Pink Grapefruit flavors.

Due to Oceans Omega’s unique stabilization technology, the company can deliver a range of superior omega-3 EPA and DHA ingredient solutions, enabling novel, shelf-stable, consumer products such as clear beverages, gelatins, gels, liquid nutritional shots, add-to-water concentrates as well as pet care products.

“The challenge is really to provide oxidative stability to these highly delicate molecules,” noted Volker Berl, co-founder and chief technology officer, Mycell Technologies, Paramus, NJ.

Traditionally, companies use flavor masking to deal with omega-3 oxidation, he said. And products are limited by a short shelf life, require refrigeration, are not clear or require special processing and handling. However, flavor masking doesn’t address the underlying chemistry issue, he added. Bridging that technology gap, the company has developed a multi-tiered approach to stabilization that allows for clear, odor-free and taste neutral products that are shelf-stable and can be stored at room temperature without refrigeration or freezing.

In terms of delivery innovation, consumers seem to respond to the idea of product personalization. The success of MiO water enhancers and similar products that allow consumers to customize the flavor of their beverages has opened the door for further innovation, according to Datamonitor’s Mr. Vierhile.

For example, Heartland Food Products Group is distributing Sunkist Water Enhancer. Available in Strawberry Lemonade, Orange Peach and Cherry Limeaid flavors, the “high in antioxidant Vitamin C” enhancers are gluten-free and contain 0% juice. Each version is available in the U.S. in a 1.6-oz. plastic bottle that “makes 24 servings.”

“This category continues to be a hotbed of innovation,” Mr. Vierhile said. “The supermarket chain Wegmans just introduced a water enhancer-like product that was actually a vitamin supplement you could mix with a drink. It is sold in the vitamin aisle, but is packaged the same as a water enhancer.”

Future Expectations
It’s noteworthy that Capri Sun this year changed its packaging following a mold issue with some lots so that consumers can see the juice through the clear bottom of the pack. Consumers want to know and see what they and their children are drinking.

Speaking of kids, Tipco F&B Co., Ltd., a large juice company in Thailand, recently launched Super Kid juice, which contains Wellmune WGP, vitamins and antioxidants to strengthen the immune systems of children ages 3-8. The 100% Mixed Berry Juice is the first of several new flavors in the Super Kid product line that will contain Wellmune WGP, which is clinically proven to boost key immune cells that help keep the body healthy. The RTD juice comes in a single-serving Tetra Pak with a straw and contains 43 mg of Wellmune.

Datamonitor’s Mr. Vierhile noted that drinkable skin care products and mood enhancing beverages may present viable future directions for companies looking to get ahead of the curve. “We are seeing more skin care products make mood-related benefit claims. The growing realization that mental health is as important—and in some cases more important—than physical health could keep this trend growing.”

HealthVerve Food Manufacturing, Rancho Cucamonga, CA, offers BBGlo Skin Rejuvenation Collagen Drinks, which contain Verisol Bioactive Collagen Peptides available in four specially formulated varieties, each designed to perform a specific function: Slim, Dream, Joints and the concentrated Beauty Shot. The latter contains 5,000 mg of collagen and 150 mg of FloraGLO lutien, which is “clinically proven to protect against UV damage to the skin and assists in maintaining a more youthful appearance,” according to the company.

Other trends to watch include products influenced by “juicing” and “cleanse” trends, Mr. Vierhile added. “As far as vegetable drinks are concerned, beets are up-and-coming, though they have a flavor that many consumers either love or hate.”