By Sean Moloughney, Editor06.02.22
The health-positioned, ready-to-drink (RTD) beverage market in the U.S. totaled $15.68 billion for the 52-week period ending Apr. 17, 2022, growing 15.7% overall, according to data insights firm SPINS LLC. This figure includes shelf-stable energy and performance drinks, refrigerated juice and juice drinks, coconut and plant waters, kombucha, fermented beverages, and other functional beverages sold in MultiOutlet/conventional and natural channels.
Meanwhile the global RTD tea market was valued at just over $21 billion in 2018, according to market research firm Statista, and is expected to grow by almost 40% to $29.7 billion by 2024.
Functional energy beverages represent a strong market of $5.17 billion, growing at a healthy 26.4%, while isotonic sports drinks have grown 12.9% to $4.48 billion, according to SPINS. Refrigerated coconut water continues to gain momentum on 33.9% growth to $61.6 million, while kombucha sales have slowed to 2.9%, still bringing in $669.4 million.
The beverage brand Free Rain offers an enhanced sparkling water that contains “benefit-driven ingredients to energize, focus or calm your mind and body throughout the day.” The brand’s Pink Grapefruit & Maca for Arousal contains 500 mg of maca; Blood Orange Ginger & Ashwagandha for Focus includes 675 mg of ashwagandha; Tart Cherry & Siberian Ginseng for Energy offers 330 mg of Siberian ginseng; and Blackberry & Passionflower for Calm contains 225 mg of passionflower.
Heywell is another sparkling water brand that features plant-based ingredients including adaptogens. The company’s Energy + Focus Sparkling Strawberry Lemon contains schisandra, L-theanine, ashwagandha, and 75 mg of caffeine from organic green coffee beans. Energy + Immunity Sparkling Grapefruit delivers amla extract (vitamin C) schisandra, L-theanine, and 75 mg of caffeine from organic green coffee beans as well.
The brand’s lineup also includes Calm + Restore Sparkling Blackberry Ginger, which contains 327 mg of amla extract; 1,136 mg of organic lemon balm leaf extract; 235 mg of schisandra extract; and 97 mg of L-theanine. Calm + Hydrate Sparkling Lime features organic lime extract, 326 mg of amla extract, 284 mg of organic lemon balm, 249 mg of schisandra, 22 mg of magnesium chloride, 100 mg of L-theanine, and 50 mg of potassium citrate.
“Understanding your consumer and being able to anticipate trends, such as up-and-coming functional ingredients, is an important part of staying ahead of competitors,” said Resetar.
California-based MUDWTR offers a good example of a brand that has successfully featured mushrooms. Positioned as a coffee alternative and an adaptogenic mushroom drink, the product comes as a powder to be added to beverages or foods. MUDWTR’s active ingredients include lion’s mane, cordyceps, and reishi. The brand has also debuted MUDWTR:rest made with rooibos chai, turmeric, cinnamon, ashwagandha, valerian root, passionflower, turkey tail, and reishi to promote relaxation and calm.
Lifeway Foods has also tapped into the mushroom trend with its MSHRM Oat line, the latest addition to Lifeway’s portfolio of cultured oat beverages. In addition to containing 10 live and active probiotic cultures, these functional shots feature a range of mushrooms and adaptogens. The Calm variety includes 200 mg of reishi and natural vanilla flavor; Focus includes 200 mg of lion’s mane plus turmeric, ginger, and 100 mg of L-theanine; and the Support variety (wild berry flavor) contains a 500 mg blend of mushrooms (cordyceps, lion’s mane, miatake, reishi, and shitake) and 200 mg of aronia berry.
The company Earth & Star offers a line of functional lattes that feature adaptogenic mushroom blends. The Black Cold Brew Coffee variety combines coffee with L-theanine, lion’s mane, reishi, cordyceps, and chaga extracts. The product line also includes Cacao Oat Milk, Matcha Oat Milk, and Turmeric Oat Milk varieties, which all highlight mushroom blends prominently on packaging.
To differentiate in a crowded market segment, packaging and product format can be important tools. “Some health beverage brands opt to offer both shot sizes and typical beverage sizing, as well as other forms with powders or tablets for on-the-go functionality,” said Resetar.
There are new demands on wellbeing as a result of COVID-19, noted Howard Telford, head of soft drinks research at Euromonitor International. “Reported stress, anxiety, and insomnia have all increased, according to recent surveys. There has been no lessening of demands on productivity, with many people working longer or more irregular hours. Food, beverages, nutrition, and functional ingredients play a vital role in the wellness routines we have built to manage our lives.”
As a result, products and ingredients to relieve stress, manage moods, and promote sleep align with modern consumer needs, and brands have taken note.
For example, PepsiCo launched Driftwell in 2021, a canned “enhanced” water beverage that contains L-theanine to promote relaxation and sleep. “In the same benefit space is Recess, a brand with an expertly crafted social media presence in the U.S.,” said Telford. “The product is a sparkling water with ginseng, L-theanine, and CBD from hemp extract. The product, brand, and online presence of Recess is built around the notion of relaxation, promoting calm as well as focus.”
Hemp extract wellness company Charlotte’s Web said in February that it expects to enter the CBD beverage market this year. The company is currently developing new “CBD social elixirs” expected to launch in the second half of 2022.
“Entering the beverage category is reflective of our increased focus on new product categories and formats to drive our topline growth,” said Jacques Tortoroli, CEO of Charlotte’s Web. “This allows us to enter this fast-growing portion of the market.”
The company intends to introduce CBD sparkling beverages that contain its full spectrum hemp extracts derived from its patented hemp cultivars. The beverages will be blended with other functional botanicals and natural flavors.
The Brightfield Group estimated sales of CBD beverages at $245 million in 2021, up 50% from 2020. The market is expected to reach $1.3 billion in 2026, representing a 40% CAGR.
Meanwhile, energy is still a major health platform in the functional beverage market. “Functionality begins with energy—particularly caffeine—in energy drinks or the coffee category, which is growing in both packaged and RTD formats,” noted Telford. “It also extends to sports hydration, where the U.S. and Western Europe have seen consistent growth in sports drinks, athletic nutrition, pre-workout, and recovery. But why might functionality, wellness, and the priority placed on healthy living matter more moving forward than it did prior to the pandemic? In short, we know the consumer’s notion of health and wellness is constantly changing, not just in terms of the soft drinks industry, but across food and supplements as well. The daily routines and health regimens of consumers have been—and continue to be—adjusted and reset.”
PepsiCo’s Rockstar Energy Drink brand debuted its Rockstar Unplugged variety in February, focusing less on a big jolt of energy and more on mood enhancement. With 80 mg of caffeine, Rockstar Unplugged blends hemp seed oil, B vitamins, spearmint, and lemon balm. It is available in three sugar-free flavors: blueberry, passionfruit, and raspberry cucumber.
“Ninety-one percent of our consumers told us they wanted a beverage that lifts their mood,” said Fabiola Torres, PepsiCo general manager and chief marketing officer of the energy category. “Rockstar Unplugged delivers the ingredients consumers have been asking for, creating an opportunity for us to transform the category and introduce new consumers to our energy portfolio.”
Coffee is still a king in the energy drinks world. Last year, NuTraditions, a finished product brand founded by Wilson Lau, president of leading Chinese herbs supplier Nuherbs, launched Good Morning Sunshine Coffee. Available in either Colombian or Guatemalan varieties, the Keurig-compatible pods contain organic, fair-trade coffee infused with organic red ginseng root extract. Red ginseng has traditionally been used to fight fatigue and provide immune support. The pods are BPA-free and can be fully recycled after peeling off the label and rinsing.
“The expanding functional territories for beverages include continued growth in caffeinated drinks and the introduction of new caffeine alternatives,” said Telford. “They also include reduced sugar, natural alternatives, and increased consumption of packaged, flavored sparkling water. Finally, this expanding territory for functional drinks also means supporting immune health and digestive health in new ways. Finding success in these new territories will require accessible refreshment flavors and mainstream branding.”
In May, the Coca-Cola Company announced it will phase out its Honest Tea product line by the end of this year, relying on its Gold Peak and Peace Tea brands to anchor its RTD tea strategy in North America. The company said it would keep the Honest Kids portfolio.
“Ongoing supply chain challenges mean we are having to prioritize production and distribution of certain product SKUs, and that we’ve been unable to meet consumer demand for Gold Peak,” said Sabrina Tandon, group director of RTD tea, Coca-Cola North America Operating Unit. “This, among other factors, helped drive this very difficult decision.”
Tandon also cited some overlap among Gold Peak and Honest tea consumers. The Honest brand was founded in 1998 by Seth Goldman and Barry Nalebuff. Coca-Cola took a 40% investment stake in Honest in 2008, before fully acquiring the brand in 2011.
Goldman said on Twitter that Coca-Cola’s decision to phase out the brand was a “gut punch to all the sweat, tears, and incredible passion that went into building our beloved brand.”
“My gratitude goes out to the tens of millions of consumers who bought our drinks and who benefited from having a less sweet, less caloric, authentic drink as part of their diet,” he added.
Gold Peak launched in 2006 and became a billion-dollar brand for Coca-Cola in 2015. Meanwhile, Peace Tea has built a loyal Gen Z following in the Midwest, Northeast, and Southeast, according to the company.
The Coca-Cola system will continue to produce and distribute the Honest Kids line of organic juice drinks and explore licensing ventures and innovation opportunities for the Honest brand in other categories. “We are phasing out the Honest teas product line, but are not selling the Honest brand,” Tandon emphasized.
McDonald’s started carrying Honest Kids in its Happy Meals in 2017, representing a huge victory for the organic movement into mainstream, and for calorie reduction among children.
Meanwhile the global RTD tea market was valued at just over $21 billion in 2018, according to market research firm Statista, and is expected to grow by almost 40% to $29.7 billion by 2024.
Functional energy beverages represent a strong market of $5.17 billion, growing at a healthy 26.4%, while isotonic sports drinks have grown 12.9% to $4.48 billion, according to SPINS. Refrigerated coconut water continues to gain momentum on 33.9% growth to $61.6 million, while kombucha sales have slowed to 2.9%, still bringing in $669.4 million.
More Than Sparkling Water
Expanding product lines to appeal to new customers while still targeting current brand loyalists can help build value and market share for beverage brands, according to Haleigh Resetar, corporate communications specialist at SPINS. “An example of this is sparkling water brands expanding their selections to include functional ingredients, as well as their normal flavors.”The beverage brand Free Rain offers an enhanced sparkling water that contains “benefit-driven ingredients to energize, focus or calm your mind and body throughout the day.” The brand’s Pink Grapefruit & Maca for Arousal contains 500 mg of maca; Blood Orange Ginger & Ashwagandha for Focus includes 675 mg of ashwagandha; Tart Cherry & Siberian Ginseng for Energy offers 330 mg of Siberian ginseng; and Blackberry & Passionflower for Calm contains 225 mg of passionflower.
Heywell is another sparkling water brand that features plant-based ingredients including adaptogens. The company’s Energy + Focus Sparkling Strawberry Lemon contains schisandra, L-theanine, ashwagandha, and 75 mg of caffeine from organic green coffee beans. Energy + Immunity Sparkling Grapefruit delivers amla extract (vitamin C) schisandra, L-theanine, and 75 mg of caffeine from organic green coffee beans as well.
The brand’s lineup also includes Calm + Restore Sparkling Blackberry Ginger, which contains 327 mg of amla extract; 1,136 mg of organic lemon balm leaf extract; 235 mg of schisandra extract; and 97 mg of L-theanine. Calm + Hydrate Sparkling Lime features organic lime extract, 326 mg of amla extract, 284 mg of organic lemon balm, 249 mg of schisandra, 22 mg of magnesium chloride, 100 mg of L-theanine, and 50 mg of potassium citrate.
The Emergence of Mushrooms
Aside from sparkling water, many beverage brands are incorporating popular functional ingredients into other offerings. Mushrooms in particular have proliferated in the past couple of years.“Understanding your consumer and being able to anticipate trends, such as up-and-coming functional ingredients, is an important part of staying ahead of competitors,” said Resetar.
California-based MUDWTR offers a good example of a brand that has successfully featured mushrooms. Positioned as a coffee alternative and an adaptogenic mushroom drink, the product comes as a powder to be added to beverages or foods. MUDWTR’s active ingredients include lion’s mane, cordyceps, and reishi. The brand has also debuted MUDWTR:rest made with rooibos chai, turmeric, cinnamon, ashwagandha, valerian root, passionflower, turkey tail, and reishi to promote relaxation and calm.
Lifeway Foods has also tapped into the mushroom trend with its MSHRM Oat line, the latest addition to Lifeway’s portfolio of cultured oat beverages. In addition to containing 10 live and active probiotic cultures, these functional shots feature a range of mushrooms and adaptogens. The Calm variety includes 200 mg of reishi and natural vanilla flavor; Focus includes 200 mg of lion’s mane plus turmeric, ginger, and 100 mg of L-theanine; and the Support variety (wild berry flavor) contains a 500 mg blend of mushrooms (cordyceps, lion’s mane, miatake, reishi, and shitake) and 200 mg of aronia berry.
The company Earth & Star offers a line of functional lattes that feature adaptogenic mushroom blends. The Black Cold Brew Coffee variety combines coffee with L-theanine, lion’s mane, reishi, cordyceps, and chaga extracts. The product line also includes Cacao Oat Milk, Matcha Oat Milk, and Turmeric Oat Milk varieties, which all highlight mushroom blends prominently on packaging.
To differentiate in a crowded market segment, packaging and product format can be important tools. “Some health beverage brands opt to offer both shot sizes and typical beverage sizing, as well as other forms with powders or tablets for on-the-go functionality,” said Resetar.
Drinks to Chill, or Rev Up
Alongside functional ingredients, companies are paying close attention to on-trend health platforms like calming and relaxation, but also new approaches to energy and vitality.There are new demands on wellbeing as a result of COVID-19, noted Howard Telford, head of soft drinks research at Euromonitor International. “Reported stress, anxiety, and insomnia have all increased, according to recent surveys. There has been no lessening of demands on productivity, with many people working longer or more irregular hours. Food, beverages, nutrition, and functional ingredients play a vital role in the wellness routines we have built to manage our lives.”
As a result, products and ingredients to relieve stress, manage moods, and promote sleep align with modern consumer needs, and brands have taken note.
For example, PepsiCo launched Driftwell in 2021, a canned “enhanced” water beverage that contains L-theanine to promote relaxation and sleep. “In the same benefit space is Recess, a brand with an expertly crafted social media presence in the U.S.,” said Telford. “The product is a sparkling water with ginseng, L-theanine, and CBD from hemp extract. The product, brand, and online presence of Recess is built around the notion of relaxation, promoting calm as well as focus.”
Hemp extract wellness company Charlotte’s Web said in February that it expects to enter the CBD beverage market this year. The company is currently developing new “CBD social elixirs” expected to launch in the second half of 2022.
“Entering the beverage category is reflective of our increased focus on new product categories and formats to drive our topline growth,” said Jacques Tortoroli, CEO of Charlotte’s Web. “This allows us to enter this fast-growing portion of the market.”
The company intends to introduce CBD sparkling beverages that contain its full spectrum hemp extracts derived from its patented hemp cultivars. The beverages will be blended with other functional botanicals and natural flavors.
The Brightfield Group estimated sales of CBD beverages at $245 million in 2021, up 50% from 2020. The market is expected to reach $1.3 billion in 2026, representing a 40% CAGR.
Meanwhile, energy is still a major health platform in the functional beverage market. “Functionality begins with energy—particularly caffeine—in energy drinks or the coffee category, which is growing in both packaged and RTD formats,” noted Telford. “It also extends to sports hydration, where the U.S. and Western Europe have seen consistent growth in sports drinks, athletic nutrition, pre-workout, and recovery. But why might functionality, wellness, and the priority placed on healthy living matter more moving forward than it did prior to the pandemic? In short, we know the consumer’s notion of health and wellness is constantly changing, not just in terms of the soft drinks industry, but across food and supplements as well. The daily routines and health regimens of consumers have been—and continue to be—adjusted and reset.”
PepsiCo’s Rockstar Energy Drink brand debuted its Rockstar Unplugged variety in February, focusing less on a big jolt of energy and more on mood enhancement. With 80 mg of caffeine, Rockstar Unplugged blends hemp seed oil, B vitamins, spearmint, and lemon balm. It is available in three sugar-free flavors: blueberry, passionfruit, and raspberry cucumber.
“Ninety-one percent of our consumers told us they wanted a beverage that lifts their mood,” said Fabiola Torres, PepsiCo general manager and chief marketing officer of the energy category. “Rockstar Unplugged delivers the ingredients consumers have been asking for, creating an opportunity for us to transform the category and introduce new consumers to our energy portfolio.”
Coffee is still a king in the energy drinks world. Last year, NuTraditions, a finished product brand founded by Wilson Lau, president of leading Chinese herbs supplier Nuherbs, launched Good Morning Sunshine Coffee. Available in either Colombian or Guatemalan varieties, the Keurig-compatible pods contain organic, fair-trade coffee infused with organic red ginseng root extract. Red ginseng has traditionally been used to fight fatigue and provide immune support. The pods are BPA-free and can be fully recycled after peeling off the label and rinsing.
“The expanding functional territories for beverages include continued growth in caffeinated drinks and the introduction of new caffeine alternatives,” said Telford. “They also include reduced sugar, natural alternatives, and increased consumption of packaged, flavored sparkling water. Finally, this expanding territory for functional drinks also means supporting immune health and digestive health in new ways. Finding success in these new territories will require accessible refreshment flavors and mainstream branding.”
Honest Tea’s Phase Out
It’s not all smooth sailing in today’s healthy beverage market. Inflation, supply challenges, and fierce competition are all having an impact, compelling brands to make some hard choices.In May, the Coca-Cola Company announced it will phase out its Honest Tea product line by the end of this year, relying on its Gold Peak and Peace Tea brands to anchor its RTD tea strategy in North America. The company said it would keep the Honest Kids portfolio.
“Ongoing supply chain challenges mean we are having to prioritize production and distribution of certain product SKUs, and that we’ve been unable to meet consumer demand for Gold Peak,” said Sabrina Tandon, group director of RTD tea, Coca-Cola North America Operating Unit. “This, among other factors, helped drive this very difficult decision.”
Tandon also cited some overlap among Gold Peak and Honest tea consumers. The Honest brand was founded in 1998 by Seth Goldman and Barry Nalebuff. Coca-Cola took a 40% investment stake in Honest in 2008, before fully acquiring the brand in 2011.
Goldman said on Twitter that Coca-Cola’s decision to phase out the brand was a “gut punch to all the sweat, tears, and incredible passion that went into building our beloved brand.”
“My gratitude goes out to the tens of millions of consumers who bought our drinks and who benefited from having a less sweet, less caloric, authentic drink as part of their diet,” he added.
Gold Peak launched in 2006 and became a billion-dollar brand for Coca-Cola in 2015. Meanwhile, Peace Tea has built a loyal Gen Z following in the Midwest, Northeast, and Southeast, according to the company.
The Coca-Cola system will continue to produce and distribute the Honest Kids line of organic juice drinks and explore licensing ventures and innovation opportunities for the Honest brand in other categories. “We are phasing out the Honest teas product line, but are not selling the Honest brand,” Tandon emphasized.
McDonald’s started carrying Honest Kids in its Happy Meals in 2017, representing a huge victory for the organic movement into mainstream, and for calorie reduction among children.
