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Functional benefits to drive global beverage market in 2021 and beyond

Functional energy drink future
Despite projecting a slow economic recovery for the beverage sector, a KPMG analyst sees opportunity in multi-functional offerings driven by health and wellness considerations.

COVID-19 has impacted the global beverage market—like every other aspect of the world—but there are critical lessons for innovative brands to take away that could fuel success in 2021 and beyond. Among the opportunities are a move to support sustainability through packaging, to enhance functionality with multiple benefits in a single product, and winnowing down options to deliver top value to consumers.

These were among the insights shared by Ross Colbert, managing director, Global Beverages, KPMG Corporate Finance, during his ‘Back to the Future: Functional Beverages’ session as part of Fi Europe CONNECT. During his presentation and conversation with Informa’s Heather Granato, Colbert offered context on the pre-COVID universe, detailed challenges arising from the pandemic, and shared his expectations for the future of the functional beverage market.

As far as the overall beverage market, Colbert noted: “COVID has split the herd. Small brands became overlooked as retailers made more space for trusted brands. And retailers looked to secure their supply to ensure they had the right brands in the right quantities in the right markets.”

However, he continued, “By virtue of the pandemic we’ve seen a significant increase in daily health and wellness regimens, adopting habits around using beverages and food to derive a functional benefit.” Many consumers have adopted daily preventive health regimens, picking up functional beverages with ingredients to bolster immunity. Interestingly, this has connected directly to digestive health, with Colbert citing interest in probiotic beverages for this benefit as well as support for immune function. He also mentioned the rise in the kombucha space, whether as ‘hard’ versions or options for more health-minded shoppers turning away from alcoholic beverages.

Of note is the opportunity for other controlled substances. “We have to look at that with the expectation that legalization at the federal level of CBD and cannabis will stimulate more trial and more usage at consumer level,” Colbert stated, citing examples of CBD infused functional beverages as well as the investment by multi-national alcohol beverage brands investing in the cannabis space.

Further, the interest in mood and health is extending into this category. “Cognitive and nootropic beverages are the future for functional drinks,” Colbert said. “Anyone in functional beverages is going to want something to offer the consumer in this space. The drivers are the aging population of Boomers and Gen-X’ers looking for functional cognitive attributes to help with an active lifestyle. Fitness enthusiasts are also seeing the connection between cognition and performance.”

This offers a new twist into the energy category, which remains at the top of the functional beverage category as consumers focus on fitness and health; however, lower cost options such as packaged juices with energy-focused positioning may take market share. In addition, concerns around elevated caffeine levels could raise concerns and send consumers toward more holistic-focused options like those nootropics.

Colbert’s presentation is now available on demand through the Fi Europe CONNECT event platform. Registration is free; click here for more information.

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