Functional Drinks: Incl Impact of COVID-19 - US - April 2020

OVERVIEW
What you need to know
Key issues covered in this report
Definition
EXECUTIVE SUMMARY 
Impact of COVID-19 on functional drinks
Top Takeaways
The issues 
Functional drinks compete with supplements   
Figure 1: Functional drinks usage, instead of or in addition to traditional supplements, February 2020
Sugar under increased scrutiny
CBD is hot, but having legal troubles 
Figure 2: Functional drinks with CBD
The opportunities 
Benefit stacking can help brands stand out
Figure 3: Repertoire of functional attributes usage in drink products, February 2020
Expand functional horizons 
Figure 4: GT’s Living Foods product examples, water kefir, kombucha, apple cider vinegar tonic
Older adults an untapped audience 
Figure 5: Benefits of functional drink products used, any benefit or none of the above, by age, February 2020
What it means
THE IMPACT OF COVID-19 ON FUNCTIONAL DRINKS
Figure 6: Short, medium and long term impact of COVID-19 on Functional Drinks, April 2020
Opportunities and Threats
Immunity support for the win in the short and medium term
Stressed-out consumers want relaxation wherever they can find it
Most consumers are skeptics, will demand proven results
In-store traffic challenges will impact brands of all sizes
Impact on the functional drinks market
Function is everywhere
Figure 7: Total US retail sales of non-alcoholic beverages, by segment, 2017 and 2019
Big brands stand the most to gain
Startups will thrive or die
Supply chain disruptions may hinder emerging functional drinks
Some brands may be too late for DTC opportunity
How the crisis will affect functional drinks’ key consumer segments
Brands need to make some effort to recruit older consumers
The future is uncertain for Gen Z
How a COVID-19 recession will reshape the functional drinks market
Back to basics with communications on functional drinks market during a recession
Functionality innovation will slow in the short-term
COVID-19: US context
THE MARKET – WHAT YOU NEED TO KNOW
Functionality pairs well with beverages
Functional drinks offer desirable quick fix
Expand offerings to fill needs of seniors
Sustainable packaging can give brands an edge 
MARKET PERSPECTIVE
Functionality in high demand 
Function knows no boundaries 
Figure 8: Total US retail sales of non-alcoholic beverages, by segment, 2017 and 2019
Figure 9: Total US retail sales of non-alcoholic beverages, by segment, 2017 and 2019
VMS brands must contend with functional drink competition 
MARKET FACTORS 
Seeking shortcuts to wellness
Aging population needs attention
Figure 10: Population aged 18 or older, by age, 2014-24
Figure 11: Benefits of functional drink products used, any benefit or none of the above, by age, February 2020
Single-use plastic needs a makeover
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Protein is a hook for many adults
Top fermented drink brands expand functional horizons
Private label options can expand exposure
Eyes peeled for sugar
Future uncertain for CBD in food and drink 
Future looks bright for adaptogens and nootropics 
WHAT’S IN
Consumers craving protein
Figure 12: Functional drinks with plant-based protein
Top fermented drink brands expand functional horizons
GT’s adapts to keep pace with new competitors
Figure 13: GT’s Living Foods product examples, water kefir, kombucha, apple cider vinegar tonic
KeVita growth reflects flexibility 
Figure 14: KeVita product examples, water kefir, kombucha, apple cider vinegar tonic
Private label options can expand exposure, impact market growth
Figure 15: Private label functional drinks
WHAT’S OUT
People are on sugar watch 
Figure 16: Functional juice drinks
Inconsistent regulation of CBD causes market roadblocks
Figure 17: Functional drinks with CBD
WHAT TO WATCH
Adaptogens and nootropics – getting to know you 
Figure 18: Drinks with adaptogens and nootropics
New ways of boosting energy
Figure 19: Clean energy drink examples
Just add water
Figure 20: Functional powdered drink mixes
THE CONSUMER – WHAT YOU NEED TO KNOW 
Familiar functionality in demand 
Functional drinks enjoy habitual use
Niche beverages moving to mainstream shelves  
In-store image can make or break a brand
Functional drinks interchangeable with some supplements
Brands need to gain consumer trust
FUNCTIONAL INGREDIENT USAGE 
Consumers seek familiar functionality  
Figure 21: Functional ingredient usage in drink products, February 2020
Younger adults more open to emerging ingredients  
Figure 22: Use of select functional ingredients in drink products, by age, February 2020
Parents seeking more functionality from beverages
Figure 23: Functional ingredient usage in drink products, by parental status, February 2020
FUNCTIONAL ATTRIBUTES OF DRINKS USED – AND FREQUENCY
Hydration and energy most popular benefits  
Figure 24: Functional attributes usage in drink products, February 2020
Functionality sought with high frequency
Figure 25: Frequency of usage of drink products, by functional attributes, February 2020
Stacked benefits can build loyalty  
Figure 26: Repertoire of functional attributes usage in drink products, February 2020
FUNCTIONAL DRINKS TYPES OF INTEREST 
Functional drinks shift from niche to mainstream  
Figure 27: Use of and interest in select functional drink product types, February 2020
Younger adults currently main audience
Figure 28: Interest (net*) and non-interest (net**) in select functional drink product types, by age, February 2020
FUNCTIONAL DRINKS – FORMAT AND SIZE PREFERENCES
Powders can’t match RTD convenience 
Figure 29: Preferred format for functional drink products, February 2020
Full-size, single-serving in demand 
Figure 30: Preferred size for functional drink products, February 2020
FUNCTIONAL DRINKS – DISCOVERY AND RESEARCH
Finding an in-store spotlight is key  
Figure 31: Information sources for functional drink products, February 2020
Friends and family are also big influencers  
Figure 32: Select information sources for functional drink products, visiting stores, friends and family, by age, February 2020
Social media presence crucial in engaging younger consumers
Figure 33: Select information sources for functional drink products, social media, by age, February 2020
Parents seeking info at higher rates across sources
Figure 34: Information sources for functional drink products, by parental status, February 2020
FUNCTIONAL DRINKS – ATTITUDES AND BEHAVIORS 
Functional drinks and supplements offer overlapping benefits
Figure 35: Functional drinks usage, instead of or in addition to traditional supplements, February 2020
Brands need to gain consumer trust
Figure 36: Trust in efficacy of functional drinks, February 2020
Younger consumers and parents keen on organic, sustainable claims
Figure 37: Willing to pay more for organic ingredients, sustainable packaging, by age, February 2020
Figure 38: Willing to pay more for organic ingredients, sustainable packaging, by parental status, February 2020
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Consumer survey data
Abbreviations and terms
Abbreviations
Terms