Bright future for beverages? Why functional drinks are likely to grow post-pandemic

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Much of the healthy drinks market saw extended growth since the start of the COVID-19 pandemic as a result of growing consumer interest in health and immunity. Consumers are now prioritizing condition-specific benefits in their beverages, and general wellness and hydration claims may no longer be enough to lure them.

What do prospects for healthy beverages look like post-pandemic? The market is likely to embrace a more diverse array of functions. And, as consumers get back to their regular routines, product convenience will once again become paramount. Here are some of the emerging trends shaping the market.

Bolstering Beverages

The determination to take ownership of one’s health is driving better-for-you beverages. Consumers’ desire to make healthier choices paved the rise of products like low- and no-alcohol drinks and less-unhealthy soda, points out Erin Costello, communications associate for beverage developer Imbibe (Niles, IL). Expect to see that trend continue.

“Categories with health halos are predicted to experience significant growth,” Costello says. “The American dairy alternatives market has a projected compound annual growth rate of 12.5% from 2021 to 2028, according to Grand View Research. We expect to see most new products positioned as offering more than just hydration.”

Immunity-supporting beverages are especially booming. Market researchers have witnessed a meteoric rise of immune-health beverages, Costello notes, while survey data gathered this year by ingredient supplier Glanbia Nutritionals (Chicago) showed that 46% of consumers are interested in beverages naturally high in immune-health ingredients. Meanwhile, 30% are seeking beverages fortified with such ingredients.

The Return of RTDs?

Despite several pre-pandemic years of strong and consistent growth, the ready-to-drink (RTD) market did stagnate during the pandemic. Although the RTD market posted strong numbers in the three years leading up to the pandemic, consumers have spent much of their time at home since early 2020, says Ranjana Sundaresan, lead research analyst for food innovation intelligence firm Spoonshot (St. Paul, MN).

“References to ‘on-the-go’ food and drink declined 40%,” Sundaresan says. “Even though parts of the world are opening up, it doesn’t look like there’s much interest in consuming food or drink while on the move. That’s not surprising, since this would require removing masks and juggling with packaging in public, crowded places.”

But there’s hope. Ready-to-drink coffee products could be the first segment of the RTD market to rebound. One Imbibe survey found that 67% of adults purchased an RTD coffee beverage between 2020 and 2021.

Imbibe’s Costello cites further market research data from IRI (Chicago). “Refrigerated RTD coffee beverages experienced close to 20% growth in the 52 weeks ending May 17, 2020, according to IRI. Although consumers are still enjoying creating the coffee shop feel at home, refrigerated RTD coffee posted USD $487 million in sales in total U.S. convenience stores and MULO [multioutlet channel] for the 52 weeks ending May 17, 2020. In our business, we’re on pace to see RTD grow by at least 8% through the end of 2021.”

Winning with Botanicals

Nutraceutical products fortified with botanical ingredients are one of the fastest-growing product categories. Why? Consumers want natural, great-tasting products with added health and sensory benefits, says Leigh Anne Vaughan, global strategic marketing director, Taste for Kerry (Tralee, Ireland).

Vaughan points to supporting data from market researcher Innova Market Insights’ product launch database. “From 2017 to 2020, there has been a 46% growth in the number of beverages containing botanical extracts. Importantly, 69% of consumers say it is important for foods and drinks to be 100% natural. The COVID-19 pandemic has also raised public interest in ingredients that have a health halo.” As luck would have it, “Botanicals have this reputation among consumers” of being healthy.

Plant Origins, Sustainability Matter

Clean-label and environmentally friendly products matter to consumers, pushing progress in the beverage market. Vaughan notes, “Kerry’s 2021 Sustainability in Motion survey found that 84% of consumers believe it’s important for people to contribute to sustainability. About half of consumers consider sustainability when buying food and beverages. This often shows up as an increase in consumers buying plant-based beverages, as plant-based is widely perceived to be very sustainable.”

Ready for Rebound

The healthy drinks market is well positioned to recover from the COVID-19 pandemic. While RTDs suffered losses, botanical drinks and beverages with immunity-boosting ingredients are in high demand. The beverage sector’s recovery may be uneven, but it is nonetheless underway.