Where is the functional drinks category heading?

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While non-alcoholic beers and spirits without spirits continue to gain more attention, there is one segment of the alcohol-free category that has huge potential according to experts: functional drinks.

“Over the next few years, we will see the soft drink industry grow in the RTD category and on premise, with a strong emphasis on functionality,” said Alexi Chialtas, co-founder and CEO of the beverage brand at cannabis Wunder. “People will continue to look for alternatives to alcohol, but they will want to feel something about their drink knowing that they will have a good tomorrow without a hangover.”

These Goop-ish drinks offer more than great taste; they’re packed with vitamins, minerals, dietary fiber, probiotics, adaptogens, CBD, THC, and other products that are good for the body or modify the mind.

According to Research and Markets, the functional drinks market is expected to reach $ 173.23 billion in 2025 at a CAGR of 7%.

Major producers are taking note and embracing functionality in the beverage space. PepsiCo

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a Driftwell, a functional water dosed in L-theanine. In 2019, Coca-Cola invested $ 20 million in Health-Ade Kombucha and launched Coca-Cola Energy, a caffeinated cola riff containing guarana extracts and B vitamins.

“The trend towards non-alcoholic drinks started before the pandemic,” Chialtas continues. “The pandemic has accelerated movement as people slowed down and began to consider what serves and doesn’t serve them in their lives – maintaining health, reducing stress and getting sleep continue to be areas of concern. importance. ”

“There are many health and wellness trends emerging in downtown stores, prompting alcohol consumers to review their drinks,” said Kim Cox, senior vice president of account development at NieslenIQ. “While non-alcoholic beer has been available to consumers for many years, there are now more options for alcohol-free and low-alcohol wines, spirits and beer than ever before. These new innovations better respond to the health and wellness desires of some consumers, such as lower blood alcohol levels, less sugar, fewer calories, or sustainable sourcing practices.

How is the functional category formed and where does it go? The experts intervene.

Better health drinks

“As the pandemic has become part of our daily lives and consumers have spent more time on their overall health choices, several brands rooted in the non-alc with existing distribution have started to experience three-way growth. numbers, ”says Bill Meissner, president and chief marketing officer of Splash. Group of drinks. “As consumers go back to their routines and re-engage in more normal social environments, we’re seeing this take hold a bit, but the foundation of the movement is rooted in the desire of young Americans to live healthier lifestyles. . It’s a macro trend that we don’t see fading away.

He finds that while the big brands are launching into mass-market alcohol-free and hyper-functional offers, the major innovation comes from small companies; start-up offering craft businesses and small series.

More accessible canning and production methods mean smaller brands have a chance to influence the trend. “Canning machines are much smaller and cheaper than they were 10 years ago,” says Matt Vincent, owner of the CBD-based seltzer brand Oh Hi Beverages, Ska Brewing Co. and Ska Fabricating. “This opens up a lot of options for beverage startups to get their product into the hands of consumers at a much lower cost to determine market viability. “

While the category is exploding, Bambucha Kombucha CEO Michael ZonFrilli sees that the functional drinks category has work to do. “We are still surprised that some retailers and food service operators are reluctant to add high quality non-alcoholic beverages to their alcoholic offerings. Obviously, the costs are higher than that of a soda or iced tea, but consumers are starting to expect and demand drinks that they are happy to consume, even with abstaining from alcohol.

He notes that major players like Molson Coors

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and Pepsi are investing in producers of functional drinks “because they, too, are seeing consumers turn to non-alcoholic drinks that consistently deliver a healthier and more satisfying drinking experience.”

The strong potential of CBD

In Drizly’s annual report, the ecommerce platform notes that retailers are “very bullish” about cannabis and CBD infused products. Over 50% of retailers surveyed believe cannabis and CBD infused drinks have the greatest growth potential in the industry.

“Rapid change is the nature of the beverage industry,” shares Jeng co-founder Christopher Lackner. “Thirty years ago, bottled water was inconceivable. Ten years ago, carbonated alcoholic drinks were mostly unknown. anyone’s radar. Today we are witnessing a growing movement of sobriety and curiosity that normalizes an alcohol-free lifestyle and a culture that increasingly perceives hemp and cannabis as healthy alternatives. The opportunity is there. ”

Many drink experts expect the CBD drink category to continue to grow. “Not only did consumers realize that their alcohol consumption had increased and needed to be reduced, but they also spent more time online, learning about new trends in ingredients such as CBD and on the benefits that a full-spectrum cannabinoid can bring to consumers. body, ”says David Knight, director of beverages at CBD bioscience company CFH, Ltd. He found that the most successful products put more emphasis on flavor and use “artisan” packaging techniques – glass bottles, designer labels, Millennial brand – to elevate the RTD experience.

He is surprised at how quickly the trend has evolved. “I think Covid-19 played a role in accelerating this trend for NA drinks. Not only did consumers realize that their alcohol consumption had increased and needed to be reduced, they also spent more time online, learning about new trends in ingredients like CBD and the benefits it brings. ‘a full spectrum cannabinoid can deliver to the body. . “

There’s also the proliferation of higher octane, cannabis-infused drinks.

“We know that a growing number of consumers are moving away from, or at least decreasing, their alcohol consumption, which has sparked interest in alternative options, including cannabis-infused drinks (CIB),” says Lori Hatcher. , Marketing Manager for Truss Beverage Co, a Canadian leader in cannabis. “In our focus group, we learned that one of the main attractions of IPCs was the absence of negative components common in alcoholic beverages, such as sugar and artificial flavors. “

Wunder’s Chialtas notes that the expansion of legalization of cannabis for adult use across the continent has triggered a wave of cannabinoids in RTDs. “The cannabis-infused beverage category is already taking off in states like California and Nevada, and consumer adoption in other states will continue. The form factor of cannabis-infused drinks is familiar, and innovation in the category has led to a safe, predictable, and consistent experience, making it appealing to the canna-curious and those looking to replace alcohol with one. healthier option. We’ll likely see big and multinational beverage companies launching THC and minor cannabinoid drinks over the next few years. ”

Truss’ Hatcher finds that the drinks appeal not only to the regular cannabis user, but the canna-curious as well. “From our previous studies, we found that 43% of Canadians who tried cannabis drinks did so because it meant they could still use cannabis, but not smoke it,” Hatcher continues. “This is likely due to the fact that 71% of Canadians cite smoke as the main barrier to cannabis use, and 74% say the lingering smell of the cannabis flower is a problem. “

At that note, Truss has deployed a wide range of lines to capture the specter of drinkers intrigued by cannabis drinks. Their Mollo brand is a beer substitute (pair it with tacos, the brand proclaims), while Little Victory is more lifestyle-oriented; low in calories and high in Millennial branding. House of Terpenes is a mixology-ready line, while XMG is a very potent line for more experienced cannabis users. Their new Bedfellows range was designed in partnership with a local alcohol-free brewery to mimic the flavors of craft beer.

“We know there is huge potential for the cannabis drink category,” Hatcher continues. “Consumer awareness levels are at an all-time high at 87% in Canada, and there is no sign of slowing down. That said, innovation and product training are vital for the continued growth of this category. Consumers’ tastes and preferences change as they learn more about cannabis drinks, so it is important that as an industry we continue to listen and innovate to meet their needs.


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