Natural Foods Merchandiser
4 factors for selling functional beverages

4 factors for selling functional beverages

Functional beverages—natural and organic beverages that are fortified with vitamins, minerals or other nutrients—are a trend that retailers must understand if they hope to successfully target their consumers. We talk about what's in, what's nutritious, what's legal and what's marketable when it comes to these drinks.

The mind-bending array of functional drink choices available today may make retailers and consumers feel like Alice in Beverageland—dependent on marketing mad hatters to navigate the growing number of brands and formulations. Gone are the days when your beverage cases and aisles needed to contain only a simple selection of juices, waters, teas and sodas. Now consumers demand drinks that rev them up or slow them down, boost immunity and athletic performance, and even repair their skin or help them lose weight.

Functional beverages—natural and organic sodas, waters, teas and juices that are fortified with vitamins, minerals or other nutrients—are definitely a trend, not just a fad, says Jeff Hilton, partner and cofounder of Integrated Marketing Group, a Salt Lake City agency that specializes in branding natural products. “There are so many formulation possibilities that this category is far from reaching its full expansion potential,” he says. “I think it’s going to be huge.” So huge, in fact, that Hilton recommends most retailers devote 20 percent to 30 percent of their beverage mix to functional drinks.

The numbers back him up. Last year, shelf-stable functional beverage sales increased 59 percent in natural products stores, to $29 million, and 23 percent in conventional stores, to $118.3 million, according to Schaumburg, Ill.-based market research firm SPINS.

Within this category, energy drink sales in natural products stores rose 17.3 percent to $7 million, and sports drink sales skyrocketed 79.2 percent to $22 million. In conventional stores, energy drink sales grew 4.4 percent to $92.1 million, and sports drink sales jumped 238.4 percent to $26.2 million.

However, the news isn’t all good: Sales of functional juices and kombucha actually dropped 6.6 percent last year in natural foods stores, to $61.9 million, although sales were up in conventional stores, at $256.5 million.

You know you need to sell these types of beverages, but with hundreds of new product launches every year and a finite amount of space in your cases and aisles, how do you decide what to carry? Here are four factors experts say you should consider when making your decision.

1. What's hot

Alternative energy drinks

With the Food and Drug Administration recently banning caffeine-spiked alcoholic drinks, there’s speculation that the agency may go after highly caffeinated energy drinks next. But Cara Welch, PhD, vice president of scientific and regulatory affairs for the Natural Products Association, isn’t sure that’s the case. “If it’s not posing an actual safety issue to consumers, I don’t think it’s going to be high on [Congress’ or the FDA’s] list,” she says. Nevertheless, manufacturers are being proactive, formulating drinks that derive energy from the herb guarana or the amino acid taurine.

Slow drinks

Beverages that contain relaxation herbs such as kava, valerian and melatonin and the amino acid L-theanine hit the market a few years ago, but they’re garnering a resurgence in consumer interest.

Beauty waters

Hilton predicts that waters that drench your skin from within via antioxidants from sea buckthorn berry and other superfruits will capture consumer intrigue.

2. What's nutritious

Not all functional ingredients are tasty, so beverage manufacturers may add sugar to make drinks more palatable, says Marisa Moore, RD, a spokeswoman for the American Dietetic Association. Check labels for high doses of cane sugar, cane juice, fructose or crystallized sugar. Remember, the American Heart Association recommends only 24 grams of added sugar a day for women and 36 grams of added sugar a day for men.

You should also examine energy drink labels for caffeine dosages. According to a January Journal of the American Medical Association commentary, the FDA doesn’t place caffeine limits on energy drinks. Consequently, some of these beverages have as much as 505 mg of caffeine per serving. The FDA does limit caffeine in cola drinks to 71 mg per 12-ounce serving.

It’s a little trickier to figure out if a beverage actually has an efficacious dose of a functional ingredient, Moore says. Percentages of the recommended daily value for vitamins and nutrients should be listed on the label, but for ingredients without an RDA, such as superfruits, herbs and amino acids, often the only thing you can do is check whether researchers have found a clinically significant dose, and if the beverage contains that amount. Even then, “not everyone’s body will respond the same way to an ingredient,” Moore says, so what may be efficacious for one customer may not be for another.

3. What's legal

Functional food and beverage claims have been on the FDA’s radar since 2006, Welch says, and both the FDA and the Federal Trade Commission have sent warning letters to and filed complaints against functional products manufacturers that make unsubstantiated health claims. The National Consumers League also filed a complaint in February with the FTC about alleged false health claims made by Vitaminwater, a functional-water brand owned by Coca-Cola.

Retailers can be held liable for making their own health claims about a product, so “if I were a retailer, I would educate myself on what can and cannot be said to consumers,” Welch says. To protect yourself in a category where little-known manufacturers are constantly debuting products, Hilton recommends partnering with companies that can provide actual scientific research to back up their claims.

4. What's marketable

Nutrition Business Journal reports that 80 percent of new functional beverages and foods fail within 18 months. So how do you ensure you’re stocking products that will last? “Research and qualify your vendors,” Hilton says. “If they have more SKUs and resources for marketing support, chances are they’re more likely to be in it for the long haul.”

Functional beverages are a low-risk purchase, Hilton says, noting that often customers buy them because of novelty, figuring: It’s only $2, so what the heck? It’s probably better for me than a Pepsi. But they won’t buy a product again if it doesn’t taste good and if they don’t see a noticeable benefit, according to NBJ research. That’s why sampling is key, along with education about what the functional ingredients actually do, Hilton says.

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