From The Winter 2004 Issue of Natural Grocery Buyer

Putting the ‘Fun’ in Functional Drinks

Nutrition boosts appeal of milk, juice, yogurt

Joe Lewandowski

As Americans look for more ways to get more nourishment in less time, drink manufacturers are lining shelves with an ever-growing variety of nutritionally functional products.

From drinkable yogurts to bottled smoothies, from juiced-up juices to new milk formulations, manufacturers are using new functional drink products to garner the attention of health-conscious consumers.

The abundance of new drinks also shows that companies are trying to differentiate themselves from competitors, says Patrick Rea, research director for Nutrition Business Journal in San Diego. “The industry has moved beyond just making drinks for everyone,” he says.

The nutritionally functional drinks category is worth about $11 billion annually and has been growing by about 7.5 percent each year, according to research by NBJ. The category includes everything from juices to teas, and from sports drinks to dairy alternatives such as soy and rice milks. Soy drinks account for about $3.65 billion of the total.

Based on the success of so many products, Rea expects product development to accelerate. “It’s in the best interest of the industry to develop new products,” he says.

A recent development in the yogurt industry proves the power of new introductions. In February 2003, Dannon introduced Danimals, a drinkable yogurt for children. Sales for 2003 will hit $85 million, far exceeding expectations, says Chrys Tsilibes, Dannon’s director of marketing. Dannon currently is the only major company with a drinkable yogurt for kids.

But the product introduction had an unintended consequence: As adults watched their kids enjoy drinkable yogurt, they decided to try it. Apparently, they liked what they tasted. Sales of the once slow-moving adult versions are growing significantly—to $142 million in 2003. But manufacturers have done little marketing for the adult products. When they do, Tsilibes expects the category to grow quickly. “Next year, with the presence of three or four major brands, I expect this to be a $300 million business,” Tsilibes says.

The big companies also have introduced yogurt-based smoothies that are gaining in popularity. The market for all yogurt products is $2.5 billion, says Tsilibes. Sales increased about 8 percent last year. The drinkables, however, accounted for 80 percent of the growth.

“Drinkables are here to stay,” Tsilibes says.

A little culture
Dannon is also experimenting with another product, Actimel. A cultured dairy drink sold in 3-ounce containers, Actimel is a probiotic that contains 10 times the active culture of yogurt. Its purpose is to provide an immune system boost. Actimel is being test marketed now, mainly in naturals outlets. The company has notdecided whether Actimel will be introduced in regular grocery stores.

Milk producers appear to be taking some lessons from the yogurt makers. The industry is searching for ways to boost sales of this oldest of functional drinks. Consumption of milk has been on a long, steady decline. In 1975, Americans drank 261 pounds per person; in 2002 they drank only 206 pounds each, according to U.S. Department of Agriculture statistics.

During the past five years, milk producers have ventured beyond chocolate, adding a variety of fruity flavors, mainly to appeal to kids. Now, producers want to expand the nutritional profile to punch up milk’s appeal to parents, explains Donna Berry, a dairy industry analyst from Chicago. “The thinking is that milk is an ideal carrier for good-for-you ingredients, and it’s already accepted in the marketplace,” Berry says.

Dean Foods, the nation’s largest dairy company, recently introduced a new product, fitmilk. It’s fortified with 67 percent more calcium than regular milk. And Lactaid, which makes milk for people who are lactose intolerant, is now adding soy to one of its products and promoting it as heart healthy.

Innovation encouraged
A recent report, commissioned by the International Dairy Foods Association, urges the industry to innovate: “There are hundreds of functional food products that could be developed based on fluid milk.” The report suggests adding a variety of ingredients, including soy protein, vitamins C and E, glucosamine, green tea extract, magnesium, sterols and even caffeine.

But don’t look for new products any time soon. The industry must first conduct research and test for taste, safety and efficacy. Per U.S. Food and Drug Administration rules, scientific studies are required before any health claims can be made.

Coca-Cola is adding a potential competitive wrinkle in the functional beverage game. The company, intent on expanding its base with young consumers—and appeasing parents—last fall introduced Swerve in schools. The sweet, low-fat drink actually has some nutritional value. It contains 55 percent milk and is fortified with vitamins A and C, calcium and fiber.

Swerve is not yet available in retail stores, and company officials won’t say when it will be. But given Coca-Cola’s marketing power, a milk/soft drink hybrid could open a whole new category for grocery stores.

Raging Cow, a milk and caffeine drink from 7UP, was introduced into convenience stores in spring 2003. It will roll out slowly in grocery stores starting early in 2004. But the dairy-based drink, aimed at 18- to 24-year-old consumers, is not being touted for its nutritional qualities, says Matt Smith, product brand manager. “After carbonated beverages, dairy is the second largest,” Smith says. “But milk is a sleepy category. We wanted to bring in some excitement, something new.”

Juiced-up juice
Apart from dairy and soy products, juices also are being used to carry more functional nutrients. Minute Maid started adding extra calcium to its orange juice back in 1987. During the last year it’s added two new products: OJ with vitamin E and zinc; and Premium Heartwise, a juice that contains sterols—plant-based fatty acids proven to inhibit development of bad cholesterol.

“OJ is naturally a healthful product, so it makes a great platform for things like sterols and zinc,” says Ray Crockett, spokesman for Minute Maid. “And most people drink a glass of juice every day.”

Premium Heartwise was introduced in October 2003. The company is planning a major promotional campaign starting early in 2004.

Odwalla has been adding functional ingredients to its drinks since it started in 1980. As a whole, the natural health juice category is growing about 20 percent per year, says Mike Scheu, Odwalla’s brand manager. Odwalla’s growth rate is higher than that, but he declined to give an exact percentage. The growth is being pushed by consumer desires, says Scheu. “People are looking for shortcuts in their lives. They want a snack to take with them. And they’re more in tune with what they’re putting in their bodies.”

Odwalla makes more than 20 different flavors and is continually developing new products. Besides traditional items such as orange and carrot juices, it makes juices that contain added antioxidants, vitamin B, protein, echinacea and other nutrients. Long a fixture in naturals stores, Odwalla is expanding aggressively into regular grocery outlets. “Mainstream grocery stores, that’s the growth market for us,” Scheu says.

Drinkable meals
Rounding out the functional drink category are the so-called meal-replacement beverages—drinks such as Ensure, Boost and Slim-Fast. These are nutritional supplements and are loaded with vitamins, minerals, protein, fiber and calcium.

The veteran of the group, Ensure, has been around for 30 years and has long been known as a source of nourishment for people who can’t digest solid food. A company official said in an e-mail message that Ensure is growing more popular with dieters and with those looking for a nutritious snack or meal. The company provided no specific sales figures.

To provide convenience for customers, Ensure products are now being sold in single-serve plastic bottles. It had always been sold in cans.

Nutritionally functional drinks of all varieties are growing in appeal to consumers. Even though drink makers have been selling a wide variety of nutritional beverages for years, a new wave of healthy drinks is just beginning to form.

Joe Lewandowski is a Fort Collins, Colo.-based free-lance writer. He can be reached at word-dog@comcast.net.