p>Growing interest in functional soft drinks is shaping the European soft drinks industry, as static sales in the traditionally strong carbonates market force major players to look at new ways of maintaining competitiveness. Moira Hilliam reports
In Europe the functional market is dominated by sports and energy drinks, while the remainder comprises a wide range of different types of fortified and functional products. Sports drinks are the most established sector of the global market (except in Japan), yet the smaller energy sector has been leading growth in recent years, and has even outstripped sports drinks in some markets, such as the UK.
Considerable activity also exists in vitamin- and mineral-enriched lines and herbal drinks. As energy drinks and herbal drinks tend to overlap in some instances, there is already a blurring of definition in the market, particularly as some companies have launched single herb-based energy drinks as part of their herbal lines.
The functional soft drinks markets in most countries are dominated by sports and energy drinks, but signs point to an approaching maturity with a growing number of other functional lines coming onto the market in response to consumer demands for healthier products. This market sector is relatively small and undeveloped, however, and is highly fragmented with relatively high levels of product activity not yet reflected in terms of market size.
Germany is one of the few countries in the world, for example, with a quantifiable ACE drinks market (products fortified with antioxidant vitamins A, C and E) although the positioning tends to be on a general health basis, rather than emphasising the antioxidant benefits specifically. The market in Germany was created in 1994 when the first ACE products appeared, pioneered by the dairy company M?ller, and the market grew from virtually zero to four million litres by the end of that year.
High levels of promotional activity followed, taking the market to over 175 million litres by 2000. Continued double-digit growth led to sales of over 300 million litres by the end of 2002, with a value of about $44.8 billion, according to Leatherhead Food International. This huge success on the German market was led by Stute Foods with its ACE Refresh product. More than 100 German manufacturers now offer products of this type, usually in orange, carrot or lemon flavours, with a typical juice content of 30 per cent.
ACE drinks are now starting to appear in the UK following their success in Germany.
Multiple Benefits In A Fragmented Market
If ACE drinks are excluded, the market for functional drinks fortified with beneficial ingredients, including other vitamins, minerals and herbal ingredients, is still very small, although showing good growth. Sales of so-called ?wellness drinks? reached an estimated 50 million litres in 2002, double the total in 2000, although this is still equivalent to just 0.6 litres per capita.
The sector remains highly fragmented, with a wide variety of product launches. Many of the products are multiple benefit, with fruit juice drinks containing vitamins and fibre, some of the earliest products on the market. One of these early products in the mid-1990s was M?ller?s Ballast-stoffhaltige Drink (fibre drink) with fruit and milk. Certain products in the ACE still fruit drinks market started to contain fibre and other beneficial ingredients, and eventually a separate category emerged.
Probiotic fruit drinks with gut health benefits have also started to appear on the market, led by the Primavita probiotic fruit drink with L. plantarum (launched in a number of countries under the ProViva name) from Swedish company Sk?ne, which was launched by Hansa in 1999. Another key launch was the Kombucha probiotic herbal drink from Henkell & Sohnlein, which entered the German market in 1998. It is based on an ancient Chinese recipe containing cultures made from yeast and lactic acid bacteria. Following its success, a number of other drinks with Kombucha have been launched in Europe, as well as some food products.
The market is also increasingly seeing ranges of products with different ingredients for different concerns. These include ranges with a specialist image, but also more mainstream lines, featuring ingredients such as Ginkgo biloba, kefir and kombucha (Stock Vital?s Carpe Diem range, launched in Germany last year, for example), as well as herbal and fruit extracts. Fruit juice company Merziger?s Corpore Sano range, also launched in Germany in 2002, has products formulated to offer energy (Vitale), relaxation (Balance) and to stimulate the mind (Esprit), each with different fruits and beneficial ingredients.
In addition, existing brands are being repositioned to offer a fitness or well-being image. The market is also segmenting to offer different formulations for men and women. A good example of this is the Frispa Shinyou green tea and fruit juice drinks range, launched in the German market in July 2002, with versions for men (orange, melon and pumpkin juice, vitamins and schizandra) and for women (apple, pear, grape and citrus juice, biotin, folic acid and ACE vitamins).
Juice And Water Lead In The UK
The market for functional soft drinks has yet to develop to this extent in the UK. If sports and energy drinks are excluded in the British market, the two most sizeable functional brands are probably the Tropicana Healthy juices range, with a value of just over $15.25 million a year, and the Danone Activ water range with calcium, worth almost $85 million a year. This means that the functional soft drinks market is likely to be less than $1.27 billion a year using a strict definition, probably rising to about $2.54 billion if a broader definition is used. This excludes sports and energy drinks, which are now worth over $1.52 billion a year.
Calcium-fortified fruit juices have been on the UK market for some years, pioneered by Tropicana with the launch of Tropicana Plus Calcium in 1999, renamed Tropicana Calcium in early 2000. It now comprises just one product within the Tropicana Pure Premium chilled fruit juices range and carries the ?healthy bones? strapline on-pack and is part of the Healthy sub-range, which also incorporates a Multivitamins juice with a ?healthy body? labelling and a new Fibre line (?healthy inside?).
Calcium-fortified waters are not new to the UK, but a heavyweight move into the sector came in late 2000, when Danone launched its Danone Activ water with calcium, and backed it with the UK?s biggest ever spend ($15.25 million) for a water launch. The advertising featured a family of skeletons, emphasising the bone-health positioning. After a year on the market, Danone Activ had gained over five per cent by value and nearly four per cent by volume of the still bottled water market through multiple grocers, giving it fourth place overall behind Evian, Volvic and Highland Spring.
The market was developed still further with the introduction of three flavoured varieties in March 2002. Both Activ and Tropicana Calcium carry the ?bone friendly? logo of the National Osteoporosis Society.
Sweden Leads With Gut Health
The first true gut-health functional drink was probably the ProViva probiotic fruit drink from Sk?ne Dairies, which was introduced in 1999 in Sweden. Made using the Lactobacillus plantarum probiotic culture, it claimed to be the first probiotic non-dairy drink sold in one-litre gable-top cartons via the chilled cabinet. Another innovation was Pete & Johnny?s It?s Alive, a dairy-free fruit smoothie with probiotic Bifidobacterium lactis cultures, launched in the UK in April 2001 using the existing healthy image of the dynamic $47.4 million fruit smoothie market as a launch platform.
More recently, the Optio range of juice-based nutrient drinks was launched in the UK, reflecting a trend toward ranges of nutrient drinks with specific health benefits. Four varieties include Optio Charge for digestion, fortified with aloe vera, vitamins and plant extracts; Optio Tempo for cardiovascular health with omega-3 fatty acids and vitamins E and C; Optio Tone for the complexion with starflower oils, ACE vitamins, zinc and selenium; and Optio Shield for the immune system with black elderberry extract, vitamin C and zinc.
France has trailed Germany and the UK in terms of product and market development, although it is now also starting to see activity in certain sectors of the market. It has also been slow to pursue categories that have seen strong growth in other countries, including calcium-fortified waters, where Danone has yet to make an impression with Talians mineral water or with the Activ brand that met with initial success in the UK.
This lack of interest has also been reflected in the relatively low take-up of sports and energy drinks in France.
Clearly, there is potential for considerable growth in the nutraceutical or wellness drinks market, which is still in its infancy. The sector needs to be supported by resolution of some of the issues surrounding health claims, high levels of promotional activity and consumer education, and a sensible approach to price positioning. With increased consumer interest in taking responsibility for their own health and the entry of major players to the market, it is likely to move increasingly into the mainstream and could show very strong growth over the next five to ten years, albeit from a very small base.
This article is based on the new Leatherhead Food International report Functional Soft Drinks—An International Perspective which reviews market sizes and trends, key players, and significant product activity for functional soft drinks. Info: [email protected]