Functional Beverages: Industry Analysis

18092012

Written by Divya Bhatia, Welingkar Institute

INTRODUCTION The first functional beverage which was launched was to hydrate the body But today large nu!bers of functional beverages are available for various lifestyle "roble!s ranging fro! an#iety to slee" to weight loss etc $oca $ola%s &hock and 'ed Bull were the early entrants in the industry and are the ones who give chance to late entrant to think about the industry (unctional beverages can be defined as ready to drink for!ulation with ingredients such as herbs, vita!ins, !inerals, a!ino acids and raw fruits to "rovide additional health benefits beyond nutrition )arious "roducts which are categori*ed as functional beverages are s"orts drinks, energy drinks, ready to drink tea and coffees, yoghurt, fruit+vegetable s!oothies and even enhanced water These functional beverages satisfy need of consu!ers of hydration, energy, en,oy!ent or si!"ly having fun The global functional beverages !arket grew by -. in 2010 to reach a value of /08,181 !illion In 2012, the global functional beverages !arket is forecast to have a value of /12,121 !illion, an increase of 23. since 2010 4ro,ections for functional beverages are that !arket will grow by 10-. in between 2010 and 2012 and total annual sales e#ceeding /58 billion in 2012 The Indian functional Beverage Industry was esti!ated to be around 's 11,123 crores in 2010 with a $67' of 21. in the last five years It is e#"ected that the industry will cross 's 13,000 crores sales in 2012 (unctional beverages are beco!ing "o"ular due to their s"ecific health benefits and are a""ealing to consu!ers because of changing lifestyles $onsu!ers "urchase these "roducts for both convenience and s"ecific health benefits FUNCTIONAL B ! RA" INDU#TR$ (unctional beverages sector can be said to be subsector of non8alcoholic industry and is fastest growing sector The faster growth of sector is also because of saturation of !arket by carbonated drinks The industrial trend is changing9 the consu!"tion of carbonated drinks is decreasing while that of functional beverages is increasing The industry can be broadly divided into four !arket seg!ents:

%ydration

6ntio#idants, vita!ins and fruit e#tracts are the ingredients which hydrate both inner and outer side of skin The various vita!ins co!!only found in energy drinks for their s"ecific benefits are: B vita!in: (or energy !etabolis! ; vita!in: <as antio#idant "ro"erty $ vita!in: To activate "eo"le 7atorade is well known hydration drink for athletes

nergy and re&uvenation 'ed bull, 6drenaline rush, 180 and !any !ore are highly caffeinated and high energy drinks These drinks include sti!ulants such as taurine, caffeine, sugars, anti8o#idants and creatine 6lthough these ingredients are a""roved by (D6,so!e health e#"erts still say that all these ingredients are not beneficial to health %ealt' and (ellness This seg!ent is about the health conscious "eo"le &o they have introduced less sugar and less caloric beverages to target this seg!ent )eig't *anage*ent Due to changing lifestyle there is an increase in obesity and consu!ers are looking towards fast and easy !ethods to reduce weight that can be easily ado"ted for their lifestyle &o various calorie burning beverages, !etabolis! boosting effect, fat burning beverages are launched by co!"anies that go well with "eo"le convenience to reduce the weight +A,OR -LA$ R# The "layers in this category are divided into four ty"es =ne is non8alcoholic beverages co!"anies including 4e"si$o Inc and $oca8$ola $o 6nother ty"e consists of !a,or food co!"anies such as >estle, ?raft food, 7eneral @ills etc The third grou" is s!all scaled co!"anies like local co!"anies =ther seg!ents are traditional !edicines co!"anies "roducts like 4atan,ali "roducts, 6sara! Ba"u "roducts etc )arious co!"anies which are co!ing into new energy drink seg!ent are Dabur, 6!ul, Britannia, Danone and 'asna 6ll these co!"anies want to woo the health conscious young Indian consu!er ;ven traditional co!"anies who never tried hands in such "roducts are also trying

Dabur will launch beverages under real brand

6!ul $o!"any has co!e u" with 4rolife lassee and butter!ilk, 'asna is even "lanning to enter into the seg!ent with a new subsidiary They are looking for brand licensing and technical collaboration 6!way launched 6!way AB energy drink which co!es in two flavors of citrus blast and tro"ical blast This "roduct is launched as Cuick and healthy solution to stress and fatigue FORC #

N!IRON+ NT ANAL$#I# -ORT R.# FI!

-RODUCT The functional beverages has wide range of "roduct like energy drinks, functional ,uice, ,uice drinks, enhanced water, rela#ation drinks, functional soy, rice and al!ond8based drinks, coconut water, functional tea, functional yogurt drinks and s!oothies The "roducts of functional beverages offer wide variety targeting different health concerns =ne !a,or "roduct is hybrid drink with co!bination of vita!ins and other nutrients which has thirst Cuenching ability The other is "robiotic or active drinks which have ability to enhance the "ower of i!!une syste! The other is for enhancing !e!ory and !ental shar"ness $hildren are also targeted by these energy drinks and >estlD%s Boost is taking the lead in this seg!ent The other categori*ations of the "roducts are on the basis of s"orts drinks, health drinks, beauty drinks, energy drinks, weight8loss drinks etc In the energy drink seg!ent 'ed bull is growing considerably fast

Dairy "roducts are even e#tending the!selves to !ore than flavored !ilk )arious functional beverages which are available in the !arket are 'hinoEs, Bullet, $loud 3, 6!way AB, "ower house, AAA AAA has two variants 'e,uve and >icofi# &'? is brand a!bassador and even brand is associated with ??' as "rinci"al s"onsor >icofi# is for!ulated to decrease the urge for nicotine and 'e,uve is for!ulated to re,uvenate !ind and body and enhance i!!unity

&oBe 6drenaline 'ush which is "riced at 's 52 for a 202 !l can $oca $ola has a global "ortfolio of five energy drink brands )ita!in ;nergy, (ull Throttle (ury, 4ower"lay, TaB ;nergy and burn F&hockEs global avatarG

"RO)T% DRI! R# 1 There are various benefits of functional beverages which interest consu!er $onsu!ers are interested in natural ingredients and beverages which are free fro! artificial ingredients 6s a result this !arket has huge attraction for "eo"le who are concerned about health Diet drinks are low in caloric content and with less of sugar content &o!e drinks contain anti8o#idants These drinks have inherent energi*ing benefits of fruits and are natural sources of caffeine @arket of functional beverages is increasing because "eo"le have been beco!e "roactive in disease "revention and control 2 ;nergy drinks used in co!bination with )odka In so!e cases energy drinks can be used to boost sales of alcoholic drinks or vice versa Due to high caffeine content energy drinks are co!"atible with alcoholic drinks es"ecially like "re!iu! )odkas 6nd another i!"ortant "oint is that both energy and )odka are targeted to consu!ers around thirty years of age - ;nergy drinks are good source of energy without "roviding e#cessive calories and sugar 6 !a,ority of Indians are now beco!ing aware about !alnutrition and under nutrition They are looking for convenient source of energy and functional drinks are fulfilling their need CON#U+ R -ROFIL Ty"ical consu!er of functional beverages is well educated, in between 22802 years old, having highly dis"osable inco!e, belong to u""er !iddle and !iddle class (e!ales consu!e or try functional beverages !ore than !ales These consu!ers are willing to try so!ething new $o!"anies are trying to sur"rise the! by co!ing u" with new "roducts &ur"rise can be in for! of color, taste and aro!a of "roduct By sur"rising custo!ers the "ur"ose of co!"anies is that consu!er won%t get a chance to co!"are "roduct with cola or ,uices Barge consu!"tion of functional beverages is due to "erceived health benefits of "roduct C%ALL N" # B IN" FAC D 1 ;nergy drink seg!ent still re!ain a new category with only few established "layers such as 'ed Bull, $loud83, 4ower <orse and &obe 2 <igh "rice of these drinks are concern for the co!"any - (ood and drug ad!inistration F(D6G regulation due to high a!ount of caffeine in so!e of the drinks 0 <ealth concerns are associated with drinks 6s so!e of these drinks contain large a!ount of sugar and caffeine which thus increases caloric intake and further increase the case of heart attack, blood "ressure and other heart risks 6s heart rate auto!atically increases after e#ercise, so consu!"tion of energy drinks !ay further increase it <igh sugar content increase the chance of dental carries $oncern is there about consu!"tion of these drinks in large a!ount &o!e of these drinks are even found to contain carcinogenic substances )arious health e#"erts clai! adverse reaction using these energy drinks 2 The "o"ularity of s"orts drink is li!ited to s"orts "eo"le &"orts drinks are used only by s"orts!an before and after "erfor!ance $hallenge is to !ake its "resence on casual basis 1 Though energy drink are !ore fa!ous than s"orts drinks Their "o"ularity is a!ong night clubbers, long distance drivers or by "eo"le after working long hours 5 There is consu!er distrust on the clai!s !ade by the beverages 8 $o!"etition fro! beverages which are !uch lower "riced than functional beverages 3 &o!e energy drinks have been re"orted to be !isused by college students because of high content of caffeine in the! FACTOR FOR #UCC ## OF FUNCTIONAL B ! RA" #

-roduct: Drink !ust taste good and have ele!ent of so!ething new in it 4ackaging should be attractive enough as these drinks are single serving beverages so "eo"le want to get notice when they are consu!ing these drinks Hser !ust feel that "roduct works 6ll the clai!s behind the "roduct !ust be "roved by scientific study and have evidence of testi!onies -rice: 4roduct should be launch in s!all "acks at less "rice >ourish$o launched glucose8 based drink ITata 7luco 4lusJ in a 200 !l cu" "riced at 's 1 and launched nutrient water under ITata Water 4lusJ at 's 11 for a 520 !l bottle 4lace: 4roduct should be available at all retail outlets &o!e of the "roducts launched by co!"anies are only available in night clubs etc -ro*otion: These drinks are "ro!oted with benefits such as healthy heart, i!"roved i!!unity and digestion and energy boosting Brands need to focus on !ass seg!ent 4roduct can be "ro!oted by sa!"ling in the !odern retail where consu!ers are !ore rece"tive to "roduct Co*/etition: 6 clear differentiation of one%s "roduct fro! the co!"etitor%s "roduct is there in ter! of ingredients and their health benefits 6s the seg!ent is continuously increasing the co!"anies are e#"loring new areas of industry )%AT.# N ) ;nergy drink seg!ent is increasing where as natural ,uices seg!ent is decreasing The growth of energy drink seg!ent has increased even during the recession What is noticed that seg!ent is fairly able to !aintain its consu!er base but is not able to add !ore of consu!ers @ore than 800 s"orts and energy drinks were launched in 2010 all over the world 4rotein drinks are also !uch in de!and These drinks are targeting to consu!er looking for basic nutrients such as "rotein and fiber These "roducts reduce the weight while !aintaining the general lifestyle as these is convenient on8the8go snack The "roble! with this seg!ent growth is that "eo"le still think that drinks cannot be good source of "rotein 4rotein can only be "rovided by bars and "owder for!ulation Traditional "roducts with ingredients such as caffeine, vita!ins, herbs and anti8o#idants are re"laced by ingredients such as "rotein, o!ega - fatty acids 'ange of "roducts has broadened to sugar free, caffeine free and organic "roducts The co!"anies are launching "roducts with less of caloric contents while retaining the sa!e taste of "roducts 4e"sico introduce 4e"si >e#t, which has sa!e taste as of original cola but caloric content is decreased in "roduct 4e"sico also launched Tro"20 =ther line of e#tension is natural teas These beverages are si!"le with all natural ingredients Beverages co!"anies are "ushing their functional beverages along with increasing consu!er de!and FAILUR # $oke ca!e u" with energy drink &hock which was "ositioned as lifestyle drink in 2001 with tagline Kunleash your wicked sideJ The "roduct was not able to "roduce good !arket res"onse &i!ilarly 4e"si$oEs energy drink &oBe, 7la#o&!ith?line $onsu!er <ealthcareEs s"orts drink Buco*ade and Tata 7lobal BeveragesEs tea8based wellness drink TL=> are not able to generate good res"onse in !arket The reasons behind these failures are "ricing and !ost of foreign co!"anies have launched their "roduct as such without any local custo!i*ation 7atorade which was initially introduced in Indian !arkets at "rice of 's 120 but now "roduct is !anufactured in India only and is available at "rice of 's -0 only =ther drink launched by coke is burn which is high caffeine drink and available in three various si*es 220!l, -00!l and 200 !l cans The "roduct is !ade not to be !ass distributed through various retail channels, but "roduct will be available in "ubs, selected !odern outlets, gy! etc FUTUR OUTLOO01R CO++ NDATION

'ela#ing drinks have to look for negative clai!s and (D6 regulation in this seg!ent of beverages The content of caffeine, sugar, other health su""le!ent etc in !ost of drinks a!ount need to be regulated, as e#cess of everything is bad whether it is health su""le!ent