Functional beverages have become a critical part of the beverage industry, reflecting consumers’ increasing focus on health, wellness and convenience. With growing demand for beverages that provide added benefits such as enhanced energy, improved hydration, and overall health support, the US functional beverage market continues to expand rapidly, creating new opportunities for brands.
Functional beverage market overview
The $50 billion US functional beverage market is forecast to reach $62 billion in 2027, growing at a 4.5% CAGR (2022-2027) (1). Energy drinks lead as the largest functional beverage category at $16.0 billion (accounting for one-third of the market), followed by sports drinks at $12.2 billion (2). While energy drinks continue to show solid growth (est. 3.2% CAGR, 2022-2027), sports drinks are growing even faster (est. 5.6% CAGR) (3).
US functional beverage market
|
Functional beverage type |
Sales (in Billions) |
|
Energy drinks |
$16.0 |
|
Sports drinks |
$12.2 |
|
Sports protein RTD and meal replacements |
$6.4 |
|
Functional waters |
$4.1 |
|
Dairy alternative beverages |
$3.2 |
|
Functional juices |
$3.2 |
|
Functional RTD coffees and teas |
$1.8 |
|
Functional carbonates |
$1.7 |
|
Yoghurt beverages |
$1.2 |
Source: Euromonitor, June 2023
US functional beverage trends and consumer preferences
Hydration
Hydration is at the forefront of functional beverage trends. As the number one driver for sports drink consumption (4), hydration means more than just quenching thirst. Consumers seek hydration for health and vitality, as well as for performance and recovery (5), with electrolytes and amino acids the most important supporting ingredients.
Energy drinks
Continued high demand is driving growth and innovation in energy drinks. With more than one in three US consumers concerned about their energy and stamina levels (6), brands are meeting the needs of this expanding consumer base through clean label strategies, segmentation (e.g. fitness energy drinks and gamer energy drinks) (7) and exciting flavours. In an energy drink, taste is more important than health to consumers (8).
Protein fortified
The most popular claim in new North American functional beverage launches after energy/alertness is high in/source of protein (9). Protein is the most important ingredient to Gen Z and millennial consumers globally (10), with protein signalling to consumers a healthier product (11). This points to opportunities in protein-fortification beyond sports protein RTD and meal replacement beverages.
Opportunities for disruption in the functional beverage market
These trends are supporting several emerging niches in the functional beverage market, including the protein water segment. Protein water provides a refreshing ready-to-drink option that delivers on consumers’ demand for healthy protein but with a flavour, mouthfeel, and hydration experience more like those of a sports or energy drink.
Beverages for proactive hydration are another growth area. While hydration beverages are often framed as a reactive solution to thirst and dehydration from exercising, health-focused consumers have a high awareness of the importance of maintaining hydration throughout the day for optimal health and energy. Messaging around proactive hydration is essential to connecting with these consumers.
Consumers’ evolving energy needs are also creating space for new approaches to energy drinks that align better with the health and wellness trend. This includes energy drinks with less caffeine and sugar and no artificial-sounding ingredients. About one in four US consumers are influenced by natural ingredients and low/no/reduced sugar claims when purchasing an energy drink (12).
Innovate with our functional beverage solutions
Functional beverages play a significant role in helping consumers support their health and wellness goals—from hydration to energy—in a convenient and enjoyable way. As consumers’ needs expand and evolve, brands can stay ahead by leveraging these trends to guide their product development and marketing strategies.
Our Glanbia Nutritionals team supports brand innovation by offering relevant consumer insights, beverage formulation services and essential beverage ingredients. These include functional proteins like BevWise®, bioactive ingredients like CreaBev® and vibrantly refreshing flavors by Foodarom® and Flavor Producers for delicious beverages that keep consumers coming back.
References
1-3. Euromonitor, June 2023.
4. FMCG Gurus, Non-Alcoholic Beverages Survey - USA, 2021.
5. Glanbia Nutritionals, Global Consumer Usage & Attitude Study - US, 2023.
6. Innova Market Insights, Trends Insider: Global Healthy Aging: A Generational Approach, December 2023.
7. Mintel, Energy Drinks – US, 2023.
8. Glanbia Nutritionals, Global Consumer Usage & Attitude Study - US, 2023.
9. Innova Database, 2024.
10. Innova Trends Survey, 2024.
11. Glanbia Nutritionals, Healthy Snacking Usage & Attitude Study, 2022.
12. Innova Market Insights, Category Insider: RTD Sports, Fitness and Energy Drinks in the US - December 2022.