To good health

It's slightly ironic that recent growth in UK energy drink sales has been gentle, rather than explosive. Its products may be fuelled by high-octane ingredients, but the functional drinks market - which also takes in sports and nutraceutical products - has been a slow-burner for the past five years.

According to Datamonitor, the UK market recorded compound annual sales growth of 4% between 2004 and 2008, to $3.2bn (£1.9bn), while volumes were rather more sluggish: up 3.3% over the period, to 425M litres.

In the US, where the functional drinks market is now worth $6.2bn, sales growth over the same period stood at 16.4% a year.

There is general consensus that the UK will see sustained growth in the coming five years, driven by new ingredients, new brands and changing consumer behaviour. But there are warnings that the category risks being brought into disrepute by spurious health claims.

Liz Bastone, media manager for the British Soft Drinks Association (BSDA), says: "The functional drinks sector is constantly developing and evolving. There is undoubtedly an appetite for continued new product development and brand extensions in this area across a variety of categories.

"Enhanced waters - those with added ingredients such as vitamins and minerals - grew by 21% in 2008, and the energy drinks and sports drinks sectors combined saw a growth of 11%. In the economic climate this growth is especially impressive. Both of these categories show positive signs for continued growth. The sports and energy drinks market is seeing a new generation of sports and energy hybrids with the dual function of focusing the mind and delivering replenishment both mentally and physically. The energy drinks category has also seen products using natural energisers such as ginseng and guarana."

Bastone says the enhanced waters or "water plus" category offers opportunity for growth "as it continues to be seen as a category which lends itself to flavoured extensions of brands originating either from the plain water or still and juice drinks sectors"

"The use of super-fruits is now much more readily accepted by consumers with branded and own-label variants continuing to build shelf-space in 2008. However such products often come with a higher price point so the challenge will be to effectively communicate their added value benefit."

Datamonitor predicts steady growth in the market, "mainly due to improvement of the composition of products and the introduction of increasingly innovative functional drinks, such as relaxation drinks" which "reduce anxiety and relax the muscles and have the opposite effect to energetic drinks". The relaxation beverage market is driven by ViB (Vacation in a Bottle), which utilises the active ingredient L-Theanine, an amino acid found in green tea leaves.

On a global scale, Datamonitor reports that the functional drinks category saw launch numbers fall more than 25% in 2008 compared with the previous year, though along with tea and juices it remains among the top three areas for innovation in the beverages market.

Nicole Patterson, principal consumer analyst at Leatherhead Food Research, says there are genuine benefits to functional drinks which may struggle to meet regulatory approval, but also "lots" of firms making misleading claims about antioxidants, fat burning and weight loss.

Misleading claims ​

"Functional food and drinks have health benefits over and above their inherent nutritional value," she says. "They frequently contain ingredients that are not present in high amounts naturally, for example omega-3 fatty acid, for brain health; and proprietary ingredients that can impact on satiety.

"There are many small companies who have set up to produce a functional drink without much knowledge of the legal situation.

"Lots of weird and wonderful products are being added on the niche side of the market that are not substantiated. Many of the products are misleading by implication, especially when promoting the flavour. 'Goji berry flavour' might not hold a health claim, but the implication could be that it holds the health benefits of the goji berry."

Patterson adds: "There is reasonable evidence for a variety of ingredients and health but this is proving difficult to get through the European Food Safety Authority (EFSA), and so in the future it is clear that firms wishing to make health claims will require a very strong body of evidence based on well-controlled trials." For example, products purporting to energise, hydrate or induce relaxation may struggle to measure or validate their claims.

Dr Mark Tallon is chief science officer at Nutrisciences, the ingredients consultancy. "Many products are using health or function claims which cannot be substantiated, at least based on the criteria set by EFSA," he agrees.

"The industry is complaining about the level of evidence required to meet the so-called gold standard of EFSA, but my feeling is this is just sour grapes over poorly designed studies in relation to the proposed claims."

Tallon believes only the larger manufacturers are taking real notice of EFSA. "The small to medium companies who have been ignoring regulations will continue doing so until local enforcement throughout the EU is implemented uniformly," he says.

"If we take the UK, we have hundreds of non-compliant products based on the functional claims made and or nutrient contents and labelling.

"Enforcement of local and EU regulations are to be enforced by MHRA [Medicines and Healthcare products Regulatory Agency], Trading Standards and ASA [Advertising Standards Authority] to name a few. However, a fraction of these non-compliant products are brought to task.

"This is a massive issue for online sales where one department to the next passes the buck as 'not our responsibility' despite the huge growth of online direct selling.

"This leads to a situation where firms think 'do I spend part of our budget on compliance or on marketing?' At present all but the largest companies focus on the latter. This must change if firms are to compete on a level playing field."

The media occasionally ventures into the functional drinks arena, questioning caffeine levels and the effect on children's behaviour, or the tooth-corroding consequences of high sugar and acid content.

But journalists rely on second-hand science to support their reporting: so if maverick producers are evading regulatory action, they will also probably escape press scrutiny.

It's not beyond the realms of possibility that negative media coverage could damage the category but, for now, the predictions are for steady growth. Datamonitor believes functional drinks will be worth $3.9bn (£2.4bn) in the UK in 2013, up 21.3% on the 2008 figure.

Bastone at the BSDA says: "The continued focus on health and wellbeing, and the consumer thirst for products that provide both value and benefit, mean that functional drinks are likely to retain a key role in driving market development within the soft drinks industry.

"However, key to their continued development will be simple and unambiguous product communication. As more and more niche functional drinks enter the market it is essential that products can demonstrate proven health claims if they are to achieve long-term success." FM

Shot of energy for the sector ​

According to drinks consultancy Zenith, the US phenomenon of 2oz 'energy shots' is "one of the energy drinks sector's strongest growth areas" which could increase the functional drinks market worldwide.

The shots contain a concentrated does of caffeine, B vitamins and amino acids. The market in the US is expected to double this year to $700M and is dominated by 5-Hour Energy from Living Essentials, which according to a New York Times report accounts for 80% of sales.

Shots are popular with students, sportspeople and those involved in heavy manual labour.

"The segment is emerging for a number of reasons: manufacturers' desire to find their point of differentiation; consumers' changing needs and energy requirements; and through an increasingly pressing demand for innovation," Zenith says.

"Their positioning as vitamin/dietary supplements opens up new product placement options outside regular energy drinks channels. Opportunities also exist in terms of new target markets, ingredients and base applications."

Dr Mark Tallon at consultancy Nutrisciences is less convinced. "Energy shots are here to stay in some form. However, those purchasing 250ml beverages are looking for more than an energy shot. Thirst and taste are important drivers and the question must be: will shots meet the needs of the consumer?

"Those looking for a physiological or functional effect look towards pharma-based delivery such as supplements, while those looking for taste and health are attracted to functional foods and beverages. Energy shots fall in between the two and as such will be a novelty for the weekend night out but won't provide a staple impact on the daily dietary intake."