They say you are what you eat, but recent trends indicate it may be time to amend that to include “… and drink.” Today’s health-conscious consumers not only are looking for tasty beverages to quench their thirst, they also are seeking products containing beneficial and functional ingredients.

Data support this shift in consumer priorities. One study conducted by Kerry showed 58% of consumers reported maintaining a balanced diet was the top way to proactively manage their health, more so even than physical exercise (57%). Kerry reported 60% of U.S. consumers were familiar with the term “clean label,” with 44% saying clean label is important to them. Finally, the report noted 65% of consumers said they seek functional benefits from their food and drinks. The Hartman Group came to similar conclusions based on its Modern Beverage Culture 2018 report that showed 44% of consumers actively want benefits from the products they consume, including providing energy, relaxation, nutrients, digestive help and more.

Knowing what consumers are looking for is important, but knowing whether, and how, those consumers are acting on those desires is just as crucial. And there is plenty of data showing these are not just empty wishes; consumers are changing the ways they shop for beverages.

Energy drinks remain the standout of the functional beverage category, with Euromonitor International data showing a sales increase of 9.5% from 2018 to 2019, and Markets and Research data showing about 31% of 12- to 17-year-olds, and 34% of 18- to 24-year-olds consume them regularly. While traditional energy drinks remain popular, the growing clean label trend is impacting that segment in exciting and innovative ways.

“It may seem crazy, but even with energy drinks, consumers still look for—and buy—organic, non-GMO, ‘natural’ options, if they’re available,” said Antje Collman, food scientist, Wixon.

Those options include innovative ingredients to “promote internal energy rather than stimulation,” according to Gary Augustine, director of marketing, Van Drunen Farms. This includes replacing synthetic caffeine with natural sources, such as green coffee and tea, as well as energy-boosting natural ingredients like guarana, guayusa, ginseng and yerba mate.

Emerging segments are also seeing a boon due to consumer preference for healthy, clean label beverages. Plant-based milks, despite having been on store shelves for decades, are seeing a newfound boost as consumers seek beverages that are not just healthier, but more ethical. A 2019 study by the International Food Information Council (IFIC) found more than 70% of Americans consider plant proteins healthy, and 25% are consuming more than in prior years.

The result: “Innovation in the plant-based beverage space has taken off, as consumers look to alter their diets for health and environmental reasons,” noted to Niki Kennedy, senior strategic insights and analytics manager, Glanbia Nutritionals. While ingredients such as soy and almond are hardly new, innovation in this space has seen a rise in plant-based milks sourced from pea, oat, flax and hemp to achieve the taste and texture consumers expect from milk without the underlying health and environmental concerns. That innovation is quickly turning into dollars; domestic sales of plant-based milks grew 61% from 2012 to 2017, according to Mintel, as U.S. sales of dairy milk fell by more than $1 billion from 2017 to 2018.

Like the rest of the global economy, however, it would be impossible to discuss the beverage market without discussing the impact of the COVID-19 pandemic.

Supply chain disruptions have left even the biggest brands struggling. For example, Coca-Cola experienced COVID-19-related issues, writing in its 2019 annual report, “Our supply chain for non-nutritive sweeteners and certain other ingredients for our products includes suppliers in China. As a result of the outbreak of the novel coronavirus COVID-19, beginning in January 2020, our suppliers in China have experienced some delays in the production and export of these ingredients.”

To read more check out the Drink up: Winning strategies for healthy beverages – digital magazine. 

The findings suggest consumption of at least two servings a day of total dairy was associated with an 11% to 12% lower risk of both conditions, rising to a 13% to 14% lower risk for three daily servings. The associations were stronger for full fat than they were for low fat dairy.

For the study, researchers examined data from people taking part in the Prospective Urban Rural Epidemiology (PURE) study, prospective epidemiological study of individuals aged 35 to 70 years from 21 countries on five continents, with a median follow-up of 9.1 years. They assessed dietary intake over the previous 12 months was assessed using food frequency questionnaires. Dairy products included milk, yogurt, yogurt drinks, cheese and dishes prepared with dairy products, and were classified as full or low fat (1% to 2%). Butter and cream were assessed separately as these are not commonly eaten in some of the countries studied.

Information on personal medical history, use of prescription medicines, educational attainment, smoking and measurements of weight, height, waist circumference, blood pressure and fasting blood glucose also were collected.

Data on all five components of the metabolic syndrome were available for nearly 113,000 people: blood pressure above 130/85 mm Hg; waist circumference above 80 cm; low levels of (beneficial) high density cholesterol (less than 1-1.3 mmol/l); blood fats (triglycerides) of more than 1.7 mmol/dl; and fasting blood glucose of 5.5 mmol/l or more. Average daily total dairy consumption was 179 g, with full-fat dairy accounting for around double the amount of low-fat dairy: 124.5+ vs 65 g. Roughly 46, 667 people had metabolic syndrome—defined as having at least three of the five components.

Total dairy and full-fat dairy, but not low-fat dairy, were associated with a lower prevalence of most components of metabolic syndrome, with the size of the association greatest in those countries with normally low dairy intakes. At least two servings a day of total dairy were associated with a 24% lower risk of metabolic syndrome, rising to 28% for full-fat dairy alone, compared with no daily dairy intake.

The health of nearly 190,000 participants was tracked for an average of nine years, during which time 13,640 people developed high blood pressure and 5,351 developed diabetes.

Insider’s Take

• Online merchants, grocery stores and mass retailers are among the distribution channels where cannabinoid-infused food and beverage products are poised to proliferate.
• Many companies in the food and beverage space haven’t entered the CBD space yet but are keeping close tabs on developments in hopes that FDA will create a clear pathway to market.
• With major sports leagues and professional athletes showing interest in supporting products, the sports nutrition market is among the areas where CBD in food and beverages holds promise.

 

CBD-based food and beverages are projected to eventually take up lots of shelves at U.S. grocery stores, mass-market retailers and other places where Americans shop daily for consumer goods.

BDS Analytics, a market research firm, estimates the market for cannabinoid-infused food and beverages will reach US$5.9 billion by 2024 across all channels, including cannabis dispensaries. That’s up from $906 million in projected sales in 2019, with $560 million, or about 62%, coming from dispensaries, said Jessica Lukas, senior vice president of commercial development with BDS Analytics.

Dispensaries, online merchants, grocery stores and mass retailers like Target and Walmart are among the distribution channels where cannabinoid-infused food and beverage (F&B) products are poised to proliferate.

Mainstream retailers have been reluctant to carry ingestible, hemp-based CBD products due to FDA’s stance that CBD cannot be added to conventional food or marketed as a dietary supplement. That’s expected to change if FDA issues regulations authorizing CBD to be sold in food, beverages and supplements.

“As we look over the next five years, we anticipate that market opening up,” Lukas said in an interview.

At a conference in February 2020, FDA’s top official described as a “fool’s game” any attempt to keep CBD products from the American people.

“We’re not going to be able to say, ‘You can’t use these products,’” said Stephen Hahn, M.D., who began serving as FDA’s commissioner in December 2019. “Even if you did, it’s a fool’s game to even try to approach that.”

Many established CPG brands are likely salivating over the potential of the total U.S. cannabinoid market, which BDS Analytics estimates will be $46 billion by 2024. CBD, including CBD products sold through dispensaries, is expected to comprise $20 billion of that hefty sum.

“It’s too big to ignore for a lot of these companies,” Lukas said.

In the F&B market, the prospect of a federally regulated CBD market is only one factor driving interest in cannabinoid-based products.

As of June 2019, 14 states and territories approved adult-use cannabis, while 33 states, the District of Columbia, Guam, Puerto Rico and the Virgin Islands approved medical marijuana/cannabis programs, according to the National Conference of State Legislatures. Many dispensaries sell gummies, chocolates, cookies and other edibles.

BDS Analytics has relationships with many CPG companies, retailers and other large businesses that have eyed the market for cannabinoid-based food and beverages. CBD and THC, Lukas noted, are just two of the more than two dozen cannabinoids being promoted on product packages in dispensaries.

“Companies are already doing investigations and research not just on CBD, but what else the plant can provide,” she pointed out.

Many F&B businesses investigated the CBD market directly following passage of the 2018 Farm Bill, Lukas said. The legislation removed hemp and its derivatives from the Controlled Substances Act (CSA), and the market was hoping FDA would expressly allow CBD to be sold in food.

FDA, however, has raised safety concerns about non-approved CBD products, and it has not wavered from its position that CBD is an illegal ingredient in foods and supplements because it was first studied as a drug.

“Now that the FDA still hasn’t come out with how they’re going to regulate [CBD] as a food additive or for ingestible products, some companies have said, ‘OK, we’re going to just pause on this altogether,’ while other companies have seen that almost as an opportunity … to figure out what, if anything, they’re going to do,” Lukas said.

Brands that have examined the feasibility of entering the CBD market don’t all have the same strategy. While some companies that have relationships with BDS Analytics describe themselves as “conservative” and aren’t planning to enter the field, others that have been told they aren’t allowed to do anything are tracking developments, Lukas said.

“It’s more of a need to be in the know [and] need to stay updated,” said Lukas, who added “most companies” fall in this category.

Others have already forged ahead with products or partnerships. Enter Boulder, Colorado-based Weller, which started developing a CBD-infused sparkling water in 2018.

The sparkling water, which contains 25 mg of CBD per serving (one 12 oz. can), is ranked No. 1 in carbonated CBD beverages based on data from SPINS, according to Weller co-founder Matt Oscamou.

“We’ve seen everybody from Millennials to Baby Boomers enjoying our product and consuming it on a regular basis,” he said in an interview.

Weller also sells coconut bites and a drink mix that incorporate CBD.

When Oscamou and his co-founder, John Simmons, were developing the Weller brand, they focused on ways to get people to use CBD regularly.

“How can we resonate with people who are looking for more functional and convenient ways to get CBD into their daily routines?” Oscamou asked.

“If you’re in a stressful meeting or things are cranking at work and you’ve got deadlines, you’re not going to pull out a tincture bottle in the middle of the meeting, but you would have a sparkling water,” he said, “and you would have coconut bites or some sort of snack that you could share with other people around the table.”

The sports nutrition market is another area where CBD in food and beverages holds promise. In October 2019, Canopy Growth Corp. announced purchasing a majority stake in BioSteel Sports Nutrition Inc., whose sports nutrition products have been purchased by major sports leagues in North America and endorsed by athletes like “The Great One”—NHL legend Wayne Gretzky.

“This acquisition allows us to enter the sports nutrition space with a strong and growing brand as we continue toward a regulated market of food and beverage products that contain cannabis,” Canopy Growth CEO Mark Zekulin said in a press release at the time of the acquisition.

In 2018, Constellation Brands—the maker of Corona and Modelo beer—announced raising its investment in Canopy Growth to 38%. Alcohol companies, which Lukas said in some cases are struggling with growth, are among those interested in the cannabinoid market.

In Canada, which has legalized cannabis, Canopy Growth has developed a range of sparkling water beverages under the new brand Quatreau, company spokeswoman Laura Nadeau said. Four different beverages each contain 20 mg of CBD, while two other flavors each contain 2 mg of THC and 2 mg of CBD per can, she said.

While a person is likely to drink an entire bottle of water as a serving, the food-based cannabinoid space faces unique challenges just based on the way people consume edibles.

“You don’t sit down and eat a whole bar or a whole package,” Lukas of BDS Analytics noted. “The consumption dynamics are very different for a cannabinoid-infused gummy versus a pack of sour gummies that you buy in a convenient store.”

Getting people to regularly buy a CBD-infused F&B also is challenging because consumers who are buying CBD to obtain a functional benefit are usually taking it as a dietary supplement, said Claire Morton Reynolds, senior industry analyst with Nutrition Business Journal (NBJ).

Even a regular purchaser of a chocolate bar or water is likely to buy the product more sporadically—perhaps once a week or once a month—compared to someone who is taking a tincture twice a day, Morton Reynolds remarked.

Still, NBJ estimates the hemp-based CBD market for food and beverages in the organic and natural channels will more than double in 2019 to $18 million and reach $185 million by 2023. By comparison, NBJ estimates the hemp-based CBD supplement market will reach $2.8 billion by 2023.

Weller and other brands are reluctant to discuss the functional health benefits of CBD reported by consumers due, in part, to FDA regulations. But Oscamou is optimistic that more non-drug trials on CBD will be conducted, helping brands share further information with consumers about their products.

“The landscape has changed,” Oscamou said. “When we were first starting this out 2 1/2 years ago, the big question [was], ‘What is CBD? What can it do for me?’ And it was a tricky time because we didn’t know how to answer that” without incurring regulatory risks.

But consumers have become more educated about CBD and “know what they’re looking for,” he said.

Randy Kreienbrink, vice president of marketing with BI Nutraceuticals, a manufacturer of plant-based ingredients, said he believes future studies will show consumption of the whole hemp plant—such as food and beverages containing hemp fiber, protein and CBD—is beneficial for overall health and wellness.

The industry is “definitely not there yet,” he acknowledged in an interview.

Food and beverage giants in the Fortune 500 are expected to swoop in when the regulations and science mature.

When asked about the prospect of large CPG companies crowding the CBD space, Oscamou responded: “We’re the ones who are able to build brands at this small, scrappy level.”

He suggested Justin’s in Boulder is an example of that success, despite having to compete with large, established brands. In 2004, founder Justin Gold began crafting the first batches of his nut butters in his home kitchen.

One could have asked Justin’s why it was “going up against Skippy and Jif,” Oscamou observed. “But the answer is that there’s consumer demand for authentic brands that have a real person behind them and not just some big corporate behemoth.”

Oscamou said he isn’t worried about larger CPG companies coming in to the CBD market. “I know they’re interested in it,” he said, “but we’ve got a nice brand affinity with consumers and that’s what we’re focused on—building and maintaining.”

While much attention has been given to physical health problems over the last decade, the issue of mental wellbeing is also driving demand for health-boosting products. As concerns about health and financial security are elevated, we can expect even more of that interest. However, it is also important that functional beverages are both tasty and affordable.

Ingredients that offer health-boosting benefits beyond basic hydration are having a greater influence on beverage choice than ever before. This is because consumers are taking a more proactive and long-term approach to their health, driven by concerns about the impact of current diets and lifestyle on long-term health.

In Q4 2019, FMCG Gurus surveyed 2,000 U.S. consumers about their soft drink habits. The research found that while carbonates, juice and bottled water remain the most popular types of soft drinks in the country, 36% of respondents said they consume a functional juice/water at least once a week. These beverages are positioned around active ingredients that boost physical and/or cognitive health. Of the consumers who turn to such beverages, over one-third (35%) said they had increased their intake of functional beverages during the previous six months.

Only 55% of consumers said they are satisfied with their health, according to an FMCG Gurus Active Nutrition survey of 1,000 consumers conducted in Q3 2019. It is therefore not surprising that 51% of Americans said they looked to improve their overall health during the past year, while 57% said they looked to improve their diets. In addition to this, 52% said they regularly research ingredients that can help improve their health.

To read this article in full check out the Drink up: Winning strategies for healthy beverages – digital magazine. 

Mike Hughes is head of research and insight, FMCG Gurus.

This article is based on the following surveys:

• FMCG Gurus Non-Alcoholic Beverage survey Q4 2019 (2,000 respondents)
• FMCG Gurus Active Nutrition survey Q3 2019 (1,000 respondents)
• FMCG Gurus Cognitive Health survey Q3 2018 (1,000 respondents)

Consumers are continuing to reduce the amount of sugar they consume. As obesity rates have risen dramatically, individuals are cutting back on sugar for heart health and weight management. Others are eliminating sugar to control diabetes. Furthermore, high fructose corn syrup (HFCS) is increasingly being removed from beverage formulations.

As Americans reduce sugar intake, they are not always switching to lower-calorie versions of the drinks they love. Beverage brands should view this trend as an opportunity to innovate reduced-calorie formulations. There is unmet demand for new, low-calorie beverages that can deliver an experience familiar to consumers, but with a reduced caloric load. Luckily, formulators have far more options today in alternative sweeteners than ever before. The key is finding the right balance of sugar substitutes that provide a desirable sweetness profile and also build back the familiar body and mouthfeel that sucrose provides.

Natural sweeteners

Certain applications may require only natural ingredients. For those, the formulator has several choices to reduce the caloric content and glycemic load. Stevia is a trending natural, nonnutritive sweetener that is derived from the leaves of the stevia plant. It has a negligible number of calories per serving and a highly intense sweetness, about 300-400 times that of sucrose. With a glycemic index of zero, stevia is an excellent sweetener for reduced-calorie versions of energy drinks, ready-to-drink teas, soft drinks, flavored water and fruit juices.

There are many different stevia extracts formulators can use to overcome challenges they face in formulation. For instance, there are glycosylated or enzyme-modified stevia products that have a lower relative sweetness compared to most other stevia extracts. In general, these are used to enhance sweetness, but also have blocking and mouthfeel effects that are useful in taste modulation. Some of these glycosylated stevia sweeteners are approved by the Flavor & Extract Manufacturers Association (FEMA) as natural flavors.

Finally, there are several options for reducing calories in applications while maintaining a similar bulk and sweetness profile to sucrose. These include the sugar alcohols erythritol and xylitol. These non-sucrose sweeteners naturally occur in small amounts in various fruits and vegetables.

These sweeteners are significantly lower in calories than sucrose or fructose, have minimal glycemic impact and do not promote tooth decay. In fact, xylitol has been shown to reduce the presence of the oral bacteria that lead to plaque and cavities. Xylitol has a cooling effect on the palate and pairs well with mint and fruit flavors.

Erythritol has much of the same look and feel as crystalline sucrose with about 60% to 70% of the sweetness of table sugar. It has a similar solubility and is useful as a bulk sweetener to provide volume and texture to reduced-calorie beverages.

To read more check out the Drink up: Winning strategies for healthy beverages – digital magazine.

Nancy Hughes is the president of Apura Ingredients. Apura’s team has over 100 years of combined experience in the manufacturing and global marketing of food additives, with extensive expertise in the low calorie and no calorie sweetener category.