The latest International Functional Soft Drinks report from leading food and drink consultancy Zenith International reveals that 2002 consumption across the United States, Japan and 16 West European countries grew 11% to over 12 billion litres. Functional soft drinks now represent 6% of total soft drinks volume in these markets, compared with just 4% in 1998.

@@img1 Zenith defines functional soft drinks as having “a health benefit beyond their basic nutrition content, by virtue of physiologically active added components.” The new report breaks down functionality into four main categories: enriched beverages (such as juices and waters with added vitamins and minerals); sports drinks; energy drinks; and nutraceuticals (with targeted ingredients to provide specific medical or health benefits). Nutraceuticals embrace over 20 different types of claim, ranging from aphrodisiac and nicotine craving relief through detox and digestion to cholesterol lowering.

“All companies along the soft drinks supply chain now recognise the tremendous margin opportunities offered by high premium functional products,” commented Zenith Research Director Gary Roethenbaugh. “This is particularly important, as some mainstream soft drinks face a threat of becoming commoditised.” The main findings of the 2003 Zenith report are that:

. The various functional categories are at very different stages of development in each region. The US market remains the largest on the world stage. However, its importance is progressively being eroded, with West Europe gaining substantial ground in recent years.

. Sports drinks are the largest category in the 18 countries covered by Zenith’s report, with sizeable volumes in both the United States and Japan. In West Europe, sports drinks have been boosted since 2001 by Coca-Cola’s pan-European support for Powerade.

. Enriched beverages have been around for some time in most West European countries. Through juice based drinks and increasingly bottled water with added vitamins and minerals, they represent the largest functional soft drinks sector there.

. While nutraceuticals have a long tradition in Japan and are fast emerging in the US, they are the youngest functional soft drinks category in West Europe. Thanks to a range of product launches by companies such as Hero, Juver, Marli and Valio – nutraceuticals are the fastest growing European functional category, with volume up from 70 million litres in 1998 to 330 million litres in 2002.

. Energy drinks have taken off from a small base in the United States, but are much more firmly established in Japan where growth rates are consequently slower. In West Europe, energy drinks have been available for some years and are continuing to grow strongly. Both the West European and the US energy drinks markets are dominated by Red Bull, while Taisho’s Lipovitan is the main brand in Japan.

“Functional soft drinks should help drive the market for soft drinks overall,” added Gary Roethenbaugh. “They are attracting increased focus from multinational players and smaller entrepreneurs alike. A host of new product offerings have flooded the full range of distribution channels, from pioneering speciality food stores to supermarkets and hypermarkets.”

The major soft drinks companies are certainly taking functionality very seriously. Cadbury Schweppes has joined the energy drinks fray in Spain and the US, while strengthening its position in the French and Portuguese enriched beverages arena as well as in the US nutraceuticals category. Coca-Cola has expanded into European and US energy drinks, while rolling out Dasani NutriWater in the US and adding to its portfolio in the Japanese market with new varieties of Qoo. Danone has extended distribution of Frucor’s V energy drink and launched calcium fortified waters in the UK and France. Nestlé has promoted enriched and nutraceutical varieties of its mainstream water products, such as Contrex and Vittel in France and the UK, alongside its latest newcomer Nestlé Wellness in Germany. Finally, beyond its newly acquired ownership of Gatorade, PepsiCo has hit the US market running with Propel Fitness Water, AMP energy drink, Aquafina enriched water and extra SoBe varieties.

Manufacturers, however, must be mindful of two potential areas of weakness that lurk in the background. First – functionality has at times fallen foul of industry regulators. Red Bull, for example, is still not active in the French market due to onerous regulations on the content of energy drinks. Secondly – consumer cynicism, perhaps fuelled by media scepticism, can pose a problem. Sunny Delight, although enhanced with vitamins, was one such product that suffered at the hands of an unforgiving media.

Despite such hurdles, functional soft drinks have often bounced back from adversity and a great many new products are appearing because consumers enjoy variety as well as something that they perceive provides them with an added benefit. Balancing out continuing high growth in some sectors and countries against a degree of maturity in others, Zenith’s forecast across all 18 markets is that functional soft drinks consumption should approach the 18 billion litre mark by 2007.

The 2003 Zenith Report on International Functional Soft Drinks contains 296 pages with 62 tables and charts, details of on 785 brands and variants, 18 national legislative overviews, extensive ingredients analysis and full market commentary. Contact Zenith International on tel +44 (0)1225 327900, fax +44 (0)1225 327901 or e-mail