Top of the pops

By Rod Addy

- Last updated on GMT

Related tags: Energy drinks, Caffeine, Uk

Top of the pops
Soft drinks have come a long way since the launch of the first orange squash. Rod Addy explores a changing market that is far from soft

Glance at Mintel or Datamonitor's global product databases and the number of ingredients combinations alone in soft drinks launched in the past year will have you reaching for a bottle of Lucozade.

Take Beverage Innovations' succinctly named Venga Functional Infusions Ready to Drink Non-Carbonated Functional Beverages range, launched in March in the US and singled out by Datamonitor as worthy of note. Its Energize variant contains (deep breath) red apple, dragonfruit, sea buckthorn, Yerba Mate tea, panax ginseng, taurine, caffeine, guarana, niacin, plus various vitamins.

Consider also the growth in UK market value for energy and sports drinks alone. Nielsen Scantrack puts it at 21.1%, up from £550.4M to £666.6M in the year to April 19. That's way ahead of the total market, which is growing at just 0.7%, from £6.06bn to £6.11bn in the year to April 28. It's easy to see that this is one of the core areas offering a lot of potential for soft drinks processors. What's more, Adrian Troy, head of marketing for Barr Soft Drinks, which makes energy drink Irn-Bru 32, says: "Penetration of energy drinks in the UK is only 20% whereas it's as high as 50% in some other countries."

Meanwhile, Datamonitor estimates the value of the UK functional drinks market will grow by 17% from £1.51bn in 2007 to £1.78bn in 2011. And it forecasts volume growth of 14.3% in functional drinks from 2007 to 2011 and volume growth of 13.9% for energy drinks in the same timescale.

'Natural' driver

The main growth driver is the all-consuming move to 'natural' ingredients, in terms of removing additives that shoppers perceive as 'artificial' and using or adding 'natural' functional elements.

Hibiscus Drinks' Hib! range, built on hibiscus extract, in grape and peppermint variants, is a perfect example of both trends. In contrast to manufacturers who bombard consumers with a battery of natural ingredients, the company has latched on to one that does the job of several. The business was set up five years ago, but the Hib! brand only hit the mainstream market in October, via Germany's Anuga trade show. Director Marx Ayigbede says it's an idea whose time has now come: "The product is a natural antioxidant. It reduces blood pressure, is very good for the digestive system and has anti-ageing properties." Hibiscus is also a natural colourant, so removes the need for added 'artificial' colours.

Carla Ogeia, who works on Mintel's Global Products Database, states: "Even energy drinks are using more natural ingredients and formulations. There has also been a focus on the natural benefits of ingredients such as energising B vitamins and natural fruits."

"Sports and energy drinks have traditionally been rife with artificial additives," says Aimia, the firm behind the Slazenger S1 brand of hypotonic sports drinks, launched in March. "It's a clean product in comparison to other sports drinks," says category marketing manager Neal Haworth. "There are no artificial flavours or colourings."

On the addition of natural, functional, components, a spokeswoman for the British Soft Drinks Association (BSDA) says: "Ingredients with added health benefits such as flavonoids remain popular. Antioxidants such as lycopene, green tea and grape-seed extract are increasingly used." One area in which interest in fortification has been sustained is bottled water, with Pepsico's purchase of V Water, which contains vitamins, minerals and herbal extracts, at the end of April.

Jon Walsh, md of new business at Nestlé UK, which launched its Boosted Smoothies range in the UK in April, offers a caveat about fortification. He suggests that simplicity may be wiser than overdoing the list of natural components. "A long list could start to feel like too much. Almost certainly there is a limit." But he says Nestlé UK research has shown that consumers don't mind lengthy ingredient lists as long as the product achieves a simple function and communicates that effectively.

Four Boost flavours currently exist: Mango Mania Energy Boost, Berry Blitz Immunity Boost, Smashin' Strawberry Mind Boost and Tropical Twist Metabolism Boost. Two more will follow, pitched at children returning to school, says Walsh. The variants illustrate the current fads in the functional arena. The strong emphasis on their juice base also indicates an emerging trend. "Tropicana and Innocent Smoothies inhabit a sector that is still growing nicely and is the largest in the fruit juice marketplace," says Walsh. "But juice with added functional benefits, which is 10% of the market, is starting to show very interesting growth - 87% year-on-year."

This also illustrates the increasing "blurring of category boundaries between energy drinks, soft drinks, fruit drinks and even dairy and fruit beverages" identified by Datamonitor.

A smaller firm that has seized on the same trend is MangaJo, which makes and markets combined juice and chilled tea varieties with natural, functional ingredients in 10 countries. The products contain no added sugar and naturally derived ingredients. With distribution established in cafés and delis, the company is pitching them to Sainsbury and Waitrose, says director and co-founder Alex Hannan.

Red Bull has taken the step of combining two sectors previously perceived by many as being completely separate: 'all natural' and colas, with Red Bull Simply Cola, launched at the end of April. With natural ingredients such as kola nut and coca leaf, it is free from all 'artificial' additives. In addition, the product takes advantage of the most popular flavour in the carbonates sector, with a 51% share of the market, according to the BSDA's 2008 UK Soft Drinks Report.

Aside from the 'all natural' trend and the blurring of category boundaries, other areas showing potential in functional and energy drinks include drinks offering mental energy or stress relief, according to Mintel. Other sectors include low sugar and reduced calorie and meal replacement options, such as protein and fibre-based combinations.

Of course, despite the future opportunities in this market, it's not all plain sailing. Legal issues surrounding the EU Nutrition and Health Claims regulation continue to tax larger players, which are pouring money and time into establishing health claims that could help sell their products. In the case of GSK Nutritional Healthcare, the issue is whether the high sugar content of its Lucozade range will prevent it from making health claims. The company's current understanding is that the Lucozade Sport range is covered by the Parnuts' (food for PARticular NUTritional purposes) without prejudice clause. According to a spokeswoman, that means it will "under PARNUTS legislation be required on pack to state the use and benefit to the target population of the product"

She adds: "We make claims on Lucozade Energy about 'physical edge' and energy. We have applied for high energy to be added to the list of allowed nutrition claims. The product would only be out from nutrient profile by one nutrient so we're allowed to make a nutrition claim as long as we put high sugar on the label as well."

But provided the legal minefield can be negotiated or bypassed, the evidence shows there are plenty of areas of potential growth in this sector. FM

Related topics: NPD

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