Functional and Natural Ready-to-Drink Beverages in the U.S.

Packaged Facts’ Functional and Natural RTD Beverages in the U.S. offers a comprehensive look at the $21 billion market for single-serve, ready-to-drink (RTD) beverages across three categories and several competing product segments: (1) energy drinks/shots, sports drinks, and nutrient-enhanced waters, in itself a $15 billion category; (2) RTD tea and coffee, and (3) refrigerated yogurt drinks and juice/fruit smoothies. A 7% aggregate compound annual growth rate for these products over the most recent five-year period is a testament to the strength of the market before 2007 and since 2010. In the recessionary years of 2008 and 2009, most of these product segments flat-lined in sales growth, in keeping with the overall sales slump in foods and beverages as well as in the U.S. consumer economy overall. By 2010, nonetheless, energy/sports drinks and RTD tea/coffee showed renewed dynamism, signaling the onset of a new cycle of sales growth for these convenience, refreshment and re-charge beverages. However controversial some energy drinks may be, this lively product segment continues to call the shots in the market, accounting for 44% of the total product introductions in 2010. Many new product introductions in rival “pick up, pick me up” beverage segments are clearly marching to the beat of energy drinks or energy shots, and the newest product segment in this market, nutrient-enhanced waters, competes as a lighter re-mix of energy/sports drinks.

Functional and Natural RTD Beverages in the U.S. examines sales and trends across the retail spectrum, using proprietary primary data from Packaged Facts' March 2011 food shoppers Insights survey as well as retail sales-tracking data from Information Resources, Inc. InfoScan Review for mass channels and SPINSscan Review for the natural channel. This report tabulates market composition by product category and retail channel, as well as marketer/brand shares within and across product segments. The analysis pays special attention to cross-category trends in new product development, drawing on comprehensive new product data from Datamonitor’s Product Launch Analytics database, and analyzes consumer usage (including demographic and psychographic context) based on current and five-year-trended Experian Simmons national consumer survey data.

Table of contents

Chapter 1: Executive Summary

Scope of Report

Three Categories, Seven Segments

Report Methodology

Market Overview

Retail Sales at $23.4 Billion in 2010

Figure 1-1: U.S. Retail Sales of RTD Functional and Natural Beverages, 2006-2010 (in millions of dollars)

Sales Edge Out of Recessionary Slump

Table 1-1: U.S. Retail Sales of RTD Functional and Natural Beverages by Category, 2006-2010 (in millions of dollars)

PepsiCo Leads as Marketer/Distributor

Table 1-2: Leading Marketer/Distributor Shares of SymphonyIRI-Tracked Sales of RTD Functional and Natural Beverages, 2010 (percent)

Demographics Favor Increased Consumption

Table 1-3: Usage Rates for Selected RTD Functional or Natural Beverage Product Segments: RTD Tea, Sports Drinks, and Energy Drinks, 2005-2010 (percent of U.S. adults)

Category Focus: Energy Drinks, Sport Drinks, and Functional Waters

Energy Drinks at 57% Category Share

Figure 1-2: Segment Sales Shares for Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2006 vs. 2010 (percent)

Convenience Stores Claim Half of Category

Figure 1-3: Retail Channel Shares for Energy Drinks/Shots, Sports Drinks, and Functional Waters Category, 2010 (percent)

Energy Drinks and Energy Shots Have Opposing Meta-Trends

Top Four Energy Drink/Shot Marketers Control 82% Share

Usage Rates Edge Up Despite Recession

Table 1-4: Usage Overview for Energy Drinks: Overall and by Leading Brand Lines, 2006-2010 (percent of U.S. adults)

Younger Adults and Hispanics Are Top Consumers

Athletic Performance: The Once and Future Meta-Trend of Sports Drinks

Nearly 40% Use Sports Drinks

Table 1-5: Usage Overview for Sports Drinks: Overall, Gatorade, and Powerade, 2006-2010 (percent of U.S. adults)

Younger Adults and Hispanics Are Again Top Consumers

SKU Introductions Average 100+ Annually Over 2006-2010

Table 1-6: New Product Introductions in U.S. Market for Functional Waters, 2006-2010 (reports and stock-keeping units)

Alternative Retail and Healthy Convenience Draw

Retail Sales to Reach $25 Billion by 2015

Table 1-7: Projected U.S. Retail Sales of Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2010-2015 (in millions of dollars)

Category Focus: Ready-to-Drink Tea and Coffee

RTD Tea Claims 58% of Category Sales

Figure 1-4: Segment Sales Shares for Ready-to-Drink Tea and Coffee, 2006 vs. 2010 (percent)

Supermarkets/Supercenters Claim Two-Thirds of RTD Tea/Coffee Category

Figure 1-5: Retail Channel Shares for Ready-to-Drink Tea and Coffee Category, 2010 (percent)

Wide Spectrum of Teas Is Segment Meta-Trend

RTD Teas Benefit from Broad Demographic Draw

Figure 1-7: Use of Ready-to-Drink Tea by Age Bracket, 2010 (percent and index)

“Coffeehouse in a Bottle” Is Segment Meta-Trend

RTD Coffee Usage Rates Edge Back Up

Table 1-8: Usage Overview for Ready-to-Drink Coffee: Overall and for Starbucks Brands, 2006-2010 (percent of U.S. adults)

Dairy Synergy

RTD Tea/Coffee Retail Sales to Reach $7.4 Billion by 2015

Table 1-9: Projected U.S. Retail Sales of Ready-to-Drink Tea and Coffee, 2010-2015 (in millions of dollars)

Category Focus: Yogurt Drinks and Fruit/Vegetable Smoothies

Supermarkets/Food Stores Claim 61% of Category

Figure 1-8: Retail Channel Shares for Refrigerated Yogurt Drinks and Smoothies Category, 2010 (percent)

Probiotics Are Yogurt Drink Meta-Trend

Marquez Brothers Heads Up Latin-Style Competitors

General Mills Angling for Control of Yoplait

Yogurt Drink Consumers Are Dieting and Fast Food Prone

Hispanics Are Prime Consumers

“Better Living Through Fresh Juice” Is Smoothie Meta-Trend

California Culture Roots Reflected in Current Marketing

5% of Adults Use Smoothies

Retail Sales to Reach $1.1 Billion by 2015

Table 1-10: Projected U.S. Retail Sales of Refrigerated Yogurt Drinks and Smoothies, 2010-2015 (in millions of dollars)

Looking Ahead

A Consumer Needs Perspective

Table 1-11: Percent of Consumers Who Purchase Selected Beverage Types When Grocery Shopping, 2011 (percent of U.S. adults)

Growing Consumer Base and Pacesetting New Products

Science No Longer Versus Nature

Chapter 2: Overall Market

Scope of Report

Three Categories, Seven Segments

Report Methodology

“Functional” and “Natural” Are Not Mutually Exclusive

Hybrid Spirit Runs Deep in RTD

Market Size and Composition

Retail Sales at $23.4 Billion in 2010

Figure 2-1: U.S. Retail Sales of RTD Functional and Natural Beverages, 2006-2010 (in millions of dollars)

Sales Edge Out of Recessionary Slump

Table 2-1: U.S. Retail Sales of RTD Functional and Natural Beverage by Category, 2006-2010 (in millions of dollars)

Energy Drinks/Shots Approach $10 Billion in Sales

Table 2-2: U.S. Retail Sales of RTD Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2006-2010 (in millions of dollars)

RTD Tea Reaches $4 Billion in Sales

Table 2-3: U.S. Retail Sales of Ready-to-Drink Tea and Coffee, 2006-2010 (in millions of dollars)

Refrigerated Smoothie Sales Surge

Table 2-4: U.S. Retail Sales of Refrigerated Yogurt Drinks and Smoothies, 2006-2010 (in millions of dollars)

SymphonyIRI-Tracked Retail Sales at $6.0 Billion in 2010

Table 2-5: SymphonyIRI-Tracked Sales by RTD Functional and Natural Beverage Category and Segment, 2010 (in millions of dollars)

Overall Market Outlook

PepsiCo Leads as Marketer/Distributor

Table 2-5: Leading Marketer/Distributor Shares of SymphonyIRI-Tracked Sales of RTD Functional and Natural Beverages, 2010 (percent)

Gatorade Returns to Growth with Back-to-Basics Positioning

Downturns and Upticks in Product Introductions

Table 2-6a: New Product Introductions in U.S. Market for RTD Functional and Natural Beverages: By Product Segment, 2006-2010 (reports and stock-keeping units)

Table 2-6b: New Product Introductions in U.S. Market for RTD Functional and Natural Beverages: By Product Segment, 2006-2010 (reports and stock-keeping units)

Demographics Favor Increased Consumption

Table 2-7: Usage Rates for Selected RTD Functional or Natural Beverage Product Segments: RTD Tea, Sports Drinks, and Energy Drinks, 2005-2010 (percent of U.S. adults)

Figure 2-2: Use of Red Bull Energy Drinks/Shots and Living Essentials 5-Hour Energy Shots by Adult Generational Cohort, 2010 (percent)

Caffeine-Positive Culture

A Boost from Antioxidants

Figure 2-3: Top Grocery Product Nutritional Claims, 2011 (percent)

High Interest in “Superfruit” Juices Benefits Market

Table 2-8: Purchasing of Selected “Superfruit” Beverage Types Within The Past 12 Months, 2009 (percent of U.S. adults)

Superfruits Are Everywhere in Functional and Natural Beverages Market

Superhyping of Superfruits

Probiotics Beyond Yogurt

Have Marketers Found the Sugar-Free Pot of Gold?

Stevia Jumps to Head of Line with Natural Appeal

Neotame’s Artificiality a Marketing Downside

Low/No-Cal Sweeteners Still a Work in Progress

Glomming on to Gluten-Free

Internet Help Creates and Level Playing Field for Hip Marketers

Illustration 2-1: Screen Shots from Web Feed for Adina for Life’s “Drink No Evil!”

Cautionary Tales from Bolthouse and Rockstar

Illustration 2-2: Poster for Bolthouse Protest Demonstration

Eco-Consciousness: If You Talk the Talk, Walk the Walk

Honest Tea Adopts Lighter-Weight PET

Naked Juice Packaging Is Not Just Recyclable But Recycled

Odwalla Ups the Eco-Ante With Plant-Based Plastic

Natural, Organic and Fair Trade Add Value

Popularity of Supplements Bodes Well for Market

Figure 2-5: U.S. Retail Sales of Nutritional Supplements (in millions of dollars)

Chapter 3: Energy Drinks, Sports Drinks, and Functional Waters

Introduction

Energy Drinks vs. Sports Drinks vs. Functional Waters

Category Sales at $17.4 Billion

Figure 3-1: U.S. Retail Sales of Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2006-2010 (in millions of dollars)

Table 3-1: U.S. Retail Sales of RTD Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2006-2010 (in millions of dollars)

SymphonyIRI-Tracked Retail Sales at $3.7 Billion in 2010

Table 3-2: SymphonyIRI-Tracked Sales of Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2010 (in millions of dollars)

Energy Drinks at 57% Category Share

Figure 3-2: Segment Sales Shares for Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2006 vs. 2010 (percent)

SPINSscan Tracking Shows Surge for Isotonic Beverages

Table 3-3: SPINSscan-Tracked Sales of Sports, Energy, and Other Functional Beverages: 52 Weeks Ending February 19, 2011 and Prior-Year 2010 and 2009 Periods (in millions of dollars)

Convenience Stores Claim Half of Category

Figure 3-3: Retail Channel Shares for Energy Drinks/Shots, Sports Drinks, and Functional Waters Category, 2010 (percent)

Segment Focus: Energy Drinks

Energy Drinks and Energy Shots Have Opposing Meta-Trends

What’s Energetic in Energy Drinks and Shots?

Sugar

B Vitamins

Amino Acids

Milk Thistle and Everything Else

Triggering the Placebo Effect?

Antecedents of Energy Drinks

The Modern Energy Drink in the U.S

Ties to the Rave and Nightclub Scene

Extreme Sports as Individual Expression

Music and Red Bull Marketing

The Marketing Roadmap for Energy Drinks

5-Hour Energy Shots Blast Off

Top Four Energy Drink/Shot Marketers Control 82% Share

Table 3-4: SymphonyIRI-Tracked Sales of Energy Drinks and Shots: By Leading Marketers and Brand Lines, 2010 (in millions of dollars)

100 Product Introduction Reports in 2010

Table 3-5

New Product Introductions in U.S. Market for Energy Drinks, 2006-2010 (reports and stock-keeping units)

Usage Rates Edge Up Despite Recession

Table 3-6: Usage Overview for Energy Drinks: Overall and by Leading Brand Lines, 2006-2010 (percent of U.S. adults)

Table 3-7: Grocery Shopping Patterns for Energy Drinks: Overall and for Red Bull and 5-Hour Energy Brands, 2010 (percent of customers and index)

Table 3-8: Health and Nutrition Psychographics for Energy Drink Consumers: Overall and for Red Bull and 5-Hour Energy Brand Lines, 2010 (percent and index)

Younger Adults and Hispanics Are Top Consumers

Table 3-9: Consumer Demographics: Energy Drinks, 2010 (percent, number of adults, and index)

Segment Focus: Sports Drinks

Athletic Performance: The Once and Future Meta-Trend

The Origin of the Sports Drink

Sports Drinks and the Prevention of Heat Related Illness

Categories of Sports Drinks

The Dairy Belt’s New Sports Drink: Chocolate Milk

Gatorade at 76% of Segment

Table 3-10: SymphonyIRI-Tracked Sales of Sports Drinks: By Top Marketers and Brand Lines, 2010 (in millions of dollars)

New Product Introductions Rates Remain High

Table 3-11: New Product Introductions in U.S. Market for Sports Drinks, 2006-2010 (reports and stock-keeping units)

Added Ingredients Trend Triggers Relaunches

Don’t Settle For “An Incomplete Sports Drink”

Indra Nooyi Takes Charge

The G Series Explained

Gatorade and the NFL Launch Beat the Heat PSA Campaign

GSSI for the (Youthful) Masses: The Gatorade Performance Center

Celebrity Marketing

Illustration 5-1: 2010 Powerade Team Website Banner

Powerade Creates FIFA Tie-in to Pursue Hispanic Market

Nearly 40% Use Sports Drinks

Table 3-12: Usage Overview for Sports Drinks: Overall, Gatorade, and Powerade, 2006-2010 (percent of U.S. adults)

Table 3-13: Grocery Shopping Patterns for Sports Drinks, 2010 (percent of customers and index)

Table 3-14: Health and Nutrition Psychographics for Sports Drink Consumers, 2010 (percent and index)

Younger Adults and Hispanics Are Top Consumers

Table 3-15: Consumer Demographics: Sports Drinks, 2010 (percent, number of adults, and index)

Segment Focus: Functional Waters

Functional Water: Like Water, Only Better

Putting the Function in Functional Water

Vitamins and Minerals

Fluoride

Electrolytes

Protein Exits Center Stage

Other Nutraceutical Ingredients

Functional Flavoring?

Water, of Course

The “Healthy” Debate

Top Two Marketers Corner 97% of Sales

Table 3-16: SymphonyIRI-Tracked Sales of Functional Waters: By Leading Marketers and Brand Lines, 2010 (in millions of dollars)

Vitaminwater Fights Back

SoBe Lifewater Goes “Zero”

Illustration 3-2: Screenshot from SoBe “Inner Lizard” Ad

Propel Beefs Up its Line-Up

The “Skinny” on Skinny Water

Illustration 3-3: Skinny Nutrition’s New Skinny Water Lineup

Arizona Rescue Water: The Power of Tea

SKU Introductions Average 100+ Annually Over 2006-2010

Table 3-17: New Product Introductions in U.S. Market for Functional Waters, 2006-2010 (reports and stock-keeping units)

Alternative Retail and Healthy Convenience Draw

Table 3-18: Usage Overview for Functional Waters, 2009-2010 (percent of U.S. adults)

Table 3-19: Grocery Shopping Patterns for Functional Waters, 2010 (percent of customers and index)

Table 3-20: Health and Nutrition Psychographics for Functional Water Consumers, 2010 (percent and index)

Younger, African-American Skews to Consumer Base

Table 3-21: Consumer Demographics: Functional Waters, 2010 (percent, number of adults, and index)

Category Growth Projections

Retail Sales to Reach $25 Billion by 2015

Table 3-22: Projected U.S. Retail Sales of Energy Drinks/Shots, Sports Drinks, and Functional Waters, 2010-2015 (in millions of dollars)

Chapter 4: Ready-to-Drink Tea and Coffee

Introduction

What Is RTD Tea?

What Is RTD Coffee?

RTD Tea vs. Coffee Marketing Trajectories

Category Sales at $5.1 Billion

Figure 4-1: U.S. Retail Sales of Ready-to-Drink Tea and Coffee, 2006-2010 (in millions of dollars)

Table 4-1: U.S. Retail Sales of Ready-to-Drink Tea and Coffee, 2006-2010 (in millions of dollars)

SymphonyIRI-Tracked Retail Sales at $1.9 Billion in 2010

Table 4-2: SymphonyIRI-Tracked Sales of Ready-to-Drink Tea and Coffee, 2010 (in millions of dollars)

RTD Tea Claims 58% of Category Sales

Figure 4-2: Segment Sales Shares for Ready-to-Drink Tea and Coffee, 2006 vs. 2010 (percent)

SPINSscan-Tracked Sales of RTD Tea/Coffee at $23 Million in 2010

Table 4-3: SPINSscan-Tracked Sales of Ready-to-Drink Tea and Coffee: 52 Weeks Ending February 19, 2011 and Prior-Year 2010 and 2009 Periods (in millions of dollars)

Supermarkets/Supercenters Claim Two-Thirds of Category

Figure 4-3: Retail Channel Shares for Ready-to-Drink Tea and Coffee Category, 2010 (percent)

Segment Focus: Ready-to-Drink Tea

Wide Spectrum of Teas Is the Meta-Trend

Varieties of Tea

Top Four Players Account for 72% of SymphonyIRI-Tracked Sales

Table 4-4: SymphonyIRI-Tracked Sales of Shelf-Stable or Refrigerated Ready-to-Drink Tea: By Top Marketers and Brand Lines, 2010 (in millions of dollars)

Table 4-5: SymphonyIRI-Tracked Sales of Shelf-Stable Ready-to-Drink Tea: By Leading Marketers and Brand Lines, 2010 (in millions of dollars)

Table 4-6: SymphonyIRI-Tracked Sales of Refrigerated Ready-to-Drink Tea: By Leading Marketers and Brand Lines, 2010 (in millions of dollars)

Power Structure Can Propel Successful Entrepreneurs

New Product Introduction Rates Remain High

Table 4-7: New Product Introductions in U.S. Market for Ready-to-Drink Tea, 2006-2010 (reports and stock-keeping units)

Figure 4-4: New Product Introductions by Flavor in U.S. Market for Ready-to-Drink Tea, 52 Weeks Ending March 31, 2011 (number of reports)

Figure 4-5: New Product Introductions by Package Claim/Tag in U.S. Market for Ready-to-Drink Tea, 52 Weeks Ending March 31, 2011 (number of reports)

RTD Tea Usage Rates Edge Up

Table 4-8: Usage Overview for Ready-to-Drink Tea, 2006-2010 (percent of U.S. adults)

7-Eleven, BJ’s Wholesale Customers Are Prime RTD Tea Drinkers

Table 4-9: Grocery Shopping Patterns for Ready-to-Drink Tea, 2010 (percent of customers and index)

RTD Tea Consumers Are Health and New Product Prone

Table 4-10: Health and Nutrition Psychographics for Ready-to-Drink Tea Consumers, 2010 (percent and index)

Diet Versions, Arizona Brand on Usage Upswing

Table 4-11: Usage Overview by Type and Brand: Ready-to-Drink Tea, 2006-2010 (percent of U.S. adults)

RTD Teas Benefit from Broad Demographic Draw

Figure 4-6: Use of Ready-to-Drink Tea by Age Bracket, 2010 (percent and index)

Table 4-12: Consumer Demographics: Ready-to-Drink Tea, 2010 (percent, number of adults, and index)

Segment Focus: Ready-to-Drink Coffee

“Coffeehouse in a Bottle” Is the Meta-Trend

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Related research categories

By sector: Ready-to-drink, Functional (in Soft drinks), General drinks

By market: United States (in North America)