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Soft drinks develop the function creep

13 May 2003

Consumers are constantly seeking more from their drinks purchases and the burgeoning functional drinks category is aiming to deliver on all those needs. But Nigel Lucas warns of overkill, while attempting to determine the next mega-trend.

Consumers are constantly seeking more from their drinks purchases and the burgeoning functional drinks category is aiming to deliver on all those needs. But Nigel Lucas warns of overkill, while attempting to determine the next mega-trend.

Every time somebody asks,  “What next?”, I’m reminded of the scientists who claimed their product was a cure-all for everything from skin diseases, kidney and liver ailments, to obesity, heart disease, and cancer. Pretty impressive if true. It’s called ‘Gift of the Cow’ and sells for 20 rupees a bottle. It’s sterilised cow’s urine.

Recently, Richard Thomas, the UK government’s information commissioner, talked of ‘function creep’ in the debate on identification cards. The soft drinks industry, it could be said, is experiencing its own version of ‘function creep’.  Hardly a week goes by without the launch of a new functional beverage. Yet a few years ago they were still firmly niche products. Now all the major beverage companies are in the marketplace with brands from SoBe, Propel Fitness Water to Coca-Cola’s Dasani, and they are frequently the leading brands. No longer can they be accused of missing out. They are operating in all the functional categories; energy, sports, enriched beverages and nutraceutical drinks. And functional ingredients now include everything from vitamins, minerals, proteins, amino acids, essential trace elements, phytochemicals, to probiotics, herbs and insects.

Before considering what next, it’s worth looking at where we are now. Zenith International put the market for functional drinks at 6% of total soft drink sales in the major markets of the United States, Japan and Europe. These markets have experienced double-digit growth year on year since 1998. None of the trends show this is going to slow down in the immediate future. Nevertheless the majority of soft drinks remain nothing more than a combination of water, juice and sugar – and no functional ingredients. So it would appear that the category still has everything to play for.

Price premium reduced
The leading brands do have similarities though. They’re all fairly conservative and they have  narrowed the premium price that functionals traditionally enjoyed over mainstream drinks. Although surveys and market research continue to show that consumers are willing to pay a premium for added nutritional benefits, the reality doesn’t seem to bear this out.

The major trends driving functionals are unarguable. The Centre for Health and Food Studies (CHFS) recently identified a number of these trends, yet they all contain the seeds of potential threats as well as opportunities. The pharamaceutical companies high profile functional food failures (eg. Novartis Aviva range) have resulted in beverages being the preferred delivery method for incorporating functional ingredients. However the danger remains that ‘over the top’ marketing campaigns will turn consumers away from functional beverages as they turned away from functional foods. Honesty remains the key to success.

Consumer confidence in self-medication and a general health awareness has resulted in ingredients that have traditionally remained as supplements making the move quickly to the beverage shelves. Whatever the hip ingredient of the moment, it’s likely to find itself in a soft drink before long. But will addressing specific health concerns really get consumers rushing to the beverage aisles in large numbers?

The baby boom generation are the target market, especially now their ageing. But how attractive is, for example, ‘Joint Juice’ with glucosamine really going to be? Unless the health-specific products are more than just a marketing message and additionally offer an experience greater than the inclusion of  ‘the ingredient’ they may struggle to succeed. Nevertheless, ingredient suppliers and npd departments will continue to put more and more out there in the hope that one will contain the next magic bullet ingredient giving the big hit product. The problem is, what health claim do you place your bet on?

The GM effect
Non-dairy opportunities have certainly taken off in the US with soy beverages, helped in part by the FDA allowed health claim. However, if you’re a European manufacturer there’s still considerable anxiety about GM produced soy and this is likely to put the brakes on a mainstream brand breaking through just yet. In the meantime smaller brands who can guarantee a non GM soy will find a ready market.

The potential ‘obesity’ court cases looming will produce an industry agenda that will put health near the top of the corporate responsibilities. This will gradually move brands towards a healthier platform and, as the gap narrows between healthier soft drinks and functional soft drinks, the consumer might well go for the cheaper, more basic option once it becomes harder to differentiate the brands.

Women are often talked about as the target consumers for functional drinks. On the surface this does make sense. They tend to be more aware of their health than men. They still make the majority of buying decisions in the supermarket aisles. And thankfully, they’re more than half the total population. But beverages targeted specifically at women, especially addressing health concerns, are unlikely to be anything more than niche products.

Even so, this is an area where, I think, real success can be had. However, the key will not be through specific health benefits but by appealing on a more emotive level. Ultimately, what will consumers pay more for: ‘happiness’ or ‘health claims’, in their beverage? An emotional ‘want’ may well succeed better than a functional ‘want’.

Confusion or success?
Unless we adopt a system closer to the Japanese FOSHU (Foods for Specific Health Uses), which allow manufacturers to make product-specific health claims, consumers will remain confused. Yet, the most common way to launch functional foods and drinks in Japan (accounting for about 90%) is still the non-FOSHU route, which allows no product-specific health claims. This has proved an equally successful strategy for many brands, which have become adept at leveraging generic health claims to benefit individual brands. Ironically, it’s probably the product-specific claims that enables the consumer to make intelligent judgements on the non-FOSHU products, to everybody’s benefit. It’s also worth noting that when they bought in FOSHU they dropped the term functional foods as a legal definition. The EU doesn’t look to be going down that route and the likelihood is that labelling regulations and the ability to hint at wellness or health benefits will be curtailed in the future. Without this the incentive to be truly innovative and health specific will be a constant barrier to mainstream growth.

So where should we look for the next mega-trend or the next billion dollar business? From the original Red Bull to probiotic dairy drinks and enhanced waters, the majority of successful concepts were successful in Asia first. But this ‘look east’ strategy, tends to over-rely on the ingredient rather than the consumer for its inspiration.

The answer may lie with our young, particularly the tweenager – the stage between childhood and teenager. One of the most marked effects of the ‘kids getting older younger’ phenomenon is their knowledge and interest in all things fashion and their ability to manipulate their parents’ buying patterns – especially for them.  Functional beverages are no different to clothing, toiletries and cosmetics for this age group. They’re all aspirational consumer goods. A child friendly version of Red Bull is probably an oxymoron, but the answer is out there. And so are the big bucks for getting it right. That’s what’s next.

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