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Niche Developments in European Functional Innovation

04 March 2013

Despite shrinking consumer confidence and the maelstrom of economic woes in the euro zone, innovation in functional soft drinks remains buoyant.

Functional beverages can be divided into fortified and nutraceutical products; ‘fortified’ indicates additions to deliver general health benefits, whilst nutraceutical products contain supplements with a distinct functional claim. The former holds a significantly greater share of the European market. This divide can be linked to two clear issues: it is often considered difficult to bring nutraceutical products to market due to the substantial research investment required. Additionally, these beverages carry high price points which consumers find difficult to justify in the present economic climate.

That said, the Slovak Republic has the highest share of nutraceutical options in Europe; with such products accounting for 3% of the country’s soft drinks market. Although volumes have been mostly sheltered thanks to young Slovaks following the western European trend of active, healthy lifestyles, functionality fell last year with a shift to more affordable alternatives reported. At the same time as this decline hot tea consumption increased, spurred by the uptake of wellness teas in this key demographic.

The largest functional soft drinks market in Europe is the UK fuelled by the high level of fortified squash/syrups products. This is despite mainstay Robinsons’ (Britvic Soft Drinks) fortified options being cannibalized by its (unfortified) double concentrate sister range. The category has maintained share thanks to its very low price per serving and it being aimed mostly at children. As seen elsewhere, dilutables with health benefits claim significant market pull, with parents reluctant to sacrifice their children’s needs even in times of austerity. GlaxoSmithKline’s new Ribena Plus range, with an ‘immunity’ proposition, is very much in line with these trends.

As consumers tighten their purse-strings, functional options with a distinct credible benefit are the winners. Development of aloe vera-based products is increasingly reported across the continent as its antioxidant properties claim to aid digestion and boost the immune system. Currently, both iced/rtd tea drinks and still drinks offer such variants, with Nestea green tea/aloe vera/strawberry (Nestlé) introduced only recently.

Although only a fledgling segment, in Poland functional soft drinks have been evolving, showing one of the most significant increases of 2012, performing well ahead of the Polish market as a whole. Nutraceutical lines are taking share from fortified; last year Ustronianka launched carbonated packaged water with magnesium, claiming to aid cardiovascular and nervous systems. Simultaneously, still drinks saw the arrival of beverages boasting added vitamins, L-carnitine (said to aid weight loss) and, as in the case of Hoop Polska, herbal options targeted at women.

In France understanding the national preference for health and naturalness is paramount to functional success; the launch of Oenobiol Beautific, Coca-Cola’s beauty drink venture with Sanofi Aventisis, could create a new dynamic and is being watched eagerly.

Due to the high product margin potential functional soft drinks are an attractive proposition for manufacturers. The segment suffers, however, from skepticism regarding the benefits of these ‘additives’, an overall lack of consumer understanding, and restrictive legislation. Going forward, the development of value added, targeted products supported by clear benefit communication will be essential in driving functional soft drinks penetration.

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