Mintel said the $762m fortified waters category was the hardest hit, recording a eight percent decline from 2008 (but still up 267 percent on 2004).
Energy drinks had also seen a cooling in demand, but had been bolstered by the rise of energy shot drinks.
Mintel forecast the whole functional beverages sector would grow 19 percent in current prices and 7 percent in inflation-adjusted prices between 2009 and 2014.
Although growth in fortified waters and energy drinks had slowed a little, Mintel noted that segments, along with functional teas, had tripled in growth since 2004.
“The sales downturn, which hit enhanced water harder than any other segment, was triggered by a convergence of negative factors, including growing concern over the high sugar content of many functional beverages, frugality motivated by the economic downturn, and a flood of new product activity that peaked in 2008 and has made choice in the beverage aisle even more complex just as more consumers are opting to cut back,” Mintel said.
Mintel includes $5bn worth of juice drinks and fruit juices in its $8.6bn figure, but noted high sugar levels and lack of on-pack information have crimped sales.
Yogurt drinks and smoothies dropped 10 percent in 2009, with only probiotic yogurt drinks showing growth.
Functional teas have also suffered a slowdown in sales as players have encroached on the niche area from the mainstream tea market.
Victim of its own success
Indeed Mintel noted that the success of functional beverages means they have moved well beyond niche levels.
“The functional beverage category, through new product activity, line extensions, and the blurring of segment definitions, has created competition for itself,” Mintel witnessed.
“Consumers looking for specific benefits can choose from an increasingly broad selection of products in different functional beverage segments.”
But cost has become an issue, Mintel noted, “as consumers have reined in their spending during the recession.”
“The high cost of functional beverages is also a factor regarding competition with functional foods and dietary supplements.Both supplements and functional foods are less expensive than functional beverages. Also, many beverages, especially new-age beverages such as enhanced water, promise to provide essential nutrients that a multivitamin can provide much more economically. During the recession amid low consumer confidence and dwindling household wealth, a ‘cheap pill’ becomes much more appealing and affordable than purchasing a functional beverage which is five to ten times more expensive.”
Mintel also found:
- 18-24 year-olds are more than twice as likely as over-65s to claim use of functional drinks
- Increased popularity has led to increased scrutiny of claims
- Coca-Cola and Pepsi have lost market share to single-brand companies such as Ocean Spray and Ferolito & Vultaggio
- New product development activity peaked in 2007 and 2008
- Only one third of functional beverage purchasers claim to have purchased them at least 21 times per month
- Fully two thirds of respondents to a survey think FDA should oversee the testing of functional foods and beverages to ensure they meet label claims