Functional beverages are drinks enriched with active ingredients that provide health and wellness benefits. The global functional beverages market is currently valued at over $150 billion and is growing rapidly, with a projected CAGR of 6.6%, expected to reach $260 billion by 2031.
In this article, we explore the key opportunities to seize and the major challenges to overcome for players in this fast-growing sector.
Consumers are increasingly prioritizing their health and recognizing the key role nutrition plays in maintaining well-being. This shift is fueling demand for functional beverages, which offer targeted benefits in areas such as:
This trend is particularly strong among Gen Z and Millennials, who seek solutions to reduce stress, promote relaxation, and improve concentration, while older generations tend to favor benefits related to digestive health and healthy aging.
Another growth driver is the no/low alcohol trend: functional beverages can offer an alternative for social drinking occasions, providing benefits such as relaxation, sociability, or calmness—without the negative effects of alcohol.
For example, Constellation Brands (owner of Modelo and Corona) recently invested in Hiyo, a ready-to-drink functional beverage positioned as a “social tonic” that promotes relaxation and well-being—without alcohol.
The ingredients used in functional beverages are evolving, driven by consumer demand for new health benefits. Some ingredients have become staples in formulations, while others are emerging and shaping the future of the category.
Currently, the most popular functional ingredients focus on immunity, gut health, stress management, and cognitive performance, including:
As the market evolves, a new generation of functional ingredients is expected to rise in importance:
The success of functional beverages relies on a delicate balance between functionality, taste appeal, and naturality.
Taste remains the primary purchase driver for consumers. A functional drink, no matter how beneficial, will fail to convince if it isn’t enjoyable to drink. However, creating appealing flavors remains a significant challenge.
Functional ingredients can alter taste—vitamins, minerals, or botanical extracts often introduce bitterness or earthy notes. To address this, brands combine them with complementary flavors such as citrus or red fruits. The challenge lies in finding the right balance: too many additives can make the product seem artificial, while too few may allow unpleasant flavors to dominate.
Flavor stability over time is equally critical. Exposure to light, air, or temperature variations can alter taste. Therefore, packaging choice and preservation processes are strategic to ensuring a consistent sensory experience.
At the same time, clean label expectations complicate the equation. Natural flavors are often less intense and more variable than synthetic equivalents, increasing technical complexity. Brands like Spindrift have embraced transparency by focusing on minimalist recipes.
Another consideration is the environmental footprint of functional ingredients. Imported ingredients from distant regions can be perceived negatively by consumers increasingly aware of carbon impact.
Learn more about how our team can support you in your clean label projects >
Regulation represents a major barrier to introducing new ingredients into functional beverages, particularly in Europe, where requirements are especially strict. The main challenge lies in the “novel food” status, which obliges manufacturers to prove the safety of certain ingredients through long and costly studies—limiting the introduction of new active components to the market.
By contrast, in the United States, many ingredients benefit from GRAS (Generally Recognized As Safe) status, making market entry easier. This offers brands greater flexibility, though still within limits: health claims must be supported by sufficient evidence and may vary depending on the communication channel (packaging vs. digital communication). Additionally, startups generally enjoy more flexibility in making claims than large corporations, regardless of the country.
Functional beverages are booming, driven by consumers seeking wellness and health-enhancing ingredients. While innovation opens new opportunities, it faces technical and regulatory challenges that slow the introduction of new ingredients—especially in Europe.
To succeed in this competitive market, players must meet growing expectations around clean labels, carbon footprint reduction, taste appeal, and scientific validation.
At Alcimed, we support agri-food companies in exploring these emerging opportunities and developing tailored innovation strategies. Interested in the topic? Contact our experts to discuss your project!
About the author,
Antoine, Consultant in Alcimed’s Agri-Food team in France
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