Functional beverages fuel hydration revolution
Beverages that just quench a thirst don’t cut it anymore. More consumers seek drinks that offer health benefits, too—vitamins, electrolytes, probiotics and the ability to address concerns about sleep, weight, concentration, gut health and mood.
Whether you call them better-for-you or functional beverages, this is a beverage category poised for growth in a big way, according to multiple research firms. In 2023 alone, 258 products entered that space, according to a Nielsen IQ report. Mordor Intelligence predicts a CAGR of 6.9% for the forecast period (2025- 2030) to the tune of US$80.88 billion by 2030. And Grand View Research says functional beverages are “the most lucrative product segment registering the fastest growth.”
The Canadian Beverage Association also recognizes the potential of the category. “The CBA expects the functional beverage market in Canada to continue to grow as consumers seek increased choice for products that meet their needs,” says Erich Schmidt, director, communications and public affairs. “As Canadians prioritize health and wellness, the demand for innovation in the non-alcoholic beverages market presents substantial growth opportunities.” of electrolytes, vitamins and minerals in four varieties with natural flavours, no artificial sweeteners, colours or caffeine.
New players enter the market
As the category becomes increasingly competitive, brands are looking for ways to stand out. Ryde has been going full throttle to pursue sales in Canada after a successful launch in Australia in July 2023. Ryde did a high-profile sampling blitz at Toronto’s Union Station to kick-off its entry in the GTA. The 60 ml pocket-sized shots are aimed at urban professionals looking for a boost. They contain no added sugar, ginseng extract and, depending on the SKU, caffeine, B vitamins or chamomile. It boasts that its key ingredients are backed by science.
Recently, PepsiCo announced the acquisition of the prebiotic soda brand, Poppi, for US$1.95 billion. Ramon Laguarta, chairman and CEO of PepsiCo, had this to say: "We've been evolving our food and beverage portfolio over many years, including by innovating with our brands in new spaces and through disciplined, strategic acquisitions that enable us to offer more positive choices to our consumers," he explained. "More than ever, consumers are looking for convenient and great-tasting options that fit their lifestyles and respond to their growing interest in health and wellness. poppi is a great complement to our portfolio transformation efforts to meet these needs."
Meanwhile, Más+ by Messi, launched in July 2024, brings together sports drink and functional beverage attributes. Argentinian superstar Lionel Messi, considered one of the world’s top soccer players, is the personality behind it. He’s a founder of the brand and Más+ Next Generation Beverage Canada, along with flavour innovators from The Mark Anthony Group—best known for distributing wine, spirits and RTDs. Available in bottles and cans, the Más+ by Messi roster has four SKUs—Miami Punch, Orange d’Or, Berry Copa Crush and Limón Lime League—each named after a milestone in Messi’s life. They feature a balanced blend
“Canadians are constantly seeking better products to help them achieve their goals,” says David Giancoulos, general manager, Más+ Next Generation Beverage Canada. “We know they understand the importance of hydration and we wanted to bring them a product that not only tasted great but was good for them.”
The product’s broad appeal makes it a good fit for convenience stores, notes Giancoulos. “Our target audience are Canadians who want to move, play and live more. They want to feel like champions in every part of life whether they are on the go or taking some down time. The convenience store channel is the ultimate medium for offering consumers a wide variety of positive hydration solutions.”
To build on the momentum of the launch, Más+ will focus on digital and social media campaigns that highlight product benefits, coupled with in-store targeted customer sampling, tailored promotions and eye-catching displays. Along with community events, the brand will also plug into soccer culture and connect consumers with Messi’s drive and passion for sports.
Diversifying the no-alcohol offering
A desire to solidify its positioning as an experiential lifestyle brand, Collective Arts has also entered the functional beverage space. Just as it disrupted the craft beer market when it began, the company is focusing on doing the same for better-for-you drinks. It will stay true to its mission to be a brand that supports artists and causes as it evolves, says Toni Shelton, head of innovation.
“With the decline in craft beer sales, we’re looking to diversify as our consumers grow,” she explains. “If they’ve cut their alcohol consumption, we can offer them creative, innovative beverage options and provide the benefits they’re looking for.”
Collective Arts has created a robust portfolio of better-for-you products, including Artworks 99% pure sparkling water with electrolytes, Botany Adaptogenic Elixirs (Uplift with coconut water, prebiotics, jasmine tea and ginseng; Balance with lion’s mane, prebiotics and schisandra berries and vitamins; and Unwind, formulated with magnesium, lemon, ginger and chamomile), and Wide Eyed Energy (four SKUS) with 80 to 140 mg of natural caffeine from green tea, natural fruit flavour and zero calories.
It’s the gen Zs who are the primary target of these beverages. “This target demo is very much about disdain for the status quo,” says Shelton. “They want to be treated like individuals.” Collection Arts’ functional beverages cater to that mindset with a there’s-something-for-everyone approach with personalized formulations for their needs, whether it’s bold flavour, low or no sugar, an energy boost or brain function support."
Maximizing sales at c-stores
Collective Arts is making progress with c-stores, but, as Shelton admits, “It’s tough to compete with Red Bull in that channel.” But as consumer tastes are changing, there’s room for smaller brands to nab shelf space.
“There’s a new wave of beverage consumption we’re seeing, and more channels are looking to stock functional beverages,” she notes.
And offering something different, drinks with clean, natural ingredients are a point of differentiation that customers want. That makes communication at the store level important. Having knowledgeable staff that can explain to customers that there are better-for-you quality options will help drive trial and gain loyalty.
Since this is a new category to many consumers, Shelton encourages c-stores to tap into the Collection Arts’ expertise on how its functional beverages can be merchandised, from assistance with planograms, BOGO promotions and education.
Looking ahead, expect more mashups between drink categories. She sees a time when non-alc cocktails could incorporate ingredients like caffeine, mushroom extract or ginseng. Disruption will continue, as seen with functional coffee coming to the forefront.
Modern sodas made-in-Canada
And watch for a continued reinvention of soda. Cove Soda is another Canadian success story. The company based in Halifax, N.S. is the creation of brothers John and Ryan MacLellan, who crafted kombucha at home and sold it at local farmers’ markets. In just six years, the brand has made major in-roads across Canada and the United States with its organic, zero sugar drinks (12 SKUs and growing) with one billion probiotics.
“We expect modern/alternative soda to become and remain the leading sub-category within functional beverage over the next five years,” says John Wahl, the company’s vice-president of sales. “Cove Soda is in a great position to be a leading brand that truly drives growth and innovation within this beverage set.”
C-stores are showing rapid growth for modern sodas. “They’re taking shelf space from other beverage options, such as juices and low velocity kombucha brands,” explains Wahl. “Buyers are starting to build both shelf-stable and refrigerated healthy soda sets as data confirms this will be a long-term market trend.”
Hear that sound? Knock. Knock. This is an opportunity for c-stores to get ahead of the curve as the demand for functional beverages grows.
This article originally appeared in the March/April issue of Convenience Stores News Canada
