Over the past couple of decades, there has been a major decline in drinking culture. Unlike their predecessors, younger generations simply aren’t drinking as much alcohol. The World Health Organization reports that the number of drinkers worldwide has decreased by 5% and by up to 10% in some European countries since 2000. Last year, alcohol consumption in America fell by 5%. As consumers have become more health conscious, especially during the coronavirus pandemic, they have been opting for healthier alternatives.
Functional or nonalcoholic beverages are becoming increasingly popular in the wake of this antialcohol movement. Although nonalcoholic drinks are a relatively new product, experts expect the industry to see major growth as people continue to seek alcohol alternatives. The functional beverage market is poised to grow at a compound annual growth rate (“CAGR”) of 7% and achieve a $173.23 billion valuation by 2025, Research and Markets predicts. For most people, alcoholic beverages are a social drug; nonalcoholic alternatives allow people to derive most of the same benefits without having to spend the next day hung over.
A lot of the alternatives on the market are also infused with minerals, dietary fibers, vitamins, adaptogens, probiotics and cannabinoids such as THC or CBD. Coca-Cola, for instance, has launched a caffeinated cola drink with B vitamins and guarana extracts and invested millions of dollars in Health-Ade Kombucha. Pepsi has also developed a noncarbonated, enhanced water beverage called Driftwell that contains L-theanine. According to the cofounder and CEO of marijuana beverage brand Wunder, the nonalcoholic beverage movement may have started a while ago, but the pandemic kicked it into overdrive.
Beverage producers have noticed the increased interest in nonalcoholic beverages and as a result, the market now has a variety of zero or low alcohol spirits, wines and beers. Kim Cox, the SVP of account development at NieslenIQ, says these new beverages are designed to meet consumers’ health and wellness concerns. This includes lower alcoholic content, lower calorie and sugar count and, in some cases, sustainable production practice.
Major innovation in the segment is coming from smaller companies rather than the large brands flooding the market with nonalcoholic offerings. Smaller brands now have a shot in the beverage space thanks to more accessible production methods, allowing them to get products to consumers at lower costs. The functional beverage space still has some growing to do, according to Bambucha Kombucha CEO Michael ZonFrilli. For instance, more food service operators and retailers need to start stocking nonalcoholic beverages, he says.
From the way customers are taking to functional drinks, early entrants in the space, including BevCanna Enterprises Inc. (CSE: BEV) (OTCQB: BVNNF) (FSE: 7BC), are poised to grab significant chunk of the market share before other players rush into this space in the years to come.
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