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FEATURE: FUNCTIONAL BEVERAGES

Clean energy on the rise

The growing popularity of functional beverages has seen a number of new brands enter the market to provide everyday consumers with alternative, healthier beverage options.

Words Lizzie Hunter

ACCORDING TO THE Australian Association of Convenience Stores (AACS) State of the Industry Half Yearly Report 2023, the functional beverages category has continued to build on its strong growth in 2022.

Energy Drinks continue to drive strong value growth up +12.9 per cent after a +8.9 per cent growth in the first half of 2022. Both Flavoured Milk including Iced Coffee +12.9 per cent and Sports Drinks +12.6 per cent also recorded double digit growth.

Lisa Schilling-Thomson, National Sales Manager of Australian health and wellness manufacturer Halo Food Co, attributes the demand for healthier options to the health lessons learned throughout the COVID-19 lockdowns.

“I think our experiences throughout COVID lockdowns made us appreciate our mental and physical health a lot more,” Schilling-Thomson says.

“What’s really interesting is the fact that it’s not your typical gym junkies or athletes who are after healthier options. Halo Food Co recently conducted shopping research which showed it’s your everyday Australians, both men and women, who are actively seeking out healthier products.”

Schilling-Thomson adds the P&C channel is key for Halo Food Co’s ready to drink (RTD) protein shake Tonik.

“Tonik is a premium functional beverage brand that is available in a range of ready to drink solutions including high protein low carb, hydration and plant-based options, so it’s perfect for people on the go like who are after a healthier snack option when stopping off to fill up the car at the petrol station.”

Mark Curry, Founder of Savvy Beverages, says the P&C channel is key to his products because it’s where people turn to convenient, energy enhancing products.

“We’ve seen more functional drinks popping up in the Australian market within the last 12 months, which is being driven by changing consumer demands,” explains Curry. “Today’s consumers have the advantage of enjoying energy-enhancing drinks that last longer, are made from natural ingredients and don’t come with a sugar crash.”

Savvy Beverages, which provides nootropic drinks designed to improve mental wellbeing and performance, will soon be releasing a fourth flavour into the P&C channel, as well as a decaf option and a range of nootropic infused bars.

“We’re making it clear for customers why our offering is the best on the market through straightforward, comparison driven advertising methods, which is educating and empowering the customer while they enjoy a high-quality product,” explains Curry.

“On average, our products have 10-15 times more functional ingredients than the traditional energy drinks like Red Bull and V, and 20-30 times more ingredients than the other major nootropic drinks in the category.

“We’re calling our nootropic infused bars ‘brain food’, a healthy and delicious brain boosting snack for body and mind.”

Kristian Johannsen, Founder of Bobby, a Victorian produced ‘better for you’ soft drink, says the P&C channel is important to the brand’s growth strategy.

“Petrol and convenience is at the forefront of our strategy to grow the Bobby brand and increase the availability of our beverage range to on-thego customers who want a single-serve, chilled beverage that has the delicious soft drink taste but is low in sugar and in calories,” says Johannsen.

Prior to Bobby’s launch in May last year, the brand partnered with a petrol and convenience store chain to expand its availability nationally through P&C.

“Following a really successful launch into the P&C channel last year we are now excited to announce our new prebiotic soft drink range will soon be available via Viva Energy,” says Johannsen.

“We’re very keen to see how our new flavours perform as they haven’t been sold in the P&C channel before. However, when Kirks relaunched their creaming soda via Ampol, it went absolutely gangbusters, so I have a good feeling our creaming soda will do well in the next six to 12 months.”

Bobby isn’t stopping there, with plans to launch a further three new flavours in the P&C channel.

“We have our modern day twist on the international classic Dr Pepper, which we’re calling Dr Bobby,” says Johannsen. “We’re also launching a vanilla cola flavour which a lot of retailers have been interested in and then we’ll have our lemon lime flavour that will be sold exclusively via 7-Eleven.”

Johannsen says the functional beverage market is a constantly evolving space, driven by changing consumer expectations.

“I think people will always be looking for a healthier option without sacrificing taste and I believe Bobby is hitting that sweet spot. Based on our latest figures, Bobby is outperforming our competitors’ products, which I believe is due to the fact we have flavours people recognise and love.

Jake George, Australian Sales Manager for New Zealand ‘brain drink’ start-up Ārepa, which has recently launched into bp and Ampol, says there is a growing trend of customers choosing brands with strong credibility.

“Building up brand credibility can be done through a variety of initiatives, from donating a portion of sales to a charity, bringing on a brand ambassador like a social media influencer or sports star to promote your product or having evidence that proves your product does what it says it does,” says George.

“At Ārepa, our credibility comes from the fact our drinks are scientifically backed to enhance cognition, increase alertness, reduce brain fog and improve physical performance. We’ve partnered with universities and invested a lot of time and money into clinical studies to deliver a healthier, all-natural energy drink without relying on caffeine.”

Petrol and convenience is at the forefront of our strategy to grow the Bobby brand and increase the availability of our beverage range to on-the-go customers.

– Kristian Johannsen, Founder, Bobby

In August this year, Ārepa launched its brainfood drinks, Performance and Calm and Clarity (sparkling) across 300 BP outlets. Since launching in 2020 in Australia, the brainfood drink company has seen 800% growth in product sales over the last 12 months in Australia where its products can be found in Coles and Woolworths, as well as through independent retailers and grocers, and online.

Ben Matthews, Country Manager AU at Ārepa, says the expansion into petrol and convenience stores in Australia is an important part of their business growth strategy for the next 2-3 years.

“Ārepa sales in Australia have grown exponentially over the last 12 months,” Matthews says. “We’re very proud to partner with BP to support petrol & convenience retail growth. The functional beverage space is experiencing strong growth and we’re pleased to provide an alternative caffeine-free option for consumers that not only tastes great but improves mental performance, enhances memory, fights mental fatigue, and delivers feelings of calm – naturally.

“Until recently, buying a drink at a convenience store involved purchasing a soft drink or an energy drink. We’re so pleased we can offer an on-the-go alternative that aids optimal brain function and is scientifically proven to work.”

Following its launch into BP and Ampol, George says there are a number of new products in Ārepa’s pipeline for the Australian market.

“We have several new product developments underway for the Australian market, from increasing the range of our product sizes to branching out into other brain-related energy drinks. We believe in order to grow and partner with retailers, we need to be on the forefront of innovation in the nootropic space,” says George.

“Our mission is to make our brand available to everyone, and that includes petrol stations and convenience stores across the country. If our numbers in New Zealand are anything to go off, we believe we are very well placed for success in Australia to take on some of the bigger brands.

Industry challenges

Schilling-Thomson says the next challenge for the functional beverage space will be identifying what the next innovation is in this space.

“I think the challenge for manufacturers will lie in understanding what new ingredients customers will want to see in their drinks. We’ve seen so many innovations from kombuchas to smart waters to protein drinks, so innovation and keeping up with consumer expectations is key. Rather than just pumping out a few new flavours each year, how will we as a manufacturer step it up to provide a great quality product that tastes great as well.”

George encourages retailers to invest in the functional beverage space.

“When kombucha was first launched, many retailers were reluctant to range it because they thought it was only for boutique health or organic food stores. Now you’ll find kombucha drinks in at least 90 per cent of retail stores. I expect the same to happen with the nootropic, cognitive enhancing drinks. Don’t wait to see what the big stores are doing. If you see a good product, grab the opportunity to range it.”

George says education and building awareness of Ārepa’s brand in the Australian market is both a challenge and opportunity for the business.

“Most retailers already know the Ārepa brand is good for brain health, however our product has many other health benefits, such as being good for the human immune system and containing high levels of Vitamin C,” says George.

“There are many different pillars that make up our product and while educating our retailers and customers on these benefits can be a challenge, it also is a great opportunity. As one of the first functional beverages in the brain health space in Australia, we are leading the way in that category.”

Curry says he is noticing more consumers are asking questions around what ingredients are used in functional beverages, what the benefits are of these ingredients, as well as the amount of each ingredient.

“It’s no longer enough to just say your product has certain ingredients in it. You need to validate your claims and explain how this benefits the consumer,” says Curry.

“People are beginning to want more than just caffeine for energy which is interesting, considering the majority of Australians drink up to three caffeinated beverages a day. Further, if you say there is no sugar in your drinks, the follow up question is ‘What’s the sweetener?’ People are really starting to wise up to what they are consuming.

“Savvy Beverages is the tip of the iceberg of years of research; hundreds of scientific studies and research, and multiple trials. We put a lot of time, effort and energy into finding the right ingredients and the amount of those ingredients in our drinks.”

Johannsen also notes while the cost of ingredients is going up unfortunately consumers aren’t prepared to pay more for the same product.

“This may result in some businesses who can’t maintain price competitiveness with the bigger players leaving the market,” Johannsen says.

“However I also think if the smaller, boutique brands can keep themselves afloat during this tricky time, once inflation comes down I believe there will be opportunity to disrupt the industry, claw market share away from the big players by providing a point of difference in your product.”

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