Functional soda is on the rise, outpacing all other beverages with 465% growth last year, per SPINS.
- UK’s Ugly Drinks (sparkling water) grew DTC revenue by 500% YoY.
- Fizzy tonic Olipop reported a 900% sales uptick and “astronomically high” repurchase rates.
- Stevia-sweetened Zevia closed a $200M funding round in late 2020 and filed for IPO in June 2021.
What is it? As tasty as soda—minus the sugary consequences—functional pop’s unconventional ingredients deliver targeted health benefits, from digestion to immune support to cognitive health.
Meanwhile, Big Soda has come under fire for links to diabetes/obesity, battling shareholders over murky marketing practices. It’s not hard to see why health-conscious consumers are switching over to better-for-you alternatives.
In the past, it was about buying into a “lifestyle,” says food and branding expert Richard Horwell, but now “you’ll have to provide functionality and health benefits.”
Sour. It’s not all smooth sailing for functional soda upstarts, though. Zak Normandin, CEO of Iris Nova (parent company for DIRTY LEMON), thinks it’s a race to the bottom.
According to Normandin, “the beverage space is more crowded now than ever before,” even more so as Big Soda catches on:
- Coca-Cola recently launched non-soda extensions of its brand with zero-sugar options, like Energy and With Coffee. And in 2019, the beverage giant invested $20M in Health-Ade Kombucha.
- PepsiCo launched bubly bounce in early 2021, a caffeinated sparkling water without their usual sweeteners. But its latest functional drink, Soulboost, was accused of ripping off branding, flavors, and messaging of two separate beverage startups.
Takeaway: Competition is heating up in the beverage industry, mirroring disruption elsewhere in food, from snacks to candy.
Young upstarts are winning now, but it’ll be an uphill battle against legacy players learning to innovate. Regardless of who comes out on top, expect grocery shelves to look very different in the near future.