Americans are multitasking more, and demanding that their beverages do, too.As a result, product makers are putting out more functional beverages, and consumers are drinking them up. Category sales are expected to grow 27% to $12.8 billion by 2009 from $10 billion in 2004, according to Mintel International Group in Chicago."Consumers are often looking for a magic bullet when it comes to nutrition,"

Americans are multitasking more, and demanding that their beverages do, too.

As a result, product makers are putting out more functional beverages, and consumers are drinking them up. Category sales are expected to grow 27% to $12.8 billion by 2009 from $10 billion in 2004, according to Mintel International Group in Chicago.

"Consumers are often looking for a magic bullet when it comes to nutrition," said Marnie Sherno, director of consumer health education for Clemens Family Markets, a 20-store chain based in Kulpsville, Pa. "Energy and functional drinks speak to this desire, and therefore do well with consumers if marketed correctly."

Yet while 66% of functional drinks are purchased in grocery stores, convenience stores, with 11% of the market, are the fastest growing outlet for these products.

Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill., said supermarkets are in good position, however, to capture greater market share of the category. "They have a tremendous opportunity to help people find functional beverages, and they have enough choice to be a place where people routinely turn for them."

Tom Pirko, president of BevMark consulting company in Santa Barbara, Calif., agreed, noting that functional drinks got their start in convenience stores. "They've found a good home in supermarkets and mass merchandisers."

Since functional drinks are relatively new, supermarkets rely on a combination of tastings, location and price tactics to push sales.

Jungle Jim's International Market, Fairfield, Ohio, puts them in several locations throughout the sprawling store. The newest items usually are featured in the store flier's Gem section that highlights one item per week.

Jill Denton, natural-foods manager, runs promotions on these items as often as she can, frequently from pallets, displaying products for a couple of weeks before dropping the price. Products are displayed with manufacturer information, signage and nutrition literature.

Sampling is one of the most effective ways Jungle Jim's promotes functional beverages, Denton said. "Sales go up significantly when we do this, because sometimes people won't buy something if they don't know how good it tastes."

The energy-drink segment is the fastest-growing part of the functional-beverage category. These products usually contain ingredients like taurine, an amino acid claimed to lower cholesterol and be heart-healthy, and guarana, a caffeine-like stimulant. Sales of energy drinks totaled an estimated $890 million in 2003 of the overall $460 billion beverage category, according to Mintel.

Jungle Jim's puts energy drinks in seven locations, including the health department, a cooler in the Asian section, a cooler at the front of the store, and the beer and wine department.

The store offers about 40 varieties of energy drinks. Red Bull, the first energy drink in the United States, is the best seller. Bret Vitek, the retailer's international manager, promotes it the most because he receives the most support from the company.

Vitek also spurs sales of Red Bull with everyday low pricing. Four-packs are priced at $6.49, while most Ohio stores sell them for $7.99, he said. For the July Fourth holiday weekend, he lowered the price to $5.99. The approach seems to be paying off: Sales of Red Bull are up 50% in the store over the last year, he said.

Energy drinks sell best off pallet displays, especially the one located directly opposite the energy-drink aisle, he said. Surprisingly, these beverages don't sell particularly well near the cash registers, he added.

Morton Williams' 10 Associated Supermarkets in New York sell almost all energy drinks from coolers, according to a buyer who asked not to be identified. "We do have some on endcaps or in nooks and crannies, but that's more overstock," the buyer said. "They are predominantly impulse buys, single-serves."

In San Francisco, meanwhile, supermarkets frequently place functional drinks in the fresh-vegetable area, said independent marketing consultant Martin Bishop, who is based there. "It reinforces how healthy they are and differentiates them."

Joe Heron, president and chief executive officer of Ardea Beverage in Minneapolis, maker of Airforce Nutrisoda, provides retailers with many merchandising materials, from sliding plastic racks to refrigerators. He also proposes price promotions. "The cooler is always the best place to be -- that's the war zone," he said.

Functional beverages have come to mean any drink that makes a health-benefit claim, and they can be found in any category. They include teas with antioxidant power claims; water with added nutrients such as Vitaminwater; and beer such as Budweiser's B-to-the-E with ginseng and guarana.

Functional drinks' claims are becoming more precise. Catapult Coffee contains herbs that are said to give a physical and mental lift, along with a buzz that lasts longer than caffeine's, while the energy drink Celsius purports to help drinkers burn calories.

Gary Hemphill, managing director of Beverage Marketing Corp., New York, said the market will continue in this direction. "We're entering a phase of more targeted products. It's hard to be all things to all people, and that's why you're seeing so many product line extensions."

Functional and energy drinks have two types of customers and are imbibed for different reasons, beverage consultants said. The former are consumed for their nutrients and are particularly attractive to baby boomers, the latter because they look cool. People often pop open an energy drink to get a rush before partying or studying, and less frequently, working out. They're equally used as alcohol mixers to get a buzz and as a remedy for one the morning after.

Men aged 18 to 34 are energy drinks' biggest consumers. "Energy drinks perform for Generation Y like coffee," Bishop Consulting's Bill Bishop said. "It's a boost, a kick, and making that available in a cool, trendy way and packing a punch with caffeine is something people will find attractive."

These beverages' growth over the past year has surprised Pirko. "They're now taking a lot of business from regular soft drinks," he said. "They offer not only a hint of exhilaration but also health benefits."

Energy drinks combine a slight bitterness with an oversweet quality. Taste comes secondary to image for the people who consume them, consultants agreed.

The appeal isn't just about coolness. Functional and energy drinks are thriving because they offer a way for busy people to get nutrients in a portable package.

Size is another feature. Red Bull created and defined the market with its 8-ounce can, and followers often come in small sizes, letting people feel like they're getting nutrients without too many calories.

In a new segment, people are more likely to buy one bottle or can at a time, and the smaller can suggests to consumers that the contents are powerful, so they don't need to consume a lot of it, Hemphill said.

These beverages are still predominantly purchased as single-serves because they are impulse-driven. Now, however, they're appearing in 16-and 23-ounce cans. As the category grows, people will look more at price and multipacks, which will benefit supermarkets, Hemphill said.

That already may be starting. At Jungle Jim's single-server functional drinks sell better than multipacks, especially in the summer, Denton said. Among energy drinks, though, single-serves also sell better in the 16-and 23-ounce sizzes, and in the case of Red Bull, multipacks sell best.

At Morton Williams' Associated Supermarkets, big sizes sell well because they appeal to the cost-conscious, the buyer said.

"If the category grows and demand increases, you'll see more innovation in multipacks," Hemphill said. "This is probably only the beginning for supermarkets and as the category grows, supermarkets have the opportunity to grow fairly quickly."

The Buzz

Energy drinks are becoming more customized than ever, as a sampling of new products shows.




PRICE: $6.49 for four 8.4-fluid ounce cans

ATTRIBUTES: Cranberry-flavored drink with adaptogenic herbs that claim to help the body's performance, and vitamins and amino acids said to increase mental alertness and physical stamina.

Everlast Nutrition

COMPANY: Vitamin Branding

DISTRIBUTION CHANNEL: health food stores

PRICE: $20.09 for 8.3-fouid-ounce can

ATTRIBUTES: Slightly carbonated citrus beverage said to improve performance and reaction time and increase concentration and metabolism.

Monster Energy Assault

COMPANY: Monster Beverage

DISTRIBUTION CHANNEL: supermarkets, convenience stores

PRICE: $2.60 for 16-fluid-ounce can

ATTRIBUTES: Double shot of energy in a tart flavor. Camouflage package designed to stand out on cooler shelves.

Wild Buzz

COMPANY: Big Brands

DISTRIBUTION CHANNEL: specialty retailers, dollar stores

PRICE: 99 cents $1.09 for 8.3-fluid-ounce glass bottle

ATTRIBUTES: Regular and sugar-free, low-carb varieties with taurine and B-vitamins.


COMPANY: Hansen's Natural

DISTRIBUTION CHANNEL: supermarkets, c-stores, health food stores

PRICE: $1.99 for 15.5-fluid-ounce can

ATTRIBUTES: Claims to be the first 100% orange juice energy drink, with ginseng and taurine.

Sources: Mintel International Group's Global New Products Database, SN research