Flavored and Functional Water Market Expanding at CAGR to 11.6% by 2030

Published : 3 years ago, on 13/08/2021

As a result of saturation in the bottled water market, demand for functional and flavored water is growing. These belong to the latest generation of bottled water that boasts capability of improving the immune system.

Fascinated by the claims of novel H2O drinks, consumers are briskly replacing old-fashioned mineral water, briskly elevating flavored and functional water as their favorite.

Sales uptick in the functional and flavored water market is resulting from overarching consumer trend in favor of better-for-you alternatives. The demand for healthier replacements for high-sugar drinks is paving way for the market’s bright future. However, price continues to remain a primary factor, determining purchase pattern for functional water.

Despite this, brands are continuing with their premium offerings with a range of label claims, expecting to fetch improved sales and higher market revenue. Further on, innovations in bottling technologies are likely to establish a stronghold for the flavored and functional water market in the retail landscape.

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Functional water is fortified with micro-nutrients and it has successfully created a niche for itself in the consumer market. Besides this, the market boasts novel ingredients, which has been a key factor helping it gain traction in the last few years. Functional water also offers better nutrient profile, which is expected to foster growth opportunities.

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Brands are Focusing on Mass-merchandizing and Building Strong Distribution Network

One thing, the market players are making impressive gains from is the mass merchandizing of their products. There is immense focus towards building a strong distribution network.

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Against this backdrop, hypermarkets and supermarkets remain the preferred distribution channel for functional and flavored water.

Moreover, some companies are adopting bundling strategies to enhance availability and accessibility of functional water. To induce better sales, also as a result of increased competition, some brands are even introducing products at economic pricing. These are some of the key strategies attributing to higher sales of functional water via mass merchandizing.

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Consumers were positively responding to bundling strategies, aiding expansion of the market size until the unprecedented COVID-19 outbreak. The ongoing pandemic has revealed vulnerabilities of several companies.

Indefinite lockdown imposed to contain the spread of the virus has caused supply chain disruptions around the world, compelling market players to rethink their distribution strategies.

Consequently, some of the leading brands have swiftly shifted to online forums to keeping sailing afloat even amid pandemic crisis. Functional water brands are seeing this as an incredible opportunity to penetrate deeper across high potential market. Greater visibility allowed by online presence is stoking revenue generation in the market.

Asia Pacific Offers Lucrative Prospects, US Continues to Remain Lucrative

The flavored and functional water market is quite established in the US and Europe.

North America for instance currently has dominance, backed by robust growth in the demand from the U.S. Sales of bottled water have already surpassed that of soft drinks in the country, prompting companies to expand their functional offerings.

The rising demand for functional water in North America is causing major shift in the beverage industry. Some of the leading brands are joining the bandwagon to offer functional hydration experience to consumers. As a result, there is higher focus on innovating compositions of beverages to lure consumers in favor of purchasing it.

Consumers in Europe too are showing a marked preference for flavored and functional water. However, consider the total population in Asia Pacific, it is highly likely that market players will target the countries in the region. As a result of increasing awareness, consumers in Asia Pacific have become more willing to spend on functional beverages.

Moreover, “better-for-you” alternative drinks are becoming a recognized category, with consumers exhibiting demand for healthier alternative to carbonated soft drinks. Driven by impressive prospects manufacturers too are expected to focus on innovating flavors and better packaging for functional and flavored water.

Despite Presence of Leading Brands, Market Offers Ample Opportunities for New Entrants

The global flavored and functional water market continues to grow at a steady rate. The market exhibits dominance of global brands, who are seeking consolidation to gain competitive advantage. Nonetheless, the market is not as heavily concentrated on account of the presence of several smaller companies and independent brands.

The market will continue witnessing influx of small private-label brands as they embark on the journey of carving a niche for themselves in the beverages sector. These companies offer better convenience and value for money. To compete against emerging companies, behemoths are adopting product development as their key strategy.

There is also immense focus on appeasing consumers, which is why the market is exhibiting higher adoption of bold flavors and exotic ingredients. For instance, in February 2019, one of the leading names in the beverages industry, The Coca-Cola Co. added two brand new beverages to its Smartwater brand. These were Snamtwater antioxidant and Smartwater alkaline.

There are other companies in the market that are focusing on the expansion of their global footprint. For instance, Danone S.A. is channelizing its effort to penetrate deeper across high potential markets in Asia Pacific, where it is aiming for a double-digit growth on the back of improved sales of bottled water recorded in the region.

Other prominent names such as PepsiCo. are focusing on innovation to offer advanced packaging. Its brand called LIFEWTR has announced championing the Art via technology in March last year. Adoption of strategies such as these will aid expansion witnessed in the flavored and functional water market.

In the coming years, the market is expected to gain significant as a result of increasing focus on health and wellness among consumers. The pandemic outbreak will leave a significant impact of consumers, changing their behavior pattern. Consequently, they are expected to show higher inclination of adopting healthier food and beverages items. This is expected to augur well for the flavored and functional water market.

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