As bottled water surges to overtake soda as the country's leading beverage, a rapidly expanding segment in the category is functional water — including caffeinated flavored water. Caffeinated water combines the pure hydration and functionality consumers are looking for in a beverage, without all the calories, Virginia Lee, senior beverages analyst at Euromonitor, told Food Dive. Sales of bottled water in the United States grew 6.4% in 2015, reaching $15 billion, and sales are projected to grow another 34.7% by 2020, according to a report Mintel released in January.
Lee authored a recent report in regard to the opportunities with caffeinated bottled water, which are making inroads with consumers of energy and sports drinks who are seeking purity and a zero to low calorie boost. With caffeinated bottled water perceived as a niche market, where will ingredient manufacturers find opportunity?
A 'healthy,' refreshing drink with a kick
Caffeinated water offers an alternative for people who don’t like coffee or who want to avoid using sugars, artificial sweeteners or cream to flavor their coffee. Caffeinated waters also offer the functionality consumers have been getting from diet sodas and energy drinks.
Flavored water companies such as Hint Inc. and Avitae USA LLC are among those offering caffeinated bottled water products that provide the benefits of better-for-you beverages. Company officials have said that Hint Kick was developed for customers looking for a caffeinated product to provide a kick without the crash. The caffeine comes from coffee bean extract and is added to fruit-infused water. The product bypassed all expectations, Kara Goldin, CEO of Hint Inc., told BevNet. She said the successful testing at Silicon Valley tech firms found the company making the product as fast as it could "because people are really excited about it."
In addition to the tech set, some users of sports drinks are turning to caffeinated water or vitamin water to rehydrate. With the surge in exercise programs such as spinning and CrossFit, consumers want to quench their thirst but are looking for a little extra, Lee says. She says caffeine consumption, according to some studies, has been linked to improvements in athletic performance.
The clean label effect
Energy drink consumers are also attracted to caffeinated water because they are paying closer attention to nutritional labels. In Lee’s recent report, Avitae’s CEO Norm Snyder states the third-leading consumer group for the company’s caffeine + water beverage consists of older energy drinkers. Lee says consumers who have grown up with energy drinks find energy drink labels contain a list of several ingredients, with names they don’t recognize or are hard to pronounce; with a typical caffeinated water bottle, they will find four or five ingredients listed, with either no calories or minimal calories.
In the Euromonitor report, Goldin said, "Most of our customers are on to health concerns about sweeteners, telling us that they have definitely moved away from diet sodas." By positioning itself as a healthy functional beverage, caffeinated water has the opportunity to take share from diet carbonates, Lee notes.
However, the trend toward natural could lead to consumers showing less interest in caffeine and more interest in natural energy moving forward, according to research provided by a Mintel spokesperson.
Mintel asked survey respondents to list the function/attributes they would use if they could create their own ideal bottled water product. Four in five respondents preferred some sort of nutritional or functional benefit, and two in five consumers preferred bottled water with vitamins. Of those looking for an energy boost, few indicated their ideal would have caffeine, which Mintel believes indicates the function of energy in bottled waters should come from sources that provide natural energy, such as B vitamins.
This data is something manufacturers can consider as they explore ways to tap into the explosive growth in the bottled water category, and the rapidly growing functional water segment within the category. Consumers will continue to demand beverages that offer purity, functionality, and zero or minimal categories.