ANZ companies increasing investments in organic products

AMIDST growing demand for natural and organic beverages, functional beverage manufacturers are investing in product innovation, new flavours, and the introduction of balanced nutrients and environment-friendly packages. Rising preference for organic beverages will benefit most the sugar-free energy drink and fortified fruit juices segments.

The market for sports drinks, energy drinks, enhanced bottle water, fortified fruit juices, functional soy beverages and others such as ready-to-drink tea, coffee, and vegetable juice earned $1.6 billion in revenues in 2012, according to a new study from Frost & Sullivan, Analysis of the Functional Beverage Market in Australia and New Zealand. The figure is expected to reach $2.3 billion by 2017.

The energy drinks sector is expected to lead through the use of healthier ingredients. Australia is projected to experience significant growth, whilst New Zealand is likely to grow moderately.

There is, however, widespread scepticism regarding health claims made by functional beverage manufacturers. “Many functional beverages use health ingredients whose safety and dosage levels have not been checked, whilst some beverages have higher levels of certain ingredients that could have an adverse effect on health,” said Frost & Sullivan Chemicals, Materials & Food Research analyst Yaqin Liu.

Market participants are also wary of rising competition from private labels as their pricing strategy is causing price sensitivity amongst consumers. Additionally, margins are shrinking due to escalating operating costs incurred on ingredients, labour and land.

Beverage manufacturers can widen margins by improving the productivity of the plant. They can lower ingredient costs by nurturing alliances and obtaining materials from all over the world. Companies can boost sales by educating consumers about the specific functions and benefits of their beverages.

“Participants will gain a definite edge by establishing a strong pipeline to constantly introduce products and flavours. Additionally, effective marketing campaigns, distribution channels, and pricing strategies will go a long way in boosting the market's prospects," the analyst said.