Bottled water used to be very big business. However, for a sector already seen as ‘the new tobacco’ – thanks to growing concerns over plastics and resources – the shift to WFH hit bottled-water companies hard. As people returned to the kitchen tap, big players from Danone and Nestlé to Coca-Cola all reported slow growth from their bottled-water brands.
Enter functional hydration. The general idea? Water is great, but adding electrolytes makes it a whole lot better.
And customers are buying into it. Analysis firm Research and Markets says functional hydration saw a compound annual growth rate of 4.6% between 2015 and 2019, hitting $129 billion.
After a blip in 2020, growth is expected to jump to more than 8% this year, with the market worth $158 billion by 2023, growth that analysts say is due to an appetite for healthy drink alternatives.
Fortified with herbal extracts, micronutrients and superfruits, these products promise improved sleep, focus, energy levels and immunity. PepsiCo’s sparkling Soulboost comes in two flavors, one with L-theanine to assist relaxation and the other with panax ginseng for mental stamina; mineral-water giant Evian’s magnesium- and zinc-enriched Evian+ claims to boost cognitive function; and Nestlé’s milk powder Yiyang Active supports mobility in aging for Chinese customers. All were launched in the latter half of 2020 or early 2021. While the big players hold most market share – 43% in 2019, according to Research and Markets – smaller brands have long disrupted the space.
Vitaminwater hit chillers in 2000 and soon became the bestselling enhanced water product in the US, with an annual revenue of $300 million by 2006. A year later, it was bought by Coca-Cola. Despite since losing sales due to health-related lawsuits, Vitaminwater paved the way for others, from Tenzing to Füd. Recently, Hydrant and Cure Hydration have appealed to young adults.
The past nine months have seen several billion-dollar acquisitions. Unilever bought the hydration-optimising supplement Liquid IV and Nestlé bought the similarly pitched Nuun. However, Niall says big companies struggle in this space because they have to vault so many corporate hurdles. ‘A good idea turns into just an alright idea by the time it gets to market,’ he says.
Consumers are also focusing on exercise, with sports hydration alone set to be worth $32.6 billion by 2026, according to Fortune Business Insights. In the US, Gatorade is leaning into personalization with its Gx Sweat Patches. The latest addition is New York Knicks trainer Bar Malik and Los Angeles Lakers star Kyle Kuzma’s plant-based, adaptogen-powered Barcode.
‘Small guys disrupt the space and then the big guys buy up the successful ones.’
Backed by science but accessible to all is an ethos shared by No Days Wasted, the Vancouver-based brand behind the Hydration Replenisher supplement and hangover preventative DHM Detox. ‘When we started in 2017, we had different branding, heavy on the science, but the truth is people just want to know that you know the science,’ says founder Nishal Kumar.
One of Nishal's biggest challenges is ingredient supply and prices that are pitched higher than ever due to the pandemic. ‘The likely outcome isn’t that you’re going to get rich overnight,’ he says. ‘So you should do it because you’re passionate.’
Indeed, while it’s a market with huge opportunity, Niall says: ‘There are only going to be a few global successful players and some regionals. The rest will disappear.’
Expert view: Do functional hydration drinks actually work?
Daisy Whitbread, who qualified as a nutritionist after studying at King’s College and the Institute for Optimum Nutrition, London, says: ‘Formulated carbohydrate-electrolyte sports drinks are useful to replenish energy during something like a marathon. But the average person doing an hour-long workout or weekly run wouldn’t really benefit. You could get the same hydration benefits from coconut water, milk or even a DIY sports drink of water and fruit juice (1:1 ratio) and a pinch of salt. I don’t see any reason to recommend these new functional drinks, but I wouldn’t tell people to avoid them, either. Provided they’re made of natural ingredients and don’t contain added sugar, they’re fine. Water is the cheapest and healthiest option, but sometimes we might want something different and these provide an occasional alternative.’
Created by Vancouver-based triathlete Travis McKenzie, Nuun claims to be the first company to separate electrolyte replacement from carbohydrates.
New York-based Jai Jung Kim and John Sherwin launched electrolyte powder Hydrant in 2018. The brand raised $5.7 million from investors in its first funding round.
Nishal Kumar created No Days Wasted to reclaim weekends lost to hangovers. Containing herbal extract, milk thistle and prickly pear, it’s designed to be taken a few units into the night.
First created by London-based Daniel Cray in 2015 to take the edge off long-distance travel, Phizz is formulated to help the body absorb more water, faster.