Table of Contents
Scope and Themes
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- What you need to know
- Definition
- Data sources
- Sales data
- Consumer survey data
- Abbreviations and terms
- Abbreviations
Executive Summary
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- Market at a glance—slowing future growth
- Market’s future outlook remains challenged
- Demographic influences
- Functional fruit juice detracts gains from energy drinks and enhanced water
- Coca-Cola and PepsiCo continue to be the top two suppliers; both companies struggle to maintain growth
- Orange juice is the most frequently purchased functional beverage
- Key consumer groups
- Calcium and antioxidants are most sought-after ingredients
- Interest in new beverages and reasons for not purchasing functional beverages
- Supermarkets remain the top channel to purchase functional beverages
Insights and Opportunities
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- Expanding realm of functional beverages; functional sodas, milk, and coffee are going to add sales
- Milk
- Carbonated drinks
- Ready-to-drink coffee
- Opportunities in profit-driving functional benefits and ingredients
- Probiotic—the friendly bacteria
- Prebiotics—largely missing from functional beverage shelves
- Going beyond low-calorie claims in positioning functional beverages as obesity-fighting tools
- Increasing incidence of diabetes and hypertension (heart health) opens up opportunities for functional beverages
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- Figure 1: Percentage of population who suffer from diabetes and hypertension—20-74 year olds, 1988-2004
- Keep functional beverages clean; artificial ingredients and added sugar may thwart popular acceptance
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- Figure 2: Sugar content in some bestselling functional beverage brands and comparison with sugar content in non-functional beverage brands
Fast Forward Trends
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- Trend: Selective Economizing/Simple Pleasures
- What’s it all about?
- Trend: Exoticism and Romance
- What’s it all about?
- Trend: Health, Convenience, and Conscience Convergence
- What’s it all about?
- Trend: Potion Power (Magic!)/I want to Believe/Perception is everything
- What’s it all about?
Market Size and Forecast
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- Key points
- Flat sales in the biggest segment detract gains from enhanced water and energy drinks
- Functional but not truly healthy; growth contingent upon “exclusion” of bad-for-you ingredients
- Premium pricing will be a major obstacle in sustaining long-term growth
- Sales and forecast
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- Figure 3: U.S. FDMx sales and forecast of functional beverages, at current prices, 2003-11
- Figure 4: U.S. FDMx sales and forecast of functional beverages, at inflation-adjusted prices, 2003-11
Competitive Context
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- Key points
- Supplements and functional foods provide specific functional benefits at lower prices
- Interchangeable options create competition among functional beverages
- Beverages with inherent good-for-you attributes create competition for functional beverages
- Growing popularity of energy shots—mixed implications
- Energy drinks manufacturers and energy shots
- High prices discourage growth
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- Figure 5: FDMx prices for select non-alcoholic beverages, 2007
- Acquisition and alliances of “boutique brands” fuels growth
- Merger and acquisition activity
- Alliances
Segment Performance
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- Key points
- Consumer quest for holistic nutrition and convenient lifestyle will drive growth
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- Figure 6: FDMx sales and forecast of functional beverages, at current prices, by segment, 2003-11
- Figure 7: FDMx sales of functional beverages, by segment, 2006 and 2008
Segment Performance—Functional Juice and Juice Drinks
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- Key points
- Functional juices continue to suffer from a “low carb” era legacy; educate consumer to increase consumption frequency
- Exclusion of artificial ingredients and added sugar will help compete better with other beverages
- Moving beyond added vitamins and mineral claims; growth opportunities in specific claims
- Sales and forecast: functional juice and juice drinks
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- Figure 8: FDMx sales and forecast of functional juice and juice drinks, 2003-11
Segment Performance—Enhanced Water
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- Key points
- Enhanced water aligns with consumer trends towards holistic health; high sugar content may create consumer distrust
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- Figure 9: Television ad, Propel Fitness Water, 2008
- Expansion in claims creates growth opportunities, but growing number of products and players may heat up competition leading to slower growth
- Sales and forecast: enhanced water
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- Figure 10: FDMx sales and forecast of enhanced water, 2003-11
Segment Performance—Energy Drinks
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- Key points
- Young adults—the key non-alcoholic beverage consumers—drive growth
- Price discount in FDM, compared to the price in the key convenience channel is a growth driver
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- Figure 11: Price comparison of single-serve and multipacks for top two brands, 2008
- Segment growth will depend upon broadening the appeal of energy drinks
- Sales and forecast: energy drinks
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- Figure 12: FDMx sales and forecast of energy drinks, 2003-11
Segment Performance—Functional Tea
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- Key points
- Most functional teas come in bag/loose format rather than convenient RTD format
- Going beyond antioxidants; growth possible through making specific functional claims
- Sales and forecast: functional tea
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- Figure 13: FDMx sales and forecast of functional tea, 2003-11
Segment Performance—Functional Yogurt Drinks and Smoothies
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- Key points
- Yogurt drinks remain flat; products with specific claims are to drive growth
- Families with children and Hispanics provide opportunities for growth in yogurt drinks
- Declining growth in smoothies; high price detrimental to popular acceptance
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- Figure 14: Refrigerated smoothie sales at FDMx, 2003-08
- Growth in made-to-order functional smoothie—mixed implications
- Sales and forecast: functional yogurt drinks and smoothies
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- Figure 15: FDMx sales and forecast of functional yogurt drinks and smoothies, 2003-11
Segment Performance—Functional Soy and Rice-based Drinks
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- Key point
- Functional soy-based drinks continue to maintain a pro-health perception
- Soy-, rice- and almond-based drinks are a good platform for the inclusion of omega-3s, probiotic, and prebiotic
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- Figure 16: FDMx sales and forecast of functional soy-, almond- and rice-based drinks, 2003-11
Retail Channels
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- Key point
- Supermarkets continue to lose share to mass and other channels
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- Figure 17: U.S. sales of functional beverage, by retail channel*, 2006 and 2008
- Figure 18: U.S. FDMx and natural sales of functional beverage, by retail channel*, 2006 and 2008
Retail Channels—Supermarkets
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- Key points
- Growth opportunity through value-pricing proposition in premium and super-premium beverages
- Placement, eye contact, and store sampling are important in driving growth
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- Figure 19: U.S. sales of functional beverages at supermarkets, 2003-08
Retail Channels—Mass and Drug
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- Key points
- Drug stores provide compatible setting to sell functional beverages
- Mass merchandisers’ innovative brands compete with national brands
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- Figure 20: U.S. sales of functional beverages at mass and drug channels, 2003-08
Retail Channels—Natural Channel
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- Key point
- Natural channels experience growth on the strength of one brand
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- Figure 21: Natural product supermarket retail sales* of functional beverages, at current prices, 2006-08**
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- Figure 22: Natural product supermarket retail sales* of functional beverages, at inflation-adjusted prices, 2006-08**
- Natural channel sales by segment
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- Figure 23: Natural product supermarket retail sales of shelf-stable functional beverages, by segment, 2006-08
- Natural supermarket channel sales, shelf-stable functional drinks
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- Figure 24: Natural product supermarket retail sales** of shelf-stable functional drinks, 2006-08*
- Natural supermarket channel sales, refrigerated functional juices
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- Figure 25: Natural product supermarket retail sales of refrigerated functional juices, 2006-08*
- Natural supermarket channel sales, drinkable yogurt and kefir
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- Figure 26: Natural product supermarket retail sales of drinkable yogurt and kefir, 2006-08*
- Natural channel sales of drinkable yogurt and kefir by organic
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- Figure 27: Natural product supermarket retail sales of drinkable yogurt and kefir, by organic, 2006 and 2008
- Brand tables
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- Figure 28: Manufacturer brand natural supermarket sales of functional beverages, 2006 and 2008
Market Drivers
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- Consumer pursuit for holistic health through food and beverages
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- Figure 29: Attitudes towards healthy eating, 2003 and 2008
- Obesity rates remain strong
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- Figure 30: Percentage of population who are overweight or obese—20-74 year olds, 1988-2004
- Demographic influences
- Teens and young adults drive growth in energy drinks
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- Figure 31: Personal incidence of drinking energy drinks among teens, young adults, and adults, 2003-07
- Figure 32: U.S. population of teens aged 12-17, 2003-13
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- Figure 33: U.S. population of adults aged 18-44, by age group, 2003-13
- Women are more health-conscious than men
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- Figure 34: Attitudes towards health, by gender, February 2007-March 2008
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- Figure 35: U.S. population of women aged 18 and over, by age group, 2003-13
- Hispanics and Asians—profit-driving demographics in the market
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- Figure 36: Population, by race and Hispanic origin, 2003-13
- Baby Boomers are an ideal target for functional beverages
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- Figure 37: U.S. population of adults aged 18 and over, by age group, 2003-13
- Energy drinks face increased scrutiny from legislators, schools, and health professionals
- Caveat to growth—call for increased FDA role in regulating the functional food and beverage market
Companies and Brands
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- Key points
- Leading companies
- PepsiCo declines due to the heavy presence in functional fruit juice
- Coca-Cola gains through expansion in distribution for Glacéau brand water
- Private labels shine thanks to innovation and value pricing
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- Figure 38: FDMx functional beverage sales of leading companies, 2007 and 2008
Brand Share—Functional Fruit Juice and Juice Drinks
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- Key points
- Fruit and vegetable juice fusion; a growth-driving functional concept
- Super-premium brands exhibit flat sales; price premium hinders wider consumer penetration
- Brands with specific benefits thrive; incorporate new functional attributes
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- Figure 39: FDMx brand sales of functional fruit juice and juice drinks in the U.S., 2007 and 2008
Brand Share—Enhanced Water
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- Key points
- Plain bottled water and fruit juice brands launch enhanced water line extensions
- Increasing competition promotes competitive marketing
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- Figure 40: Television ad Propel, 2007
- Enhanced water brands broaden functional claims to interchangeable options
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- Figure 41: FDMx brand sales of enhanced water in the U.S., 2007 and 2008
Brand Share—Energy Drinks
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- Key points
- Leading brands will benefit from bigger packaging
- Hybrid line extensions promise growth through expanding energy drinks use occasions
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- Figure 42: FDMx brand sales of energy drinks in the U.S., 2007 and 2008
Brand Share—Functional Tea
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- Key points
- Brands with specific claims find success among consumers; high price deters popular acceptance
- RTD format with specific claims would drive growth by attracting on-the-go consumers
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- Figure 43: FDMx brand sales of functional tea in the U.S., 2007 and 2008
Brand Share—Soy, Rice, and Almond-based Drinks
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- Key point
- Silk remains the biggest brand; efforts to change consumer perception through new campaign
- Digestive health and omega-3 inclusion is likely to promote growth
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- Figure 44: FDMx brand sales of soy, rice, and almond-based drinks in the U.S., 2007 and 2008
Brand Share—Functional Yogurt Drinks and Smoothies
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- Key points
- Fruit-based smoothie brands derive growth on the strength of diverse functional claims
- Appearance of made-to-order smoothie brands at retail will boost sales
- Most yogurt drink brands decline; high price and the lack of specific claims lead to dismal performance
- Private-label yogurt drinks and fruit juice-based smoothies compete with national brands
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- Figure 45: FDMx brand sales of functional yogurt drinks and smoothies in the U.S., 2007 and 2008
Brand Qualities
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- Popular non-functional brands become functional
- Aquafina goes Alive while Dasani adds with Plus
- Tropicana and Minute Maid increasingly incorporate functional claims to counter the decline in core orange juice brands
- Growing numbers of brand extensions—an effort to capitalize on functional images of the core brands
Innovation and Innovators
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- Growing pace of innovation in functional beverages
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- Figure 46: Numbers of new product introductions that make specific functional claims in the functional beverages market, 2003-08*
- Figure 47: Numbers of new product introductions in beverages that may or may not make specific functional claims and are fortified with vitamins/minerals, calcium, and fiber, 2003-08*
- Digestive health claims on decline despite healthy growth in products with the claim
- Added fiber—claims range from promoting heart health to bowel management—to weight control
- Energy drinks move beyond generic “energy boost” claim to target broader demographics
- Growing numbers of new energy hybrids
- Superfruits—antioxidant benefits and more
- Milk and soda innovate to include functional claims
Advertising and Promotion
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- Overview
- Functional fruit juice and juice drinks—joint health, digestive health, and general wellbeing
- Minute Maid expands on enhance claims
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- Figure 48: Coca-Cola’s Minute Maid Enhanced Orange Juice, TV ad, 2008
- Ocean Spray Cranergy—functional juice and energy hybrid
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- Figure 49: Ocean Spray Cranergy, television ad 2008
- Sunsweet PlumSmart incorporates prebiotic fiber
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- Figure 50: Sunsweet PlumSmart juice, TV ad, 2008
- Sunny D—targeting black families
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- Figure 51: Television ad Sunny D, 2008
- Enhanced water—competitive edge and more
- Kellogg’s K2O water—smart way to ward off hunger
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- Figure 52: Kellogg’s K2O Water, television ad, 2008
- PepsiCo’s Propel—calorie counting
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- Figure 53: Television ad Propel, 2007
- PepsiCo’s SoBe Life Water—“thrillicious”
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- Figure 54: SoBe Life Water television ad, 2008
- Energy drinks—functional and racy
- Red Bull
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- Figure 55: Red Bull television ad, 2007
- Mountain Dew Amp energy drink
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- Figure 56: Mountain Dew Amp Energy, television ad, 2007
- Functional soy-based drinks
- Silk Soy—emphasis on taste
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- Figure 57: Silk Soy milk, television ad, 2008
Functional Beverage Purchasing
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- Who purchases functional beverages?
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- Figure 58: Incidence of purchasing functional foods or beverages in the past three months, by gender, June 2008
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- Figure 59: Incidence of purchasing functional foods or beverages in the past three months, by age, June 2008
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- Figure 60: Incidence of purchasing functional foods or beverages in the past three months, by race/Hispanic origin, June 2008
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- Figure 61: Incidence of purchasing functional foods or beverages in the past three months, by presence of children and size of household, June 2008
- Functional beverages purchased for whom?
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- Figure 62: Functional beverages purchased for whom, by gender, 2007 and 2008
- Figure 63: Functional beverages purchased for whom, by age, June 2008
- Healthy lifestyle followers
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- Figure 64: Health or lifestyle practices, by gender, June 2008
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- Figure 65: Health or lifestyle practices, by age, June 2008
- Choice of healthy lifestyle and consumption of functional food and beverages
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- Figure 66: Health and lifestyle practices and consumption of functional food and beverages, June 2008
Consumer Belief in Functional Drinks’ Effectiveness
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- How effective are functional beverages?
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- Figure 67: Belief in the effectiveness of functional beverages, by age, June 2008
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- Figure 68: Belief in the effectiveness of functional beverages, by race/Hispanic origin, June 2008
Functional Beverage Preference and Role of Functional Ingredients
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- Type of functional beverages purchased
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- Figure 69: Types of functional beverages purchased in the past three months, by gender, June 2008
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- Figure 70: Types of functional beverages purchased in the past three months, by age, June 2008
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- Figure 71: Types of functional beverages purchased in the past three months, by race/Hispanic origin, June 2008
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- Figure 72: Types of functional beverages purchased in the past three months, by presence of children and size of household, June 2008
- The role of functional ingredients in consumer purchase decisions
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- Figure 73: Role of functional ingredients in functional beverage purchase decisions, June 2008
Attitude and Behavior and Interest in New Functional Beverages
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- Figure 74: Attitude and behavior and interest in new functional beverages, by gender, June 2008
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- Figure 75: Attitude and behavior and interest in new functional beverages, by age, June 2008
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- Figure 76: Attitude and behavior and interest in new functional beverages, by race/Hispanic origin, June 2008
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- Figure 77: Attitude and behavior and interest in new functional beverages, by presence of children and size of household, June 2008
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Choice of Retail Channels to Purchase Functional Beverages
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- Figure 78: Where functional beverages are bought, by age, June 2008
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- Figure 79: Where functional beverages are bought, by income, June 2008
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Cluster Analysis—Antioxidizing maximizers, functionally passive, and uninformed infrequents
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- Antioxidizing maximizers
- Opportunity
- Who they are
- Functionally passives
- Opportunity
- Who they are
- Uninformed infrequents
- Opportunity
- Who they are
- Cluster characteristics
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- Figure 80: Functional drink clusters, June 2008
- Figure 81: Please tell us whether, in the last three months, you have bought…_ by functional drink clusters, June 2008
- Figure 82: Other than yourself, for whom have you bought a functional drink in the past three months? by functional drink clusters, June 2008
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- Figure 83: In the past three months, which of the following types of functional drinks have you bought for yourself, by functional drink clusters, June 2008
- Figure 84: From where did you buy any functional drinks in the past three months, by functional drink clusters, June 2008
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- Figure 85: Tell us how you feel about each functional beverage ingredient and the role it plays in your decision to buy and use a functional beverage, by functional drink clusters, June 2008
- Figure 86: Please tell us whether you agree with any of the following, by functional drink clusters, June 2008
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- Figure 87: Which of the following types of health or lifestyle practices or philosophies do you personally use? by functional drink clusters, June 2008
- Cluster demographics
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- Figure 88: Functional drink clusters, by gender, June 2008
- Figure 89: Functional drink cluster, by age group, June 2008
- Figure 90: Functional drink clusters, by income group, June 2008
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- Figure 91: Functional drink clusters, by race, June 2008
- Figure 92: Functional drink clusters, by Hispanic origin, June 2008
- Cluster methodology
Custom Consumer Groups
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- Adults aged 18-34 are the key consumers in the market…
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- Figure 93: Incidence of purchasing functional foods or beverages in the past three months, by gender and age, June 2008
- …but over-55s may drive growth
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- Figure 94: Attitudes towards health, by age and gender, February 2007-March 2008
IRI/Builders Panel Data—Key purchase measures
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- Consumer insights—selected functional beverages
- Bottled and Enhanced Water
- Enhanced/Functional water brand leaders by household penetration
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- Figure 95: Key purchase measures for enhanced bottled water brands, by household penetration, *2007
- Soymilk and other milk substitutes
- Shelf-stable soymilk and milk substitutes
- Refrigerated kefir, milk substitutes, and soymilk
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- Figure 96: Key purchase measures for shelf-stable milk substitutes, by household penetration, *2007
- Figure 97: Key purchase measures for refrigerated kefir and soymilk brands, by household penetration, *2007
Appendix: Studies on Fruit Juice
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- Studies linking negative influence of drinking fruit juice for children
- Studies linking fruit juice with positive health benefits
Appendix: Other Useful Consumer Tables
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- Incidence of purchasing
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- Figure 98: Incidence of purchasing functional foods or beverages in the past three months, by geography, June 2008
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- Figure 99: Incidence of purchasing functional foods or beverages in the past three months, by household income, June 2008
- Healthy lifestyle followers
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- Figure 100: Health or lifestyle practices, by race/Hispanic origin, June 2008
- Types of functional beverages purchased
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- Figure 101: Types of functional beverages purchased in the past three months, by geography, June 2008
- Importance of particular functional ingredients in beverage purchase decisions
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- Figure 102: Role of functional ingredients in functional beverage purchase decisions, by gender, June 2008
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- Figure 103: Role of functional ingredients in functional beverage purchase decisions, by race/Hispanic origin, June 2008
Appendix: IRI/Builders Panel Data Definitions
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- IRI Consumer Network Metrics
Appendix: Trade Associations
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