Evolving consumer preferences towards healthier beverage alternatives are resulting in a fast-growing market for functional, low-alcohol, and alcohol-free products, pushing both brand owners and manufacturers to rethink their portfolio composition and innovate new product offerings, according to an industry report released by the Food and Beverage investment banking team from Brown Gibbons Lang & Company, in conjunction with REACH. 

The beverage industry is witnessing a remarkable transformation as consumers increasingly favor functional drinks that provide hydration, energy, and health benefits. This shift is evident in the global functional beverage market, which reached $206 billion in value in 2022. In the wake of a post-pandemic era, there is a growing trend among consumers, especially among the Gen-Z cohort, to opt for healthier food and beverage choices and seek premium alternatives. 

Some of the trends driving growth in the alcoholic and non-alcoholic space include: 

  • Health and wellness are becoming a greater priority for consumers

  • Sustainability continues to be a focus as companies aim to be more environmentally friendly 
  • Innovative flavors are appealing to a wider audience 
  • Ready-to-drink beverages have soared in popularity due to their convenience 

The global beverage market was $1.6 trillion in 2022 and is projected to reach $2 trillion by 2030, representing a CAGR of 3.0%. This growth will be fueled by new product innovation and adjacent category expansion from large beverage players looking to capitalize on shifting consumer interests and preferences. Limited edition flavors, stand-out packaging, and new-age marketing tactics are all steps producers are taking to get their products to stand out in an increasingly competitive market.