Everyone loves a good David and Goliath story, especially when David wins. In the US market for functional beverages, which market research firm Mintel now values at US$9.8 billion, big multinational companies like Coke and Pepsi have jumped into the functional game, yet one could argue that the category started with a few enterprising Davids—Gatorade and Red Bull could be called the first truly functional liquids. With the success of the functional category, the big soft drink companies are now active players in the enhanced water market and Coke continues to buy once up-start innovators like glacéau vitaminwater and Fuze. With consumers now demanding beverages with real, specific functional health benefits and competition increasing, it can be challenging for the Davids, which often have fewer resources and smaller budgets, to stay in the game. How can smaller beverage companies continue to stay innovative and formulate a functional beverage that slays consumers’ growing thirst for something more than just satisfying recommended daily doses of vitamins? Beverage World posed the question to a panel of industry insiders, some of them Davids in their own right.
   

Go With What You Know: Function Drinks founder Alex Hughes got his formal education in medicine, and he continues to do rounds at the UCLA Medical Center. Function’s line of elixirs—including Night Life, a new offering designed to promote sexual health—sprung from his curiosity about how to leverage some of the pharmaceuticals he and his white-coat cohorts employ in the practice of medicine.

“We [Function Drinks] are constantly evaluating the mainstream scientific literature,” Hughes says.

The Function Drinks line started with Urban Detox, which contains N-acetyl-L-cysteine (NAC) and prickly pear fruit extract to rid lungs and sinuses of the harmful effects of airborne pollution, and the line has been expanded to now include beverages that boost the immune system, reduce stress and ramp up metabolism.

Ardea Beverage Co. founder Joe Heron also leveraged experience in healthcare to create his functional beverage line, Nutrisoda. Prior to starting Ardea, Heron held an executive position with Novartis Medical Nutrition.

“He really knew his nutrients and vitamins and minerals and herbs and amino acids,” says Maile Buker, vice president of marketing and strategy for Ardea. “So when he started mixing this stuff up, literally in his basement, he was really on to something.”

Nutrisoda has established itself in the functional market as a brand willing to experiment with new and innovative ingredients to offer meaningful health benefits. For instance, Calm was formulated with Essentra, an ingredient derived from Ashwagandha root extract, an Indian herb regarded for thousands of years as a natural tonic that produces a calming effect. Nutrisoda Renew was the first carbonated drink to offer a full gram of dietary fiber. Pepsi Americas, Inc. acquired Ardea back in 2006.

Go Fast Energy Drink founder Troy Widgery also leaned on expertise from outside the beverage industry to launch his beverage company. Before starting Go Fast, he competed as a professional skydiver. “I never thought of anything other than doing an energy drink,” says Widgery, who worked with a team of specialists to create the perfect blend of ingredients, taste and performance.

Make Sure the Drink Works: For a drink to succeed, it has to taste good—obviously. But when formulating a functional beverage, taste is not the first consideration. The first thing that has to be talked about is who’s your target market and what sort of target functionality are you looking for, according to Chet Rao, food scientist turned sales and marketing manager for Hormel Specialty Products, which markets Eterna omega-3 fish oils, a patented form of omega-3 that’s tasteless and odorless for inclusion in food and beverages.

“If your ultimate consumer is drinking it, and it’s not doing anything for them, what good is it?” Rao asks. “It’s kind of going in the opposite way of traditionally how things are done, because when you’re making a nutriceutical claim, that’s the focal point. You’re then taking all these ingredients and developing a product around it.”

So, start with functionality. Task your product development team to identify which nutrients—at what amounts—actually deliver the functionality. Then it’s a process of trial and error with the nutrients to develop a taste profile, appearance and mouth feel that sustain a meaningful level of the functionality.

In the fall, Ardea will launch a product focused on eye health called Vision. The core functionality of the product will come from the plant extract lutein.
“A lot of research shows this certain level per day has an association with reduced eye health issues,” says Kate Ratliff of the product development and ingredient supply company, Pro-Liquitech International, which works with Ardea on its product development. “So we make sure we have a significant amount versus just a splash of lutein. It’s actually an amount that can add up over the day and give you the health benefits that you’re looking for.”

Echoes Go Fast’s Widgery, “A lot of beverages are developed where companies just pixie dust. Every ingredient we put in for a reason, and a quantity that makes an impact.”

Marry Development and Marketing: Ratliff says her company’s collaboration with Ardea goes beyond what one might consider typical for an ingredient supplier.

“We don’t work in isolation,” she says. “Ardea really leans on us to be their full R&D partner, and in that we serve as sort of a department in their company from a mentality standpoint.”

Hormel’s Rao suggests such collaboration between product development and marketing can be vital for smaller companies trying to carve out a niche market segment.

“The marketing person will know what they can market, and product development will know what they can effectively make or not,” he says. Rao also suggests smaller companies should consider opportunities to co-brand with ingredient suppliers. “The advantage for me is I’m getting more visibility for my brand,” Rao says. “The advantage for the small company is the ability to leverage our scientific expertise.” Not to mention the potential to lower product sourcing costs.

Never Stop Innovating: Every bottle in the Function Drinks line includes a small icon: created by physicians. Hughes says he constantly reads medical journals not only to keep up with his specialty, but also to guide innovation.

“We make a promise to our customers that as our professional understanding of clinically proven science, physiology and health and wellness evolves, so will our products,” Hughes says.

As an example, he points to recent updates to Function’s Light Weight platform, introduced just over a year ago.

“We worked in the lab for a year to perfect a highly functional yet improved EGCG (epigallocatechin gallate) tincture and gymnema extract,” Hughes says. “It was a lot of hard work, but our customers appreciate it.”

Go Fast’s Widgery says his team also continues to tinker. For example, two years after launching Go Fast, they added ribose to the formula to help sustain the energy boost. A year later, they introduced Go Fast Light, which has 100 fewer calories.

“We’re never satisfied with saying, ‘That’s good enough,’” Widgery says. “Ninety-nine percent of the people don’t have the persistence.”
flavorman.com (Pro-Liquitech) • hormelingredients.com

From Beverage World June 15, 2008