Functional beverages the next step beyond healthy beverages
For several years now, ‘healthier’ and ‘better-for-you’ beverages have been important buzzwords in the beverage industry, usually signifying features such as reduced sugar, sugar-free, preservative-free, natural and so on.
In this space, the trend has now evolved to see many industry players having moved into the development of functional beverages, i.e. focusing on products that are meant to provide specific functionalities and health benefits which is a definite step forward for the sector.
These products are not limited to any single consumer demographic, with options existing for all ages from children’s gut health to hydration for sports athletes to productivity for working adults, and are being developed by both large multinational corporations as well as start-ups.
“There is no doubt that the demand for functional beverages is very much on the rise in APAC, as consumers have grown to expect certain elements to already be a given in their drink purchase,” children’s symbiotic drink brand Tummy Buddies Co-Founder Rita Sellars told FoodNavigator-Asia.
“Elements such as sugar reduction and labelling transparency are already considered as key factors to successfully convince savvy consumers who read their labels to make a relevant purchase, and the addition of added functionalities such as probiotics or vitamins is what they are really noticing when browsing supermarket shelves.”
The rise of functional beverages is also attributed to inflationary pressures causing price hikes across the APAC region, resulting in many companies having had to seek out ways to improve the value-for-money offering of their products in order to retain consumer interest whilst still maintaining profit margins.
“Many companies [including Kirin] have had to revise prices in stages to cope with the rising costs of raw materials,” Kirin Corporate Communications Manager Yuka Itoh told FoodNavigator-Asia.
“In general, the external environment surrounding the market for soft drinks [and other non-alcoholic beverages] continues to be challenging, as costs for raw materials, energy, and logistics continue to rise, and we believe it is a significant challenge to address these issues throughout the supply chain.
“We see the functional beverage market as continuously increasing, with consumers becoming not only more health conscious after the pandemic but also more aware of healthy life expectancies and wanting to stay healthy in order to enjoy life.
“Kirin has been working hard in developing useful functional beverages for the market, and we very much see the areas of diet (weight reduction) and health improvement as leading the way in this area.
“In light of this, we have beverages such as iMUSE containing our proprietary LC-Plasma postbiotic, and assumed ownership of Kao’s Healthya tea brand [which is] based on metabolic research on body and visceral fat.”
Very often, functional beverages are expected to contain not just one but multiple types of functionalities in order to ensure consumers get the most bang for their buck.
“Taking hydration drinks as an example, this category is a major growth opportunity in APAC and especially the ASEAN market,” market intelligence firm Mintel Senior Food and Drink Analyst Tan Heng Hong said.
“The hydration trend stems from factors such as the hot weather, air pollution concerns and the desire to improve skin health, and play an exceptionally poignant role in ASEAN where many consumers are reluctant to drink plain old water.
“Product launches in this region have reflected this, with water product sales dropping from 6% in 2019 to 4% in 2023 – whereas there has been an increase in products with [multiple functionalities] such as Malaysia’s BeNourish which contains botanicals that claim to protect against air pollution, Vietnam’s Orgalife Leisure Lyte which both hydrates and boosts immunity, and Japan’s hydration drink Aquarius with multivitamins for skin repair.”
Premium alcohol the space to watch in Singapore
Premiumisation has been a rapidly growing trend in many food and beverage sectors, but this is expected to accelerate even more for alcohol in particular in the coming year.
Amidst the challenging economic environment expected in 2025, major alcohol brands such as Pernod Ricard believe that consumers will be taking an even more significant turn towards ‘quality over quantity’ when it comes to alcohol purchases, driving the premiumisation concept even more strongly.
“We must acknowledge that the operating environment in 2025 will remain challenging, [but] we are definitely seeing an increased demand for prestige spirits, reflecting a ‘quality over quantity’ mindset - people may be drinking less, but they are choosing better,” Pernod Ricard Singapore Country Manager Alex Liu told us.
“This is the reason we have developed our ultra-prestige portfolio caters to these refined tastes, featuring brands like Martell XXO & L’Or de Jean Martell Cognacs, Royal Salute whisky, The Glenlivet Single Malt whisky, Perrier-Jouët Champagne, and Código Tequila.
“So for 2025, we will prioritise growing awareness and availability of these brands in the right venues to tap into the expanding prestige spirits market.”
The rise of these premium products is accompanied by a rising appetite for craft spirits as well, in line with consumer demand for ‘well-crafted, high-quality products’ and unique experiences – a trend amplified by the burgeoning cocktail and craft spirits bar scene in markets such as Singapore.
“In this space, we have Monkey 47 Gin and Código Tequila which are already favourites among bartenders and cocktail enthusiasts, and we aim to nurture these brands through immersive experiences in the craft and cocktail bar space,” Liu added.
The demand for alcohol premiumisation is not unique to the spirits sector – a similar pattern is being observed in beer, driven by younger beer drinkers.
“Premium beers are also expected to growth in 2025 with consumers - especially the younger demographics - becoming more discerning in their spending, and hence prioritising quality over quantity,” Asia Pacific Breweries Singapore (APBS) Marketing Director Gerald Yeo added.
“Today, there is greater emphasis on flavours, origin and taste profile [and] in Singapore we are also seeing an influx of higher ABV products, particularly from international beer brands, creating a more competitive and yet vibrant market.
“Inflation is impacting everyone, and it can influence spending habits as people prioritise essentials to manage the cost of living - 66% of younger consumers like Gen Z see being frugal as very important, [so] they’re selective about where they spend, [making it even more important for us to deliver] real value and quality.”
APBS manages both the Tiger and Heineken beer brands amongst various others, and a Heineken Global Innovation Hub is located in Singapore to support the brand’s plans to double its innovation rate by 2025.
High quality cheese potential for acceleration in Asia
Cheese is by no means a new category to Asian consumers, but a large part of the region remains mostly familiar with processed sliced cheese as opposed to other higher-quality ‘real’ cheeses.
Sliced processed cheese has a much poorer reputation than fresh cheeses, and this along with the relative novelty of the high-quality cheese sector in Asia, as well as a high proportion of lactose intolerance in the market has resulted in a much lower consumption rate of cheese here compared to other markets such as Europe.
This gap was first noticed by Chinese dairy giant Yili, which has made significant efforts to increase local cheese consumption in the local market by diversifying its product offerings, including the creation of products such as drinkable cheese and an Ambient Cheese Lollipop.
“Looking at dairy in general, there is still enormous scope for growth in Asia and China in particular, as even with the industry’s rapid rise over the past few years after the government started recommending higher dairy intakes, consumption rates are still only around 39g daily compared to the recommended rates of 300g to 500g daily,” Yili Innovation Centre Oceania Head Dr Philip Wescombe said.
“There is a lot of potential in all the Asian markets as none of these are meeting their recommended daily dairy intake rates – only markets such as the EU and United States have hit this.”
According to the US Cheese Guild, Singapore is the region’s best bet for premium cheeses.
“There unfortunately exists a perception of American cheeses as being of the lower-quality, processed sliced version only – and we very much hope to redefine this in this region, particularly in Singapore which has much higher premium cheese sales than other markets here,” US Cheese Guild spokeswoman Dalilah Ghazalay said.
“Singaporeans are renowned for being well-travelled and having sophisticated palates, and we aim to dispel current stereotypes by emphasising quintessential American originals such as Monterey jack, pepper jack, Colby jack and more.”
Moving forward in 2025, the vast potential for premium cheese here has been recognised on a wider level by even more dairy giants, such as the Bel Group which believes that there is a need for hyper-localisation here to tap this potential.
“Cheese is considered an integral part of food culture and tradition in Europe, so innovation tends to apply across the region, but in Asia a lot more effort is needed in terms of hyper-localisation,’ Bel Group CEO Cecile Beliot told us.
“Every market here has its own unique consumption method and habits -for instance China prefers its cheeses to be sweet, India uses cheese as part of their cooking, and Indonesia commonly uses shredded cheese as part of a dessert.
“So even though we want to bring cheese into Asia in a larger way beyond just the Laughing Cow and Babybel brands moving forward, we know that just making ‘Asian’ products is not going to be effective, and we need to look closely at the specifics for every single market.
“There is vast potential here if we look at the basics, namely that cheese is essentially a concentration of dairy nutrition in a small, convenient portion, so it has a competitive edge to become a mainstay of the affordable nutrition trend amidst times of economic stress.”
Similarly, Savencia Fromage and Dairy Southern Asia MD Joris Bernard has also revealed the firm’s plans to expand more strongly into the cheese sector in APAC - Savencia is the owner of the ‘Eiffel Tower brand’ Elle & Vire as well as premium cheese brands such as Saint Albray and Coeur de Lion.
