FNA DEEP DIVE: NON-ALCOHOLIC BEVERAGES
Beverage elevation: Kirin, Yili, Yeo’s and more APAC leaders weigh in on functionality, convenience as key drivers
It is no secret that the prices of many FMCG products have been revised upwards in recent months, given the increased inflationary costs coming as an economic aftermath of the pandemic as well as global geopolitical instabilities having had major impacts on commodities from wheat to sugar.
This has affected many if not most food product prices as these are of course reliant on food ingredient costs – beverages have also been severely affected by these, with even large multinational brands such as Kirin having had to implement multiple rounds of price hikes in the past year or so.
“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 addition to the general impact of the COVID-19 pandemic on the market, one of the reasons [which is particularly relevant to the Japan market] has been a decrease in vending machine sales due to less consumers going out and about.
“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.”
Faced with the need to raise prices, many beverage companies are attempting to tap on the simultaneous rise in consumer demands for wellness-enhancement, convenience and experiential novelty, which has in turn led to the rise of beverages containing a variety of added functional benefits from either a heath or format angle.
For Kirin, this functional beverage development has been very much in the wellness area.
“Kirin very much sees the areas of diet (weight reduction) and health improvement as leading the way in this area,” she added.
“In light of these market trends, we have already developed beverages such as iMUSE that contains our proprietary LC-Plasma postbiotic, as well as assumed ownership of Kao’s Healthya tea brand [which is] based on metabolic research on body and visceral fat.
“Healthya is rice in tea-catechins and currently has five variants including Healthya Green Tea, Healthya Green Tea Umami, Healthya Water (sports drink), Healthya my rhythm (carbonated drink) and the Healthya Tea Catechin Green Tea powders.
“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.”
Other firms have chosen to specialise in functional beverages based on consumer demands, such as Singapore’s Curated Culture which specialises in probiotic teas for gut health, for sports recovery and also for relaxation.
“There is a clear gap in the beverage space for drinks that are not exactly energy-providing – so not high in sugar or caffeine for that power boost – but more for recovery after the exertion,” Curated Culture Co-Founder and CEO Christian Eviston-Putsch told us.
“There is also a lot of demand currently in this region for relaxation aids, which is understandable given the high-stress environment consumers in Asia are living in.
“This is the health and wellness space that we are focusing on, to move away from high caffeine products that are stressing the body even more amidst a high-stress environment, and just helping people to get back to optimal condition.
“The most important thing when it comes to adding functionality to drinks though has to be the science – there are many potential trends out there as consumers have many different demands and improvements they would like to make, such as focus and mental performance.
“So this would move into the area of things like adaptogens and nootropics, but though these pop up a lot we are not fully in this space yet as we look closely at the data, and need to make sure there is really hard data to substantiate the claims being made on the ingredients and their functions, such as how ashwagandha is proven to help calm the mind and destress.”
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A potential product solution to this and new entry into the functional drinks space is Flojo, which has developed sparkling drinks containing B vitamins and purely extracted nootropics and adaptogens such as Reishi, Echinacea, Rhodiola and more.
"Our product is the only one that made by neuroscientists, and approved by neuroscientists too - A lot of science goes into this and our science arm which is based in Canada is actually also part of the Johnson & Johnson Innovation labs," Flojo Co-founder and Chief Neuroscientist Christine Wong told us.
"As such, they have a lot of experience working with pharmaceutical and nutraceutical grades to ensure high efficacy in terms of the product actually working and the safety aspects too.
"The key targets are consumers who are office workers or have to study a lot as this is what we call the daily focus drink - it's for consumers who are looking to keep their minds sharp, and want an alternative to coffee or an energy drink that contains synthetic caffeine.
"Too much caffeine is very bad for your kidneys and for your heart, and in Flojo, the amount of caffeine is just half that in a cup of green tea."
From the angle of experiential functionality, Singapore-based Moon Juice Kombucha has taken the kombucha beverage to a new level by using the concepts of biodynamic farming in their product brewing, which takes place during the full moon and new moon phases.
The concept is meant to add a mystical vibe to fun and quirky creations that also have solid health functional benefits such as aiding digestion, boosting hydration and powering detoxification.
There is also a scientific angle to this: Biodynamic farming, which is rooted in self-sustaining agriculture; and the use of the Old Farmer's Almanac from olden times.
“Using the Old Farmer’s Alamanac as a rough guide to biodynamic farming is also practised in some organic winemaking and drinking communities, where people would drink certain wines on certain days of the week. -Drawing parallels with these practices, we brew during the full and new moons so that the moon energies can power our brews," Moon Juice Kombucha founder Emily Loo said.
"Before we moved on to the Gregorian calendar, we were all using the lunar calendar [so based on these ancient principles], following the moon cycle allows us to listen to the rhythm of our bodies a little better."
Fortification findings
Other than functional benefits, many firms have also turned to general beverage fortification to increase the value of their products in the eyes of consumers, such as traditional brand Yeo Hup Seng (Yeo’s).
Yeo’s has also highlighted operational cost inflations and softening in consumer spending as major challenges for it in the past year.
Being one of the largest drink brands in the South East Asian region, the firm has a strong footprint in the soya bean beverage market – and is tapping on this market leadership advantage to launch more variants, fortified with vitamins and minerals, in order to tap on the health and wellness demand.
“Beverage brands need to innovate to meet changing consumers needs in this era of evolving consumer lifestyles, and [the new] Yeo’s Immuno Soy Milk offers health-conscious consumers a delicious item that can also support their immunity,” Yeo’s CMO Ang Chong Lee said.
“This is fortified with a combination of Vitamin B6 and Zinc to support the immune system, [and is considered] one of the biggest innovations to our classic soy milk in 70 years.
“The initial launch will be for the Original and Chocolate flavours – more variants are planned for future launches.”
Similarly, China dairy giant Yili has also moved to fortify its popular yoghurt drink brand AMBPOMIAL, which is already known for its high 1 billion CFU probiotic content.
“Fortification with vitamins such as Vitamin C, D, and B6 as well as dietary fibres has become a popular trend [in China],” Yili Yoghurt Business Unit Product R&D Manager Yin Xiaojing told us.
“Yili has placed a great deal of focus the on research and application of new ingredients and formulations such as the addition of fruit and vegetable fibre, prebiotics or protein [into products] to improve their nutritional value.”
Convenience and functionality
The quest for improved product functionality has evolved beyond a focus on the ingredients alone, but also to the overall experience and convenience aspects.
This has been so much so that companies have moved beyond their traditional areas of expertise in order to discover these new opportunities – case in point Yili’s expansion from dairy into tea product innovation.
“Yili has had the Inikin volcanic water brand as part of our portfolio for several years, which is known for its rich volcanic mineral content, and we have opted to expand this into a fresh-brew tea product,” Yili Innovation Centre Europe Managing Director Dr Gerrit Smit said.
“This Inikin Brewed Tea features a patented technique, a first-of-its-kind in China bottle cap that will release freeze-dried tea powder into the volcanic water within the bottle when unscrewed.
“This tea powder will dissolve into the water within three seconds, becoming a freshly brewed tea with zero sugar, zero fat and zero calories that tastes as though it were brewed by hand.”
This innovation can be said to combine the elements of both experiential functionality as well as convenience, as it allows for increased freshness using premium ingredients that can be consumed at the twist of a cap as opposed to the many steps associated with high-quality tea-brewing.
Sugar reduction driven by younger consumers
Most new beverage brands on the market today tend to launch as low or zero sugar products, not only in order to meet consumer demands but also to steer clear of the higher taxes and labelling regulations associated with sugar-sweetened beverages in many APAC markets.
But for traditional brands where a complete formula change would have major impacts on both supply chains as well as consumer acceptance such as soda giant Coca-Cola, the most common pivot has been to launch new products that are lower or free of sugar.
This has almost become a necessity in most markets, even those traditionally known to have high sugar consumption and the proverbial ‘sweet-toothed’ consumers such as Indonesia, as younger consumers in these markets have caught on to the importance of sugar reduction to health and are demanding such products.
“Our focus in Indonesia is on sparkling drinks and ready-to-drink teas, with a focus on younger consumers,” Coca-Cola Europacific Partners CEO Damien Gammell said.
“We have already launched the Coke Zero and Sprite Zero products in this market, [and seen some significant results] of sugar-free products growing at a steady rate.
“A new price pack channel strategy incorporating deeper understanding of Indonesian consumer sensitivities and affordability has also been completed.”
Regulations revived
Many Asian markets have some form of excise tax or labelling penalty on sugar-sweetened beverages, most of which were implemented before the pandemic.
The excitement and debates surrounding these cooled off amidst the pandemic as governments and industries had undoubtedly had more pressing concerns to attend to – but in recent years, these have seen some revival in various markets.
A concrete example was seen in China in April 2024, when Shanghai implemented a traffic light labelling scheme pilot for sugar-sweetened beverages covering both prepackaged RTD beverages in retail as well as freshly-prepared ones in foodservice.
This is similar to the Nutri-Grade system in Singapore as well as the Nutri-Score system in the UK, utilising a green-to-red colour scheme indicating ‘best-to-worst’ choices, labelled from A to D.
“The designations are based mainly on three factors: Non-dairy sugar content, saturated fat content and trans-fat content,” the Shanghai Municipal Centre for Disease Control and Prevention stated upon launch.
“To get the Grade A designation, beverages must also not use any form of non-sugar sweeteners in addition to fulfilling the criteria for these three factors.”
Singapore’s Nutri-Grade formally came into force in December 2022 and was also formally expanded to include freshly prepared beverages in December 2023.
“More than half of Singaporeans’ daily sugar intake comes from beverages, of which pre-packaged beverages contribute 64% and freshly prepared beverages contribute 3%,” Singapore’s Health Promotion Board said.
“More needs to be done to further reduce Singaporeans’ sugar intake - These measures aim to help consumers identify beverages that are higher in sugar and saturated fat and to reduce the influence of advertising on consumer preferences,”
“This will thus encourage more informed, healthier choices and spur industry reformulation.”
A debate on sugar-sweetened beverage taxation has also been reignited in India, due to a new GST authority decision to tax all carbonated drinks 40%, regardless of the sugar content in these, resulting in even zero-sugar products or fruit juices with no added sugar which are carbonated falling into this bracket.
“This approach misses WHO guidelines by a mile – while WHO recommends taxing beverages on sugar content, India is taxing them based on whether they have undergone aeration/carbonation,” India’s Central Board of Indirect Taxes and Customs (CBIC) Member (Policy) Dr John Joseph said in a statement.
“Carbonation is a mere preservation technique, which is critical in a country with seasonal vagaries. Nothing in the process suggests addition of sugar content to the beverage.
“The tax rate should be relative to the sugar content contained in the beverage – this has been the trend globally.”
Many academics believe that sugar-sweetened beverage taxation is important for public health concerns such as the lowering of obesity rates in children – but more concerningly, recent studies suggest that less-than-optimal implementation strategies in APAC markets such as India, Australia and the Philippines could lead to poor results.
Additional commentary by Audrey Yeow.
We will be discussing Healthier Product Innovation in more detail in our upcoming Growth Asia Summit 2024 in July - find out more on how you can join us here.
