As beverages are becoming an element of disease prevention and management, the credibility of the claims they make related to health benefits will be increasingly important. This is particularly true for CBD products, which are seeing rapid growth in North America. CBD-infused beverages, food, and beauty products claim many health benefits, but not all are backed by science. However, given the market potential, beverage companies are scrambling to get in the game as Constellation Brands, Diageo, Ab InBev, and Molson Coors Brewing have all invested in the space. Constellation has a $4 billion stake7 in Canopy Growth, and has already taken two successive write-downs in its investment value. Heineken is in the process of developing their own CBD-infused beer and already has THC-infused sparkling water available in California. Investments in CBD beverages, whether that’s through in-house R&D or an acquisition, can be risky. Investing early has a significant upside, but also increases the risk that the bubble will burst if market demand doesn’t materialize or further research in this space doesn’t back some of the health claims. However, not investing makes one vulnerable to missing the opportunity to gain market share in a sector that has significant growth potential.
While CBD may be the miracle beverage with the most risk and reward, the opportunity to focus on “beverages as medicine” is virtually limitless. The global collagen peptide market is estimated to be valued at nearly $1 billion in 20198, and registered a CAGR of 7.7 percent. This product was virtually unknown just a few years ago but has gained a loyal following. Health and wellness is at the top of consumers’ minds in Asia Pacific9, with 65 percent of consumers saying they are “always or often” influenced by this when choosing what they eat and drink. In Europe, probiotics are projected to grow at a CAGR of 5.35 percent10 during the forecast period (2019–2024). Beverages such as infused waters, sparkling tonics, and kombucha make probiotics readily available in beverage form rather than relying on supplements. Even alcohol brands are getting on board adding botanicals and herbs with nutritional elements or infusing bee pollen and currents into their products.
With this tremendous growth trajectory, beverage companies are leveraging M&A to gain these new functional products. Celsius Holdings11, Inc. announced the acquisition of Func Food Group, a Finland-based provider of functional beverages and foods, to expand its presence in the wellness product portfolio and the European market.
Functionality provides another opportunity for collaboration, as creators of beverages can enhance their products with supplements and offerings already on the market. Moving forward, the chance to personalize beverages and further expand on the concept of drinks as medicine for preventive health provides nearly endless opportunities for growth.