Sip into the future: The rise of functional beverages

India's functional beverages market is experiencing rapid growth, driven by rising demand for drinks like non-alcoholic beverages, coffee, and fermented teas. As consumers become more health-conscious, there is a shift towards nutrient-rich options like whey beverages, and probiotics. The country's youthful, adventurous population is increasingly open to global flavours, fueling demand for both traditional and innovative beverages.

The rise of quick commerce is reshaping retail dynamics, with faster delivery becoming a key factor in consumer behaviour. Additionally, opportunities exist for entrepreneurs to address challenges like post-harvest loss, spurring innovation in the functional beverage space.?

A functional beverage, by definition, is a non-alcoholic drink that quenches thirst or enhances health and well-being by including ingredients like plant extracts, probiotics, or other essential nutrients. These beverages are commonly categorized into dairy-based, plant-based, and sports or energy drinks.

The origin of functional drinks in India can be traced back to kadhas, the traditional herbal remedies dating back to the Vedic era. These mixtures, made using ingredients like lemongrass, kwath, cinnamon, cloves, basil leaves, tulsi, and honey, have been household staples for treating various ailments. Known for their therapeutic properties, kadhas are believed to protect against infections, support detoxification, relieve respiratory stress, and boost colon health. Over time, their recipes have evolved, blending ancient practices with modern adaptations, yet they remain at the core of India’s wellness traditions.

As India evolved, so did its functional drink culture, giving rise to a variety of beverages. Chaas, the curd-based drink, became popular across the Indian subcontinent and is known by various names in different regions, offering a refreshing respite from the heat. With the rise of royalty, Badaam Milk and Kesar Milk emerged as celebrated drinks, symbolizing indulgence and health.

The most significant evolution in Indian functional drinking habits, however, came with the introduction of milk-based caffeine drinks—tea and coffee. Coffee made its unique place in Indian culture with the famous filter coffee becoming a beloved beverage. Tea already holds a sweet spot, with domestic consumption of 1,168 million kg in FY’22, according to the Tea Board of India.

And the landscape is evolving continously in line with global trends. Green and herbal drinks, popular among yoga practitioners and health-conscious individuals, are known for their immunity-boosting properties. Energy drinks, often marketed as sports drinks with zero-sugar options, cater to gym-goers and fitness enthusiasts. Whey drinks have also emerged as a popular product for this segment. Additionally, traditional beverages like Kombucha, originally from China, are gaining traction for their probiotic and digestive health benefits. This growing trend shows India embracing a diverse, health-focused, beverage culture in line with dominant global trends.

Trade trends

India’s functional beverage imports reached US$ 507 million in 2023, reflecting a robust 5-year CAGR of 11.9%. Nepal stands out as the top source of imports, valued at US$ 85.6 million in 2023. Non-alcoholic beverages dominate this trade, while fermented tea is the second largest import commodity.

Vietnam follows closely, with imports of US$ 65 million, primarily driven by coffee (US$ 59 million). Indonesia and Uganda ran third and fourth, collectively contributing US$ 110 million, again led by coffee.

Interestingly, Austria, a relatively negligible source until 2022, has risen to prominence. In 2023, it broke into India’s top five source markets, exporting non-alcoholic beverages worth US$ 52.5 million,?

In 2023, non-alcoholic beverages and coffee maintained their positions as the top two imports within India’s functional beverages category. These were followed by black fermented tea, whey, and mineral/aerated water—both flavoured and unflavored—each demonstrating impressive 5-year CAGR growth rates.

In today’s fast-evolving retail landscape, e-commerce has emerged as a dominant force, but when it comes to beverages, traditional markets remain pivotal. The dynamics between these channels often depend on the product category, price point, and consumer preferences. This contrast is well illustrated by the experiences of Archian Foods’ Lahori Zeera and Storia Foods’ Coconut Water.

Saurabh Munjal, CEO & Co-founder of Archian Foods, highlights the importance of traditional markets for their flagship product, Lahori Zeera. “With a product priced competitively at ?10 and ?20, the traditional market dominates our sales, with a staggering 99:1 ratio compared to online retail,” he explains. Munjal emphasizes that products in the affordable price range rely heavily on the accessibility and scale of offline distribution channels.

On the other hand, Vishal Shah, Founder & MD of Storia Foods and Beverages, shares a contrasting perspective on his company’s premium offering, coconut water. “A few years ago, our e-commerce and traditional market sales were at a similar ratio. No consumer wanted to place an order for a beverage and wait days for it to arrive,” he recalls. However, Shah acknowledges a significant shift brought about by the rise of quick commerce platforms.

“Today, thanks to faster deliveries, our sales split between traditional and online channels has shifted to almost 50:50,” Shah explains, emphasizing the role of convenience-driven platforms in reshaping consumer behaviour.

The Indian market's dynamic and experimental nature offers vast potential for global brands and cultural drinks, particularly as consumers become more exploratory with flavours. As Mayank Kumar, Vice President of Marketing at Dabur, aptly puts it, "Keep the consumer at the centre of any product development, addressing their concerns—hygiene, year-round demand for seasonal fruity drinks, and, most importantly, delivering them at the right price."

Key Trends & Drivers

1. The Shift Towards Nutrient-Rich Drinks: Consumers are increasingly prioritizing health and wellness, driving the demand for functional beverages that go beyond basic hydration. Drinks like flavoured waters, isotonic drinks, yoghurt drinks, and functional RTD teas are becoming more popular due to their added health benefits, such as improved cardiovascular health, digestive health, and immunity. As consumers become more health-conscious, ingredients take centre stage, with many people reading labels to understand the nutritional content. Notably, there is a rising interest in energy alternatives to caffeine, caffeine-free beverages, probiotic drinks, and ingredients that promote gut health, reflecting a broader shift towards functional and wellness-focused drink options.
2. Meal Replacement Products: Meal replacement beverages, such as shakes, bars, and powdered drinks, are becoming popular due to their convenience and nutritional value. These products cater to fitness enthusiasts and those seeking balanced, quick meals. Additionally, locally sourced ingredients are being used to create balanced, low-sugar, nutrient-rich meal replacements for the elderly.
3. India’s Demographic Transition: India’s young population is rapidly growing, accompanied by increasing urbanisation and rising incomes. This demographic shift is positioning India as the world’s fastest-growing health foods market, projected to become a US$ 30 billion sector by 2026, according to a report by investment banking services firm Avendus Capital. Largely, India’s young market is very adventurous with its palettes, eagerly exploring global flavours and cuisines. This demographic’s openness has driven the rise of international and fusion offerings, reshaping the food and beverage landscape.
4. Quick Commerce: The quick commerce industry in India has surged since the pandemic, projected to reach US$ 5.5 billion by 2025, according to a RedSeer report. Its share of the online grocery market is expected to grow from 10% to 45%, reflecting a major shift toward convenience and faster delivery, challenging both the existing online and offline retail.

INDUSFOOD HIGHLIGHT

Piccadily Agro Industries Ltd. (PAIL), incorporated in 1994, is the largest independent manufacturer and?seller of malt spirits in India and also manufactures?Ethanol, Extra Neutral Alcohol (ENA), CO2 and White?crystal sugar. Divyanshu Dwivedi, Head of Brand Advocacy at Piccadily Agro, shares his experience at Indusfood, helping the company get an international showcase for its brands.

INDUSTRY UPDATES

Indusfood Services Pavilion

Indusfood 2025 is gearing up to unveil its exclusive Services Pavilion, a new addition to Asia’s premier F&B trade exhibition. Taking place from January 8-10, 2025, in New Delhi, this pavilion will bring together key service providers from sectors like logistics, finance, IT, and consulting, offering a unique platform for networking and global business opportunities in the F&B industry.

With over 1,800 exhibitors and 7,500+ global buyers, it’s the ultimate space to showcase expertise and forge valuable connections.

Interested service providers may submit their details here.

IFMS 2025: Pioneering sustainability in food manufacturing

Trade Promotion Council of India (TPCI) is hosting the India Food Manufacturing Summit on January 10-11, 2025, at the Yashobhoomi Convention Centre, Delhi, marking a pivotal moment for India’s food manufacturing industry.

Co-located with Indusfood Manufacturing, the summit will bring together industry leaders, global experts, technologists, and key stakeholders to delve into innovations in food technologies, packaging, ingredients, and hospitality.

?? For Visitor Registration to the India Food Manufacturing Summit, click https://lnkd.in/gAtbADmF

IIAS 2025: Driving India’s Farming Future with Agritech

TPCI is organizing the India International Agritech Summit on January 10-11, 2025, at the Yashobhoomi Convention Centre in Delhi, marking a significant step in shaping India’s agricultural future. The event is being organized with the support of the Ministry of Agriculture and Farmers Welfare and the Department of Animal Husbandry and Dairying.

This Summit will bring together policymakers, industry leaders, and global experts to explore innovations in agritech, fisheries, dairy, and sustainable farming. Co-located with IndusFood Agritech, it will serve as a platform for insightful dialogues on technology, sustainability, and the future of agriculture in India.

?? For Visitor Registration to the India International Agritech Summit, click https://rb.gy/tvjeab

Experience the future of the food and beverage industry at Indusfood, Asia’s Premier Food and Beverage Trade Show (indusfood.co.in). Indusfood connects global F&B businesses with India’s thriving food economy. At the same time, it provides an unparalleled platform for participating exhibitors to expand their global market presence by connecting to the most relevant international buyers for their products.

Contact details:

Indusfood

Exhibitors Enquiry | Buyer's Enquiry

+91 9205883424 | 9205883435, +91 8287900309

[email protected] | [email protected]