Functional Beverages: $300 Billion and a Split Between Up and Down

By Amara Osei

Inc. expects functional beverages to reach more than $300 billion by 2030 as brands split growth strategies between revving consumers up and calming them down.

Neuro gum ranked No. 195 on this year's Inc. 5000 after posting 1,737% growth. Inc. described the business as a nine-figure company and two-time list honoree.

Its latest product targets the calmer end of that split. Co-founder and CEO Kent Yoshimura called it “after-hours” gum, designed to deliver calm and focus with 125 milligrams of ashwagandha per serving. Inc. framed the wider range from ashwagandha calm drops to 120 milligram cold-brew tea cans.

How did energy drinks reset the category?

Red Bull, Monster and Celsius once dominated the energy drink market, Inc. reported. Over the past few years, new entrants arrived with novel flavors, sparkling formulas, clean labels and marketing aimed more directly at female consumers.

That flood of new cans turned startups such as Bloom Nutrition into household names, according to Inc. Two years after Bloom’s energy drinks first reached shelves, the cans generated most of the company’s revenue and grew to three times the size of its original supplements business.

Bloom co-founder and CEO Greg LaVecchia called the category’s growth “out of control” when he spoke with Inc. earlier this year. Inc. linked the surge to years of category growth and a flood of challenger brands.

Why are brands adding calm products?

Inc. used the term “supplement-ification of food” for consumer packaged goods adding ingredients that promise benefits beyond nutrition or taste. The movement spans conglomerate-owned brands on grocery shelves and direct-to-consumer startups, according to Inc. The market divides into drinks and snacks that rev users up and products that help them simmer down.

Serial entrepreneur Seth Goldman launched Just Ice Tea after Coca-Cola shuttered his first organic tea business, Honest Tea. Its Awaken cold brew tea line packs 120 milligrams of caffeine for an energy audience. Just Ice Tea has made the Inc. 5000 for the past two years, growing an average of 2,167%, according to Inc.

The cans launch nationally at Whole Foods this week, according to Inc. Goldman said they offer “source of clean caffeine – we’ve been brewing it for nearly 3 decades” without “the ingredients you can’t pronounce.”

Goldman suspected consumers buy energy drinks mainly for caffeine. His LinkedIn post framed Awaken as a possible replacement:

“Energy drinks have been a fast-growing category for years. But we suspect people are buying them more for the caffeine than for all the other ingredients…Once you Awaken to the taste of cold brew tea, you might just leave your energy drink behind.”

Can relaxation become the next growth engine?

High caffeine availability has created what Inc. described as an equal and opposite opportunity for ready-to-drink relaxation products. Founders are responding with formulas built around ingredients associated with calming effects.

Last month, Justin Tidwell and Anthony Puterman, co-founders of the $100 million THC beverage brand Nowadays, launched Unwind. Nowadays packed the drink with magnesium and L-theanine and rolled it out nationwide at Walmart.

Walmart has pioneered a dedicated “Mood & Mind” functional beverage category in about 1,000 stores, according to Inc. Unwind is part of that wave, offering a ready-to-drink option for consumers seeking to wind down.

Tidwell called calming beverages a multi-billion-dollar opportunity. He told Inc.: “The energy segment is booming, and we’re big believers that on the back end of any major boom, there’s going to be a second opportunity that’s usually targeted at the opposite behavior.”

Inc. said positioning products around specific need states has become the new retail playbook. Neuro targets calm and focus with 125-milligram ashwagandha servings, while Just Ice Tea packages 120-milligram caffeine for an energy audience.

The next phase will test whether calm products can convert the energy boom’s momentum into their own growth. Inc.’s projection of more than $300 billion in beverage sales by 2030 leaves room for both ends of the market to expand.