GCR linkedin Logo

Coffee gets a functional makeover

From the April 2018 issue.

Rather than simply touting coffee’s existing health benefits, coffee entrepreneurs are going a step further to create functional coffee beverages with added nutrients.

For Andrew Aamot and Kevin Crowley, the choice to produce ‘functional’ coffee was a matter of differentiation in a crowded market. For Jordan, Jake and Jim DeCicco, it meant filling a need that the market wasn’t currently serving. And for Morgan and Andrew Iwersen, it meant entering a new market to diversify their business.

All three coffee brands created very different products for very different reasons, but they’re all tapping into the same trend, one that has been gaining momentum in the wider beverage industry and the coffee industry in particular – a demand for healthy, functional beverages.

Although coffee is increasingly being named as a functional natural beverage as more and more scientific research is released that confirms its varied health benefits, true functional coffee is comprised of products, such as coffee grounds or ready-to-drink (RTD) beverages, that have been fortified with vitamins or minerals that didn’t already exist in the coffee.

Rather than simply touting coffee’s existing health benefits, these coffee entrepreneurs are going a step further to create functional coffee beverages with added nutrients.

“The big trend in American drinks these days is a shift toward healthier products,” says Matthew Barry, senior beverage analyst at Euromonitor. “People are looking for more from their drinks. They want those functional benefits as part of a healthier lifestyle. It’s not just a coffee thing, but rather a larger beverage trend that is also affecting coffee.”

He references other categories in the beverage industry catering to this shift in consumer preferences, such as fortified waters, kombucha, tea, and energy and protein drinks with less sugar. As consumers look for healthier versions of their favourite drinks, “every food and beverage manufacturer is quickly trying to create healthy, functional products to claim their share of the consumer’s stomach,” says Spencer Turer, Vice President at Coffee Enterprises, a coffee business consulting company.

Market research firm Technavio forecasts the global functional food and beverage market to increase a strong 7.8 per cent per year on average through 2021. While that data represents functional food products, too, growth is also strong across beverages.

Considering that 64 per cent of consumers drink coffee daily, according to the National Coffee Association’s National Coffee Drinking Trends (NCDT) report released in 2018, coffee is an obvious beverage candidate for enhancement, especially with its expanding list of existing health benefits.

Explains Dr Mark Corey, the NCA’s new Director of Scientific Affairs & Project Management, “Many consumers drink coffee daily, so [functional coffee] is an easy way for them to get additional nutritional benefits because it’s easy to incorporate into their diet.”

This is especially so if consumers don’t even have to change their buying habits. “People want to buy their favourite foods and beverages but with an added health benefit,” Turer says. “By creating functional coffees, we’re not changing the purchase patterns or habits; we’re providing the right products for the consumers’ [evolving needs].”

In addition to changing consumer preferences, that aforementioned scientific research is helping drive the functional coffee trend. Turer reflects back to the mid-’90s when there was minimal publicly available research on coffee and he was working as a coffee development manager at a national coffee company.

“We were looking into the potential benefits of adding [vitamins and minerals] to coffee,” he says. “But we were very hesitant at the time because there wasn’t any research available and there were too many unknowns.”

Today, not only is there at least some research, but also major roasters are hiring food scientists and nutritionists to work in research and development.

Similar to what Turer and his team experienced more than 20 years ago, Andrew Aamot and Kevin Crowley were faced not only with a functional coffee idea that no one else had tried, but also with an idea that had no available research.

When they first launched Strava Craft Coffee out of Denver, Colorado, in 2015, they set out with big dreams of bringing an exceptional specialty coffee to consumers. But very quickly they realised how crowded the space was, Aamot admits. “It didn’t matter how good of a job we did, we were doing the same thing as thousands of other specialty roasters.”

As a way to differentiate their product, they explored coffee infusions, specifically with hemp oil, which contains cannabidiol (CBD). Recreational use of marijuana, which has cannabinoids CBD and tetrahydrocannabinol (THC), had been legalised in Colorado three years earlier, so the Strava team was surrounded by the buzz of that industry.

They chose hemp specifically for its lack of THC, which gives the psychoactive high that recreational marijuana users typically look for and, thus, makes the industry more heavily regulated. According to Aamot, the CBD molecule calms the central nervous system, aiding in ailments like neuropathic pain or inflammation. In addition, CBD has antimicrobial properties, antioxidants, and oils that are rich in omega-3 and omega-6 fatty acids.

“Most people drink coffee for the same reason in the morning – to get up and get going – but the CBD begins to become therapeutic in increasing amounts,” Aamot explains. “We started to get a tremendous response from customers who were feeling less anxious, and were feeling fewer aches and pains. We really started to embrace [Strava] not just as a great cup of coffee, but also the functional role that this enhanced coffee can provide.”

Canyon Cultivation’s innovative coffee provides a similar function, but the company’s founders entered the coffee industry much differently. When they launched the Denver cannabis company in 2009, they started with tinctures and edibles, so coffee was an entirely different product category – and an entirely different industry.

“When cannabis [became legal] recreationally in Colorado, there was demand for new innovative ways to consume cannabis,” explains co-founder Morgan Iwersen. “So we decided to explore products other companies weren’t, and coffee was one of those.”

Meanwhile, the coffee industry was booming and cold brew was the newest craze, so Canyon’s 2106 release of Drink It Coffee infused with cannabis was timed perfectly. Says Iwersen, “We’ve recently noticed other companies coming out with cannabis drinks and teas, and we really feel like we were at the forefront of that, which makes us really proud of our product.”

The founders are also elated at the positive feedback it has been receiving for its therapeutic functionality, similar to Strava’s hemp-infused coffee. At the moment, Iwersen says, their main customers are Baby Boomers and older generations who rely on cannabis for pain management. The cold brew has a 10-miligram dose of THC, “a functional dose that can typically get them through the day pain free.” 

On the other end of the functional spectrum, Jordan DeCicco’s ‘Super Coffee’ aims to give consumers a long-lasting boost of focused energy through high-quality Colombian beans, 10 grams of lactose-free protein and five grams of healthy fats via coconut oil.

DeCicco created the concoction out of his dorm room when he needed a high-energy beverage that wasn’t loaded with sugar and artificial ingredients like the RTD bottled coffees sold on campus. “Rather than relying solely on caffeine and sugar for an energy boost, Super Coffee enhances the caffeine [with protein and healthy fats] to provide all-day energy,” he explains.

With teammates and classmates clamouring for his functional coffee mixture and his two older brothers eager to join the venture, DeCicco’s dorm room experiment turned into a fully fledged business. In March, the Super Coffee trio featured on ABC television’s Shark Tank where they attempted to secure a US$400,000 investment for their business, Sunniva.

“I want to commend you on recognising the shift that’s happening in the food and beverage industries today,” said Shark Tank investor Rohan Oza, referencing the trend toward health and functionality.

Although Sunniva didn’t leave with an investment deal, online sales of its functional coffee skyrocketed.

Between Strava and Sunniva exists an expansive list of other functional coffee products. To achieve functional benefits beyond those already found in coffee, ingredients, both understandable and obscure, are being mixed with or infused into coffee, from butter and probiotics to cannabis and açai berry to lavender and turmeric.

While companies like these are answering the consumer need that Turer speaks of, doing so isn’t without its challenges. One of the key obstacles is strict regulation without guidance in the functional beverage category.

Currently there aren’t any FDA-approved health claims for coffee and so brands struggle to tout the health benefits, especially on marketing and packaging, Corey explains.

“Even for brands that are adding a functional ingredient to their formulation for the unique nutritional benefit, the types of claims they can make are very limited,” he says.

This is true in all functional food and beverage categories. Euromonitor’s Barry emphasises that just as the functional trend is not specific to coffee, neither are its challenges. Coconut water and kombucha, beverages that entered the health-focused product market before coffee, have seen their shares of legal issues related to health and functional claims.

“If coffee continues moving in more of a heavily functional direction, you’ll probably see something a little similar,” Barry says. “And I don’t think you’ll see any clear guidelines [from the FDA] for a while.”

What the industry lacks in structure, it makes up for in competition.

Consumers obviously have a lot of choices when it comes to beverages, and even in a narrow category like functional hot drinks, coffee still has competitors, as tea has long dominated the category. However, the unique creations coming out should help set coffee apart from other functional beverages vying for market share.

“If we can develop beverages that increase the health benefits of coffee through functional ingredients, that will position coffee as a competitive beverage against all the other functional options out there, keeping consumers in the coffee industry,” Turer says.

While the experts say it’s too early to know which functional coffee products will last and which are just fads, the focus on energy is a promising avenue. Barry points to the long-established soda and energy drink categories. Even though both are falling in popularity due to their high sugar content, they remain key sources of caffeine.

“People are always going to need energy, so the opportunity in terms of healthy, low-sugar, natural energy will remain a long-term trend,” he explains. “It doesn’t mean coffee will be the only way consumers will solve that need, but I do think coffee will play a leading role.”

For the more obscure products or functional ingredients, it’s a matter of appealing to consumers enough to first grab their attention, and then keep them coming back.

“You can always get someone to try something once through merchandising, promotion, and price,” says Coffee Enterprises’ Turer. “Any company that is promoting the healthfulness or functionality of its coffee is going to get the first sale. It’s only the quality in the cup that is going to get repeat business.”

Because of that willingness to at least try something once, there’s generally more product cycling and turnover within functional foods, especially as consumer preferences and health needs evolve over time.

“There’s often that initial appeal, but then what ultimately develops a loyal following?” Corey asks. “If the product and the benefit resonate with the brand, if the brand appeals to the consumer, if the benefit has a broad appeal to a large number of consumers, if the consumers can feel the benefit without compromising the taste, and if the product is priced right, then it could have lasting power.”

As if getting that precise formula right isn’t difficult enough, brands are still up against an industry with limited information. According to the NCDT report, 69 per cent of respondents were not aware that standard coffee reduced the risk of illnesses like heart and liver disease, diabetes, stroke, Parkinson’s, Multiple Sclerosis and Alzheimer’s.

Even though research has shown that negative perceptions surrounding coffee have softened, they still exist.

“There is a degree of undoing of past perceptions about coffee,” Barry says. “People have been drinking coffee for decades, so a lot of consumers question ‘why now?’ and just assume coffee will be declared unhealthy again in a couple years.”

That’s been a challenge for the Super Coffee team, says Jim DeCicco, referring to both purchasing habits and stigmas involving ingredients that were once deemed bad.

“People are creatures of habit, so we tried to make a product that’s familiar to them in taste but provides lasting energy with healthy ingredients,” he says.

Understandably, Strava is also dealing with stigmas and misperceptions. There is less regulation and controversy surrounding hemp than marijuana, but historically, there has been a lot of confusion between the two plants.

“It’s really a matter of education and breaking through some of the misinformation that exists out there,” he explains. “For us, the key was to build the brand and its entire family of products with the reputation for integrity and effectiveness,” Aamot says.

From there, they rely on customers’ testimonials and reviews that have thus far aligned with the message the partners try to communicate about their brand, and specifically the benefits of their functional coffee line.

“Any information we can put in front of the consumer about how coffee contributes to a healthy lifestyle is a positive thing for the industry as a whole,” Turer says. “All research will have some negatives, but at the end of the day we know coffee contributes to a healthy lifestyle and the positives outweigh the negatives.”

  • GCR Newsletter

    Sign up now to Global Coffee Report's newsletter and keep up to date with everything coffee.

© Copyright 2018 Prime Creative Media Pty Ltd. All rights reserved.

ABN: 51 127 239 212

X