Phil Parisi: There are many key factors shaping beverage development. Most importantly, creating products that are innovative, whether the innovation is all about new ingredients and flavor, or to serve consumers' functional needs.

New packaging innovations, which are targeting on-the-go and convenience trends, are creating new processing challenges and techniques.

While meeting all of these needs, new products need to remain affordable for consumers. And most importantly, they need to taste good!

Sam Wright: The major focus, by far, is on healthfulness. One of the biggest factors shaping product development today is the decline of the traditional sugary carbonated soft drink in favor of healthier options such as fruit-based beverages, energy drinks and fortified waters. The teen obesity issue has helped create this climate, with some school districts banning older, traditional drinks such as Coke and Pepsi from school vending machines. Former President Bill Clinton is very active in this initiative.

Energy drinks and teas are particularly hot, and as these segments grow, it becomes increasingly important to differentiate brands. Value-added ingredient and nutrient systems are a major mechanism by which to accomplish this.

Another factor is the growth of functional, condition-specific, age-specific and gender-specific beverages for heart health, immune system enhancement, joint health, eye health, digestive health, mental acuity and other concerns. Beverages now account for more than 50 percent of the functional food category on a worldwide basis and have proven to be a major vehicle by which consumers prefer to get their nutrients. They are second only to tablets and capsules.

Ram Chaudhari: [There are] high levels of product innovation and promotional activities related to health and wellness of the nutritional ingredients – delivered in different flavors with convenience. Of course, taste is a huge factor and directly impacts sales.

Herb Woolf: Formulators and ingredient providers must not overlook the overarching expectation of the consumer for flavor and thirst satisfaction in their quest to develop more functional beverages. Beyond that, functional beverages will only succeed if novelty meets a perceived or, in fact real, deliverable. To be a functional beverage, the product needs to provide meaningful health benefits above and beyond basic nutrition.

Sam Wright: The hot ingredients are herbals, ribose, taurine, arginine and other amino acids, carnitine, solubilized coenzyme Q-10, glucosamine and carotenoids. Vitamins and minerals remain strong and the use of more exotic juices and extracts including noni, cupuacu, guarana, acai and pomegranate continue to dominate product development in 2006.

Phil Parisi: There are many hot ingredients this year, and a good deal of them tie into functional food trends. While pomegranate and acai flavors are gaining in popularity, consumers are more familiar with their antioxidant and healthy powers, and that seems to be what's really driving the demand.

Energy drinks continue to soar in popularity, and ingredients like caffeine, or more natural sources like taurine and guarana don't seem to be going away. There is a lot of controversy about these ingredients at the moment, and while we may see some of the usage levels decreasing, they will continue to gain in popularity.

Weight loss ingredients like Hoodia, which actually "tells" the brain that it is not hungry, and L-Carnitine, which helps to metabolize fat in your system, are growing rapidly in popularity. Weight-conscious consumers will often look for meal replacement beverages, and the addition of weight control ingredients just makes sense.

Of course, omega-3s are a hot button. With a list of benefits that include improved cardiovascular health and lower cholesterol, consumers are getting curious as they become more educated.

And finally, Stevia, which is extracted from the flavido, or peel, of citrus fruits, offers product developers a natural dietary supplement that is 200 to 300 times sweeter than sucrose. Of course, in the United States, Stevia can only be sold as a dietary supplement, not a sugar substitute.

Ram Chaudhari: Omega-3, phytosterols, dietary fibers, pre- and probiotics, green tea, antioxidants and chelated minerals.

Herb Woolf: Ingredients that are coming into vogue are those that yield some level of benefit or effect. Classically, caffeine is enormously successful because it delivers an overall "taste" and also delivers an instant "feel good" effect. Several ingredients today have well-recognized benefits and have a high consumer awareness. These all can be “hot” if they can be formulated into beverages and not sacrifice taste satisfaction. Ingredients such as omega-3's, lycopene, antioxidants, fiber, calcium, pre- and probiotics, stanols and sterols are nutrients that fall into this category. The underlying consumer expectation for functional beverages will be met if these products are consumed regularly and part of an overall healthy lifestyle.

Ram Chaudhari: One is smoothie-type beverages containing hydrolyzed protein/peptides. Also, beverages with phytosterol phytonutrients, pre- and probiotic beverages, omega-3 beverages, green teas and beverages containing CoQ10, lycopene, lutein and lypoic acid.

Baby boomers are going to drive the market for these ingredients to improve and sustain wellness and performance related issues.

Phil Parisi: The first thing that comes to mind are the "new" teas — red and white. Manufacturers seem to be doing a good job of educating consumers on the health and flavor benefits of these teas and that's always important when changing up a category.

Fusion beverages are another category that we're seeing some growth in. Whether it's the combination of fruit and vegetables, or pairing sweet flavors with flavors that are traditionally used in savory applications, this has truly developed into a hybrid category. In fact, at our 2005 Innovation Roadshow, our beverage and culinary department joined together to create Culinary Infusion Beverages. In Basil Tamarind Pear, Rosemary Acai Raspberry, Ginger Lulo Lime and Clove Guanabana Pineapple, these waters were for more than just drinking, they were also for cooking. Recipes utilizing each flavor were created.

We may also see more fusions in the distilled spirits market as floral, tea and coffee flavors pop up more in this category.

And, just as meal kits are becoming staples, drink kits may also appeal to the busy consumer looking for a quick-to-assemble, high-end product. Kits that contain all of the pre-measured ingredients for say, a Cosmopolitan, make entertaining easy, while still allowing the user to be the mixologist.

Sam Wright: The areas of prebiotics and probiotics have created major new categories in Europe and Asia and have the potential to do so in North America as well. There is ample opportunity for creating intellectual property and strong branding around probiotic organisms and prebiotic ingredients. It is an extremely promising area. Value-added product forms are available which enable live organisms to remain viable through processing and storage. This is a very important consideration in working with these “living” ingredients.

Phil Parisi: Water-plus. Water is a category that continues to grow, and the next step of adding more functional ingredients like vitamins and minerals, or weight-loss ingredients such as Hoodia, seems like a natural progression. Flavored waters that taste great and are low in calories, also have a great deal of potential.

Floral beverage flavors are another untapped area that are screaming with potential. What about Floral lemonades!

Sam Wright: In addition to probiotics and prebiotics, marine omega-3 fatty acids are another promising area for innovation. Traditionally, these products have been underutilized in beverages because of taste and odor problems inherent with the available raw materials. Advances in refining technology and microencapsulation techniques have yielded highly value-added forms of omega-3s that work well in beverage systems, particularly those that are protein or dairy-based.

Another area for possible beverage innovation is in the field of nutrition and even OTC drug delivery for older consumers, many of whom have trouble swallowing more traditional product forms such as tablets and capsules.  Effervescent products that can be added to water as needed are particularly interesting as are dose-dispensing bottle caps that release contents as they are opened. These delivery systems also add a “fun” element that some segments might value.

Ram Chaudhari: Beverages containing natural fruits/berry concentrates (or extracts) with other functional food ingredients like polysaccharides. For example, adding functional food nutrients under the cap – prior to consumption – would be a good addition to help avoid interactions and quality issues.

Herb Woolf: Antioxidant beverages should become an even more popular segment of the functional beverage sector for several reasons. There is already a good history of success for antioxidant beverages because antioxidants are vital components of fruits and vegetables. Many phytonutrients impart attractive colors and also have antioxidant properties. Scientific data continues to show that long-term intake of antioxidants provides health benefits against a wide variety of diseases.

Ram Chaudhari: New innovations cost money, therefore pricing is always a concern. However, with good scientific studies and delivery of a health benefit would justify the cost. Depending upon the type of product, i.e. powdered beverages vs. ready-to-drink, and single-serving pouches vs. bulk would have pricing issues. Technological advances have generated new ingredients, but cost and application of new ingredients must be addressed to overcome long-term safety issues.

Sam Wright: The rise in energy and commodity prices in recent months has had a negative effect on the economics of the beverage industry. Packaging components, processing costs, ingredient costs and transportation expenses are all affected. The rising power of retailers and the price sensitivity of consumers as a result of the “Wal-Mart effect” make it difficult or impossible in some cases to pass these cost increases through to the end consumer without risking market position.

It’s a real dilemma for those companies caught in the middle, and we do not see any improvement coming in the short run. It is more important than ever to have some value-added positioning for a beverage that will enable manufacturers to capture higher margins. The nutrient systems are often the primary way to distinguish one product from another. Interesting package design has also been an important differentiator in some cases.

Phil Parisi: Ship less, save more. Fuel costs aren't going away, and while the category is trending more toward RTD beverages, there may be opportunity to save on transportation fees by offering more concentrates or powdered mixes. Aside from just juice concentrates, manufacturers could offer their consumers concentrates with multiple applications. What about a pomegranate concentrate that can be added to water to make a juice beverage, or to gin to make a martini. Or a lemon concentrate that can be made into lemonade just as easily as it can be added to tea or even your favorite grill recipe.

Herb Woolf: Fortification has not yet garnered  the expected level of financial return for many beverage companies. Consumers will accept this premium and appreciate these benefits when they understand these nutrient benefits. Clear messaging is key to initial success. Measurable health benefits will ultimately drive this category. BI

Every year there are products that have the potential to create a new beverage category or send a category in a new direction. What do think are the products that are doing that this year?

What do you see as product categories or concepts that have untapped potential, or that beverage companies should consider more closely?

Are there any issues such as pricing, transportation costs or supply issues that you see affecting the beverage ingredient industry today?