After seeing a ton of venture capital investment flow into independent beverage startups recently, it was time to take a step back and see if this kind of company actually made sense as a venture investment.
For one, the competition for space on grocery store shelves is fierce, eclipsed only by the fact people are finicky. The U.S. Beverage Manufacturing and Filling Locations Database contains nearly 2,500 alcoholic and nonalcoholic beverage manufacturers making everything from beer and soft drinks to coffee and 10,000 flavors of fizzy water.
Within the whole beverage sector, functional beverages grew in popularity over the past five years as consumers sought out better-for-you drinks. Most of them include add-ins like vitamins, probiotics and electrolytes and boast lower sugar content and more natural ingredients.
This market is also growing fast: Precedence Research estimated the global functional beverages market was valued at $129.3 billion in 2021 and would grow nearly 9% annually through 2030, when it’s forecast to be worth $279.4 billion.
These companies don’t usually go public, but often sell to another entity, perhaps a soda conglomerate or even an alcoholic beverage company looking to get into the nonalcoholic space.
Opening a fresh can of capital
If the amount of capital going into this area is any indication, investment into the sector makes sense. Venture capital firms pumped over $170 million into functional beverage companies in 2018, up $111 million from 2017, according to PitchBook.
Christine Hall
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