Summary: What’s driving the functional food and beverage boom in 2025
- Global market hits $398.81bn with 10.33% annual growth rate
- One in three shoppers prioritise health in discretionary spending
- European consumers pay up to 50% more for functional benefits
- Taste is key to repeat purchases despite health-driven demand
- Yeast extract helps mask bitterness and improve savoury flavour
Functional foods and beverages are big business in 2025. From confectionery to coffee, manufacturers are investing heavily in this health and wellness megatrend, and consumers are proving the demand is not just there but growing, as sales soar.
So much so, the global functional food and beverage market is now worth an estimated $398bn (€338bn) and growing at a CAGR of 10.33% (market insights company Fortune Business Insights)
“Recent market insights reveal that health and wellness are becoming top priorities for consumers, with approximately one in three global shoppers identifying health and wellbeing as a primary area of discretionary spending,” says Daria Pashkova, product and marketing manager at ingredients company Ohly.
What are functional foods and beverages?
Functional foods and beverages are food and beverage products that contain functional ingredients, such as vitamins and minerals. These ingredients provide health benefits beyond basic nutritional value, and are often aimed at specific needs, such as cognitive health.
And consumers are not only willing to spend on functional foods and beverages, they’re willing to spend significantly more, with a study from Texas A&M University finding that European consumers are willing to pay 30–50% more for functional benefits.
This presents manufacturers with a huge opportunity to expand functional product lines and benefit from the sector’s success.
But, while consumers are keen to embrace foods and beverages with functional benefits, there’s one detail they won’t compromise on - taste.
In fact, a survey from Ohly has 85% of consumers prioritising taste over price and health.
Elsewhere, research from ingredients supplier ADM puts taste slightly lower (70%) but still top, with high-quality ingredients coming in second (69%), and health and nutrition third (66%).
“Taste is number one,” says Susanne Palsten Buchardt, CEO of Danish ingredients brand, Algiecel. Though she also highlights the importance of texture in the overall experience.
“Taste remains the primary factor in repeat purchases,” agrees Ohly’s Pashkova.
In other words, getting flavour perfect from the very start is essential to repeat purchasing.
But it’s not always easy to get right.
The formulation challenge
“With increasing consumer demands for higher protein and fibre content alongside reduced sugar or sodium content, ensuring appealing taste and texture can be challenging,” says Shanyn Seiler, product marketing manager of global flavour modulation at ADM. “However, advancements in food science, such as new plant protein iterations to support higher protein content, quality sweetening solutions and sophisticated flavour modulation technology, help balance nutritional and sensorial attributes in functional foods and beverages."
Plant-based proteins, whey or collagen may deliver higher protein content, but they can lead to bitterness and off-flavours. Protein concentrates used in ready meals may also dull savoury flavours.
Meanwhile, fibre and mineral-enriched formulas may introduce dryness or metallic tastes, while sugar reduction solutions can leave strong off-notes.
“Achieving a clean label while maintaining taste requires more than adding or removing ingredients,” explains Pashkova. “It necessitates a balanced and nuanced approach to flavour formulation.”
One solution, suggests Pashkova, is yeast extract. Rich in naturally occurring amino acids and nucleotides, yeast extracts bring umami, enhance saltiness perception, and critically for functional foods, help mask bitterness and other off-notes.
In practical applications, yeast extract can play a crucial role in enhancing the flavour profiles of functional foods across various categories. For high-protein ready meals and pasta pots, targeted yeast extract fractions can be used to restore the savoury depth that is often lost during protein fortification, while also improving the taste of sauces at reduced salt levels.
Other natural flavour options include fruit concentrates, natural sweeteners, and herbs and spices.
Formulation success
Successful functional food and beverage development, says Ohly’s Pashkova, relies on three key elements - a credible health benefit, clear labelling, and appealing taste.
“Teams should prioritise taste early in the development process to avoid costly reformulations,” says Pashkova. “Start by defining sensory targets, then address nutrition, processing, and labelling requirements.”
The future of flavour in functional foods and beverages
As the functional food and beverage market continues its rapid ascent, the message from consumers is clear - health benefits are important, but taste is essential.
Brands that invest in flavour from the outset - using smart formulation strategies and ingredients like herbs and spices, fruit concentrates, and yeast extract - are best positioned to capture consumer loyalty and stand out in a crowded marketplace.
With demand showing no signs of slowing, the future belongs to those who can deliver wellness without compromise.
