Consumers are looking for healthier beverage options and are turning to water and beverage enhancers for a flavor and nutrition boost. The emerging category is putting even more pressure on the market for carbonated soft drinks and increasing bottled water consumption.

Gary Hemphill, managing director of research at The Beverage Marketing Corp., New York, said water enhancers are also a part of a larger trend of consumer customization of beverages. Other examples include the Freestyle vending machine from Coca-Cola Co., Atlanta, which offers more than 100 beverage varieties for mixing and customization, and the popularity of single-cup coffee machines. He said the consumer desire for individualized products stems from the culture of being able to go into Starbucks and order a beverage in a nearly limitless amount of ways.

In addition, Mr. Hemphill said customization and the ability of the enhancers to be portable make them on-trend products for the lifestyles of today’s consumers.

“The popularity of these enhancers is based on squeezing and adding as much or as little as you want,” said Bill McKay, chief executive officer of Vitamin Squeeze, Phoenix, Ariz., a company that produces a line of enhancers.

To meet consumer desire for portability and natural sweeteners, SweetLeaf from Wisdom Natural Brands recently introduced SweetLeaf Sweet Drops on-the-go packs.

“(Consumers) are looking for a moderately sweet taste to their water, but (they want) a flavor they really like and can be used to replace soft drinks and other beverages they have been drinking in the past,” said James May, chief executive officer of Wisdom Natural Brands, which produces SweetLeaf stevia products and Sweet Drops, a food and beverage enhancer with stevia.

Mr. May said Sweet Drops contains no calories or carbohydrates, does not increase the glycemic index and may be used in water, coffee and milk. The cola flavor variety may be added to sparkling water to taste like a traditional carbonated beverage without ingredients such as artificial sweeteners.

Vitamin Squeeze, which gained national distribution a little more than a year ago, offers powdered and liquid water enhancers in various flavors with vitamin fortification, primarily vitamins B and C. The products also include chromium and electrolytes.

Major companies such as the Coca-Cola Co. and Kraft Foods Group are driving the market through their Dasani Drops and MiO brands. According to SymphonyIRI Group, a Chicago-based market research firm, MiO products — including fruit drinks, energy and sports products — totaled $192,688,300 in sales for the year ended Jan. 27.

Kraft said it invested more than $50 million to launch the MiO brand, making it the company's biggest launch in years.

“MiO is the poster child for our playbook,” Barry Calpino, vice-president of breakthrough innovation at Kraft Foods Group, Inc., said in comments at the Consumer Analyst Group of New York conference in Boca Raton, Fla.  “Everything in our playbook we brought home on MiO. We went big, we invested big, we had a great idea, a great product, great for the consumer, great for the retailer, great for Kraft. And instead of going small, we went really big.”

Mr. Calpino said in its second year MiO actually grew 67% when 80% of new products decline during the second year.

Tim McLevish, chief financial officer, also commented at the CAGNY conference on Feb. 19 that the company has made MiO one of its “big bets,” and it is expanding the line because it’s one of the highest-margin products in their portfolio and they have significant visibility into its returns.

While all these various water enhancer products have zero calories, not all use natural sweeteners. MiO contains sucralose, and Dasani Drops uses an artificial sweetener. Kraft recently introduced Crystal Light Liquid, a portable drink mix with artificial sweeteners containing between 0 and 5 calories per serving.

Mr. May said he believes consumers are concerned about high-fructose corn syrup and artificial sweeteners, and consumers are looking for natural sweeteners such as stevia.

Mr. McKay said his company is working to expand its functional ingredient offerings. Vitamin Squeeze currently has green coffee bean for weight control in some products. Additionally, heart health with omega-3 and brain health benefits are other functional efforts in the pipeline.

“I think our natural play is really going to have legs and resonate with consumers, and I think our functional benefits play is really going to resonate as well,” Mr. McKay said.

Water enhancers also are taking on the energy beverage and shot segment as Vitamin Squeeze and MiO both have energy varieties.

“The success of energy drinks has basically proven consumers will buy a refreshment beverage for reasons other than simple thirst-quenching benefit of a product,” Mr. Hemphill said. “They will buy it for a functional benefit as well. Consumers are open to that, and it is really incumbent for the manufacturer to find the right functional niche consumers want.”

According to SymphonyIRI, the carbonated beverage market declined 1% to $28,671,980,000 during the year ended Jan. 27 while the bottled water market grew nearly 7% to reach $11,455,360,000 during the same period. Mr. May pointed to such trends as opportunity for enhancers.

“The early results (of water enhancers) have been successful, so I would expect that would translate into more competition in the category and increased sales,” Mr. Hemphill said.

With most of these products having only been on the market for just a few years, the long-term strength of the market has yet to be seen. Yet for now it is meeting consumer demand.

“People are getting bored with just drinking water, so what water enhancers have done is brought some excitement, some new flavor options and portability to flavoring water and making it more interesting,” Mr. McKay said.