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The energy drink industry is undergoing a dramatic shift as consumers increasingly prioritise health and wellness beverages, fuelling the rapid surge of sugar-free options. With younger generations leading the charge, this shift is continuing to reshape the entire category at dramatic speed. Tony Guilfoyle, CCO at Celsius Energy Drinks, explains how sugar-free products are not only driving market growth and innovation but also signalling a broader movement towards healthier functional beverages that meet the evolving needs of today’s health-conscious consumers.

As competition grows more fierce, brands that capitalise on this growing trend will emerge as the true winners in capturing long-term loyalty, especially from critical Gen Z and Millennial consumers.

Health and wellness as the drivers of consumer decisions and market opportunities

As consumer behaviours continue evolving post-pandemic, they are gravitating toward fitness and wellness and choosing functional food and beverage products that support their health goals. This is helping fuel the robust popularity of ready-to-drink energy products, which are the leading drivers of growth in the overall ready-to-drink beverage market. And there are no signs this consumer trend is losing momentum.

The global wellness economy has reached an impressive $6.3 trillion and is projected to grow approximately 7.3% annually, potentially reaching nearly $9 trillion by 2028. In the US alone, 84% of consumers now consider wellness a top priority in their daily lives and seek products that align with their lifestyle needs – and 47% of consumers aim to reduce their sugar intake in the coming year.

Younger generations are the primary catalyst behind this impressive growth. Consider that Gen Z and Millennials constitute just over 36% of the adult US population, but account for more than 41% of annual wellness spending, and Gen Z consumes less alcohol compared to other generations, or avoids it completely. Strong indicators that younger demographics are redefining what health and wellness truly mean.

Beyond consumer choices, brands must also consider actions from governments and public health organisations that are also instigating change. In the UK, the Soft Drinks Industry Levy, implemented in 2018, is credited with removing over 45,000 tonnes of sugar from beverages through reformulation efforts. Restrictions under the Health and Care Act of 2022 could limit HFSS (High in Fat, Sugar, and Salt) food and beverage advertising on TV before 9 p.m. and ban it entirely in digital spaces starting October 2025. France is also in the process of increasing sugar taxes, which would also include artificial sweeteners.

Globally, the World Health Organization has launched a bold "3 by 35" initiative, aiming to halve the consumption of sugary drinks, alcohol and tobacco by the end of 2025. This convergence of consumer demand and regulatory pressure underscores the urgency of sugar-free innovation.

Sugar-free now outselling traditional varieties – proof of a changing market

The meteoric rise in the popularity of sugar-free energy drinks is responsible for more than 70% of the market’s growth since 2022, now constituting almost half of all energy drinks sold in stores. According to Jefferies, sugar-free energy has blurred the lines between energy and functional beverages, expanding the energy opportunity for brands and driving significant growth. Dollar sales for sugar-free energy drinks surpassed full-sugar varieties for the first time last year, and the momentum of these better-for-you functional beverages drove 87% of category growth in Q2 2025.

A significant share of innovation happening in the US is emerging from sugar-free formulations. Notably, Alani Nu’s recent Cotton Candy LTO (Limited Time Offer), a sugar-free variety, became among the best-selling energy drinks. Cotton Candy set records across multiple retailers in regard to launch performance, both from a dollar sales, velocity and share perspective. In many cases, it was a top performer by orders of magnitude and led to national share gains of over 1.2 points sequentially week-over-week, and the brand has maintained the majority of those gains, sitting at .7 points above where it was pre-launch. This is on the tail of multiple other successful launches in Sherbert Swirl and Watermelon Wave, which both set records and saw monumental share gains during their launches.

The rise of sugar-free energy drinks represents a monumental, generational opportunity for brands. Younger consumers, particularly Millennials and Gen Z, are actively factoring in health and wellness in every purchasing decision, driving the intense demand for beverages that offer energy and functional benefits without the negative health impacts of sugar – and aligning with broader trends of reduced sugar consumption and healthier lifestyles. As the wellness economy continues its impressive expansion, agile brands making smart investments in sugar-free innovations are strategically positioned to capture long-term loyalty from these influential health-conscious consumers, making sugar-free not just a trend but an engine of growth for the entire industry.