Consumers are increasingly seeking to optimize their performance and reduce the risk of ill health with functional food and beverage products. This is reflected by strong market growth and a myriad of functional products entering the global marketplace. The average U.S. consumer now spends $90 per year on functional food and beverages, resulting in a market exceeding $27 billion in 2007. Meanwhile, in the first 11 months of 2007, worldwide launches of products containing omega-3, one of the hottest functional ingredients, increased by 40% compared to 2006, Datamonitor’s Productscan database found. This is indicative of how NPD activity is aligned with the “positive nutrition” trend: consumers now want ingredients that will actively help in improving their health.
The definition of functional foods and beverages is a contentious issue, especially as regulatory agencies do not recognize “functional food” as a nutritional entity. A lack of legislation means there are several different definitions of “functional” products, and this lack of consistency explains why market valuations on the size of the industry can vary dramatically between sources. Datamonitor defines functional foods and drinks as “everyday packaged food and beverage products that contain specific physiologically active components that provide health and well-being benefits beyond basic nutritional functions” (the term “nutraceuticals” is interchangeable with the term “functional foods and drinks”). In summary, when placed on a continuum, functional products exist somewhere between conventional food and pharmaceutical medicine (see chart “Better Food and Beverage Choices”). This reflects a broader macro trend toward a converging of industries.
Food for HealthThe “2007 International Food and Information Council (IFIC) Food & Health Survey” found U.S. consumers overwhelmingly believe food and nutrition plays the greatest role in maintaining or improving health (75%), more than exercise (66%) or family history (43%). This attitude is also helping to drive discernable behavioral changes. IFIC found more U.S. shoppers (66%) had made changes to improve the healthiness of their diet in the six months before the survey. This is similar to the findings of Datamonitor’s research in 2006, when 68% of U.S. respondents stated they had taken steps to eat more healthily, with greater regularity, in the previous 12 months. As the link between diet and health becomes more established, it drives interest and demand in functional products. Indeed, more than 80% of Americans said they consumed, or are interested in consuming, functional foods and beverages, according to IFIC’s “Consumer Attitudes Toward Functional Foods/Foods for Health” research in 2007. This mentality helps put into context the burgeoning U.S. functional food and beverage market; Datamonitor expects it to exceed $36.5 billion by 2012, up from $18 billion in 2002. The increased awareness between diet and nutrition is only one driver shaping consumer demand and product innovation, more generally (see chart “Managing Health Through Diet”).
Growing consumption of functional foods and beverages goes hand-in-hand with the trend toward self-medication. More responsible, health-conscious shoppers are buying into the notion that they can improve their present health and/or hedge against aging and future disease. Rising healthcare costs have been an important factor here. A 2006 survey byUSA TODAY, ABC News and health policy company, the Kaiser Family Foundation, found 44% of U.S. consumers are dissatisfied with the quality of the healthcare system. Furthermore, 13% of the population admitted to having no healthcare insurance at all. It is no wonder Americans overwhelmingly believe “greater emphasis on prevention is a solution to the nation’s healthcare challenges,” as highlighted in a 2007 consumer survey commissioned by U.S. Preventive Medicine. As individuals become concerned over the spiraling costs and quality of healthcare, investments in preventative, premiumly priced, functional food and beverages seem more reasonable by comparison.
Consumers adopting a more preventative approach has created a strong demand for products offering both “softer” wellness benefits (e.g., immunity-supporting, vitality-enhancing or energizing), as well as more targeted “hard health” benefits (e.g., “improves gut health” or “helps prevent osteoporosis”). The softer functional benefits have become an established feature of beverage product claims but also are being seen in dairy-based launches. For instance, the recently launched Breyers Light! line of Natural Probiotics claims to “boost immunity.”
Kraft Foods Inc. has launched a “new” line of Post LiveActive for “digestive health” cereal. Company literature reads, “(They) contain a prebiotic fiber called inulin to help increase daily fiber intake and naturally regulate the digestive system.” This launch is symptomatic of consumers’ desire to improve gut health, as well as suppress hunger. As a result, satiety-enhancing products are expected to be in high demand in coming years.
One area of innovation getting added attention is the idea of boosting mental performance. Globally, energy drink markets have thrived by promising short-term performance boosts (both mental and physical). Now, it seems the food and beverage industry is seizing on the trend--primarily by incorporating DHA omega-3 and vitamin B to support brain functionality. For instance, Rama Idea!, a brand of margarine, was launched across Europe in 2007. Described as “margarine for the brains,” it is rich in the unsaturated fats DHA, ALA and vitamin B. These nutrients are said to help the brain and nerve cells to function optimally. Elsewhere, Crosse & Blackwell Ltd. launched Baked Beans with Omega-3 in the U.K. Marketed under the Crosse & Blackwell’s “Branstein” brand, the beans are positioned as being a “brain food,” with the name playfully evoking Einstein.
Busy, Busy BeesFunctional foods and drinks already have been identified and implemented as solutions to help eradicate nutrient deficiencies in Third World countries. However, cash-rich, time-poor consumers in developed societies are finding it harder to meet nutritional requirements with “traditional” foods and drinks.
According to some research, an estimated one third of older U.S. consumers are not getting enough calories, leaving them vulnerable to malnutrition. At the other end of the age spectrum, less than half of U.S. kids aged 2-8 and only a quarter of youths aged 9-19 get the recommended three servings of dairy a day. A federal U.S. study found just 40% were meeting then-current recommendations to eat five servings daily of fruits and vegetables. Functional alternatives can help consumers of all ages meet the recommended dietary intakes. For example, fruit juices enriched with calcium provide this essential nutrient for kids who refuse to, or who cannot, drink milk.
Age-old StoryIn the next five years, more than a quarter of the U.S. population will be aged 55 and over. Compared to 1935, the average American 65-year-old male will live 19.2 years longer, and the average 65-year-old woman will live 21.8 more years, according to research published in 2007 by the American Academic of Actuaries. By 2012, approximately 26% (80.6 million) of the U.S. population will be aged 55 and over, up from 24% in 2007.
As the global population continues to age, new functional products offering specific antidotes to age-related ailments (such as osteoporosis and hypertension) will continue to enter the market. This will occur in the broader context of a new level of optimism and empowerment among older people; they want to stay active and engaged, mentally, physically and socially, for as long as possible. Functional products can thus be promoted as facilitators to “healthy aging,” providing they are marketed to reflect these values. This opportunity is all the more apparent, since food and drink manufacturers have not yet directed a suitably high proportion of their marketing budget to the older demographic.
Frutzzo Organic Yum-berry Juice, which was introduced to the U.S. in 2007 by Frutzzo Natural Juice, is marketed as being “rich in nutrients effective for anti-aging.” Yumberry is a hot “superfruit” right now, in the way that pomegranate and açai berries have been in recent years.
Products targeting aging populations (or at least offering anti-aging benefits) are being seen in numerous food categories. For instance, Amoriss Bite-Size Organic Dark Chocolate is also promoted for its anti-aging properties. Manufactured by Phytobase Nutritionals, this consists of bite-sized chocolate portions, which are infused with a combination of red wine extract, resveratrol and antioxidant-rich super fruits. An unusual claim of this product is that it can also be used as a face mask. According to the company, when melted and applied for 15-20 minutes, Amoriss acts “as a nourishing, moisturizing and antioxidant facemask treatment for healthy-looking skin.”
The Luna Sunrise Morning Nutrition for Women Snack Bar has been introduced in a new Apple Cinnamon flavor. The bar is said to be a good source of omega-3 from organic flax seed and to be “rich in antioxidants to boost the immune system and combat aging.”
In 2007, Italian food company Barilla Alimentare S.p.A. introduced its Alixir brand of functional health foods to the market in Italy. Aimed at consumers 35 and over, the 10 products were promoted as part of a nutritional food program, with emphasis on heart health, immunity, anti-aging and digestive health.
In Canada, Nutra Fruit products launched a range of cranberry-based meal components in 2007. The promotional literature touted “the power of cranberries” and how “many studies tend to prove that cranberries may help protect against aging diseases, cancer, urinary tract infections and heart diseases.”
Income = Well-being?Rising incomes and wealth in North America (and globally) have enabled the buoyant growth previously identified in the functional food and beverage marketplace. In short, people are more willing to spend a premium on products they perceive as being good for their health. The recent uncertain economic climate may inhibit this in the short-term, but it seems consumers see functional benefits as a point of differentiation and are willing to pay price premiums—when the benefits are well-understood and/or well-communicated. MonaVie Organic Juice, from MonaVie, costs $39 for one bottle. The juice is said to be a blend of Brazilian açai berries and 18 other nutrient-dense fruits. It is claimed to deliver phytonutrients and antioxidants to help maintain a healthy lifestyle, helping the body detoxify as well as build the immune system.
According to speakers at the Perspectives for Food conference (held by the European Commission’s Directorate-General for Research in Brussels in April 2007), personalized diets will have replaced 20th-century mass-consumerism by 2030. The understanding of more specific human dietary requirements is aided by developments in many scientific disciplines including food science, nutrition, chemistry, biochemistry, physiology and genetics. New research in proteomics, nutrigenomics, metabolomics and other disciplines look set to further drive the idea of personalized nutrition. Consumers are interested in it, too; the “IFIC 2007 Consumer Attitudes Toward Functional Foods/Foods for Health” report found Americans are more open to the concept of genetic information being used to provide personalized nutrition recommendations.
The most prominent manifestation of “personalized nutrition” at this stage is by offering targeted (often health) benefits. For instance, U.S.-based Abbott Nutrition offers people with diabetes new snack and meal choices specifically formulated for their special dietary needs. Abbott’s new and improved line of Glucerna nutrition products includes cereal, shakes and snack bars with great taste, more convenient packaging and new ingredients to help manage blood sugar spikes. Elsewhere, Green Giant recently introduced three frozen vegetable blends delivering targeted health benefits. The Health Blends were touted as the first of their kind in the frozen vegetable category. “Healthy Weight” features sliced carrots, sugar snap peas, black beans and edamame. “Immunity Boost” features broccoli florets, julienne carrots, and red and yellow sweet pepper strips, and “Healthy Vision” features sliced carrots, zucchini quarters and sliced green beans.
Knowledge is KeyConsumers want products that exist without any compromise on taste, smell, feel or appearance. In recent years, the food and beverage industry has faced a continual challenge in convincing increasingly health-conscious shoppers that “better-for-you” and “good-for-you” formulations are also enjoyable to consume.
Manufacturers of functional foods and beverages must increasingly promote hedonistic attributes, such as “great taste” and “freshness,” to entice consumers to the category and to maintain their long-term interest. Recent functional food launches in the confectionery sector include Taste of Nature Cookie Dough Bites, Amoriss Bite-Size Organic Dark Chocolate and Hershey’s All Natural Extra Dark Squares, which all make high-antioxidant claims.
Terms such as high-antioxidant, lycopene and flavonols confuse many consumers, causing them to avoid functional products. However, this could change in the future; as awareness about newer functional ingredients grows, new scientific evidence materializes and communication effectiveness also increases. In the future, many of the scientific terms surrounding functional ingredients are likely to become more established. As a result, the terms probiotic, prebiotic, omega-3 and others will be used more frequently and will eventually become “normalized” benefits--in the way that high-calcium and low-fat are today. The terms that stick and have resonance with consumers will depend largely on how effectively marketers establish key “benefit platforms” that people understand.
Danone Activia is widely regarded as a best-practice example of a functional food brand that managed to capitalize on market drivers and overcome market inhibitors. Indeed, considerable success has been achieved in numerous global markets, notably the U.K. and the U.S. It has succeeded where many other functional foods and drinks fail; it is perceived as an enjoyable food product, not a medicine. The benefits are targeted and clearly understood, and Danone ensures that it does not blind (and alienate) consumers with the healthy science. Instead, the scientific credentials are explained in detail in more information-dense sources, such as the company website. Indeed, during the product’s first eight weeks in the U.S., there were more than 70,000 downloads of the study on its website.
Datamonitor believes functional products represent a value-added growth opportunity for the food and beverage industry, driven by high consumer interest. In an ideal world, people would consume a balanced diet with adequate quantities of vitamins, minerals, fatty acids and so on. However, the reality of the time-starved consumer makes this idealized scenario difficult and creates a market for functional products that looks to continue well into the future.
Consumers are getting the message that some food components and ingredients promote health. However, when it comes to functional foods and beverages, consumers are both skeptical and confused. Intensive consumer education initiatives, further ingredient innovation and scientific evidence/research will, therefore, be needed to continue to push the market forward.pfThis article contains extracts from “Functional Food, Drinks & Ingredients: Consumer Attitudes & Trends” (Data-monitor, February 2008). The report explores the broad range of factors currently influencing the functional food and beverage markets, primarily from the consumer perspective. Where relevant, it also addresses broader industry issues affecting market development. Vicky McCrorie is an editor at Datamonitor, while Daniel Bone is a senior consumer analyst at the company.
False OptimismDespite the rising prevalence of obesity and other diet-related illnesses, Americans are seemingly satisfied with their general level of health and diet. A 2007 survey by the IFIC found 10% of Americans rate their health as “excellent,” with 29% saying it was “very good” and a further 41% classifying it as “good.” Only 2% of U.S. consumers rated their health as “poor.” When it comes to Americans’ perceptions of the healthiness of their diet, more than half (58%) described their diet as healthful. Less than one in four (20%) described their diet as either “not very” or “not at all” healthful. This reflects how consumers suffer from an “optimistic bias,” which means they tend to underestimate the nutritional deficiencies of their own diet.
Datamonitor research has found consumers are trying to “get back to basics” by embracing a more balanced and varied diet. Both these behaviors mean consumers are less likely to see a need for functional foods and beverages to compensate for dietary deficiencies.