Food Product Design: Cover Plus - April 2004 - Functional Foods: A Prescription for Success

April 2004

Functional Foods: A Prescription for Success

By Stephanie JacklinContributing Editor

With health concerns on the increase, functional foods are a major growth area in the food industry. Seen by many consumers as a way to address real or potential illnesses and improve general health and well-being, many functional products have seen tremendous growth rates, particularly those addressing common health concerns such as obesity, high cholesterol or osteoporosis. In the past 5 years, success stories include functional oils and fats, probiotic drinkable yogurts, energy-boosting drinks and snacks, and products with added calcium.

According to Julian Stowell of Danisco, Copenhagen, Denmark, a leading supplier of functional ingredients for markets across the world, "The World Health Organization (WHO) has reported that globally, overweight is a bigger problem than undernourishment. Lifestyle-related diseases now constitute a global epidemic; hence more and more attention is being given to the nutritional benefits of the food we all consume. A successful functional food is one that offers well-proven benefits beyond those associated with traditional nutrition."

For food manufacturers, the functional food market is an attractive area offering great growth potential, but developing successful products means understanding consumer motivation for purchasing functional foods. This is no simple matter in a market that exhibits much confusion, leaving consumers unsure about what is healthy and which products best address their needs. For manufacturers to succeed, they must have effective products that are well sought after and simple for the average person to understand. Clarity of message and credibility of product are crucial.

Food as cause and cure The rise in functional foods stems primarily from a wish to address the failures of modern dietary patterns. Diet-related disease is on the increase in most developed markets due to poor nutritional intake. This covers a wide range of problems, from obesity (and related diseases such as type 2 diabetes and heart disease) to diet-related cancers, high cholesterol and osteoporosis. The situation is further compounded by busy lifestyles, which lead to greater physical inactivity and less time to prepare healthy meals. As a result, depression and insomnia are also on the rise.

An increasing number of people are now following restricted diets. Growing numbers of vegetarians, meat restrictors, and those aware of intolerances or allergies -- especially wheat and dairy intolerances -- means a larger base of consumers who need to supplement their basic diet.

Critically, as diet-related disease has risen, a greater awareness about the role that diet and nutrition play in health care has emerged. The mainstream press has devoted pages to the influence of food on consumer health, an area that has generated much interest, particularly in countries where governments are reducing health spending, increasing the need for self-medication.

Consumers are increasingly turning to food-based solutions that can help them avoid the diseases of modern life. "Food has been the cause, so they are hoping that food will be the answer," says Stowell.

Although functional foods are not the only solution to the problems raised by an unhealthy diet, they offer a convenient solution, which is crucial to today's consumers. Functional foods help address concerns without requiring consumers to change their lifestyles. If anything, the biggest appeal of functional foods -- and arguably the key to their success -- is that they help consumers continue hectic lifestyles while removing or easing the negative impact on their health.

WHO statistics paint a grim picture of the global level of obesity and its related diseases. Currently, more than 300 million adults and 17.6 million children under the age of five are obese, with these numbers rapidly increasing. Of the 10.3 million cases of diet-related cancer reported per year, diet and exercise could prevent 3 to 4 million. Globally, close to 150 million people have contracted type 2 diabetes. This figure is expected to double by 2025. Many of these cases are due to aging, unhealthy diets, obesity and a sedentary lifestyle.

Various population segments are more prone to diet-related risk than others. WHO estimates that 540 million elderly people -- more than half of that population -- experience malnutrition and its diet-related degenerative diseases, including cardiovascular and cerebrovascular disease, diabetes, osteoporosis and cancer. For women, the lifetime risk for osteoporosis stands at 30% to 40%. Euromonitor, London, reports that WHO recommends calcium, vitamin D and exercise as crucial nutrients or preventive measures to combat osteoporosis.

However, motivation for purchase is not clear-cut. Some consumers research and purchase foods with the express intention of addressing a specific health problem or dietary deficiency. Such consumers are likely to be well informed and will purchase very specific, medicinally positioned products, rather than those with more mass-market appeal. Others are simply attracted by the idea of purchasing a product that offers some health benefits over and above a standard product. These consumers look to improve their general well being and prevent later development of disease -- and offer greater growth potential to manufacturers -- and are becoming more prevalent as functional foods meet the mass market.

Diagnosing consumer concerns Functional foods should address widespread health issues to have broad consumer appeal. Currently, major functional food types include those targeted at bone health (suitable for aging populations and for women as a preventative measure), digestive problems, and high cholesterol or heart disease. There is also strong demand for products that tap into concern about mild mental problems, such as stress, lack of energy and insomnia. Products with added herbal ingredients aimed at tackling these issues have a rich vein of demand among the overworked modern-day consumer, anxious to find some relief.

According to Lyla Adwan, author of an upcoming report on functional foods for Euromonitor, "Energy-type products are probably most popular, driven not only by sports enthusiasts but also by everyday family consumption. The second most popular function is probably intestinal/digestive health -- principally seen in dairy products, including fermented and probiotic varieties, but also in baked goods and bars with the addition of fiber."

New functional areas are also set to emerge. Low-glycemic-index (GI) foods are of particular interest. Following recent research, GI is viewed as an important factor in maintaining blood-sugar levels and managing weight. It is understood that foods with a low glycemic effect have a positive impact on diseases such as obesity and type 2 diabetes and can improve cardiovascular function and satiety. As such, low-GI foods are in a strong position to tap into consumer concern about weight gain and its related diseases. "It is estimated that the glycemic effect of our diet is now typically 10 times as high as it was prior to the advent of processed foods," says Stowell. "Our bodies cannot rapidly adapt to such changes and the net result has been an alarming increase in the incidence of type 2 diabetes." To date, there are several fructose-based products on the market in Australia, Sweden and South Africa making claims about glycemic effect. These include fructose-based sweetener Sweetaddin, manufactured by Penfold's, Australia, and Nutella® spread, Ferrero, Australia. Recently, Slim·Fast, West Palm Beach, FL, launched a range of low-glycemic-effect snack bars.

Regional demands Demand patterns for functional foods, unsurprisingly, vary from country to country, depending on the primary needs of consumers and the deficiencies caused by their diet and lifestyle. In Europe and Japan, gut-health products, such as probiotics, have a strong presence. In the United States, they are less developed due to a lack of tradition of fermented-dairy product consumption coupled with consumer caution over live cultures. This makes it difficult for manufacturers to effectively market such products in the United States.

In contrast, popular functional food types in the United States are those fortified with vitamins, minerals and herbs, especially those that tackle mental issues such as stress, fatigue and depression. Bone-health products and other functional foods targeting the elderly are also popular in the United States. Generally, products aimed at tackling a specific problem are popular in U.S. markets while a general "wellness" proposition seems to serve manufacturers well in Europe.

A key example of localized product development comes from Brazil, where the local diet has been found to be lacking fiber. This encouraged the government to approve a new functional ingredient created by Danisco -- a polydextrose marketed under the Litesse® brand. This is a small polymer of glucose that the body cannot digest so it passes through the colon like fiber. Functional foods containing fiber are also popular in Japan, where the fiber-rich drink Fibe-Mini, introduced by Otsuka Pharmaceuticals Co., Ltd., Tokyo, was one of the first functional products in the world.

Creating a suitable remedy While it is clear that there is no simple formula for successful functional food development, some basic criteria must be fulfilled. Stowell points out that successful functional foods tend to "have tangible benefits, which have been clearly documented through sound, scientific investigations. The associated claims must be sensible and credible." Generally, key success criteria for functional food products follow these parameters:

· The product addresses a widespread and widely publicized health issue. · Product claims are backed by scientific evidence. · Benefits are clear to the consumer. · The product is genuinely effective and results are noticeable to the consumer. · The product has a pleasing taste and the right appearance. · The product is price-competitive with strong branding, advertising and distribution.

For consumers to accept that a functional food could bring benefits, it must prove its credibility and efficacy. The first stage in this process is to undertake clinical studies, which ensure that the product is supported by sound science. Without such studies, consumers are unlikely to be convinced that the product carries any medical benefits. It is equally important that the product has real, swift and tangible effects, as illustrated by the recent consumer rejection of functional oils and fats in the United States. Phytosterol spreads, which were initially a success in the United States, have recently seen sales take a dive as consumers could not see results quickly or clearly enough to justify the high price point.

However, once a company has established scientific proof of effectiveness, the difficulty lies in communicating it to the layperson. "Communication of new concepts has always been a challenge -- it took some 20 years for the implications of high cholesterol to be understood. Product labeling is an important means of communication, as is the media. The European Union has acknowledged the need for nutrition- and health-claims labeling legislation and a proposal on this has been adopted by the Commission. The objective is to provide a clear message which is both accurate and helpful," says Stowell.

For well-established nutrients, such as fiber, iron, and vitamins A, C and E, consumers have sufficient awareness that it is enough to simply state that a product is fortified with these nutrients. For more novel ingredients, such as phytosterols, this is more difficult due to restrictions that prevent food manufacturers from making health claims in most countries.

Legislation and confusion Most markets (with the key exceptions of Japan and China) establish clear legal distinctions between food and drugs. While drugs can make claims pertaining to their medical effect, this is not allowed for foods. In Japan, the foods for specified health use (FOSHU) system means that functional foods have a separate classification that allows them to make claims. However, most countries have yet to create a third classification for functional foods that lie midway between food and drugs and are therefore bound by the legislation on foods. Such legislation means that a manufacturer cannot state that its phytosterol spread "reduces cholesterol levels" or claim that its probiotic drink "improves gut function," making communicating the message to the consumer a complex matter.

Indeed, the inability to make claims, combined with the large volume of conflicting information generated by the media and unclear rules on food labeling has led to consumer confusion. Unregulated use of marketing terms, such as "light," "reduced" and "low," and conflicting stories regarding what is healthy and what is unhealthy has generated a degree of skepticism about all products that claim to be healthy. The sheer number of products that claim to be "good for you" has undermined the unique selling points of functional foods. "This demonstrates one of the key issues currently facing manufacturers of functional products. Increasingly, a whole range of products -- containing anything from whole grain to soy -- is being marketed on a general wellness platform. This is likely to confuse consumers unable to differentiate between general claims and specific health benefits," says Adwan.

Despite restrictions, there are methods of communicating product benefits to the consumer. Some products -- mostly those that are strictly medically positioned, such as phytosterol spreads -- market directly to doctors and health professionals. Doctor recommendations can prove to be an effective way of convincing the consumer that the product is effective. Manufacturers of products that are positioned in this way (medical, and not fully mass-market), often apply a high price tag to indicate the functional superiority of the product. While such positioning builds a strong brand reputation as a serious medical product and gives scope for better margins, it also limits the consumer base. Marketing products to doctors is more common in the United States than in Europe.

Other products, such as probiotic drinks, successfully utilize effective educational advertising strategies to achieve acceptance. Clever use of packaging and brand names can also help communicate the correct message.

Where some level of claim is permitted, clarity and simplicity are important to gain consumer trust. Claims presented in overly scientific language deter customers, sparking skepticism and confusion, as do claims regarding unfamiliar ingredients.

Much ground can be cleared in gaining product credibility through effective branding. Clearly, changes in legislation would be most effective in allowing functional foods to fulfill their full potential. Moves are afoot to address this issue in Europe, with the European Union looking to establish regulations that would allow manufacturers to make claims for some functional food products. In the meantime, effective branding can be a huge advantage in gaining product credibility. An existing brand name with the right associations or an effectively pitched new brand name can play an important role in gaining customer trust.

A good prognosis The popularity of functional foods among consumers is clear. With increasing consumer awareness of health issues and a tendency to focus on preventative measures, the functional foods market looks set to remain popular for many years to come. Arguably, the secret may lie in the fact that functional foods offer an easy and convenient solution, which does not necessarily involve a significant lifestyle change. Although it represents an area of potential high growth for manufacturers, it is not easy to launch successful products with broad consumer appeal.

Careful product development and a clear understanding of the target consumer market can lead to huge sales. "Just as many consumers continue to smoke despite a clear understanding of the dangers, so many will continue to eat unwisely despite the potential consequences. So, perhaps food manufacturers should target their 'healthy options' at the enlightened consumer," says Stowell.

The market offers great growth opportunities in today's "quick fix" society where consumers are increasingly tempted by products offering convenient solutions to health problems. However, manufacturers must ensure that their products really do deliver the benefits that they promise or the future of the functional foods market could suffer. If consumers do not feel that these foods are giving them the benefits they were promised, they will quickly lose faith in functional food products and look for solutions elsewhere. Yet, if functional foods are effective, Stowell believes that, "the tangible benefits will become an inspiration to others and in this way lifestyle diseases will be diminished."

Stephanie Jacklin is a Euromonitor associate and senior analyst with 10 years experience in the food, drink, consumer goods and retail industries. She can be contacted at [email protected]. Danisco contributed to the creation of this article and can be contacted by calling 800/2556837 or through its website, www.danisco.com.

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