Postmodern Nutrition: Functional Foods, Beverages

Gone are the days when snack bars served only as a mid-afternoon snack, holding hunger over until dinner time. Consumers want their snack bars to actually do something a lot of something. Snack bars, yogurts, beverages, shots and more are now a nutritional vehicle for immune health, digestive health, weight management, protein you name it. And just as postmodernism shrugged off the austerity of modernism and reintroduced aesthetics, eclectics and ornamentation, functional foods and beverages circa 2011 are adding the aesthetics back into food. Both form and function matter. Consumers are looking for diversity, functionality and a whole lot more.

The Market Pulse

As the market trembled a little when stocks fell in early Augustbringing back memories of the 2008 recessionfinancial insiders reassured the industry of its integral role in consumers health care regimen. And, if that wasnt enough, numbers talk louder than insiders. While other industries have been limping along, functional foods managed to not only stay on their feet, but to take make a few strides. Nutrition Business Journal reported functional foods grew 4.6 percent in 2010, pulling in $39 billion in sales, as compared to $37.3 in 2009. Global Industry Analysts (GIA) is predicting the global market to exceed $130 billion by 2015.

To say this market is a well-oiled machine is not an overstatement. Its clearfrom Baby Boomers to health-conscious consumers alike, product functionality is in high demand. According to Steve French, managing partner at Natural Marketing Institute (NMI), Baby Boomers have been acute growth drivers of functional foods because of their uncertainty about the future of health care (seven out of 10 Boomers said theyre taking a more active role when it comes to health), and in an attempt to delay aging and prevent disease. Boomers are interested in health-condition-specific products.

In the United States, growth in the functional food and beverages category is being driven by a number of factors, including an aging population, high health care costs and a heightened consumer awareness of the link between diet and health, said Stephen Moon, CEO, Provexis plc.

NMIs 2011 Healthy Aging Boomer Database found they would be more likely to purchase foods/beverages if they offered a specific health benefitcholesterol/heart; immunity/joint pain/cancer prevention/energy booster; and toxic cleanup/cleanse digestive trackin primary, secondary and tertiary order, respectively. A total of 75 percent of Boomers wish all foods had some type of health-boosting claim, and more than 25 percent of them feel functional products can be used instead of medicines.

This market definitely has Boomers attention; but, the problem remains; this market is heavily reliant on ingredient knowledge. Restrictions on food and beverage label claims can make the conversation between consumer and manufacturer difficult and quite possibly non-existent if shoppers dont understand the products benefits and how its going to help them lead a healthier lifestyle. Therefore, it is imperative consumers understand the benefits of specific ingredients, rather than relying on label claims, French stressed. Thank goodness consumers are tenaciously seeking healthier lifestyles, right? French cited omega-3s and probiotics as examples: even though 60 percent of Boomers know omega-3s benefit the heart, 27 percent cant cite any omega-3 benefits; and only 33 percent know probiotics benefit digestion and 44 percent dont know any probiotic benefits.

Patrick Luchsinger, industry specialist for Stepan Lipid Nutrition, echoed Frenchs findings, stating: Consumers need to grasp the health benefits associated with a given ingredient in order to appreciate its relevance and premium pricing. Manufacturers of functional foods need to consider what actions they can take to better educate potential consumers and provide this level of understanding.

Regulation

It goes without saying, one of the most influential factors on the functional food and beverage market is domestic and international regulations. Regulation has a huge impact on marketing, and health claims play an important role in the marketing of health food and nutritional products," said Stefanie Geiser, regulatory affairs manager at international food policy consultancy EAS.

There are major differences around the world in the way ingredients are regulated and the research requirements for certain types of product claims, said Rich Mueller, Biothera president and CEO. Regulatory authorities worldwide are demanding companies base claims on research with their own specific ingredient strain and not rely on borrowed research that was conducted with another product or ingredient. Also, regulatory requirements in various parts of the world are undergoing rapid change. As a result, some finished product marketers have delayed product launches until the new environment is becomes clearer. However, some marketers view the uncertainty as an opportunity to launch products and grab market share as others stand by.

Mueller is right. Advertising messages across the functional food market in Europe may be seeing some new directional changes come 2012, according to Geiser, possibly making the hurdle even harder to leap over. The European Commission will soon finalize its draft Article 13.1 Union List" of permitted health claims. Once everything is finalized and adopted, food companies will have to develop alternative ways of marketing and advertising to communicate health and other benefits of products.

It is possible that such stringent requirements might spread to the United States in the future, with the FDA taking notice of the EFSA rulings, Moon commented.

FDA has been cracking down, Paul Dijkstra, CEO, InterHealth Nutraceuticals, noted big food companies such as General Mills (GM), Coca-Cola and Danone have recently had their product claims scrutinized by FDA. In 2009, FDA issued a warning letter to GM regarding its Cheerios® Toasted Whole Grain Oat Cereal. The company claimed it could reduce bad cholesterol by 4 percent in six weeks, but FDA said its claims would classify the cereal as a drug, stating, These claims indicate that Cheerios® is intended for use in lowering cholesterol, and therefore in preventing, mitigating and treating the disease hypercholesterolemia, which is a no-no. Coca-Cola also got a slap on the wrist when FDA sent the company a warning letter regarding its Diet Coke Plus for its usage of the term Plus and the words Diet Coke with Vitamins & Minerals. FDA said its product was misbranded and it made nutrient content claim but does not meet the criteria to make the claim. Dannon Co., the U.S. subsidiary of France-based Danone, was also issued a courtesy letter in 1999 because its dietary supplement Actimel resembled a conventional food with claims such as delicious fermented milk drink and a wholesome fast food, another no-no.

The new New Dietary Ingredient (NDI) Guidance, if adopted, could stifle new ingredient development for supplements because, for example, synthetic analogs of nutrients would no longer be viewed as new dietary ingredients, said Sandy Bigelow, principal at Vanguard Global Associates LLC. If the current U.S. administration position regarding supplements becomes effective and continues to restrict dietary supplement trade, the prospect for a more robust law passed by Congress can become more evident after the 2012 election.

GMPs (good manufacturing practices) and GRAS status (generally recognized as safe) are also major players in the regulatory landscape of functional foods and beverages. GMP regulations are affecting most traders tremendously. Vigorously having to test material is very costly, not only that the amount of time it takes to complete the questionnaires. For small companies, this can put them out of business, said Jamie Spell, Nutraceuticals International GROUP®.

GRAS status is an important safety assurance for manufacturers, so it makes an ingredient more desirable from a sales standpoint, Dijkstra added. Having GRAS status means the nutrient is safe and can be added to every source of food, making it more readily available to consumers. Many large manufacturers require it as a matter of course.

Application Expansion

The industry is expanding its application wings. What was once considered standard energy or digestive applications, such as shots and yogurt, are now vehicles for other health benefits. According to Mueller, beverage shots arent just for the energy market anymore; overall wellness goods are utilizing them, too, as well as other systems. Shots first became popular with energy drinks and now are transitioning to wellness, he noted. There are more applications for immune-benefit wellness in bars, both cereal and chocolate bars. There are more beverage applicationsjuices and dairydelivering immune health benefits.

Weight management is also seeing delivery advancements. Stepan Lipid Nutritions conjugated linoleic acid (CLA) ingredientClarinol® CLAlaunched in a weight-management yogurt, Safflower Power Yogurt; and LiveGreat Foods LLC introduced a dairy-based fitness drink with Clarinol CLA, too.

According to SPINS, total U.S. sales of functional juice drinks and kombucha in the natural and conventional FDM channels were $330,829,170 (52 weeks ending July 9, 2011), a 4.6-percent increase from 2010 (52 weeks ending July 10,2010). Total U.S. sales of energy and other functional beverages experienced a larger increase (14. 1 percent) in the combined channels, from $92,126,152 in 2010 to $105,083,285 in 2011.

As SPINS cited, functional beverage sales are up; and according to Anna Batsakes, marketing director for Innovative Food Processors, the U.S. powder beverage market passed sales of $1 billion. The powder beverage market has grown beyond traditional sugar drinks, basic protein shakes and sports-energy beverages, she said. Functional beverage and food marketers see powders as a new opportunity to expand their delivery formats and offer convenience, better value and an environmentally friendly solution to ready-to-drink options.

Stick-pack powder mixes for beverages are an excellent fit for delivering condition-specific benefits such as joint health, Dijkstra said. With the convenience and versatility of mixes, the market for functional beverages is almost certain to grow substantially over the next several years.

Companies such as Nutraceuticals International GROUP® are also seeing the beverage boom. I think [beverages] are more productive and more popular due to the fact that its on-the-gopeople have such busy schedules that they are looking for a quick fix for energy; hence the reason the energy shots have done so well, Spell said.

Spell may be on to something. It may not be the delivery system itself, but the convenience of the delivery system. Going forward, convenience will be a key differentiator for busy consumers and healthy shot products will continue to grow in popularity, Moon said.

Need an easy weight-management snack in between meetings? Grab a Safflower Yogurt. Hopping on a long flight and want to prevent deep vein thrombosis? Grab a shot from Provexis commercial partner, DSM, with Frutiflow® derived from tomatoes. Or want to mix your joint-health supplement into your water bottle on the way to the gym? Grab a stick pack with InterHealths UC-II® collagen and mix it up. Get the idea?

'Condition'-al Market

From stomach aches to joint pain, consumers have specific health issues theyre looking to tackle, i.e., theyre shopping specific. So, what health conditions are in high demand right now? In terms of consumer trends, digestive health will continue to be important, Moon said. An impressive 4,000 new products were launched globally in 2009, according to Innova Market Insights, making the gut and digestive health market the single largest division of the food and health markets in Europe, Japan and South America, with North America not far behind. Within this segment, established ingredients such as pre- and probiotics, as well as fiber will continue to be of interest to consumer groups worldwide.

SPINS reported total U.S. sales of food (grocery, refrigerated and frozen) with pre- and/or probiotic content grew from $1.10 billion in 2010 to $1.44 billion in 2011 in the combined channel, a 30.7-percent increase.

Another health segment that incorporates pre- and probiotics is immune. Weve found immune health is either number one or two product development priorities at most major food and beverage companieswhether they are based in Asia, Europe, North or South America, Mueller said.

Chase Hagerman, business development and marketing manager, Chemi Nutra, noted a few hot categories, including weight management, energy, heath and digestive health; but, he also called out a few off the beaten path categories, too. Categories such as anti-aging, skin and hair maintenance, womens health and sports performance are often overlooked, he said, adding a cautionary note to manufacturers to be sure to educate consumers properly since these categories are not as well understood as the more popular ones.

The joint-specific market in particular is among the top growing condition-specific markets, Dijkstra noted.The sheer size of this category has spurred increased product innovation on the ingredient side.

From condition specific to ingredient specific, consumers are looking for specific ingredients, too. According to SPINS, the top five primary ingredients (by volume) in 2011 for the functional juice drinks and kombucha, and energy and other functional beverage categories in the natural channel are: kombucha, spirulina blue-green algae, soy foods, probiotics supplement and vitamin C.

I view certain milestones in gauging the overall popularity in ingredients, Bigelow said. The mega ingredients are those that have widespread acceptance and understanding by the general public: calcium, fiber, fish oil and now probiotics. Niche ingredients like whey protein by athletes are another ingredient milestone; and for several years beta-alanine has been emerging as an ingredient that supports sustained performance. An example of an emerging ingredient is bacopa leaf extract for cognitive health (speed of mental processing, memory, etc.).

Max Maxwell, market analyst, Glanbia Nutritionals, noted another popular ingredientprotein. Protein is hot, he said. People are becoming more aware of protein and the need for more protein in the market. Consumers are recognizing that protein can provide essential nutrients, build and maintain muscle, and aid in satiety. Athletes of all sorts continue to build the demand for not just protein, but high-quality protein. In particular the trend for more digestible proteins is increasing not only for active individuals, but for the aging population.

Sink or Swim

If any industry knows it best, its the natural products industrythe natural food, beverage and dietary supplement marketplace is a sink or swim business. Major food giants have launched new functional foods and failed, while smaller companies have hit the nail on the head. So what makes a product successful? Its hard to say, but a few starting points are marketing, innovation, price and taste.

Marketing. Larger companies introduce a functional product, but market it the same way they would a non-functional food or beverage, Mueller said. The successful ones, whether they are large or small companies, focus more on that functional benefit and what it means to the consumer instead of expecting that the consumer already understands it.

Bigelow added: In my experience, having worked for and with small and big companies; small companies have more liberties and less internal and external restraints than big companies in regard to crafting marketing messages that create reason to believe in their consumer audience. In my experience, many marketing managers are more cautious in marketing big, established brands than are regulatory personnel. Smaller, niche brands provide greater flexibility because the audience base is smaller. In addition, marketing departments can place an over-reliance on market research data, and sometimes need to step back: the market research answers depend on the questions asked in the first place.

As many sectors in the natural products industry are learning, consumers want their experience personalized, and that includes their functional foods and beverages. Personalized nutrition might be the biggest change in the past decade, Maxwell contended. People are more interested in what they eat. Consumer demands have led to the clean-label revolution. People want to know everything about what they eat, minimize chemical additives and even know the source of all elements of their food. Providing the ability to personalize nutrition while balancing all of these issues will be a key expectation going forward.

Consumers dont want to be lumped together with their fellow shoppers. Their needs and wants are differentone size doesnt fit all. Emile Henein, global business manager, Stepan Lipid Nutrition, said: What has changed is the growing trend toward nutritional individualization. Food companies are being careful not to offer one-size-fits-all nutritional advice. Consumer interest in healthy, nutritional strategies to promote weight management or muscle recovery is increasingly in line with the trend to self-manage health. The challenge now is how to bring products to market to be appealing to one group, but without alienating other potential users.

It can be a challenge; but as Hagerman said, Not every functional category will be relevant to every consumer.

Luchsinger added, Manufacturers must identify and be able to target a niche, communicating a specific health benefit linked to a common ailment and substantiate the claims of the benefit. Or they could incorporate multiple desirable qualities into a single product for that niche. He also noted innovative packaging can also help differentiate products in the marketplace.

Innovation. Show them something new and novel or consumers interest may not be piqued. The functional food and beverage industry is highly saturated, so finding an underdeveloped segment could be key for manufacturers keen to hit the mark with consumers, Moon said. Identifying a gap in the market for a product that helped maintain healthy blood circulation, Provexis developed its Fruitflow technology for healthy blood platelet aggregation. The innovation is suitable for a wide variety of applications, and has commercial application in both the U.S. and European markets. Novel concepts and ingredients are really a must in any industry, including this one.

Price. Price point is an issue in every consumer goods market; but, The dilemma with functional foods and healthy foods is that they cost a premium over regular food, Hagerman noted. This is a problem since most consumers are value driven and are very discerning when it comes to what they buy. With this in mind, a functional food has to deliver what it promises to make repeat purchases justifiable.

Maxwell agreed. He said, Long-term success often requires reaching sufficient economies of scale to get to a reasonable cost for all the ingredients and packaging.

According to the International Food Information Council (IFIC) Foundation 2011 Food & Health Survey, price was the number two determining factor to U.S. consumers when making food and beverage purchases. A total of 79 percent surveyed said price was important, a 6-percent increase from 2010.

Taste. And really, at the end of the day, one of the most important factors in a successful product launch is taste. If it doesnt taste good, consumers arent going to eat it. Taste is the cherry on top, i.e., its the number one deciding factor when it comes to U.S. consumers food and beverage purchases, according to IFIC Foundation 2011 Food & Health Survey, with 87 percent of those surveyed stating taste matters.

 The effect a functional ingredient can have on the taste profile of a product is an important consideration when developing new product formulations, Dijkstra said. Theres no doubt about that. Selecting ingredients that are tasteless, odorless and colorless in solution will have little or no impact on the overall organoleptics of a finished product, he continued. This can also help reduce the amount of sugar or artificial flavors needed to ensure a consumer-friendly taste profile. This not only makes it more attractive to the consumer, but can cut down on manufacturing costs as well as the retail price of the finished product.

Hagerman agreed, stating: Many functional ingredients have off-flavors that can deter consumers. So it is very important for these flavors to be addressed.

The functional foods and beverage market is seeing a lot of change and growth. Postmodern nutrition is rejecting the rules and minimalism the industry started with as consumers are demanding more from the foods they eat and the beverages they drink. The overall market is driven by several factors: aging Baby Boomers, condition- and ingredient-specific products, etc., and there are several variables to consider when launching a new product: price, taste, marketing strategy, etc. But one thing is for sure, there are no rules, meaning yogurt can do more then help digestion, it can help regulate weight; shots can do more then boost energy, they can help maintain healthy joints; and the list goes on. Manufacturers need to continue to think outside the bottle (or bar). Think big, think more, think less is a bore.

Editors Note: INSIDERs Market Insight section is designed to give a broad overview of marketing and sales trends in a particular category.