Trends in Functional Food and Beverage Marketing

Being part of the functional food and beverage movement is sort of like journeying with Indiana Jones to find the Arc of the Covenant. You never know what is around the next corner, and you are trying desperately to reach the destination before the competition. A simple walk down the beverage aisle of Whole Foods says it all. The sheer volume of functional beverage entries is both staggering and intimidating. And a bit frightening, since probably 50 percent of those brands wont be on the shelf one year later. Its definitely a fight for survival. Functional food brands have not yet proliferated to the extent that functional beverages have, but it wont be long.

Consumers have clearly stated they want their health and wellness to result primarily from what they eat and drink; it is not a huge leap to assume expanded growth for these once niched market segments. Increasingly, consumers are looking for foods that are naturally functional. Several significant, relevant trends are making waves in these growing categories.

Functional foods and beverages represent roughly a $37 million category in the U.S. retail market. 2009 growth slowed a bit vs. 2008, primarily recession driven, and saw the discontinuation of many slow-moving entries. That said, the functional category is outpacing traditional food and beverage sales in the United States. So the first trend to note is brand proliferation followed by a shakeout of slow movers. This is already happening within the beverage sector, and foods will follow suit as the number of entries expands.

Next, whether its foods, beverages or supplements, its all about condition-specific applications. Increasingly, consumers are shopping based on specific and identified health needs. They are smarter and are honing in on personal-health issues and potential solutions. Some of this more targeted shopping behavior is recession driven; but, even beyond that, consumers are looking for a more focused approach that allows them to assess results and health improvements or lack thereof. The most dominant health conditions at this point in time include energy/performance, healthy aging, immunity, digestion, cardiovascular, joint support, weight loss and diabetes.

As mentioned earlier, there is a high failure rate in this category. In fact, it is estimated roughly 80 percent of new functional products fail in the marketplace. This is largely due to inadequate promotion, inadequate consumer and trade education (just because it is a food, dont assume consumers will readily see the added value or be willing to pay more for it), and the fatal flaw of introducing what is basically an undifferentiated me too product (how many energy drinks can the market support?). Despite increased creativity and innovation in the sector, dont expect this pattern to improve anytime soon. If anything, risk will increase as the category proliferates.

However, there are still some very hot ingredient categories. Literally hundreds of undiscovered fruits are hidden in the rainforests of the world, so dont expect the superfruits trend to subside anytime soon. Americans are enamored with these healthy superfoods. Next on the horizon are sea buckthorn berries (beauty), yacon (diabetes) and camu camu (immunity). At the same time, antioxidants continue to be the belle of the ball, primarily due to increased consumer awareness and demand. Shoppers may not know what antioxidants are, but they know they are good for health and wellness. Likewise, the other power players in functional food and beverages continue to be fiber, soy or whey protein, omega-3s and probiotics/prebiotics. Finally, expect to see spices and seasonings emerge as functional ingredients over the coming months. Also keep an eye on tart cherries, which boast some impressive research on gout/arthritis treatment.

At the same time, mom research supports what we all suspect. She is totally overwhelmed with food choices and making the right decisions for herself and her loved ones. Generally, the fewer ingredients on the nutrition facts panel the better. Keep it simple is the new mantra. Are we listening?

And dont go thinking because consumers are seeking greater functionality in the foods and beverages they consume, that taste is a secondary consideration to performance. Successful brands must deliver on both great performance and great taste. Delivery on those two key benefits has been the driver behind the success of functional brands like Corazonas in recent years. The old adage if it doesnt taste good, nothing else matters is still true.

Finally, companies must walk the talk. Its important to remember product education in this category is in its infancy. Consumers may talk about eating healthy and making better food choices, but that doesnt always translate to purchase behavior. The more customers know about a products health benefits and clinical support, the more likely they are to embrace the brand.

In summary, functional foods and beverages is definitely a category to watch over the coming years. Consumers are clamoring for new products and are looking to food first for enhanced nutrition and functionality. Soon demand will exceed supply. Get busy.

Jeff Hilton is partner and co-founder of Integrated Marketing Group, Salt Lake City, a marketing and branding agency. He has been recognized by Advertising Age as one of Americas Top 100 Marketers and has more than 28 years of experience, including 17 years in the natural health products industry. For more information, visit IMGbranding.com .