Global Functional Food Trends

The U.S. market for fortified and functional foods and beverages is the largest in the world. In 2008, combined value sales are expected to reach $33.3 billion, accounting for one-third of total global sales. And yet, when it comes to functional food and beverage innovation, U.S. manufacturers take much of their inspiration from other countries. Several trends are emerging in key sectors, some of which could soon migrate to the U.S. market.

Leading innovator markets

The highly populous Asia Pacific region accounts for the biggest chunk of fortified and functional product value sales. In general, consumers in Asia Pacific are not attracted to other health-and-wellness product categories, such as better-for-you foods (e.g., foods reduced in fats and sugar) or organics. The concept of getting—and paying for—something “extra” by means of fortification is much more appealing to them. A similar consumer mindset prevails in the developing markets of Eastern Europe. North America and Western Europe are the other two big markets for fortified and functional foods and beverages.

Japan is at the forefront of innovation, particularly where functional beverages are concerned. Japan is not only the birthplace of daily-dose probiotic dairy drinks (courtesy of Yakult), but of a whole range of innovative drink concepts, including functional bottled water, which is currently enjoying a global boom. The country’s latest functional-product craze is beauty-enhancing foods and drinks. The most-popular beauty ingredients employed by Japanese manufacturers are collagen, ceramide and hyaluronic acid. They are added to a wide variety of products, including yogurt, confectionery and ready-to-drink tea.

Surprisingly, the Western hotbed for functional-food innovation is chilly Finland. Finnish company Raisio Food Group was the first to come up with plant-stanol-enriched cholesterol-lowering margarines, creating Benecol, now the world’s fourth-ranking functional spreadable oils and fats brand. Xylitol, a natural sweetener originally extracted from birch bark, which offers dental health benefits, is also a Finnish discovery and has completely revolutionized the global chewing gum market. Valio Oy, Finland’s leading dairy company, is another top innovator. In Jan. 2008, the company launched Valio Gefilus Max, a dairy drink in 100 ml bottles, and marketed it for “calming a stressed stomach.” The company claims that it is the first such product on the market targeted at the growing demographic of consumers suffering from irritable bowel syndrome.

Dairy domination

The dairy sector tops the global fortified and functional packaged-food market in terms of size, growth and innovation. The sector is also highly competitive, which is why adding value to products by means of fortification is a key strategy for manufacturers.

Probiotic yogurt accounts for over half of all fortified and functional dairy value sales, and cheese is next on the list as a key medium for enrichment with probiotic bacteria. There are already quite a few products by smaller players on the shelves, but the entry of Kraft Foods, the world’s leading cheese manufacturer with a whopping 32% value share of the North American cheese market, is likely to provide a mighty push for the concept. The company has just announced a major change in strategy, and functional cheese is where it is heading. Earlier this year, Kraft announced a tie-in with Swedish biotech company Probi, a leading manufacturer of probiotic bacterial cultures intended for Kraft’s LiveActive range, which includes probiotic and prebiotic cheeses, launched in both Canada and the United States this year.

Functional soft drinks

After dairy, functional soft drinks are the next functional success story. This sector comprises both sports drinks and energy drinks, with a total value (based on retail sales price) of $18.4 billion and $17.8 billion in 2007, respectively. The functional drinks category is one of the few that appeals to image-conscious young men, who are notoriously difficult to target with health-and-wellness messages.

An emerging trend is “functional organic.” It seems that organic is by no means incompatible with the energy-drinks format, as demonstrated by the activities of many smaller players. For example, German company Bat Beverage GmbH makes Mad Bat Bio Energy, an organic energy drink, which uses guarana extract for boosting energy, but which eschews taurine. Swiss-based Groove AG sells its organic Groove Bio Energy Drink in five European countries and is about to expand distribution to Australia, Canada and the United States. The company claims that its product contains caffeine extracted from coffee beans in their natural, unroasted state, which has a longer-lasting effect than the synthetic caffeine found in conventional energy drinks. Now that the concepts of “organic” and “functional” are no longer mutually exclusive in consumers’ minds, and with their growing expectations, the potential for innovation across all sectors is enormous.

Functional chocolate

As expected, fortified and functional confectionery is almost equally split between sugar confectionery and gum, with a major emphasis on soothing sore throats and whitening teeth. A small share is accounted for by functional chocolate confectionery, but it is well worth examining.

In Western markets, where chocolate confectionery has a long tradition as a pure indulgence product, offerings that are in any way seen as “adulterated” with ingredients that “should not be in there,” tend to be rejected by consumers. This does not stop even larger and experienced manufacturers from bravely bringing novelty ideas into the marketplace. In 2007, Swiss chocolate confectionery giant Barry Callebaut introduced its probiotic chocolate with a big fanfare. The company was keen to emphasize that chocolate is an excellent carrier for probiotic cultures, ensuring the delivery of up to four times as many live probiotic bacteria into the intestinal tract compared to those consumed with dairy products. It also pointed out that the addition of probiotics to chocolate did not affect the taste of the product.

All very promising, but what is the likelihood that consumers will accept probiotic bacteria in their chocolate?

The probiotic yogurt boom has undoubtedly revolutionized the dairy sector, but probiotic cultures are essential when fermenting milk. Without them, yogurt would simply not exist. Cocoa beans do undergo (bacterial) fermentation at an early stage in their processing, but live probiotic cultures, arguably, have no place in the finished product. U.S. consumers, who were initially reluctant to embrace the probiotic concept compared to those in Asia Pacific and Western Europe, might be unlikely to embrace such a product.

The best business opportunities for functional chocolate exist in markets where chocolate does not have a long history of consumption, and Japan is a good example of such a market. Half of the 2007 global value sales (around $250 million) of fortified and functional chocolate confectionery were generated in Japan.

Because chocolate is not a traditional food in the Asia-Pacific region, Japanese consumers are not in the least bit purist about putting different ingredients into their chocolate. Bourbon Corp’s Cacao Power brand includes a CoQ₁₀ variant, and the country’s most-popular functional chocolate is Mental Balance Chocolate GABA from Ezaki Glico Co. This product contains gamma-aminobutyric acid (GABA), which allegedly exerts a calming effect on the brain. It comes as chocolate pearls in a tub, perfectly designed for sitting on the desks of overworked individuals.

While this is by no means a comprehensive account of the many vibrant trends coursing through the global functional food and beverage market, it does draw attention to some interesting global developments, highlighting the importance of cultural perception on consumer acceptance of a product, as well as the key role played by effective targeting of specific population segments.

Simone Baroke, based in London, is a nutritionist by training. She has worked for Euromonitor International (euromonitor.com) for three years as a health and wellness analyst, and is also currently studying for her master’s degree in food policy.