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December 1, 2005

Price and perception hampering functional and organic foods

Functional and organic foods are considered two of the most dynamic segments of the global food industry. Yet new research shows that price, uneven distribution and plain scepticism are still holding both back, as Catherine Sleep reports.

Functional and organic foods are considered two of the most dynamic segments of the global food industry. Yet new research shows that price, uneven distribution and plain scepticism are still holding both back, as Catherine Sleep reports.

For several years functional foods have been hailed as the saviour of a lethargic food industry, in developed markets at least. Fortified with added vitamins or supplements and promoting specific health benefits, functional foods quickly rose to prominence, spearheaded by category giants such as Yakult, Benecol and Actimel. In recent years any number of new and me-too products have hit the market. Some of the less substantial or poorly marketed have fallen by the wayside, but the category as a whole remains full of promise.

However, it seems that many consumers have yet to be convinced of the value of functional foods, as a global ACNielsen survey conducted on the Internet across 38 countries indicates. ACNielsen asked consumers which of a list of foods promoting specific health benefits they purchased:

  • Cholesterol reducing oils and margarines;
  • Fermented drinks containing ‘good’ bacteria;
  • Yoghurts with Acidophilus cultures / probiotics;
  • Soy milk;
  • Milk with added supplements/vitamins;
  • Bread with added supplements/vitamins;
  • Whole grain, high fibre products;
  • Cereal with added folate;
  • Fruit juices with added supplements/vitamins;
  • Iodine-enhanced cooking salt.

Among these ten major food types, only four were bought regularly by at least a third of shoppers. Another four would not be considered by over one third of shoppers, and two have never been heard of by one tenth of consumers.

Across the globe, it seems that consumers in South Africa, Brazil, Chile and Mexico are the most convinced of the value of foods promoting health benefits. In South Africa in particular, the share of regular buyers of healthy foods ranks the highest across six out of ten of the surveyed food types. Latin America boasts the highest number of regular buyers of ‘iodine enhanced cooking salt’ and ‘milk with supplements/vitamins’. Latin America, along with Asia Pacific, also ranked the highest in purchasing ‘fermented drinks containing good bacteria’ and ‘soy milk’ (see table below).

click table to enlarge

Despite generally high awareness of various healthy foods among consumers globally, the survey shows there are certain die-hards, especially in Europe, who have never bought foods of this kind nor never even heard of them. Of all markets surveyed, Denmark had the highest number of people who, startlingly, claimed never to have bought nor heard of ‘soy milk’ (94%), ‘milk with supplements/ vitamins’ (94%), ‘bread with supplements/vitamins’ (83%), ‘fruit juices with supplements/vitamins’ (60%), and ‘iodine enhanced cooking salt’ (90%). South Korea ranked highest of people having never bought nor heard of ‘cholesterol-reducing oils and fats’ with 69%.

“As the findings indicate, lack of awareness, availability or even credibility are real barriers to the purchase of these functional food products and the health benefits they promote,” commented Bienvenido Niles, regional president, ACNielsen Asia Pacific.

On average, about a third of consumers in the four regions surveyed didn’t believe they really offered additional health benefits as they claimed. The distrust was the greatest in Asia Pacific, Europe and in South Africa towards fruit juices, while North and Latin Americans questioned oils/margarines that claim to lower cholesterol levels.

Organic advantage

Clearly there remains much work to be done on explaining the benefits of these fortified products. When it comes to another type of healthy food – organic foods – the situation is somewhat different. Around the globe, organic alternatives are purchased mainly for health reasons. Over two thirds of survey respondents think that organic foods are healthier for them and their children. This healthy perception is consistently strong across Asia Pacific.

Europeans seem to be more conscious of the wider benefits of organic foods, such as protecting the environment. Nearly a fifth think organic foods conserve the environment, and 12% cited kindness to animals as the key reason for purchasing organic alternatives. However, in other regions, less than a fifth of consumers are aware of the environmental benefits of organic foods, and even fewer cited animal protection.

When it comes to barriers to purchasing organic alternatives, high prices are the biggest problem for one third of internet users in Asia Pacific and over 40% of Europeans and North Americans. Across Latin America and in South Africa, availability is said to be an issue. Interestingly, lack of availability prevails over lack of credibility as a reason for not purchasing organic foods globally.

The general sense among consumers who wouldn’t buy organic products is that they were usually more costly. “There is an opportunity for marketers to find a positioning for foods claiming health benefits to be credible and not prohibitively expensive”, Niles commented.

“Manufacturers and retailers must also understand the geographical differences in terms of acceptance and perception of organic food. For example, in Asia Pacific, perceptions of price of organic foods is more a challenge in eight out of 13 markets studied, while in Thailand and China, in particular, credibility turned out to be the major consideration”, he added.

Among the variety of organic foods, ‘eggs’ (32%), ‘vegetables’ (29%), and ‘fruits’ (28%) were the most popular food types attracting most regular buyers. At the other end of the scale, organic types of beverages, delicatessen and tea products were the least purchased by most consumers around the world.

Find out more about just-food’s Global market review of functional foods, with forecasts to 2010

 

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What’s the forecast for the food and grocery industry?

The food and grocery sector thrived during the pandemic, largely due to the shutdown of the food service industry and the sector’s subsequent necessity, panic-induced bulk purchasing, and spending more time at home. The market has grown as a result of inflation. Consumer unwillingness to go out and socialize, and the reopening of several hospitality facilities, helped maintain the demand for groceries, particularly online, in 2021. As consumer behavior changes, we consume more food and drink at home, and inflation increases basket sizes. GlobalData predicts that the sector will continue to hold a higher share than had been predicted prior to the pandemic. This is true despite the fact that the food and grocery sector's share of overall retail will decline from its peak in 2020. This report will discuss market forecasts and key themes in the global food & grocery industry in 2022 and beyond. It covers:
  • Market drivers and inhibitors
  • Five-year forecasts and the impact of COVID-19
  • The performance of the online channel versus offline
  • Major trends in the market including rapid delivery, ambient retailing, supply chain disruption, and inflation
Assess developments within this sector to help your business thrive in 2022 and beyond.
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Enter your details here to receive your free Report.

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