View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Analysis
February 28, 2011

The just-food management briefing – Functional foods – An innovation opportunity

The functional food market is currently worth around US$22.92bn globally, and is expected to grow year-on-year by between 3% and 5% over the next five years, according to Leatherhead Food Research forecasts.

The functional food market is currently worth around US$22.92bn globally, and is expected to grow year-on-year by between 3% and 5% over the next five years, according to Leatherhead Food Research forecasts.

As previously stated, growth in the sector is being driven by new product development (NPD), principally the extension of existing brands with healthier or functional variants by major food manufacturers. NPD and innovation will continue to be clear drivers for the market going forward.

The news last October that PepsiCo would be creating a “global nutrition group” aimed at delivering “breakthrough innovation” across a number of better-for-you product areas including functional foods represents just one, albeit prominent, example of a trend being seen to varying degrees across the entire food market.

That functional foods are now big business is underlined by PepsiCo’s statement that it plans to grow its nutrition businesses from about US$10bn in revenues in 2010 to US$30bn by 2020. Brands such as Quaker and Tropicana already boast high-profile functional range extensions.

Extending existing lines not only taps into consumer sensibilities over health and helps to reinforce brand presence. It also clearly represents a premiumisation opportunity for major food brands.

However, as the functional market develops, competition intensifies and consumers become inured to products bearing purported health benefits, some analysts believe premium-pricing may become more difficult for brands to justify. “Research shows that consumers are likely to pay a premium for foods they believe are healthy and will provide them with a health benefit – if they can see immediate results. For those new innovations not offering immediate benefits, competitive pricing is imperative,” Future Directions for Functional Food, a report from Leatherhead Food Research, states.

However, the most salient issue affecting the future of the functional foods sector is the debate over health claims. While there has long been concern among campaigners that legislation regarding health claims on functional foods is lax, recent regulatory activity in Europe and the US suggests there could be some tightening of controls in the foreseeable future. As the same report from Leatherhead Food Research, concludes: “Regulations are likely to become stricter and only health claims with strong scientific backing will be permitted for use or can be endorsed.”

As the regulatory environment is likely to become tougher, the challenge for food marketers will be to live within those strictures and market their products inventively but legally. The introduction of limitations on what brand marketing can say about the ‘science’ of their products could in theory lead to greater marketing ingenuity around functional foods as brands seek to attract consumers and differentiate themselves. The future progress of the sector will therefore to a degree be defined by the balance between scientific accuracy and marketing creativity.

As the market matures, consumer knowledge – and scepticism – will also become an increasingly influential factor. In fact, consumer scepticism is already a critically important issue for marketers of functional foods to address.

The centrality of the health claims issue is often characterised in terms of consumers being misled by deceptive or exaggerated claims. In terms of its negative impact on reputation, this does represent a threat to producers of functional foods. However, an equally worrying factor for producers is that many consumers do not believe the claims at all.

A report on the probiotic sector published by just-food states that one of the chief obstacles that functional food producers need to tackle is the “high degree of consumer scepticism” about health claims. As the market has developed, consumers are becoming increasingly demanding of more robust evidence to back up claims, the report states.

Research by the EU Commission suggests that 77% of European consumers do not trust health and nutrition claims made by food manufacturers on their products. In a survey of UK consumers’ attitudes to functional foods commissioned by business research company Key Note last year, 51.9% of respondents said they did not tend to believe the health claims made by manufacturers.

In the US, around half of the population find health claims on food either confusing or misleading, while only a minority are believed to pay much attention to them when shopping for food, according to the just-food probiotics report. In Australia, only around 25% of people firmly believe the health claims on functional foods, the same report states.

General product reformulation may also have a bearing on the progress of the functional food market. As there is increasing demand from consumers, campaigners and policymakers for food in general to be made healthier, functional foods may have to work harder to differentiate themselves. However, as constraints may be made on what brands can and cannot claim on packaging and advertising this may not be easy to achieve.

Once again, this makes the current debates over the way functional food health claims are verified and communicated critical in assessing how the category may develop.

In the obesity debate, the industry always claims there is no such thing as unhealthy foods, only unhealthy diets. That may or may not be a valid point. However, while they may claim that no food need be branded “unhealthy”, when looking at it from the other way food companies are happy to identify functional offerings as decidedly more healthy than others. Whether this seems a contradiction or not may depend on one’s point of view but there is no doubt that an important and expanding sector of the food market is founded on precisely that premise.

Free Report
img

Innovation Update Q2 2022: Meat and Meat Alternatives

Meat alternatives continue to push boundaries, as companies explore 3D printed, plant-based, and precision fermentation-based alternatives. As a result, shoppers are more open to experimental formulations that introduce new flavors to meat products, blur traditional food categories, or swap in new ingredient types. It is vital for their development that retailers acknowledge this range of emerging trends during these increasingly uncertain times. Brands must continue to understand how consumer needs and desires change, and offer a range of products that reflect the world around them, therefore developing purchasing and consumption decisions. Exciting non-traditional formulations are hitting the market - following the trajectories and target audiences of these launches will help other brands find their niche. Consult our report on Meat and Meat Alternatives, from the collection of >17,000 reports on GlobalData Explorer, to:  
  • Understand the current market dynamics of the Meat and Meat Alternatives Sector
  • Assess strategies implemented by companies to better penetrate the market
  • Understand the key themes in the market that these companies and their respective products appear to be targeting
  • Marketing / Advertising strategies being used by these players for specific products
  • Other segment-specific analysis (packaging, design, flavors etc.)
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

Related Companies

Free Report
img

Innovation Update Q2 2022: Meat and Meat Alternatives

Meat alternatives continue to push boundaries, as companies explore 3D printed, plant-based, and precision fermentation-based alternatives. As a result, shoppers are more open to experimental formulations that introduce new flavors to meat products, blur traditional food categories, or swap in new ingredient types. It is vital for their development that retailers acknowledge this range of emerging trends during these increasingly uncertain times. Brands must continue to understand how consumer needs and desires change, and offer a range of products that reflect the world around them, therefore developing purchasing and consumption decisions. Exciting non-traditional formulations are hitting the market - following the trajectories and target audiences of these launches will help other brands find their niche. Consult our report on Meat and Meat Alternatives, from the collection of >17,000 reports on GlobalData Explorer, to:  
  • Understand the current market dynamics of the Meat and Meat Alternatives Sector
  • Assess strategies implemented by companies to better penetrate the market
  • Understand the key themes in the market that these companies and their respective products appear to be targeting
  • Marketing / Advertising strategies being used by these players for specific products
  • Other segment-specific analysis (packaging, design, flavors etc.)
Don’t miss out on key market insights that can help optimize your next investment – read the report now.
by GlobalData
Enter your details here to receive your free Report.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Friday. The industry's most comprehensive news and information delivered every other month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Just Food