Functional foods are routinely cited as a top trend shaping the future of the food industry, but what are they, really? A grab-bag term that can include everything from genetically modified tomatoes to cholesterol-lowering margarines to juices laced with ginseng and echinacea, functional foods can be devilishly difficult to define. After all, what food isn’t in some way “functional?” Maybe that’s why estimates of functional food sales in the United States range from US$4bn to more than US$200bn.
Not surprisingly, consumers are confused. While most Americans are aware of the link between diet, nutrition and health (studies consistently show that 90-95% of consumers recognize that foods can have health benefits or costs), less than 25% are aware of the terms functional foods and nutraceuticals. Even fewer can correctly define these terms.
This low level of awareness is due in part to the industry’s treatment of functional foods compared to conventional foods. Unlike other health-based segments, such as natural/organic, GM-free, and low-fat, there are no grocery aisles dedicated to functional foods, nor do they come with a “certified functional” label.
At Promar International, we define functional foods broadly to include “dietary supplements, as well as foods and beverages that claim or suggest to consumers specific health benefits beyond basic nutrition, including preventing or curing a disease.” Excluded from this definition are dietary supplements consumed in forms atypical of foods such as capsules, tablets, and tinctures. So, we consider Celestial Seasoning‘s line of wellness teas to be a functional beverage, but Centrum Herbals are not, although both are regulated as dietary supplements.
Market growth
Using this definition, Promar estimates that the market for functional foods in the United States was approximately US$18bn in 1999. At least as important as the size of the market is its strong growth rate. Over the past decade, the year-to-year growth in sales of functional foods has outpaced that of conventional foods and supplements by twelve and three percentage points respectively.
This rapid growth is fueled by a unique market synergy: the combined effects of a favourable regulatory environment, entrepreneurial manufacturers with new products (or new ways to sell traditional ones), and consumers searching for ways to improve their health. Since none of these forces seems likely to fade away, the functional food phenomenon could well be a permanent part of the food market.
The changing consumer
Of these three forces, changing consumer attitudes will ultimately determine the fate of functional foods. Promar believes that today every US consumer is a functional food consumer. Our market size estimate includes mainstream products such as fortified cereal and orange juice supercharged with calcium that have nearly universal household penetration. Thus, neither consumers nor manufacturers need to view nutraceuticals as engineered products creating a brave new world of energy bars and gels.
Demographic shifts
Changes in the age profile of the US population will dramatically transform consumer attitudes toward food. Two age-related demographic shifts are noteworthy. First, the US population is getting older. The median age of the US population is set to increase from today’s 35.7 years to 37.2 years in 2010, primarily as a consequence of the aging of the prominent Baby Boomer cohort. Second, children of the Baby Boom (known as the Echo Boomer or Generation Y), will make up almost 25% of the population by the end of this decade.
Consumer concern about health is nothing new. However, the intensity of health concerns will increase as consumers get older and are faced with both the prospect of treating chronic illness and the day-to-day challenges of aging. Echo Boomers, who have grown up with the idea that foods can heal, will be more receptive to functional foods than prior generations as they begin to head households of their own.
Marketing foods to address consumer concerns about health is also nothing new. Coca-Cola was originally positioned as sort of a turn-of-the-century performance beverage with its tag line “After exercise, drink Coca-Cola.” Today, consumers are more sophisticated and adhere to a new set of beliefs about the relationship between food and health. For food marketers, three concepts will shape consumer acceptance of functional foods: self-care, wellness, and alternative medicine.
Self-care movement
Loosely defined, self-care refers to consumers’ efforts to take more responsibility for their own health. Under self-care, consumers essentially opt to “self-treat” their illnesses or prevent future illnesses through a host of conventional and alternative remedies. Self-care practices range from simple modifications in diet and exercise to taking over-the-counter drugs and dietary supplements.
The prescription model of healthcare, in which a doctor prescribes medicine to treat a disease, has lost its lustre among consumers in recent years, largely due to perceived inadequacies in the conventional healthcare system. With 40 million Americans lacking health insurance today, many consumers are simply priced out of participation in the prescription model. Even those with health insurance are often frustrated with the conventional healthcare system, which is seen to be more concerned with managing costs than providing patient care. The self-care movement means that more and more consumers are taking action and being proactive about their future health.
From health to wellness
Over the past five years “wellness” has come to replace “health” in the vocabulary of most of those analyzing food and other health-related industries. More than just a change in terminology, wellness reflects a fundamental shift in how Americans approach staying healthy. Previously, nutrition (the science of matching food choices to health maintenance) was one of several isolated components involved in pursuing a healthy lifestyle. Nutrition had a limited focus: consuming the Recommended Daily Allowances and limiting intake of cholesterol, fat, sodium and other “bad things.” Exercise was also viewed as autonomous, having little to do with nutrition or the pursuit of mental health and happiness.
In contrast, today’s consumers are more aware of the interrelationships between different aspects of health. Under the wellness paradigm, people take a more holistic approach to health and different aspects of well-being. “Eating right” now includes choosing foods that not only provide adequate nutrients but also support mental acuity, physical performance and traditional medical treatments.
Alternative medicine
By “alternative medicine,” we refer to therapies and products that have gained popularity in the past 20 to 40 years, even though many may be centuries old. In addition to physical therapies, such as acupuncture and massage, alternative medicine also includes the use of herbal and nutritional supplements to treat the symptoms of disease. While many practitioners and adherents of alternative medicine doubt the efficacy of foods containing these ingredients, the link between these nutraceutical ingredients and health have been established in the minds of consumers.
The future of functional foods
In another decade the first Baby Boomers will be in their sixties and their children, the Echo Boomers will be thirty-somethings. Both groups will look to food manufacturers for “functional foods” – not as novelties but as standard items. And as the process of adding unusual and functional ingredients to food products becomes routine, the term functional food will diminish in importance.
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