Datamonitor’s new report, ‘Food as Medicine’, reveals that the functional food/nutraceuticals market has grown by £205 million in the UK over the last four years. As consumers become increasingly interested in health, many are turning amateur physician, choosing to self medicate or find a stop-gap solution to their medical problems through their diet. The industry will need to fully substantiate product claims to overcome consumer concern and ensure future success for the market.

The traditional function of food is promoting general well being, whilst assuming a generally preventative role against disease. Pharmaceuticals on the other hand are used to actively cure or control specific medical conditions. ‘Food as medicine’ products tend to be found in the middle ground, assuming functionality that is mid-way between pharmaceuticals and the traditional function of food. The growing popularity of food as medicine products is evidenced in the figures, with a £205 million increase in sales between 1995 and 1999.

UK functional food market value, £m, 1995-1999

Categories 1995 1999 *CAGR 95-99
Functional Breakfast Cereals 643 701 2.2%
Functional milk and yoghurt 74 107 9.7%
Functional fats and spreads 6 7 6.0%
Functional confectionery 409 444 2.1%
Sports and energy drinks 130 191 10.1%
Vitamin and mineral supplements 133 150 3.1%
TOTAL 1395 1600 3.5%

Source: Datamonitor *CAGR = compound annual growth rate

Health is becoming a more important aspect of food

Consumers increasingly see the link between food and health, thus generating growing levels of consumer interest in more actively managing their diets and, by implication, their health. This more calculating consumer is making increasingly conscious buying decisions based on product attributes such as origin and production methods, percentage of recommended daily allowance of essential vitamins and minerals and levels of fat and sugar. An aging population in Europe and the US is another key factor in building long-term momentum for the ‘food as medicine’ concept. In the US and most European countries the population growth rate of the over 50s will increase by one or two percent per year. The population of under 50s will show little increase or slight decline.

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Increased Health Awareness Sees Consumers Taking Control

Driven by increasing levels of mainstream health-awareness, concern about modern lifestyles and the desire to look and feel good, while living longer, healthier lives, consumers are taking increasing interest in the concept of ‘self-medication’. This increased knowledge of health issues, coupled with increasing time pressure, means that consumers will seek to look after their own well being on a daily basis, buying products that either maintain their health, or prevent health problems in the first place.

Functional foods are looking to achieve increasingly ambitious goals, from maintenance of the digestive system and prevention of osteoporosis to mental and physical performance enhancement and cholesterol reduction. Often, the role of ‘food as medicine’ is in compensating for excesses or deficiencies that occur elsewhere in a typical ‘western’ diet. For example, vitamin and mineral fortification is necessary where the diet contains insufficient variety fruit and vegetables. Equally, cholesterol reduction often becomes necessary through lack of exercise and a diet that is overly rich in saturated fats. However, performance enhancers and products aimed at mental well being achieve functionality beyond the traditional capability of food. Modern functional food products are becoming more like pharmaceuticals, with more targeted effects and greater effectiveness in controlling medical conditions.

Lifestyle vs. Medical Products

The market for ‘food as medicine’ is split into two parts – lifestyle products and products that address medical issues. Medical products, such as Benecol, are concerned with controlling or reducing the risk of important medical conditions such as high cholesterol, diabetes, heart disease and cancer. While medical issues are a clear application for food with active ingredients there are also many ‘lifestyle’ opportunities. In particular, people look to foods to maintain their sense of physical and mental well being, to help in appearance and presentation issues and even to boost mental and physical performance.

Performance enhancement is one of the key lifestyle issues related to ‘food as medicine’. Consumers look to their food to provide general good health and well being in order to maintain consistent mental and physical performance rates. However, there are important occasions when people want to push themselves beyond their usual limits. This should not be considered a new phenomenon as athletes have always chosen meals that contain plenty of protein and carbohydrate and students often work through the night before an important deadline aided by a jar of coffee. This is now becoming a hot topic, however, as new drinks and foods are available that are more effective.

The development score so far: Lifestyle 1213, Medical 317
The rate of development of lifestyle products is certainly faster than for medical. Datamonitor tracked the launch of 1,530 ‘food as medicine’ products across Europe and the US over the last twelve months. Only 317 of these were classified as medical products and the remainder targeted lifestyle issues. But this oversimplifies the situation – many lifestyle products are simply ‘low and light’ or vitamin fortified. However, an increasing number of products such as Raiso’s Benecol and Novartis‘ Aviva address medical issues, using active ingredients and demanding a heavy price premium.

The future is bright for differentiated medical and lifestyle products
Future opportunities for differentiated products are equally prevalent in both lifestyle and medical issues, but the influence of pharmaceutical companies may encourage the continued emphasis on medical issues in the short-term. In the longer-term, Datamonitor expects to see rapid growth in the number of differentiated products within the fashion driven lifestyle sector. Mental well being, for example, seems to be a particularly attractive and growing market.

Targeting Consumers: Routine Vs. Occasion

Recently launched in the UK by Novartis, the Aviva range of foods is targeted at bone, heart and digestive health. The range includes everyday products such as cereals and juices. Providing a whole range of medical foods that fit well into the consumer’s daily routine means that the manufacturer is able to establish a relationship with the consumer.

This will prove a successful strategy, as many consumers want to feel as though they are contributing to their general well being by eating functional products on a daily basis. Manufacturers are also targeting consumers on an occasion basis, with lifestyle products that suit a particular circumstance or tackle a particular problem such as overcoming tiredness or combating moments of depression.

Both food and pharma companies want to make ‘food as medicine’
Food as medicine is a new topic that does not lie perfectly within the expertise of either food companies or pharmaceutical companies. For food companies, ‘food as medicine’ represents an opportunity to create value-added products. Consumers are willing to pay a premium for products that are differentiated by offering proven health or performance benefits. High margins may be available for products that use effective patented ingredients to address the issues that worry consumers most. Benecol have been relatively successful in Europe with their cholesterol reducing spread that retails at seven times the price of other margarine products.

For pharmaceutical companies, the ‘food as medicine’ concept offers the advantage of a new distribution channel for their technology, allowing them to adapt pharmaceuticals that are already patented and proven to be successful. In addition, functional foods require shorter development time and much lower investment than pharmaceuticals.

Food-pharma alliances are in the best position to take market share
It is very likely that successful ventures will be the result of alliances between food and pharmaceutical companies. It will be difficult for a food company without experience of the pharmaceutical industry to introduce the most effective functional foods. Similarly, it is relatively difficult for pharmaceutical companies with no experience in this area to develop and market retail foods – from mass producing tasty food and negotiating with retailers, to promoting the product to the consumer.

‘Food as Medicine’: No Shortcuts to Success

Datamonitor food industries consultant, Hugo Ehrnreich comments: “There has been a temptation to get to the marketplace quickly by creating a product and making insufficiently substantiated claims about it. Lack of discipline by manufacturers in making well-supported health claims has been at the core of most functional disappointments in the past, and has eroded consumer confidence. One of the most important changes in the functional market has been the realisation by major food manufacturers that there are no shortcuts to sustainable development of the opportunities it offers. The testing required to meet traditional safety guidelines in the food industry is not enough. Functional food success requires the type of strategic long-term commitment to the search, identification and clinical testing of ingredients that the ingredients and pharmaceutical industries are known for.

“According to many manufacturers, the barriers to development in the functional foods market has been difficult and ambiguous regulation. In reality, in the past, some manufactures have not made enough effort in either testing the products or educating the consumer by providing the evidence necessary to convince them of product benefits. Given that regulation is unlikely to change in the short term, successful functional food ventures will have to work closely with the regulatory bodies. Without evidence of clinical trials and tests, manufacturers will leave their products defenceless in the face of criticism and rumour and will very quickly lose credibility not only for their own products, but for the entire industry.”