Functional Foods and Beverages

More than 80% of Americans are currently consuming or would consider consuming foods with added health and wellness benefits. Photo by Jeffrey A. Davis Photography.

Since the era of modern processed foods began 70 years ago, consumers have made their food-purchasing decisions on the basis of two key factors: taste and price. Lately, however, a third factor has been gaining in importance: health.

More than 80% of Americans are currently consuming or would consider consuming foods with added health and wellness benefits, according to the International Food Information Council Foundation's (IFIC Foundation; Washington, DC) 2008 Food and Health Survey. The survey, a poll of 1000 adults, found that 62% of Americans consider healthfulness to be an important food attribute. That percentage has remained roughly constant for the past three years.

The baby boom's preoccupation with health bodes well for U.S. manufacturers of functional foods, who have seen the value of their market jump by 63% from 2002 to 2007, according to a May 2008 report by Mintel International Group Ltd. (London). New product introductions during that period multiplied tenfold, as consumers embraced foods targeting the immune system, cognitive health, and weight loss, among other areas.

Inside the Mind of the Consumer
The typical functional foods shopper is an educated person with a busy lifestyle, explains Bill Gambel, director of specialty ingredients at Caravan Ingredients (Lenexa, KS). These consumers are seeking easy-to-prepare good-for-you foods, which contain mostly healthy ingredients, and better-for-you foods, which contain added nutrient offering additional health benefits.

Market research suggests that consumers have several longstanding concerns about their food, their health, and the relationship between the two. About 75% of Americans say they are worried about their weight, according to the IFIC Foundation survey, and 57% say they are actively trying to lose weight.

Because dietary modification is a popular weight-loss strategy, fat is a major concern. In the IFIC Foundation survey, 70% and 68% of the respondents said they worry about the amount and type of fat they consume, respectively. The survey also notes that 91% of Americans are aware of trans fat. In fact, 59% of consumers who read the Nutrition Facts panel on the labels of the products they buy look for information about trans fat content.

Consumers also worry about sugar and carbohydrates, with 69% citing the amount of sugar they eat as a concern. Notably, shoppers are growing wary of alternative sweeteners as well, with 43% trying to avoid aspartame, 45% shying away from saccharin, and 44% trying to skip sucralose. Those figures have remained nearly constant for the last three years. Furthermore, less than half of those who completed the IFIC Foundation survey—44%—thought low-calorie sweeteners can play a role in weight management.

 Good-for-you foods that have been formulated to eliminate extra sugars, saturated fats, and empty calories may go a long way toward addressing these concerns. In addition, better-for-you foods fortified with added nutrients such as vitamins, minerals, probiotics, and fiber may appeal to the 60% of Americans who believe that some foods and beverages can supply multiple health benefits.

Condition-Specific Foods
According to Mintel's report on functional foods, fewer than one in three consumers cite specific health issues as a motivating factor behind the items they purchase. "Marketers who seek a broad and mainstream consumer base for their products are wise to make more general references in their advertising," advises the report, which suggests marketing statements such as "the fiber you need" or "the omega-3 you want." Mintel's research notes that older consumers are more likely to seek out foods for specific health problems, however. Among condition-specific items, top functional food categories include immune health, cognitive health, and weight loss.

Immune Health
The immune health category is in the midst of an exciting expansion, as probiotics, prebiotics, and synbiotics make their way into not only yogurt and dairy beverages, but also juices and—thanks to recent advances in manufacturing technology—baked goods, soups, and coffee.

"Immune health is rapidly emerging as a key driver in functional food and wellness food sales, as consumers are better at understanding the link between nutrition and health," says Joseph O'Neill, executive vice president of sales and marketing at Beneo-Orafti Inc. (Morris Plains, NJ). "Consumers are modifying their lifestyles and diet to help alleviate the pressures of daily life and are willing to purchase products that boost the body's natural defenses and delay or limit the onset of poor autoimmune health."

"We believe the probiotic functional food market is just beginning to take off," agrees Michael Bush, vice president of business development at Ganeden Biotech Inc. (Mayfield Heights, OH). "Consumers want choices beyond yogurt. As more choices become available, the market will continue to grow."

O'Neill notes that consumer education remains a barrier to increased market penetration. But shoppers are growing more aware of the relationship between diet and health.

"Most consumers do not realize that the digestive system is the single biggest immune organ in the body," O'Neill says. "As consumers are becoming increasingly more educated on the importance of digestive function, manufacturers have a significant opportunity to market prebiotic products linking digestive health, inner balance, and immunity."

Beneo-Orafti, which supplies natural prebiotic chicory fibers among other ingredients, has seen its products used in a range of applications, such as baked goods, beverages, cereals, and dairy foods. O'Neill notes that many formulators like to couple the food technology benefits of prebiotic fibers with their health benefits to create value-added products.

"Within the dairy sector, prebiotics maintain good digestive health and help boost the body's natural defenses in cultured, frozen, and fluid dairy applications," O'Neill says. "Other popular applications include extruded, flaked, and puffed cereals. Prebiotics may also be added to refrigerated fruit juice and dry-mix products. Some of the leading food manufacturers in the United States have created brands based on the use of prebiotics and the sound science supporting good digestive health and function."

Ganeden's Bush adds that his company's Ganeden BC30 probiotic ingredient has been used in many applications that are off limits to conventional probiotics. The ingredient is shelf stable and can withstand extremes such as heat, cold, and high pressure.

"We have clients formulating it into baked products, such as muffins and bars; heated products, such as soup, coffee, tea, and oatmeal; and refrigerated and frozen products, such as frozen yogurt and traditional dairy applications," Bush says. For instance, in June, Main Street Gourmet (Cuyahoga Falls, OH) launched a Ganeden BC³⁰-enriched raisin bran muffin called Activate. Moreover, in May, Turtle Island Soup (McHenry, IL) unveiled four varieties of soup containing the ingredient. In addition to Ganeden BC³⁰, the soups also contain omega-3s, CoQ10, and fiber.

Cognitive Health

Kemps Plus Healthy Lifestyle and Healthy Kids contain MEG-3, an EPA/DHA ingredient supplied by Ocean Nutrition. Photo courtesy of Ocean Nutrition Canada.

Immune health isn't the only category that's expanding. Functional foods that are intended to support cognitive health are also enjoying healthy demand. Although well-known ingredients such as phosphatidylserine are slowly making their way into functional food applications, the lion's share of functional food products targeting cognitive health are formulated with the omega-3 fatty acids docosahexaenoic acid (DHA) and eicosapentaenoic acid (EPA). Within the last two years, the number of new product introductions for omega-3s doubled. Moreover, the market research firm Packaged Facts (New York City) estimates that the U.S. market for omega-3 foods will reach $7 billion by 2011.

"In the last couple of years, we have seen a shift toward functional ingredients with a strong scientific background," says Lori Covert, vice president of marketing and communications at Ocean Nutrition Canada (Dartmouth, NS, Canada), which supplies the DHA/EPA ingredient MEG-3. "Omega-3s have benefited greatly from this trend because clinical research supports the use of DHA and EPA for cognitive health."

Covert attributes the tremendous growth of the omega-3 category to three main drivers: the general trend of the healthy lifestyle, baby boomer concerns about cognitive and cardiovascular health, and parental concerns about the developmental health of their young children. Covert notes that research such as the Zutphen Elderly Study and the Oxford-Durham study helped spark interest among baby boomers and parents.

"We see a huge growth opportunity in the future for products positioned for cognitive health," Covert says.

Again, as with the immune health ingredients mentioned earlier, new technology is enabling manufacturers to widen the scope of potential omega-3 applications to foods that were once off limits.

"We have developed an encapsulation technology that allows food manufacturers to include omega-3 in a wide variety of foods so consumers can get the same great taste in brands they love and trust, with the added convenience of improved nutrition," Covert says. "To date, we have included MEG-3 in more than 30 applications, including baked goods, milk, yogurt, bars, juice, and more."

For instance, in June, Maramor Chocolates (Columbus, OH) created a new dark chocolate product with MEG-3 that contains 315 mg of DHA and EPA per serving, demonstrating that omega-3s need not interfere with taste. Furthermore, in July, Right Track Global LLC (Costa Mesa) launched a four-flavor line of nutritional chews called Popumz that provide 100 mg of DHA/EPA per serving. The line, which is cobranded with MEG-3, is sold under the Dr. Sears Family Approved name.

"Our vision is that there will be a whole category of foods that include omega-3 EPA and DHA," Covert says. "Consumers will be able to choose the types of foods and brands their families prefer. This choice will provide flexibility and convenience, plus great taste, so it will be easy for all consumers to access these vital nutrients."

Weight Loss
Weight-loss products are a perennial favorite among consumers, most of whom, as the IFIC survey noted, are trying to lose weight. Although two-thirds of Americans say they are making changes to their diets to eat healthier food, only 52% say they are trying to increase physical activity. Functional foods that can promote weight loss, therefore, are likely to meet a receptive audience.

Despite the high demand, most ingredient suppliers agree that the market for weight-loss products is still in its infancy.

"There's no place to go but up," says Bob Green, president of Nutratech Inc. (West Caldwell, NJ), which supplies the weight-loss ingredient Advantra Z, a patented Citrus aurantium extract. Green adds that the market is growing so fast that the regulatory environment is still catching up.

"Functional foods and beverages are essentially food-supplement hybrids," Green says. "From a regulatory perspective, several issues have been raised as to how to properly market and sell these products—and under what set of regulations they will be governed. The current nebulous regulatory environment for functional foods and beverages will have to be ironed out as this category continues to grow."

John Alkyre, president of AHD International (Atlanta), which supplies the weight-loss ingredient LuraLean, adds that there are other challenges as well, such as the difficulty of educating consumers and the lack of generally recognized as safe (GRAS) weight-loss ingredients. LuraLean is a GRAS form of glucomannan fiber that is free of mannanase, an enzyme that is thought to break down the ingredient and hinder its efficacy.

"Weight control is one of the biggest categories where individuals are seeking out food products to help them manage their condition," Alkyre says. "Although they are showing more interest in learning about the relationship between certain foods and health, that does not always translate into taking the next step and purchasing the product."

"There are also a host of challenges when it comes to developing an ingredient that can easily be used in a diverse array of food applications ranging from breads to soups to drinks," he adds.

Indeed, the wide array of applications available to food manufacturers is one reason weight-loss products are so successful.

"We have developed several grades of LuraLean for use in a variety of functional foods, including high- and low-viscosity beverages, meal replacement bars, cookies, soups, and potato chips," Alkyre says. "Most consumers are aware that fiber can help maintain a healthy digestive system and have heard that increasing fiber in your diet may play a role in promoting weight loss. Manufacturers are aware that their consumers see a benefit in fiber, and as a result, we have experienced a lot of initial success with LuraLean."

JavaFit's Diet Plus Latte contains Advantra Z along with chromium polynicotinate, Garcinia cambogia, and extra caffeine. Photo courtesy of JavaFit.

Similarly, Green notes that Advantra Z can be found in a variety of meal replacements, sports nutrition beverages, energy drinks, vitamin waters, nutrition bars, shakes, and smoothies. AdvantraZ can also be found in functional coffee products like JavaFit’s (Fort Lauderdale, FL) JavaFit Diet Plus Latte. The 100-calorie drink, which contains no trans fat and no added sugar, contains chromium polynicotinate, Garcinia cambogia, and extra caffeine, in addition to Advantra Z.

"We also see an opportunity for Advantra Z to be offered as a nutritional add-in, or booster, at retail smoothie and snack bars like Jamba Juice, Robeks, Smoothie King, and other operations that offer healthy blended beverages and made-to-order foods and snacks," Green says.

Is the Market Saturated?
Mintel's report on functional foods noted that there is an upside and a downside to the proliferation of new functional food products. On one hand, a high number of products is "a boon" for the market, as it helps consumers become more familiar with the functional foods concept. On the other hand, the flood of new entries could lead to the threat of market saturation.

Most functional food ingredient suppliers believe that the nascent market still has a long way to go before consumers get fed up with functional foods. That doesn't mean, however, that there won't be some refinement of the functional food concept.

"There definitely is still a need for products that address consumer needs and wants," says Harshal Kshirsagar, Nutralys business development project coordinator at Roquette America Inc. (Keokuk, IA). Roqette supplies Nutralys, a pea protein used in functional beverages, snacks, and meat products. "Events of the recent past have made consumers acutely aware of the origins of food products and their impact on the environment. In coming years, we are likely to see an increasing preference toward products that are natural and minimally processed, and that have minimal carbon footprints."

"There is still a lot of room for growth for functional ingredients in the weight-control segment," adds AHD's Alkyre. "I think at this point what won't be tolerated are ingredients that do not have legitimate safety and efficacy validation, including clinical research and extensive safety data. The regulations on functional foods are stringent, and the cost to market is high. As a result, manufacturers aren't willing to gamble on an ingredient that has not been proven to work."

Why Consumers Will Pay a Premium

The range of functional food applications has expanded in recent years to include snacks and baked goods. Photo courtesy of Ocean Nutrition Canada.

A successful functional food delivers added nutrition in a convenient package. But that achievement seldom comes without a cost. The financial commitment required for research and development, intellectual property protection, and consumer education often means higher prices for consumers. These expenses pose an important question: Do consumers believe in functional foods enough to pay a premium?

Many consumers will pay a premium for functional foods if they believe they will receive a direct benefit. For example, Caravan's Gambel notes that an expectant mother is more likely to seek out and pay more for products containing folic acid than someone who is not pregnant. The fact that some nutrients, such as certain vitamins and minerals, are abundant in foods and others, such as omega-3s, are more difficult to obtain, can also justify a higher price point, notes Ocean Nutrition's Covert.

"Consumers determine which health benefits are the most important to them and justify the additional cost in exchange for the benefits the products offer," says Ganeden's Bush. "Premium products span across many areas in the market. Consumers show time and time again that they are willing to pay for quality, benefits, and peace of mind."

Helping consumers understand a food’s health benefits usually requires educational and marketing campaigns. "Consumers will pay more when they understand the greater value of the ingredients in functional foods," says Nutratech's Green.

But AHD's Alkyre cautions that marketing health benefits for functional foods can entail a difficult balancing act. On one hand, manufacturers need to avoid marketing benefits that are "so specific that they do not appeal to a general audience." On the other, marketing a product with too many benefits may lead consumers to believe "it doesn't have a distinct purpose," he says.

Further complicating matters is the fact that consumers are willing to experiment with some aspects of their food choices but not others. Roquette’s Kshirsagar notes, for example, that consumers appreciate novel packaging as long as a product delivers the same texture and flavor as the conventional product.

"A successful product, in essence, has to deliver added value without compromising on its familiar appeal," Kshirsagar says. "A prepackaged brownie may be microwabable to give the consumer a desired 'freshly baked' brownie, but the same brownie will still have to feel, look, and taste like a brownie that has just come out of the oven to be considered a true substitute."

At a Turning Point
While more growth lies ahead for the functional foods category, the future remains uncertain. The Mintel report estimates that 48% of consumers bought a functional food within the past three months. But the report also predicts a slowdown in some areas, as consumers migrate to functional foods that target general health instead of condition-specific items. Varying levels of commitment to R&D among manufacturers may also mean that concepts that are not well thought out may not last long. In short, competition for consumers will be more robust and more complicated.

Further complicating matters is the fact that the current consumer preoccupation with issues like health, the environment, and food safety suggest a shift away from some consumer attitudes of the past. This has led the functional foods category to a turning point, says Kshirsagar.

"In the past, taste, flavor, cost, and convenience were the main determinants of success for food products," Kshirsagar says. "The future of functional foods is going to be even more demanding. "Formulators will have to retain the conventional benefits of palatability, cost, and convenience, all while delivering healthfulness and sustainability."