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Functional food and beverages: the outlook.
Forgive us for sounding jaded, but given how long we in the dietary supplements industry have heard pundits herald the rise of functional foods and beverages, we can be justified in concluding that “pharmafoods,” “phytoceuticals,” or whatever you call them are the wave of the future-and always will be.
Then again, maybe functional foods and beverages really are ready to break out. Is the media and marketing chatter just an example of carefully orchestrated hype? “Not at all,” says Michael Bush, vice president of business development, Ganeden Biotech (Mayfield Heights, OH). “Worldwide, there is a growing demand from consumers for functionality, and I think we are just at the beginning of seeing the trend take off.”
But if the functional edibles trend is to stay airborne once it’s in flight-and if we want come along for the ride-we’ll have to shift our thinking from putting pills in a bottle to formulating foods and beverages that consumers want to eat. That requires not only a logical matching of function to form, but an understanding of how to bring formulations to fruition: in bars, beverages, breakfast cereals, and beyond.
Perhaps functional foods still seem such a brave new world to some in the supplements arena because it isn’t always clear where supplements end and edibles begin. “This sounds simple, but anyone watching the activity around the U.S. energy drink market will have seen how difficult it can be to identify [the distinction],” says Russ Hazen, PhD, raw materials and innovations specialist, Fortitech Inc. (Schenectady, NY).
No legal definition for functional foods or beverages currently exists in the United States; by contrast, Congress, in the Dietary Supplement Health and Education Act of 1994 (DSHEA), defined supplements as items intended for ingestion in pill, tablet, capsule, or liquid form-explicitly excluding products represented as conventional foods or sole components of a meal or diet.
That exclusion leads some to apply the “if it walks like a duck” test to distinguishing between supplements and snacks. In other words, as Hazen puts it, “If the product’s primary intent is to quench thirst, it would be a beverage.” And while such seat-of-the-pants assessments are likely to be of little comfort to manufacturers wary of wandering into FDA’s crosshairs, other than hiring a crack legal team-or committing Title 21 of the Code of Federal Regulations (the part governing foods and supplements) to memory-they may be our best strategy for navigating a market where category convergence is increasingly the norm.
That’s what Sam Wright IV, CEO, The Wright Group (Crowley, LA), sees happening in our industry today. “We used to think of telephony, computing, and TV broadcasting as separate industries,” he explains. “But now it has converged into what we call a ‘meta-industry.’” Dietary supplements, functional foods, over-the-counter drugs, and even prescription drugs, he says, are undergoing a similar transformation.
“Is a shot a beverage or a supplement?” Wright continues. “Is glucosamine/chondroitin a supplement or an OTC drug? How about a shake, dissolvable film, or gummy? To a certain extent, the definition has become less important than the consumer benefit being delivered, except from a regulatory standpoint.”
And though we may not have a firm definition for what functional foods and beverages are, we do know what they’re not: run-of-the-mill fortified. As Wright says, “A functional food or beverage delivers health benefits over and above basic nutrition, which is the rationale behind simple fortification.”
So while manufacturers may enrich wheat flour with vitamins lost during refining, or fortify milk with a minimum amount of vitamin D to prevent deficiency, functional foods go for the “extra credit,” delivering nutrients believed to optimize health and wellness. “A functional product may purport to support heart health, mental acuity, digestive health, immunity, energy, etc.,” Wright says, “all of which goes beyond the definition of simple nutrition.”
The concept of deliberately formulating for functionality emerged in 1980s Japan as a government effort to improve the health of the nation’s elderly and stem rising healthcare costs. Unlike FDA, though, the Japanese government established special regulatory status for the products as Foods for Specified Health Use, or FOSHU.
“The Japanese were the innovators in this space,” says Lu Ann Williams, head of research, Innova Market Insights (Duiven, The Netherlands), “and the Europeans were the ‘filter.’ Out of this, functional foods have spread to North and South America.”
She sees the category as standing at a critical juncture, with new health claim regulations in Europe shifting the dynamic in ways that will inevitably ripple here. “I have had Americans tell me that what is happening with EFSA”-the European Food Safety Authority-“is not relevant for them,” Williams says. “But they are wrong. It will have a big impact.”
Whatever it turns out to be, that impact will hit a category already valued at approximately $42 billion in the United States, according to Nutrition Business Journal, compared with the supplement industry’s roughly $30 billion valuation. “Each sector grew around 7% in 2011,” Wright points out, “but functional foods have outgrown supplements by a larger margin over the past decade.”
That bodes well for the category-as does wooing from industry giants. “Major companies such as Unilever, Nestlé, Coca-Cola, Pepsi, and others have made a major commitment to this category,” Wright says. These folks do their homework, and they wouldn’t be bullish on functional foods if they didn’t see potential there. And when you step back and look at the moment we’re in, you realize they’re right.
In its 2011 Functional Foods/Foods for Health Consumer Trending Survey, the International Food Information Council (IFIC; Washington, DC) found that 95% of Americans believe they have some control over their health, while 73% see food and nutrition as playing the most important role in maintaining and improving overall health. Crucially, 87% of those surveyed claim to accept the concept that “functional foods” have health benefits beyond basic nutrition.
This increasing approval belies the notion that functional foods belong in an exclusively LOHAS (Lifestyles of Health and Sustainability) niche. From conscientious moms and their kids to athletes hungry for a competitive edge to “anyone looking to manage an ongoing health condition like osteoporosis or diabetes,” Fortitech’s Hazen says: regular folks are today’s functional foods consumers.
Baby boomers, in particular, will drive growth as they turn to functional foods both for relief from the rigors of aging and for health and wellness optimization. “Unlike generations before them,” Hazen says, “they actively seek products that help manage their changing needs, such as bone and joint health, energy, and nutrition.” Younger consumers, too, support the category because they are “cognizant of the fact that if they take care of themselves now, the long-term health benefits will be realized in their senior years,” he says.
To the extent that functional foods are enjoying widespread appeal, their success shouldn’t be entirely surprising. People love to eat, after all, and if more of them would rather eat an omega-3 muffin than toss back a softgel, functional foods could revolutionize how we deliver supplementary nutrition.
“The problem,” says George Pontiakos, president, CEO, BI Nutraceuticals (Long Beach, CA), “is compliance; the delivery vehicle is everything.” The advantage of functional products is that they deliver supplements in a more palatable vehicle, thus encouraging compliance. And while “there will always be a customer base within the supplement industry that is pill centric,” Pontiakos continues-think bodybuilders, for instance-the general consumer “doesn’t have the time, attention, or discipline to take these supplements on a long-term basis.”
John Sweeney, director of food and beverage applications, Cargill (Minneapolis), agrees. “Consumers are not getting any less busy,” he says, “and functional foods and beverages can provide a portable way to ensure good nutrition.” But the supplement industry shouldn’t mothball its tableting machinery just yet. As Laura Troha, segment marketing manager, BASF Corp., Human Health (Florham Park, NJ), says, “This is not an either/or proposition. There is plenty of room in this emerging market for both functional foods and dietary supplements.”
But achieving message clarity in a crowded-and confusing-media landscape is a headwind facing everyone involved, functional food makers especially. “Clear communication to consumers about the benefits of functional foods or beverages is key to the success of the products,” says Courtney Kingery, marketing and customer development manager, ADM Foods & Wellness Division (Decatur, IL). “But many food manufacturers are still trying to find the right combination of science and lifestyle messaging to communicate benefits and value.”
That messaging must of necessity work to keep consumers’ expectations in check. Products that over-promise and under-deliver not only attract regulatory scrutiny; they sow skepticism and mistrust among consumers-and that’s kryptonite to a growing category. “Manufacturers need to make the consumer aware that their product is not a magic bullet,” Hazen counsels. “The diabetic who consumes a product designed to help maintain blood sugar is not going to get results if he or she is downing a donut or throwing back a handful of jellybeans with it.”
Further, functional ingredients will need a strong research record both to establish their public credibility and to earn regulatory approval. Fortunately, says Richard Mueller, CEO, Biothera (Eagan, MN), suppliers are on the case. “The number of ingredient companies conducting clinical research is increasing,” he says. “Multiple clinical studies on key functional food ingredients broaden the base of evidence in support of the healthy role these ingredients can play in the consumer’s diet.”
It’s not enough for a functional food to make clinical sense, though; it has to make conceptual sense, too. As Troha says, “The optimal word for innovators is concept.” When collaborating on functional food projects, she says, “We first work with our customers to evaluate concepts and solutions that target a specific audience and lifestyle habit, such as snacking. We then move on to identify the best ingredients and formats to deliver that solution, whether it’s a gummy, beverage, or bar.”
Fitting these functional benefits to products involves both art and science, and manufacturers need to learn to recognize which concepts are likely to click and which are liable to clash. As Cargill’s Sweeney points out, “Our experience has been that consumers are most accepting of health claims and benefits when they are part of a product they inherently perceive as healthy, such as yogurt. Twinkies with cholesterol-lowering benefits, even if they qualified for the FDA health claim, would not make sense to anyone.”
Wright cites margarine fortified with stanol esters as another example of a conceptual clash. “Not enough consumers believed that they could lower cholesterol levels by eating more margarine,” he says. “The product form itself was counterintuitive and, in retrospect, may have been better introduced as a softgel supplement.”
Also ding against heart-healthy margarine: Consumers didn’t immediately feel its effects, having instead to wait until their next lipid panel to know if it was working. By contrast, foods and drinks containing glucosamine for joint health, probiotics and prebiotics for digestive health, and natural forms of caffeine for energy “have been very successful,” Wright says, “because the benefits are readily apparent.”
Readily apparent functionality is definitely a plus. But if IFIC’s 2012 Food & Health Survey is to be believed (and there’s no reason it shouldn’t), even functional foods sink or swim on another criteria altogether: taste. Fully 87% of the survey’s respondents named taste as the most important determinant in choosing what to eat or drink, and that’s no surprise to Hazen. “It doesn’t matter what the label claim is or how healthy it is,” he says. “If it doesn’t taste good, it is destined to fail.”
This poses challenges to functional formulators, as the chief functional ingredients are notorious for their sensory drawbacks. “Some ingredients have a taste or texture profile that will need to be taken into account in the overall formulation,” Sweeney says. “Stability is also a concern with some ingredients, especially when they are used in formulas that are overly harsh in terms of acidity or heat exposure, as with pasteurization.” Solubility issues plague some vitamins, minerals, and proteins, and ingredient interactions “need to be understood for a good-tasting and functional product.”
But ingredients are improving as suppliers-keen to see functional foods succeed-overhaul their offerings for improved hedonics and stability in complex food and beverage matrices. “This generally comes down to better tools in the toolbox,” Hazen says, “thanks to improvements in the extraction, taste, or encapsulation of some of these raw ingredients, as well as in more specific specialty flavor ingredients that allow the masking of less desirable flavors.”
Omega-3s provide a great example. “A product that at one time had a reputation for being challenging to work with,” says Megan Gorczyca, marketing manager, DSM Nutritional Products (Parsippany, NJ), “they have really turned a corner. With technology improvements in manufacturing and increased product development know-how, omega-3s have been successfully added to everything from beverages like juices and milks to a variety of foods.”
Similarly, proteins have grown more versatile and palatable. As Mark Smith, research scientist, Glanbia Nutritionals (Twin Falls, ID), explains, “Traditionally, developing mid-range protein beverages”-around pH 4-“or neutral-pH beverages was more difficult because whey proteins were not stable under those conditions. However, with recent advances in whey protein chemistry, we can now produce shelf-stable protein smoothies at pH 4. We can also make neutral-pH, shelf-stable beverages that contain whey protein as the sole protein source.” That allows manufacturers to “provide a wider variety of flavors, packaging, and convenience,” he says.
Palatable proteins, microemulsions, nutrient premixes, encapsulation, controlled release: Ingredient suppliers are cooking up all sorts of delivery technologies to improve functional formulations. And who better to help supplement manufacturers dip their toes into this category than the suppliers who are familiar with its ins and outs?
As Troha says, “We have to think and act like a modern food company. The process can be overwhelming for customers, so we help eliminate the guesswork by offering guidance, from farm to fork. We consider opportunities such as, ‘How can we help improve supply chain and regulatory challenges? What impact does the demographic or regional culture have on the product’s success?’”
Kingery also emphasizes the value of working with food- and beverage-savvy suppliers who “understand the complex interactions between all of the ingredients in a matrix, through production, packaging, and shelf life.” Suppliers can help with analytical services, label claims, and even wading through ingredients’ GRAS (Generally Recognized as Safe) status, too.
“The GRAS process is both a blessing and a curse,” says Hazen. “On one hand, it’s allowed manufacturers to use a wide array of ingredients without the regulatory complications of the pharmaceutical industry.” On the other, “there are still a lot of ingredients that have not gotten a letter of no objection from FDA, and with the self-affirmed option, it can be difficult to perform your own evaluation on the data to back up your claims. This makes building that relationship and trust with your suppliers even more important.”
It’s all about relationships. And if your supplier relationships are strong, they may even reveal to you the secret to functional food and beverage success. “If there is a secret there,” Hazen says, “it’s probably making sure you understand the target consumer and give them a product that they want-not just the product you want to make.”