Nutraceuticals:

  Not all nutraceuticals are well received, however. Take Campbell Soup Company's Intelligent Quisine line of frozen foods. The Camden, NJ-based organization's dietetically balanced meal program was developed for people with hypertension, high cholesterol, or adult-onset diabetes. However, these products weren't available in the frozen-foods aisle of the grocery store. They were delivered weekly by UPS, and consumers needed to follow the plan exclusively for at least 10 weeks to reap the benefits. Campbell's dropped the line after 15 months of test-marketing in Ohio. Consumers resisted being roped into a prescribed menu of high-priced frozen food; they wanted more variety. In addition, the benefits weren't easily measured or understood. They lost interest because improving overall health was not a clear proposition that could be measured and tracked.

  Other nutraceutical products appear to be sheer genius. Tropicana Products, Inc., Bradenton, FL, increased orange juice sales with a product-line extension containing Cincinnati-based Procter & Gamble's FruitCal® - a patented calcium citrate malate clinically tested and shown to be absorbed as well as or better than calcium from milk. Why has this product proven so popular? Because it's a logical and simple proposition. Consumers have been bombarded with messages on calcium's impact on bone density for years. They've understood this message, and are eager to increase their consumption. This was an especially easy switch for consumers who were already drinking orange juice, and presented a new delivery vehicle for non-milk lovers and the lactose intolerant. Tropicana maintains 75% of sales in the calcium-fortified orange juice market - a market that has increased 173% since its 1997 inception, according to the company.

  Growth in the nutraceuticals market is being driven by several factors. Consumers are increasingly informed and aware of the link between nutrition and health, including disease prevention. Lifestyles have changed, with dual-income families trying to balance work and lifestyles. Consumers are seeking convenience for themselves and those they care for - from children to the elderly. Many are seeking the convenient "healthful" solution in a food offering, or as a complement or alternative to medicinal or exercise regimes. Additionally, the current environment of managed health care has forced consumers to take more responsibility for their health care than past generations. Speaking of generations, aging baby boomers are interested in living to 100 - and maintaining their health to the end. In a nutshell, they want it all. And in an era of increasing prosperity, consumers have the disposable income to help add "life to their years."

  Rapid technological advances are turning aspirations for healthy longevity into reality. Within the next few years, the human genome will be completely mapped, which in turn will help identify new targets for drug development and determine an individual's predisposition for specific diseases. New pharmaceutical technologies such as combinatorial chemistry have profoundly accelerated the pace of discovery of new bioactives. Technology has also altered the nutritive value of certain crops. For example, DuPont, Wilmington, DE, introduced a new soybean variety in 1997 that produces oil lower in saturated fat than regular soybean oil. Oil from this value-added high-oleic soybean contains no trans fatty acids, which some studies have linked to heart disease.

  Unlike the mature food industry (1% to 3% annual growth) and the maturing pharmaceutical industry, nutraceuticals are an emerging, highly fragmented market with many players from the food, pharmaceutical and nutrition industries. From Dannon to Novartis to Mead Johnson, these companies have recently launched many new products - from drinkable yogurt to mainstream designer bone, heart, and digestive health foods to calcium chews. Small specialty companies - from sports nutrition bar makers to soy burger manufacturers - have also carved out niches in this market. Still a nascent market with the potential for revenue growth for its players, nutraceuticals are poised to undergo very rapid growth in the coming years.

  Traditional success models have attacked the nutraceuticals market space from a mainstream food and beverage standpoint rather than a clinical perspective. Calcium-fortified orange juice succeeded because it's good tasting, has an easily understood health benefit, and requires no behavior change. Factors contributing to Intelligent Quisine's failure include that it was an expensive, complex system requiring a change in lifestyle - and it didn't taste great.

  Which brings us back to the consumer. For any nutraceutical product to be successful, it must meet four consumer demands: taste, convenience, simple proposition and price. No matter what kind of health claim or benefit a product can offer, if it doesn't taste good, consumers won't buy it. This is the golden rule of all food product development. Consumers may be lured with a promise of great taste and nutrition once, but they won't be repeat customers if their taste demands are unmet.

  Likewise, consumers are not looking to complicate their lives. Products that make consumers' lives easier are more likely to succeed. Americans increasingly are a "hand food" society, grabbing everything from meal-replacement bars to energy drinks. To cash in on this change in eating habits, the Dallas-based convenience-store superstar 7-Eleven recently codeveloped a pair of fortified health drinks with Met-Rx. 7-Eleven has been aggressively replacing soft drinks with "alternative beverages" to the tune of almost 60% of total store volume, according to Brandweek magazine.

  The third consumer demand, simple proposition, refers to consumers' general understanding of the link between a product's bioactive role and its health benefit. If a health benefit is clearly understandable, or if the health benefit is clearly perceptible - such as weight loss or stress reduction, or can be easily measured - such as a product that reduces cholesterol, then the product is much more likely to succeed. Battle Creek, MI-based Kellogg Co.'s cholesterol-reducing line of foods, Ensemble, did not provide a clearly comprehensible health benefit. This 21-item line of nutraceutical foods was recently scrapped after disappointing sales. Ensemble products revolved around a health claim for psyllium - a seed whose husks are high in fiber. While the benefits of oat bran in reducing cholesterol have been well publicized, the average consumer did not fully understand what psyllium was or its health benefits, even though psyllium was one of the first ingredients to receive an approved health claim.

  Finally, history shows that consumers are unwilling to pay a large premium for nutraceuticals relative to their unenhanced counterparts. Johnson & Johnson learned this the hard way. Their cholesterol-lowering margarine, Benecol®, marketed by McNeil Consumer Healthcare, Fort Washington, PA, retails as high as $5.99 per tub. Quite a shock to consumers who find the much cheaper non-nutraceutical brand sitting side by side on the shelf with this premium product. The company even pulled the television portion of its $100 million advertising campaign in response to disappointing sales. They will instead focus their marketing efforts on physicians, who increasingly provide dietary advice to their patients.

  Historically, many companies have approached the nutraceutical market from a disease-state perspective. This meant focusing on diseases that could be treated or prevented through nutraceutical consumption. But this misses a huge slice of the potential nutraceutical pie. Surveys of consumers' health concerns yield some surprising results and bring in a unique perspective: it's not just about disease. Whereas cancer and heart disease are top consumer concerns, so are fatigue/energy and stress. Consumers are particularly interested in nutraceutical products that have an immediate effect on their well being - especially products that give them more energy or make them feel calmer. These performance enhancement and wellness benefits would be missed in a simple disease-state analysis of the market.

  This concept is reflected in the phenomenal growth of the energy-bar market, which has grown into a $500 million category. Initially a product targeted solely at sports enthusiasts, energy bars are now a quick snack or a meal replacement for the everyday consumer. Kraft Foods, Northfield, IL, recently acquired the Balance Bar Company, and Nestlé, Vevey, Switzerland, acquired PowerBar. Kraft plans to leverage its distribution system to make Balance Bars available at grocery and convenience store checkouts. Energy bars meet consumers' perceived need for increased energy, convenience and portability. Historically, these products have compromised on taste, relying on perceived performance benefits to lure athletes. For these products to appeal more broadly to mainstream consumers, the flavor and texture of many energy bars will need to be improved.

  If consumers are seeking a more indirect health benefit, they prefer products that show measurable short-term results. For instance, they want to see their cholesterol level drop, or their weight go down. Even though consumers are concerned about illnesses such as cancer, they're less likely to purchase a cancer-preventing nutraceutical since the payoff may take a lifetime to prove. But if a product tastes good, is basically nutritious, and has a proven health benefit they can relate to - such as oat bran added to cereals - then popularizing the health benefit may incrementally increase product sales.

  Many companies considering entry into or expansion within the nutraceuticals market begin by developing an understanding of consumer needs and the corresponding benefits they seek from nutraceutical products, whether foods or supplements. This often begins by prioritizing and selecting consumer health conditions for development. The overall attractiveness of a consumer health condition is a function of market and technical attractiveness.

  Market attractiveness is driven by many factors: the size of the target population; the breadth of alternative products - prescription, over-the-counter, dietary supplements, nutritional products, or functional foods (the fewer such products, the better); motivation to buy (such as a health condition or a risk factor); awareness of the link between diet and health; and the ability to self-diagnose and self-manage the health condition. Conditions that have clear symptoms (such as stress), or biomarkers (such as serum-cholesterol levels), and for which the benefits are visible in the short term (such as weight loss), would be highly rated. Conditions that generally lack symptoms or require long-term consumption to obtain measurable benefits (such as cancer), would be rated lower.

  Technical attractiveness is a function of strength of science and level of unmet need. Strength of the science is a measure of how well the link between the food or dietary component and the health effect is known and accepted by the medical community. The level of unmet need addresses what currently existing products fail to deliver in terms of efficacy, safety, dose and potentially unpleasant side effects.

  A qualitative ranking system can also be used to judge the attractiveness of individual bioactives targeted for specific health conditions. The two most important factors are the demonstrated safety of the bioactive and the quality of the clinical evidence. The quality of the clinical evidence considers both the type of experiment and the clinical outcome. A multi-arm, double-blind, placebo-controlled, randomized study with a well-defined end point and a large study population represents the "gold standard" for clinical trials. At the opposite end of the spectrum would be nonhuman studies such as in-vitro or animal studies. Bioactives with strong scientific evidence demonstrated by definitive clinical findings in humans - such as significant improvement on a health-related endpoint - that are accepted and published in peer-reviewed journals would be highly rated. Research findings that are suggestive but not definitive would receive lower ratings.

  Other factors that measure attractiveness of bioactives include patent protection, source of supply or availability, stability and other technical formulation issues, and cost. Some bioactives have physical and chemical properties that make them more versatile and suitable for a variety of food products. For example, stanol esters are fat soluble. They work well in margarines, dressings, bars and other fatty foods. But they would not work in fat-free products, such as fat-free yogurt or soft drinks. For some manufacturers who plan to deliver the bioactive in a variety of food formats, its versatility becomes an important consideration.

  At this point in product development, the company looking to compete in a particular arena should have a clear understanding of the market and technical attractiveness of various consumer health conditions and the available bioactives. The next step is to determine how well a particular health condition area fits with the company's current business or future ambitions. Factors to consider include fit with current product portfolio, current competencies, desired regulatory positioning and associated product claims, distribution channels, and time-to-market requirements.

  Defining the need for a new product that delivers a functional, technology-based benefit is critical, given the dismal success rates of new products entering the marketplace. Typical qualitative focus-group approaches to gathering consumer information are partially responsible for the nine out of 10 new food products that fail in the marketplace every year. A more quantitative approach to understanding consumer needs - with links to descriptive attributes that can be measured through sensory analysis - can up the odds of a product's success.

  There are several ways to explore the "fuzzy front end" stage of a product's development. Various methods to do so examine a target consumer group's wants or needs in terms that emphasize descriptive, actionable attributes. One method, IdeaMap® from White Plains, NY-based Moskowitz Jacobs Inc., polls focus groups about conceptual pieces over a range of product possibilities and builds the best overall model by selecting the highest-ranking conceptual pieces. Another process, Arthur D. Little, Inc.'s Product Attribute Elicitation Method, employs consumers to taste a range of products and describe the attributes in their own language. By evaluating the spectrum of product attributes and ranking the most important as a group, consumers themselves uncover the gaps of flavor or texture they would like to have in a theoretical product. Then these consumer data are statistically correlated to professional panel category descriptive data. The value here is in the bridge between what consumers like and what a professional panel scores in descriptive terms, which can then be used by the product development team to identify and optimize the attributes of the delivery vehicle for the chosen bioactive.

  Time and energy spent on the front end of the development process can almost guarantee product success. This is especially true for nutraceuticals, which must provide a clear health benefit while maintaining the satisfaction of a food in terms of flavor, texture, refreshment, satiety, etc. Accurate decisions made early on in the product development process have far more impact on product success. Employing quantitative tools to balance tradeoffs with product form and function will also help balance technology and consumer needs.

  Once the R&D wheels are set in motion, optimizing flavor and textural properties is one of the greatest challenges in nutraceutical product development. Masking off-flavors associated with a multitude of bioactive compounds is particularly demanding. Nestlé's M&M Mars failed in this task with it's much touted VO2Max energy bar. They formulated this antioxidant-packed energy bar for serious athletes. With its bright orange "performance core" full of antioxidants, this product was clinically proven to enhance recovery from strenuous activity. But it failed to deliver on the most important consumer demand - taste. It lacked the sensory characteristics of a market leader, and as a result, after test marketing the bars in California, Mars pulled the plug on its invention.

  The FDA requires appropriate scientific evidence regarding safety before a nutraceutical product containing a bioactive compound can be marketed as a food product. And as those in the pharmaceutical industry know, this translates into longer lead times, larger R&D budgets, and more technical expertise than the typical food company has at its disposal.

  Bioactive compounds and bioactive-containing products also have some regulatory and manufacturing challenges. If a product has an allowed health claim, it must deliver the required dosage of bioactive. For instance, if a product is making a health claim related to soy protein, it must contain 6.25 grams of soy protein per serving. In other cases, primarily supplements, products are sold based on the presence of an herb or compound that consumers associate with a perceived benefit.

  In today's competitive sales arena, standardization for the bioactive is often a source of competitive advantage. But what are the standards based on? In many cases, only the main source of bioactivity has been identified. In the case of garlic, for example, although it's used as a macro-ingredient, the micro-compound allicin, which is a small component of garlic, is most likely responsible for the health benefit. Knowing the identity of micro-compounds and being able to analyze for them is critical to achieving standardization and living up to label claims. Even after developing product specifications and prototypes that contain standardized amounts of bioactive, the compound(s) must be present in the required amount after the appropriate manufacturing processes have been completed. These naturally occurring compounds are often extremely sensitive to heat, light, and other conditions such as pH and metal ions. Clearly, these sensitivities have processing implications, and must be monitored during the development process and prior to reaching the shelves.

  Product stability must be determined prior to combining a bioactive in a food product with other ingredients. This way, precautions can be taken to minimize formulation and processing effects. The polyunsaturated fatty acids (PUFAs) abundantly present in fish oils such as menhaden oil are extremely sensitive to heat, light and metal ions - all of which cause rapid oxidation in the food system and off-flavors. Knowledge of lipid chemistry and oxidation combined with experimental design techniques can help solve the problem. Adding ingredients in a different order and adding fat-soluble bioactives to a more stable oil emulsion prior to processing - protecting them from harsh processing conditions - can eliminate some problems. Saving oxidizing agents until the last possible second in the processing run may also minimize off-flavor development because the exposure to the bioactive is limited during the process. Processing under inert conditions as often as possible will also minimize off-flavor development. A nitrogen blanket, though expensive, may also be worthwhile, but appropriate safety procedures need to be developed and followed.

  After leaving the manufacturing plant, nutraceuticals, like foods and pharmaceuticals, also have shelf-life issues. In order to maintain shelf life, a nutraceutical product needs to maintain stable levels of bioactive compounds. This often requires extensive real-time testing as well as accelerated shelf-life testing to determine the exact shelf life. As is the case with labile vitamins in many products, adding an overage of the most sensitive ingredients may ensure that they will be present throughout the shelf life of the finished product. This is quite acceptable if the safety profile of the ingredient has been well established for the levels in question. But adding a new bioactive at a level that is higher than what has been established as safe mandates testing to ensure that the levels present throughout the life of the product are safe as well.

  On a one-time basis, most nutraceutical products are quite safe, especially when consumed according to a recommended plan. But complications arise when consumers use more than the recommended servings or "doses" of products in a given period of time, or combine a number of nutraceutical products, dietary supplements and/or drugs during that period. Because these products are not labeled as pharmaceuticals, consumers often get lulled into a false sense of security that their ailments may be cured, with little to no risk of side effects or complications. But drug interactions - or other interactions among herbals or other food constituents - are just beginning to be known, and for many products, the jury is still out.

  So what's a food company to do? Many are choosing to partner with other food, nutrition or pharmaceutical companies - particularly those that are interested in marketing products based on sound science as opposed to products based on the "ingredient of the day." However, partnering is no panacea. It too has pitfalls. The most obvious is choosing the right company to partner with.

  Food companies are consumer-centric. They have short product-development cycles, experience in branding and flavor leadership, and sell on a low margin at high volume. They know how to go out and determine what the product needs to look like, feel like, taste like, and how it needs to be packaged for a consumer to like it. What they don't have is large R&D budgets, experience in safety and efficacy testing, proprietary technology, access to multiple distribution channels - such as healthcare professionals - or high value-added products.

  Pharmaceutical companies, on the other hand, are science-centric. They have long product-development cycles that often involve proprietary technologies. They have large R&D budgets and reams of regulatory experience. Their weaknesses are that they lack experience in consumer marketing, they don't have experience in developing palatable consumer products, and they don't have access to food-distribution chains.

  The nutraceutical business has opened the doors for a variety of partnerships that would not have been considered years ago. This has provided entry into new consumer markets, with new value propositions. For food companies, it has provided a means to meet increased revenue targets through increased market share, penetration into new markets, and the potential for higher margins. For pharmaceutical companies, it also provides penetration into new consumer markets as well as a direct channel to leverage their life-science developments through licensing arrangements that enable them to turn a profit.

  Historically, the food industry has been very insular. It has not relied on joint ventures, partnerships or even in-licensing as a source of competitive advantage. For pharmaceutical companies, this has become a core competency and some "life sciences" companies, notably St. Louis-based Monsanto, recognize that it's a way to capture value at all points along the value chain. Monsanto has collaborative agreements with several companies. For instance, in 1997 they paired with InCyte Pharmaceuticals, Inc. to obtain a comprehensive set of genomic technologies. The multi-year partnership provided Monsanto with non-exclusive access to InCyte's full range of genomic and bioinformatic know-how and services for use by all sectors of Monsanto's life sciences businesses. Monsanto felt this would increase the robustness, speed and efficiency with which new products would be created.

  In 1999, Swiss pharmaceutical giant Novartis launched Aviva - a whole line of nutraceutical foods designed to address cholesterol, bone strength and digestive health. While it claimed this was a global brand, Novartis recently entered into a joint venture with the Quaker Oats Company of Chicago to form Altus Food Company. Altus will tap the product development and consumer healthcare skills of Novartis and the consumer food marketing expertise and brand leadership of Quaker. Altus will focus on proprietary ingredients that provide discernible health benefits. They will develop food and beverage products to address the healthcare needs of women, children, athletes and maturing adults. Novartis has further bolstered its market position by in-licensing many of its technologies and bioactive ingredients.

  Food companies are even pairing with other food and ingredients companies to take advantage of complementary skills. In November 1999, Galaxy Foods Company, Orlando, entered into a licensing agreement with Tropicana. Together they will develop a soy-based, lactose-free smoothie beverage containing fruit juice and nutraceuticals. The product, called Tropicana Ultimate Smoothie, will combine Galaxy's soy, rice and oats Veggie Milk® base with Tropicana's fruit juices. The product will take advantage of Galaxy's knowledge of plant-based products and Tropicana's expertise in juices and its extensive distribution chains.

  Nutraceuticals will continue to be a fast-growth area in the coming years. But this fractured market can be difficult to navigate - with many more products doomed for failure than destined for success. The growing nutraceuticals market will continue to be dominated by partnering, joint ventures, and in-licensing. These business models may provide food, pharmaceutical and nutrition companies the tools they need to create successful products.

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