Global Functional Food Trends

The U.S. market for fortified and functional foods and beverages is the largest in the world. In 2008, combined value sales are expected to reach $33.3 billion, accounting for one-third of total global sales. And yet, when it comes to functional food and beverage innovation, U.S. manufacturers take much of their inspiration from other countries. Several trends are emerging in key sectors, some of which could soon migrate to the U.S. market.

Leading innovator markets

The highly populous Asia Pacific region accounts for the biggest chunk of fortified and functional product value sales. In general, consumers in Asia Pacific are not attracted to other health-and-wellness product categories, such as better-for-you foods (e.g., foods reduced in fats and sugar) or organics. The concept of getting—and paying for—something “extra” by means of fortification is much more appealing to them. A similar consumer mindset prevails in the developing markets of Eastern Europe. North America and Western Europe are the other two big markets for fortified and functional foods and beverages.

Japan is at the forefront of innovation, particularly where functional beverages are concerned. Japan is not only the birthplace of daily-dose probiotic dairy drinks (courtesy of Yakult), but of a whole range of innovative drink concepts, including functional bottled water, which is currently enjoying a global boom. The country’s latest functional-product craze is beauty-enhancing foods and drinks. The most-popular beauty ingredients employed by Japanese manufacturers are collagen, ceramide and hyaluronic acid. They are added to a wide variety of products, including yogurt, confectionery and ready-to-drink tea.

Surprisingly, the Western hotbed for functional-food innovation is chilly Finland. Finnish company Raisio Food Group was the first to come up with plant-stanol-enriched cholesterol-lowering margarines, creating Benecol, now the world’s fourth-ranking functional spreadable oils and fats brand. Xylitol, a natural sweetener originally extracted from birch bark, which offers dental health benefits, is also a Finnish discovery and has completely revolutionized the global chewing gum market. Valio Oy, Finland’s leading dairy company, is another top innovator. In Jan. 2008, the company launched Valio Gefilus Max, a dairy drink in 100 ml bottles, and marketed it for “calming a stressed stomach.” The company claims that it is the first such product on the market targeted at the growing demographic of consumers suffering from irritable bowel syndrome.

Dairy domination

The dairy sector tops the global fortified and functional packaged-food market in terms of size, growth and innovation. The sector is also highly competitive, which is why adding value to products by means of fortification is a key strategy for manufacturers.

Probiotic yogurt accounts for over half of all fortified and functional dairy value sales, and cheese is next on the list as a key medium for enrichment with probiotic bacteria. There are already quite a few products by smaller players on the shelves, but the entry of Kraft Foods, the world’s leading cheese manufacturer with a whopping 32% value share of the North American cheese market, is likely to provide a mighty push for the concept. The company has just announced a major change in strategy, and functional cheese is where it is heading. Earlier this year, Kraft announced a tie-in with Swedish biotech company Probi, a leading manufacturer of probiotic bacterial cultures intended for Kraft’s LiveActive range, which includes probiotic and prebiotic cheeses, launched in both Canada and the United States this year.

Functional soft drinks

After dairy, functional soft drinks are the next functional success story. This sector comprises both sports drinks and energy drinks, with a total value (based on retail sales price) of $18.4 billion and $17.8 billion in 2007, respectively. The functional drinks category is one of the few that appeals to image-conscious young men, who are notoriously difficult to target with health-and-wellness messages.