Functional Foods and Beverages: Future Trends

Functional food and drinks is an area of new product development that continues to generate strong interest among many consumer product goods companies. The industry continues to see new and unique ingredients-and health claims-appear, making the idea of developing more functional food and drinks quite compelling.

But where is the market going? Is there room for significantly more new products, new types of claims, and new ingredients? Let’s take a closer look at what’s happening and what’s on the market to try to understand a little better what may be ahead.

According to Mintel estimates, the functional food and drink market is valued at about $15 billion. Mintel categorizes functional food and drink as:

• Products that are enhanced with added ingredients to provide specific health/disease benefits beyond general nutrition, such as aiding digestion or joint health
• Products that have been modified and enhanced through the act of processing (e.g., fermentation of dairy products where the bacteria that cause the fermentation are selected for their health benefits, as in probiotic beverages)
• Products also can bear approved claims from FDA. For example: “Helps lower cholesterol” or “25 grams of soy protein a day, as part of a diet low in saturated fat and cholesterol, may reduce the risk of heart disease,” as well as others that make structure/function claims, such as “Calcium builds healthy bones”

Although functional food and drink sales are quite hefty and have seen exponential growth in the last five years, Mintel does forecast that the rate of growth will slow, especially in beverages. What we see is that consumers are becoming more wary of functional food and drinks. Although our research indicates that 56% of U.S. consumers say they have purchased a functional food or drink in the last three months (reported in 2010), we do know that today they are more careful with how they spend their money and what they spend it on.

In fact, more than two-thirds of U.S. consumers (68%) say that functional beverages should be tested by FDA to make sure they do what they say they do. Clearly, consumers are skeptical. That skepticism is apparent when they are asked if they “feel the difference” after consuming a functional food or drink. According to Mintel, only about 20% say they “feel the difference” when they consume them, and more than 30% say that such products are neither effective nor ineffective.

Nevertheless, we have seen functional food introductions continue to grow. Globally, new product introductions have shown slow but relatively steady increases every quarter for the last several years. The pattern in the U.S. market is similar, but with greater peaks and valleys than what we see globally.

However, it is instructive to dig a bit deeper into exactly what makes up those numbers. When looking at functional food introductions, we see that products with new packaging are increasing, while truly new products or line extensions are decreasing.

The types of products we see on the market tend to be mainly in those “traditional” claim areas, such as digestive health, cardiovascular health, and immune support. However, we do see growth in a few new areas: relaxation, beauty and skin care, and products for seniors.

Looking at those traditional functional categories, we continue to see activity in products that offer some sort of a digestive-health benefit. These products can be ones with added fiber, or ones that use probiotics. The Good Belly brand of probiotic products from NextFoods in the United States has expanded recently to include a coconut water. This product combines the isotonic benefits of coconut water with added probiotic ingredients, thus providing multiple benefits.

When it comes to cardiovascular health, we do see introductions with plant stanols or plant sterols, but it seems that the latest ingredient that promotes cardiovascular health is resveratrol. Resveratrol, an antioxidant derived from red wine, has been appearing in a wide range of products, from juice drinks to dietary supplements. In the United States last year, Preventive Beverages introduced its EVR Resveratrol Antioxidant beverage. This drink contains 30 mg of resveratrol and comes in pomegranate and grape flavors.

Taking a closer look at some of the emerging functional benefits, we see some interesting introductions.

Relaxation products could be seen as the counter-trend to energy drinks. Mainly beverages, those with a relaxation positioning are designed to calm you. They are made with a range of active ingredients, including herbs and amino acids.

One product of note is Lull, a lightly sparkling drink in the UK market. The company says it is designed to soothe the mind and body via its blend of botanical extracts. Those extracts include lavender, hibiscus, green tea, chamomile, lemon balm, lime blossom, and more. The company says the drink does not provide an energy spike and therefore no crash afterward.

When it comes to products for seniors, we continue to see virtually nothing on the market, barring some introductions in Asia. However, it does seem that there is potential in products that are positioned to this large demographic group. Danone, in Poland, has introduced an extension to its Actimel line that is called 50+ and is positioned specifically to consumers over 50. It is enriched with magnesium. Magnesium is linked to bone and heart health, two important concerns for aging consumers. Note that this product is positioned in a very positive way and promotes health and vitality, rather than mitigation of ailments. This approach may make this product a success in the market.

In terms of where we see functional foods going in the future, it seems that the products that bundle claims and benefits together are the ones that stand the best chance of long-term survival. Today, a functional food needs to do more than serve a function. It also has to taste good, have some sort of familiarity consumers recognize, be simple and easy to use, and also be an indulgence. That indulgence factor (in terms of flavor, texture, or positioning) can allow a functional product to bear a premium price and be better accepted by consumers.

Although the new product introductions in the U.S. market have slipped somewhat in the last year or so, we still see unique and compelling new products coming to market. The ones that are likely to do the best are those that provide those range of attributes plus benefits that consumers can feel.