Natural Foods Merchandiser

Customers thirst for functional beverages

Has the functional foods mania peaked? After years of frothy growth that far outstripped the pace of conventional products, experts like Patrick Rea, research director at Nutrition Business Journal, say that last year saw comparatively tepid growth in the functional foods category because consumers turned their limited attentions toward low-carb diets.

In the long term, of course, greater consumer appreciation of links between food and disease or health may bounce back and benefit functional foods.

In 2003, functional foods accounted for approximately 4 percent of the total $555 billion food market, according to NBJ?s report, ?Healthy & Functional Foods.? The functional foods sector saw $22.7 billion in sales in 2003, and has averaged 8 percent to 10 percent annual growth for five years.

Within the functional foods category, beverages are one of the fastest-growing segments, accounting for more than 50 percent of total sales. Functional snack sales have traditionally outpaced beverage sales, but Rea says sales of low-carb snack bars stopped growth of the functional snack category in its tracks. When the numbers for 2004 are compiled, he believes they will show that functional snack foods? growth dropped from 12.8 percent in 2003 to perhaps 1 percent growth last year. Since functional snacks still only make up 10 percent of all functional food sales, the decline in their growth rate should not have a huge impact on the overall functional food growth rate.

The function of functional
What constitutes a functional food? NBJ acknowledges that there is no consensus on the topic, but for its purposes defines functional foods as ?food fortified with added or concentrated ingredients to a functional level, which improves health and/or performance, or products marketed for their ?inherent? functional qualities.? Examples include fortified drinks, cereals, snack foods, breads and baby foods.

In an April 11 article, ?Foods With a Health Boost,? BusinessWeek described functional foods as products containing ?natural nutrients in higher-than-natural concentrations.? The story cited new high-visibility functional products, including Yoplait Healthy Heart yogurt with naturally occurring plant sterols, scientifically shown to inhibit cholesterol absorption, and Logic Juice 4 Joints with glucosamine and chondroitin, designed to ease joint pain.

Though Yoplait may get its functional fix the natural way, plenty of functional products use synthetic chemicals that would be out of place on the shelf of a natural foods store. ?Functional generally means not natural,? cautions Rea. He says that although functional ingredients can be natural (ginseng, for instance) he has not seen much crossover between the two categories. For example, Red Bull is considered a functional product. The drink is marketed as capable of enhancing performance, concentration, vigilance and emotional status. But Red Bull contains a range of artificial ingredients; the company?s own Web site couldn?t be clearer on that point, stating, ?All ingredients used for Red Bull Energy Drink are synthetically produced.?

Clearly, functional does not always equal natural. The NBJ report says, ?Natural and organic food has not always been regarded as the easiest match for functionality, which often requires additional processing.? Nonetheless, because a product?s organic or natural qualities may not be enough to win the eye of a health-conscious consumer in today?s competitive marketplace, naturals companies like Hain Celestial have begun adding natural plant sterols to their products in order to add the heart-healthy claim to their packaging, according to the NBJ report.

Please, no fortified cheese
Opportunities for growth in certain functional food categories seem stronger than in others. The Hartman Group, a consulting and market research firm in Bellevue, Wash., found that while 72 percent of surveyed consumers consider functional juices acceptable, half of the respondents said they would not like vitamins or minerals added to cheese. The fortification of juice with functional ingredients may have plenty of social currency because for the last decade, consumers have been stepping up to juice and smoothie bars, guzzling concoctions blended with functional extras. ?Products that have a history of being ?added to,? ?adjusted? or otherwise ?messed with? have more permission to claims of functionality in the minds of consumers,? says a recent Hartman Group report.

Though many functional foods may now be fortified with synthetic chemicals, consumers prefer fortified foods that are or appear to be natural, according to The Hartman Group. In a January survey, Hartman found that the top five functional additives in products consumers purchased were calcium, vitamin C, fiber, protein and vitamin E.

?Understanding the subtleties of consumers? ideas of ?naturalness? presents a serious challenge to those wanting to get a piece of the functional food market,? says Laurie Demeritt, president and chief operating officer of The Hartman Group, in a message to the food and beverage marketing industry. Demeritt?s warning to general marketers may be a call to action for naturals retailers. It seems that the natural foods industry is best positioned to benefit from consumers? twin desires for foods that are simultaneously functional and natural. Since most functional foods do not fall into the naturals category, those manufacturers and retailers that fit the double niche should be poised for success.

Aaron Dalton is a New York-based freelance writer.

Natural Foods Merchandiser volume XXVI/number 7/p. 28, 32

Click here for more on functional foods.

Most Functional
According to research from NBJ, the top three functional food categories in the United States are:

  1. Soft drinks (soda, bottled water, Gatorade), $5.27 billion in sales
  2. Dry breakfast foods, $4.18 billion
  3. Snacks and bars, $2.3 billion

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