Growth in the UK's functional food and drink market has slowed dramatically and is set to remain modest in years to come, according to a new analysis by market researchers Key Note.
In its 'Functional Foods 2010' market report, Key Note said the value of the UK's market for functional foods grew by an estimated 9.6% in the year ending October 2009, to a value of £1.46bn. This growth rate was higher than that experienced in 2007/2008 but substantially lower than the estimated 22% growth recorded in 2005/2006.
Key Note said the reduction in growth was accounted for by an apparent peaking in sales of yogurt drinks and soy milk, after strong prior growth, and gradually declining sales of cholesterol-lowering margarines and functional breads. Strong growth had, however, been shown by probiotic yogurts and fortified breakfast cereals, resulting in positive growth overall.
Key Note said confusion among consumers regarding the various health benefits offered by products, increased regulation and the economic downturn could account for the fall-off in growth. "The trend in recent years has been to add several functional ingredients to individual products, with probiotic, prebiotic and Omega 3 yogurts and yogurt drinks, or probiotic and cholesterol-lowering yogurts, some of them containing extra vitamins. However, the addition of several functional ingredients has reportedly proved confusing to consumers and some products are now being withdrawn or relaunched.
"Additionally, doubts have been expressed about some of the health claims made by manufacturers, and the European Food Safety Authority (EFSA) is in the process of evaluating all such claims. Those that are not approved by EFSA will not be allowed to be used in promotions within the EU until they are modified or better scientific evidence is provided.
"This factor, coupled with the recession, which has caused consumers to question any purchases of premium-priced branded foods and drinks where discount brands or retailer own-label alternatives are available, has had an adverse effect on the functional-foods market."
The outlook nevertheless remained relatively positive, said Key Note. "The continued emphasis on healthier eating, and the fact that many functional foods are targeted at age-related health conditions — the UK has an aging population profile — will support future growth in sales of functional foods."
Key Note said that over the next five years it expected sales of functional foods in the UK to increase at a rate closer to the conventional food market, with overall market growth estimated at 4.5% to 6.5% per year. It added: "Stronger growth will require new product development in the various market sectors, and this may prove more difficult than in the past, owing to the EU regulations on health claims."