Organic Functional Food The New Niche Frontier?

Can a product be both functional and organic? In the first of a two-part special, Lynette Thwaites reports on US products which can legitimately claim to be amongst the pioneer organic functional foods and considers the marketing implications.

With a few notable exceptions, organic brands in the US are still struggling to find a fast, effective way to convey key organic values to consumers. What happens when you add functional attributes to an organic product? Are you in danger of sending consumers into information overload? Or are you helping to highlight your product in a sea of specialty niches in which a single point of differentiation is simply no longer enough?

According to Nutrition Business Journal's (NBJ) market research on both these food sectors, the organic food market reached $5.8 billion in consumer sales in 2000, up 19% over 1999. Meanwhile, US sales of functional foods reached $16 billion in 1999 or 3.3% of the total food market of $474 billion, with annual growth forecast at 8-9% for the next four years.

Clearly, both organic and functional foods look very attractive, and a few companies have set out to prove it's worthwhile to combine the two propositions in a premium-priced product — hoping to touch several hot buttons in the health-conscious consumer.

Organic And Functional Breakfast Cereals
Organic dry breakfast cereals comprised a $282 million retail market in 1999 (2.9% of total cereal sales), rising to $344 million in 2000, according to NBJ. Breakfast foods is also one of the first organic categories to feature functional attributes beyond traditional fortification.

Nature's Path Foods, the leading US manufacturer of packaged certified organic breakfast cereal, reports stellar growth for its Organic Optimum Power Breakfast Cereal, launched a year ago for the "active lifestyle" consumer. This is a product that fires on all cylinders. Not only is it organic and non-GMO, it also contains additional bran, soya and wheat fibre, protein, flax seed for omega 3s, soya threads, tocopherols, folic acid, vitamins A, C, B12, calcium, and iron. Despite premium pricing compared to its simpler flaked cereals, growth is strong, according to the company.

Golden Temple sells breakfast cereal made with organic ingredients and botanical extracts, including echinacea, ginger, green tea, and ginkgo under the Peace brand.

Although they are primarily natural product retail brands, Nature's Path and Golden Temple both enjoyed high double-digit growth in the mass market in 2000 as their cereals crossed over into supermarkets, according to scanned data.

Imagine Foods, a pioneer of natural and organic beverages and foods, is best known for its Rice Dream non-dairy beverages. This year, Imagine started marketing Organic Power Dream Soy Energy drinks to athletes and fitness enthusiasts. According to focus groups conducted by Imagine, athletes perceive food as fuel.

Unfortunately, it appears the average jock doesn't know enough to care whether it's healthy fuel, and is just as likely to reach for a cola. Imagine's strategy is that by educating athletes about the benefits of organic food (a consumer group that should be health-aware) they will eventually reach a broader circle of fitness-conscious consumers.

Imagine planned to market Organic Power Dream Soy Energy drinks with a direct-to-consumer print advertising campaign in such magazines as Runner's World, Men's Fitness, Sierra, and others.

On a smaller scale, 100% certified French Meadow Bakery, which has been producing organic breads since 1983, reports that its fastest selling loaf is Woman's Bread, a relatively new functional item containing 7gms of protein, 5gms of fibre and 40 gms of soy isoflavone in each slice. The specialty loaf retails for around $5.99. Despite the premium price, French Meadow says that mainstream supermarkets are expressing more interest in its functional-organic loaf than its lower-priced organic loaves.

All The Benefits Of Soya
Clearly, the easiest type of organic foods to market as functional are those that are intrinsically functional without having to provide additional fortification. Soya milk is probably the best example, thanks to the 1999 US FDA approval of a heart health claim for soya protein.

Organic non-dairy beverages (soya, rice, nut, oat) comprise one of the largest organic food categories in the US, with sales of $316 million out of total sales of $510 million in 1999. The largest portion of this non-dairy category is soya milk; most leading brands are made with organic soya beans, giving non-dairy beverages the highest penetration rate of any food category at 62%.

Seeking differentiation in a sea of soya milk, many brands now have additional fortification, such as Vitasoy's Enriched Original, featuring extra calcium, riboflavin, zinc and vitamins A, D and B12, for example. However, the refrigerated Silk soya milk brand by White Wave, which carries a 100% organic label on the package, is the powerhouse for the soya milk category.

Following on the coat tails of Tropicana, the first brand to add calcium to packaged orange juice, organic marketers including Horizon Organic dairy and Organic Valley are selling fortified citrus juices.

One quintessential functional food unlikely to be manufactured in organic form any time soon is energy bars. According to Brian Powell, a former Balance Bar executive and co-founder of new company allGoode Organics, energy bars generally have a base of soya protein isolate, which is made from soya beans using a process that involves solvents and is not organically certified. Believing that the energy bar category has been "commandeered by science," allGoode launched a 100% organic energy bar made only from food ingredients, without additional fortification, in the belief that added functionality runs counter to the philosophy of organic food as "whole" food.

Although the organic-functional products discussed here seem to have been well received, herein might lie the rub for marketers: Does deconstruction and reconstruction of functional food products fly in the face of the unadulterated approach to food (and life) that seems to be a central premise of organic?

In the United States, multinational corporations jumped much quicker into the functional food fray than into organic products, thanks largely to the soya health claim. However, creating a functional food can also be less trouble than launching an organic food, which requires the construction of a whole new supply chain. Marketing a functional food may also be easier. Ask any consumer about the health benefits of calcium and you probably stand a reasonable chance of getting "stronger bones" somewhere in the answer. The meaning of organic still stymies the average consumer. Most Americans don't even know that they have federal organic standards.

However, with the October 2002 compliance deadline approaching and regulatory stability somewhat assured, multinationals are preparing to expand their investments in organic food, certification agents report. It's the next food niche frontier. And who's to say that it won't intersect with the concept of functionality as well?

Nutrition Business Journal's 400-page report, The US Organic Food Industry 2001, is now available, in addition to market research reports on Functional Foods, Dietary Supplements, Sports Nutrition, and M&As in the Nutrition Industry. Visit for information.

NBJ is based in San Diego, California, USA

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