Spaniards are striving for better health, creating a booming market for food manufacturers, and one that is demanding constant innovation. Christiana Benkouider explains
Unlike Italy or France, the Spanish diet has never had the same global reputation for being naturally healthy. Yet with its strong Mediterranean roots, the country is, in reality, at the fore of some of Europe's most innovative and exciting health and wellness trends. According to the latest research by Euromonitor International, the Spanish functional and fortified foods and beverages market reached sales of $2.3 billion in 2005, up seven per cent on the previous year's retail figures. Functional packaged foods lead the way with value sales of almost $1.8 billion in 2005, but with functional drinks enjoying 11 per cent growth from 2004-2005, the sector is also very dynamic.
Euromonitor International's research suggests that functional packaged foods and beverages sales will climb to $2.9 billion by 2009, a gain of more than 26 per cent on 2005 figures. Functional drinks are predicted to see sales of $595 million by 2009, with continued growth dependent on ongoing product development. Spanish consumers are growing accustomed to frequent new functional product launches and food manufacturers are capitalising on the growing awareness of the potential health benefits offered by functional ingredients.
Spanish lifestyles have undergone dramatic shifts in recent years, many of which have coalesced to make functional foods and drinks an attractive option for those seeking to improve their health. Like many developed countries across Europe and the West, obesity has become a critical public health problem for the government. In 2003, the Spanish Department of Health estimated that 20 per cent of the population were obese, a significant rise in just two years.
To combat this, the Department of Health developed a strategic plan to reduce the prevalence of obesity in 2004. However, not just weight is rising, but also the number of people affected by high blood pressure, cholesterol, stress and heart disease. Chronic conditions such as coronary heart disease not only place a financial strain on national health services, but also pose specific lifestyle challenges to those affected by them. With a rapidly ageing population — 17 per cent of Spaniards were over 65 in 2004, a number expected to continue to climb — the proportion of people living in ill health is also set to rise.
Because people are living longer, they are taking a more active role in their own health and well-being. Spaniards work some of the longest hours in Europe and, as a result, are increasingly turning to self-medication, preventive measures and functional foods and drinks. Research and investment in functional ingredients is heavily supported in Spain, and manufacturers have been quick to take advantage of consumer interest in the sector.
In 2005, Euromonitor's research shows that 18 per cent of the nation's dairy sales were fortified or functional products, with more than 40 per cent of yoghurt falling into this significant health and wellness category. In addition, 21 per cent of milk sales were from fortified and functional products. Chart 2 shows that dairy products represented 85 per cent of total fortified and functional foods sales in 2005, and Euromonitor International expects this dominance of dairy in Spain's functional foods market to continue into the forecast period (2006-2010). Not only is the dairy sector the centre of functional ingredients innovation in Spain, but it is also the sector demanding constant innovation.
Functional dairy leaders
The functional dairy sector is led by Danone, CAPSA and Ebro Puleva. With fortified and functional yoghurt seeing value sales growth of eight per cent in 2005, innovation is clearly still driving an increasingly saturated market. Spaniards have often been the first to experience functional dairy product innovations. Yoghurt and milk with added omega-3s was popular in Spain well before it hit other parts of mainland Europe. Indeed, so far advanced is the market that even the probiotic ranges that have helped position Danone as the market leader in functional dairy are now being enriched with fibre.
Added fibre has been big news across numerous food sectors in 2005, as consumers have been keen to reap the heart and intestinal health benefits associated with fibre-rich foods. In the US, whole grains have quickly become a staple functional ingredient thanks to their endorsement by the USDA Dietary Guidelines in 2005. Manufacturers such as Nestlé and Danone have quickly transferred this message to the Spanish market, with fibre-enriched yoghurt 'with cereals' the latest member of an increasingly specialised and segmented dairy sector.
Danone's launch of its cholesterol-reducing yoghurt drink Danacol has also been well received in Spain, where diets high in saturated fat have inevitably led to health concerns. The small-bottle format is already well known in Spain and familiar from probiotic drinks such as Yakult. Pro-Activ's plant sterol-based drink claims to reduce cholesterol if consumed in the correct amount as part of a healthy lifestyle. This idea has quickly appealed to time-poor Spaniards.
With dairy products an important part of the Spanish diet, it is logical that the sector should have received the most attention from research and development teams. This is more the case today than ever before, as value sales are suffering at the hands of cheaper private-label versions of functional products, and consumer attention spans shorten. Subsequently, consumer expectations for dairy products continue to raise the bar, presenting manufacturers with a heady challenge. Luckily, the pressure hasn't seemed to diminish Spanish manufacturers' leadership in this sector.
Earlier this year, Ebro Puleva announced that it would be the first in the world to sell a fermented dairy probiotic product with bacteria strains derived from human milk. The product, to be sold under the Max Defensas label, claims to be able to boost the immune systems of 4-12 year olds and thus is aimed at parents. It contains two probiotic strains — Lactobacillus gasseri from human milk and Lactobacillus corynformis from goat's cheese.
The research was undertaken in collaboration with the Universidad Complutense de Madrid, and took seven years to complete. The product is unusual among probiotics in that it is the first to include strains not from intestinal samples. The Hereditum strain identified by Ebro Puleva is the first of its kind and identical to that passed from a mother's to her baby's immune system.
The new strain may also have strong potential for use in infant formulas. This is expected to be the next big growth area for functional products and, in particular, the dairy category. The use of probiotic strains from human milk for adult-centred products is slightly more contentious, and is expected to take impressive marketing combined with conclusive scientific trial results to persuade consumers.
Industry experts predict that the probiotics market still has huge potential for growth, despite the large range of products already available. However, consumer choice may also inhibit growth by confusing and blurring categories. Consequently, product differentiation has become an important brand strategy. Euromonitor International forecasts that value sales of functional and fortified dairy products will still continue to grow to 2009, albeit at a much reduced pace.
Keep them coming back
The functional foods and drinks market in Spain is well-developed and rapidly reaching saturation. Growth rates, although still impressive, have slowed from their highs in 2002-2003. Functional foods, and in particular the dairy sector, have seen huge investment in new product development as manufacturers struggle to retain share in an increasingly crowded marketplace. Competition is leading to price-cutting, and global giants such as Danone and Nestlé are in a tight race to develop products that address consumer needs. Consumer knowledge is rising, and a strong tradition of science-based advertising to sell health and wellness products means that people have strong expectations for quality and delivery when it comes to health claims.
The Spanish functional foods and drinks sector is well placed to respond to a demanding consumer base, but needs to be on its toes. Anticipating, rather than responding to needs and demands, is the first rule of functional ingredient development. Keeping unit prices high is perhaps the biggest challenge in the saturated functional dairy market. Offering a unique product based on innovative ingredients could well be the key to sustaining consumer interest.Christiana Benkouider is responsible for Euromonitor International's global Health and Wellness research programme, which monitors the market for functional, organic, 'better for you' food intolerance and naturally healthy packaged foods, beverages and supplements.