Functional ingredients: lessons learned

Functional foods and bioactives represent the first time significant amounts of technology have been brought to bear in what has always been a low-tech industry — and the industry is still struggling with this new and unfamiliar world, according to author and editor of trade journal New Nutrition Business, Julian Mellentin, in the new report, Failures in Functional Foods: 10 Key Case Studies & 10 Key Lessons.

In a section on ingredients, Mellentin references high-tech marketing guru, Geoffrey A Moore, who notes that at an early stage in the commercialisation of a new technology, companies encounter a 'chasm' in the market between the early adopters and the rest of the market. Technology can either stay in the niche on the early-adopter side of the chasm, or it can attempt to bridge the chasm to access the mass market.

For many functional-ingredients technologies, the dietary-supplements market represents the niche, early-adopter market, while the food and beverage industry represents the larger-opportunity mass market.

"Having said that," Mellentin writes, "at this stage in the evolution of functional foods, many functional-food and beverage brands also still sit in the niche area and have yet to cross into the mainstream market. The challenge for each company is to discover exactly how it should cross the chasm. This is usually the area to which technology companies pay least attention, and rely on their own assumptions about the speed and pace of technology adoption and growth forecasts based on questionable market data. As a result, according to Moore, the majority of technologies fail to cross the chasm and many simply tumble into it, never to be heard of again."

Novartis Aviva Life is a brand that "started out with a message, technology and pricing suited to the early adopters, yet attempted to jump straight into the mass market, only to slip and fall." The misconception that the mass market is ready for explosive growth is another trap into which many companies fall. "In practice where growth does occur for new technologies, it's for very specific products in very specific circumstances and usually happens much more slowly than most business plans anticipate."

1. Hard health claims are not essential.
2. Market a relevant benefit.
3. Brand relevance is important.
4. It's not possible to have 'complete ranges' - brands only stretch so far.
5. Differentiation through packaging design can achieve price premiums.

1. Have the science to substantiate the benefits.
2. Dominate a niche and expand from there.
3. Plan for commoditisation and falling prices.
4. Don't be a me-too producer.
5. Avoid me-too benefits.

Source: Failures in Functional Foods: 10 Key Case Studies & 10 Key Lessons More information:

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