The global embrace of healthy foods and Functional Ingredients is driving the nutrition industry. Larger suppliers focus on quality, while smaller outfits carve out niches in trendy ingredients. In this, the second annual Functional Ingredients market overview, Todd Runestad surveys the status of every major ingredient and category
The global raw materials-supply market has undergone significant changes in the decade since the heady North American supplements-market peak of 1998. Since then, while supplements from vitamin E to St John's wort have declined sharply in sales, functional bioactive ingredients have found new homes in foods and beverage delivery systems, and newer ingredients such as probiotics and omega-3 fish oils have picked up much of the slack.
The upshot is a maturing US supplements industry pegged at $22 billion and growing at 5.4 per cent — a rate consistent with where it's been since the double-digit growth times of the late 1990s. At the same time, US functional-foods sales are growing at 10.2 per cent in a market valued at $31 billion, according to Nutrition Business Journal (NBJ).
According to a 2007 report from market researchers The Freedonia Group, who define categories somewhat differently from NBJ, world demand for nutraceutical ingredients is forecast to advance 5.8 per cent annually to $15.5 billion in 2010. In that year, these compounds will serve a projected $197 billion global market for nutritional preparations and natural medicines. Freedonia asserts the best worldwide growth opportunities for nutraceutical ingredients will emerge in soy isoflavone proteins; the functional-foods and beverage additives lutein, lycopene, omega-3 fatty acids, probiotics and sterol esters; the essential minerals calcium and magnesium; the herbal extracts garlic and green tea; and the nonherbal extracts chondroitin, glucosamine and coenzyme Q10.
Based on sales, there's no question that omega-3s and probiotics are enjoying phenomenal growth, and the same holds true for organic anything, with joint-health stalwarts glucosamine and chondroitin remaining strong sellers — representing nearly half of all dollar sales of nonherbal supplements in the US — with relatively little new growth, indicating mature ingredients.
For suppliers and manufacturers, then, success seems to be predicated on playing in a preferred category — and not getting stung by quality scandals that are being aided and abetted by the new Adverse Events Reporting law and Good Manufacturing Practices (GMPs) regulations. Other factors at play include uneven supply quality from China (and increased costs there as the country strives to improve its environmental, quality and safety performances), spiking energy prices, and increased demands on commodities such as corn by the emerging biofuels industry.
Prevention of specific chronic-health conditions is the leading reason people purchase dietary supplements.
Demographics; the healthier, optimal-living trend; and disenchantment with the hyperexpensive, pharmaceutical-based Western medical paradigm are powerful drivers creating growth opportunities for raw-materials suppliers and product manufacturers alike. Government regulations and pronouncements (health claims and more) also spur growth. Innovation continues to be a strong driver. And the cornerstone of the industry is scientific research to validate nutrients' efficacy on the range of health conditions.
Related to GMPs is the 800-lb gorilla in the room — China — the subject of withering condemnation over a broad cross section of goods supplied to the rest of the world. Nutrients have not been touched by scandal, yet, but the fear is leading the nutrition industry to ratchet up its due diligence of suppliers and, no doubt, has executives crossing their fingers a bit more tightly these days.
Organics continue to sell in double-digit growth rates — a steady 13 per cent growth rate over the past four years, says NBJ. And rising energy costs are eating into profits, though by and large have not had an effect on consumer prices — suppliers and manufacturers say they are, so far, eating the costs.
While vitamins and minerals remain the mainstay of the greater nutrition industry, omega-3s, probiotics and superfruits are the nutrients of the year.
Vitamins and minerals
In the US, total vitamin sales for 2006 were up 4.9 per cent, while mineral sales were up 2.1 per cent. US multivitamin sales continued their upward trajectory — every year registers a modest uptick — and sales were valued at $4.3 billion in 2006. But behind these modest gains are clear winners and losers. Vitamin A and carotenoids, for example, are up 21.6 per cent, according to NBJ data, and vitamins A and D sales in the mass market are up 13.4 per cent, according to IRI data, while vitamin E has continued its decline, down 10.1 per cent. On the minerals side, after being touted as the next big thing for the past few years, magnesium has finally arrived with growth rates up 18.8 per cent. On the flip side, chromium is down 7.7 per cent. Vitamin E: As ever, the mainstream media plays a significant role in either blessing or blaming nutrients — a fickle and confounding variable. The fall-off in vitamin E fortunes — at $395 million in 2006 sales, about half its 1999 high of $850 million — is owed in particular to the power of the media. Many in the industry cry 'foul' — not to mention 'Big Pharma conspiracy!' — when the media distorts study results.
Case in point is the infamous 2005 meta-analysis that cratered vitamin E sales to less than half its 1999 high of $850 million.
"The dietary-supplements market has been badly affected over the past two years by what many consider low-grade and manipulative evidence formats such as the meta-analysis," asserts Mark J Tallon, PhD, author of the '2007 Dietary Supplement Outlook Report' from Business Insights.
"The criteria of selection for these reviews of evidence can heavily bias the outcome, leading to headlines that do not reflect the totality of evidence. Recent examples have included glucosamine and high-dose vitamin E," Tallon says.
Another major study, published in August 2007, reported no difference between vitamins E, C or A, and placebo on cardiovascular-health markers. However, when researchers looked at the subgroup of 68 per cent of subjects who actually abided by the study regimen and took the supplements, findings in the 2007 study showed up to 26 per cent decrease in cardiovascular deaths and heart attacks. This study also found vitamin E to be safe and effective when taken at 20 times the RDA. These hardly nonsignificant details were routinely buried in the official press releases (was it influenced by the fact the study took place at Brigham and Women's Hospital in Boston, which enjoys a cozy relationship with pharmaceutical interests?) and never adequately followed up on by the media.
Even so, suppliers are reporting that vitamin E may have hit bottom and is now working its way back to redemption.
"The demand for vitamin E in the supplements market has started to rebound from a low in 2005 as a result of the Johns Hopkins study, with prices for vitamin E-oil acetate moving up by about 10 per cent this year," says Todd Sitkowski, senior commercial manager at DSM Nutritional Products. "In addition, we are beginning to see significant growth building with vitamin-E sales in beverages."
Those sentiments were echoed at Cognis Nutrition & Health. "We are starting to see the vitamin E market level off," says Carrie Potaczek, global product line manager at Cognis. "Since the wave of negative media coverage a few years ago, consumers seem to be frustrated by the conflicting headlines and are slowly reuniting with their E."
These assessments were made before the impact of the Brigham study could be known. It is notable that industry trade groups had little or nothing to say to rebut the clearly skewed conclusions by researchers.
Vitamin D: Whereas vitamin E suffered from positive study results spun as negative, vitamin D's problem is great study results that go unreported. A June 2007 study funded by the National Institutes of Health found perhaps the greatest cancer breakthrough ever. The four-year, randomised study followed 1,179 healthy postmenopausal women who took supplemental calcium and a quantity of vitamin D3 (cholecalciferol) nearly three times the RDA. It showed a dramatic 60-77 per cent reduced risk of cancer compared to those who did not get the vitamin.
You would have thought the news — far greater (not to mention far cheaper) than anything realised with pharmaceuticals — would have made headlines across the media landscape. You would be wrong.
Still, something is sinking in. "We have seen solid growth in our core vitamin products, particularly vitamins D and E," says DSM's Sitkowski. "DSM has experienced double-digit growth in our vitamin D sales over the last couple of years and can see this trend continuing, particularly if the FDA follows through with increasing the RDA for vitamin D from the current level of 400IU to as much as 800IU to 1,000IU, which is strongly recommended from across the academic community on vitamin D intake."
It seems only a matter of time before companies start sticking omega-3s in bubble gum, as the ingredient darling of supplements and functional-foods manufacturers becomes ever more ubiquitous. The bubble certainly doesn't seem like it's in any danger of bursting for the essential fatty-acids market, with IRI reporting total mass-market retail sales of $79 million for the 52 weeks ending in June, a 26.5 per cent leap from the year before.
Even more encouraging is a report from Packaged Facts that says foods with omega-3s will reach $7 billion in the United States alone, more than triple 2006 sales figures. In 2002, sales were only $100 million. Grain-based foods such as bars, breads and cereals account for the majority of the functional-foods market at 86 per cent. Eggs and dairy were the other major categories, with the latter expected to grow from its current four per cent share.
"The party in omega-3s is continuing," confirms Jan Haakonsen, vice president of sales and marketing for Denomega Nutritional Oils. The company saw its food and beverage segment grow more than 200 per cent last year, and expects similar good times this year, Haakonsen said. Its supplements business is doing well, he says, but Denomega is focusing on functional foods. "That's where we have defined our future, in the food and beverage."
Current prices for omega-3s largely depend on source, concentration and purity. A kilogram can go for as little as $3 for basic fish oil (18/12 of EPA to DHA) used in general supplements, according to NBJ. More concentrated blends (30/20) can sell for as much as five times that amount while customized or highly specialized blends can command 20 times that price for a kilogram.
Success is coming with a price. Competition, added capacity and the rising cost of raw materials have put pressure on suppliers' margins, NBJ reported. Heavyweights such as Cargill are also entering the market. Haakonsen says there's plenty of room for the ingredients giant and others in the omega-3s arena.
"I think it's a good thing that big, renowned companies join in the party," he says. "I think it's the specialist companies that will continue to win the important contracts because omega-3s are not easy ingredients to work with, and I think it's only those companies who put special effort and focus on them that will continue to succeed in the next few years."
Recent headlines seem to attest to that. Martek Biosciences, based in Maryland, is pushing into the world's potentially biggest market — China. The company announced in August it received the green light for its algae-based omega-3 product, life's DHA, to be used in major food products in China. "We certainly have global interest in [the omega-3s market]," says Jeff Bernfeld, director of marketing for Martek. "And China, of course, is a large country with growing importance and a growing consumer base. ?We're excited about it."
Flax ingredients are increasing in use as a source of omega-3 fatty acids, phyto-estrogens in the form of lignans, antioxidants and fibre. Datamonitor's tracking of a tripling in the number of flax-product introductions into the global market between 2003 and 2006 supports this interest. Further, according to Productscan Online, 1,241 foods, beverages, pet foods and cosmeceuticals enriched with omega-3s were launched in 2006 worldwide, up from 1,065 in 2005. These new products cover the range from yoghurts, margarines, beverages, cheese, chocolate, pasta, prepared foods and even popcorn.
Canadian companies have been actively involved for decades in the supply of innovative flax ingredients, including Natunola, a supplier of kernels, hulls, powders and fibre extracts. Pizzey's Milling holds several patents for ensuring high-stability milled flaxseed products under the MeadowPure process. The company has recently introduced MeadowPure Omega 3 Ultra, a granulated, free-flowing powder of milled flax in combination with either 2.2 per cent or eight per cent fish oil. Bioriginal Food and Science is marketing three unique powdered flax-meal products. Processing technology makes these higher in ALA and lignans, as well as soluble and insoluble fibres, compared to regular milled flax. They are also rich in calcium, and are a good source of protein.
"At present, the presence of the word 'omega-3' displayed on any product almost automatically guarantees a level of interest from consumers. It's a marketer's dream," says Linda Pizzey of flax supplier Pizzey's Milling. "The difference between flax-sourced omega-3s and fish-sourced is like redheads vs blondes — both are beautiful."
Friendly bacteria have been friendly indeed to the industry, with mainstream US sales up 21 per cent to $24 million, according to IRI data. NBJ put overall US sales for 2006 at $299 million, up 23 per cent. The US market for probiotic-infused yoghurt drinks alone is pegged at $9.7 billion in 2005, and expected to hit $15 billion in 2010, according to Dairy Management Inc (DMI), the US dairy industry advocacy group.
For an anecdote, one need look no further than the US launch of Dannon's Activia probiotic drink, fortified with the Bifidus regularis strain. Launched in US markets in January 2006, its first year surpassed $100 million in retail grocery sales in the US. It's called one of the most successful new-product food launches ever with numbers to make an executive in any industry salivate.
Dannon values the global sales of probiotics yoghurts and dairy-drinks market at approximately $10 billion (and set to grow further). Clearly, the US market looks like it is, at last, about to crack open.
"The successful launch of Activia in the United States proved to us that Americans are looking for healthier food choices with clinically proven, peer-reviewed functional benefits without sacrificing great taste," says Dannon CEO Juan Carlos Dalto.
"Dannon is doing a service to all probiotics suppliers with Activia," says Scott Bush, vice president, dietary supplements business unit at Danisco Cultures Division, which supplies the Howaru and Florafit brandline of probiotics, as well as a few strains of generic commodity-style strains to food and supplements manfacturers. The company has seen sales growth of probiotics in excess of 30 per cent every year since 2000.
Bush says the supplements market currently stands at about four times that for foods, at least in the US. The main reason is that supplements manufacturers continue to increase the dosage quantity — pills with five billion colony-forming units (CFUs) represented the high end a few years back whereas today that would be the low end.
"If you look at pills and yoghurt, by far the pills dominate in terms of delivered dosage," says Bush. "When you're buying a pill, you're paying for the probiotic, so you may buy a higher dose. With a food, you're first paying for a food, and you'll only pay a little more for something in that food."
Foods with an inherently healthy halo, such as yoghurt, are prime candidates for probiotics integration. It helps that yoghurt needs to be refrigerated, which helps with maintaining shelf life of the friendly bacteria. Dairy products also help probiotics survive through the digestive tract by buffering stomach acids. Also, many probiotic bacteria seek out lactose in the gastrointestinal tract and turn on various genes that may increase the benefits of probiotic cultures.
And despite supplements currently winning the probiotics battle in the US, foods are coming on strong.
"Probiotics in food products is showing the greatest potential for growth in the next five years," says James T Kopp, Sr, vice president of nutritional baked goods at Lal'Food, a spin-off of Canadian probiotics supplier Institut Rosell Lallemand that focuses on food-based delivery systems. Kopp pegs the growth rate in excess of 15 per cent for the next five years.
"The next hot area will be a system that is already full of health benefits, and probiotics will complement it," Kopp says. And that will not necessarily mean another yoghurt launch (though Yoplait yoghurt, no doubt seeing Dannon's success, has recently launched a probiotic-fortified YoPlus line).
"Far from dairy applications, Lal'Food has targeted new areas of innovation, in which mid- to long-term development projects have been initiated. We are expecting some launches in snacking by the end of 2007 in Europe, whereas some products are already existing in the USA," says Lal'Food's development manager, Anne Laure Clair.
"A lot of companies are getting on the probiotics bandwagon," says Karen Terry, spokesperson for Dairy Management Inc (DMI). "There's hardly anyone not talking about probiotics — how to leverage them into a products line. They're showing up in cheese, cottage cheese, not only fluid milk but smoothies — they're catching on in a big way."
Prebiotics and fibres
Closely related to probiotics — and also enjoying dual roles as a fibre source — are prebiotics. These carbohydrates act as food sources for probiotics, which lead to greater growth and activity of select endogenous bacteria and their attendant health benefits. Manufacturers are seeing increasing success integrating them into foods because consumers are responding to the recent government pronouncement to increase fibre intake.
Suppliers such as Mitsubishi, SunOpta Ingredients, Pizzey's Milling, Orafti, Kerry, Acatris, National Starch, Nutracea, Lonza and Matsutani/ADM are all doing good business in this sector with finished products from breads to bars to orange juice beverages looking for a fibre boost. Frost & Sullivan put the fibre ingredients market at $200 million in the US alone and set to double by 2011.
Fibre's profile has also been improved by the fall of 'low carb' and the rise of the idea of 'slow carbs' as a better means to control sugar release than those methods many consumers tried and rejected during the low-carb boom.
"A lot of fibre players saw a good chunk of their business fall away when low-carb died away but now that is picking up again," says Rudi van Mol, vice president of marketing at the world's largest oats ingredients supplier, Canada-based SunOpta. "Interest in fibre continues to grow."
The tremendous diversity of fibre forms — from traditional psyllium and oats to Matsutani/ADM's high-tech Fibersol-2 ingredient to larch arabinogalactan and stabilised rice bran to inulin- and chicory-based fibres with prebiotic properties — also speaks to the success of the sector.
"Awareness is driving fibre in the cereals and energy-bar markets," says George Pontiakos, CEO of BI Nutraceuticals, which supplies psyllium. "For the longest time Metamucil was the only guy out there. Now it's completely different. Fibre is a big growth category. It's in cereals, energy and meal-replacement bars — it's a big deal."
Hydrocolloids such as acacia gum have long been seen as a functional ingredient only insofar as food-processing performance goes, but with the 2005 US Dietary Guidelines recommending increased fibre consumption (24-36g/day), gums are seeing new life as a bonus fibre source.
Danisco also offers a range of hydrocolloids, including Grindsted-brand pectin. The pectin could be used in low-pH protein beverages to stabilise the protein and other beverages to add mouthfeel, along with fibre, and also in combination with Litesse for a marketable fibre content claim, Brooks says.
Prebiotic ingredients, such as inulin and oligofructose, selectively stimulate the growth and activity of endogenous bifidobacteria and lactobacilli, thus improving gut health and modulating immune response. Belgium-based Orafti has introduced Beneo LGI, a virtually sugar-free inulin for healthier food formulation. Beneo inulin and oligofructose are derived from chicory root. But the new LGI version boasts just three per cent sugars and just 1.1kcal/g, allowing food formulators to make more low-sugar and low-calorie claims on products with a 'feel good' health factor.
"Last year's inulin and oligofructose sales were very good and this year we are right on track, realising an ambitious and continuous double-digit growth," says Tim Van der Schraelen, marketing and communication manager at Orafti. "Because of the constant growth in sales of inulin and oligofructose, Orafti needed an increase in production capacity. We decided to do this by building a second plant, in Chile, with roughly the same capacity as the one in Belgium."
Orafti benefited from having its ingredient used in a European Union-funded SYNCAN trial, which showed positive effects of synbiotics on cancer. Its Beneo Synergy1 prebiotic ingredient will be used in another EU-funded initiative, this to assess the effects of prebiotic infant formulas supplemented with inulin on the development of the neonatal immune system and the incidence of allergies in infants.
Some of the newer sources on the market include Lonza's FiberAid, a soluble fibre composed of larch arabinogalactan that is stable at a wide temperature and pH range and in beverages, does not degrade and will not hydrolyse. And NutraCea has taken the rice bran that is usually thrown away when rice is processed and developed a stabilised rice bran, including its RiSolubles line, a gluten-free, nutrient-dense, all-natural soluble fraction of rice bran high in prebiotic fibre.
Superfruits: Exotic, trendy fruits such as açai, pomegranate, mangosteen and noni are making category creators wealthy overnight. Productscan analysis shows that the increase in pomegranate-based products, for instance, has grown nearly 400 per cent in new products launched containing the ingredient in the last two years, compared to the previous six.
The market is in full gold-rush mode, which has led to much of the market being cannibalised — who doesn't supply the four fashionable superfruits du jour? — and what little space the category creators once enjoyed is now being hemmed in by competition, which is probably to be expected.
Fruits are being incorporated into juices, smoothies, bars, muffins, and cereals. Supplements are performing well, too, with ingredients suppliers such as California-based Cyvex Nutrition reporting a healthy trade in fruit ingredients including pomegranate, cranberry and red grapes.
Mangosteen, açai, goji, tamarind, gac-chi, lychee, acerola, yuzu, seabuckthorn, pomelo and noni are just some of the new breed that have made recent inroads into Western markets.
"There are five key criteria for superfruit success: novelty, health benefits, convenience, controlled supply and promotion," says Karl Crawford, business development leader at New Zealand-based fruit science specialists, HortResearch.
Old-guard fruits have not let this opportunity pass them by either. Blueberry sales in the UK have more than doubled in the past two years, to $190 million in May 2007 alone, according to market analyst AC Nielsen. And Ocean Spray ITG, the world's leading cranberry co-operative, announced in August 2007 a $27 million second expansion phase to add a further 100,000 square feet to the company's sweetened, dried cranberry production plant in Wisconsin. This move comes in response to spiraling global demand for products containing sweetened, dried cranberries, the company says.
And whereas superfruit leaders such as Xango created the mangosteen category in 2003, mainstream giants such as Coca-Cola have jumped on the bandwagon. Coke launched its energy drink called Monster, which contains açai. Coke recently acquired Fuze Beverages in the US, which is infused with a Super CitriMax weight-management ingredient from InterHealth USA derived from the dried rind of Garcinia cambogia, a native fruit of India.
Science-backed and proven fruits will remain in the mainstream and continue to grow, and that is why cranberry continues to grow," assesses Doug Klaiber, general manager at Massachusetts-based cranberry supplier, Decas Botanical Systems. "Those superfruits that can substantiate a health benefit may find themselves more mainstream in years to come. We are considering cranberry combinations with other superfruits."
Sterols: When the European Union liberated plant sterol esters for inclusion in yellow-fat spreads in June 2000 under its Novel Food rubric, it cracked the door for this functional ingredient. In March 2004, the door opened wide when approval was granted for other food categories such as milk-type, yoghurt-type, and cheese-type products, as well as soy milk and dressings. The US market stalled even in the face of European success, and most observers agree it was the delivery system that did in American hopes — after all, Americans had long been conditioned to understand that margarine-type products were not good for their hearts, so the message that one brand was actually good for lowering cholesterol was a hard sell indeed.
Cargill changed all that when it launched CoroWise brand sterols into Minute Maid orange juice — a classic healthy-seeming delivery system. Approval has since been granted to milk, bread, bars, rice drinks, cheese, brownies and more.
Cargill is focusing CoroWise applications in food categories with high consumer acceptance around health benefits like juice, bread and milk," says Pam Stauffer, marketing programs manager at Cargill.
In dollar terms, the total market for sterol products was $66 million in 2004, $93 million in 2005 and nearly $200 million in 2006, according to ACNielsen, though Cargill puts the figure at $400-$500 million worldwide.
That about squares with Forbes Medi-Tech and its Reducol branded sterol ingredient. The Canadian supplier announced phytosterol revenues of $4 million for the six months ended June 30, 2007, compared to $2.1 million for the six months ended the previous year, an increase of 90 per cent.
"The global total market for sterol- containing food products and dietary supplements is much higher. We estimate a size of more than $1.5 billion," says Franz Timmermann, Vegapure global product line manager at Cognis Nutrition & Health, which he says is the world's largest producer of sterols and sterol esters with the broadest range of sterol formulations for all approved applications. Cognis has about a 60 per cent market share in Europe. "With more than 50 per cent of American households managing their cholesterol, there's a huge opportunity for makers of functional foods."
The FDA-authorised health claim for the reduction of cardiovascular disease also helped sterols' fortunes. Still, the kings of cholesterol are the statin drugs.
protein, oat beta-glucan and barley beta fibre are nutraceutical competitors, says Stauffer. But sterols occupy a comfortable middle ground as they are probably the most widely researched nutraceutical ingredient for cholesterol, they can be integrated into foods, and they do not suffer from egregious side effects as with pharmaceuticals.
Larry Kolb wants to be optimistic about the glucosamine and chondroitin market, but the facts keep casting a cloud on his global horizon. While consumers continue to purchase glucosamine and chondroitin products in healthy numbers, Kolb, president at glucosamine and chondroitin specialists TSI Health Sciences, believes the market could be in for a rude shock if quality issues cannot be resolved in the near future.
Yet the market remains strong. Vancouver-based Bergstrom Nutrition, formerly Cardinal Nutrition, specialises in another joint-health ingredient, MSM, and is restructuring to accommodate expected expansion in the MSM market and has deals with companies like Gee Lawson in the UK to distribute its product in Europe.
Alternative delivery systems such as shakes and waters exist but these are very much in their infancy and supplements continue to dominate the sector. IRI data of mass-market sales (excluding Wal-Mart) puts the US glucosamine/chondroitin supplements market at just more than $303 million — a growth of about two per cent on the previous year. MSM stood at just under $3 million though growing by about 20 per cent per annum.
Montana-based TSI has been a long-time importer of material from China where it has a 35,000-square-foot facility and which usually finds its way to TSI's supplements manufacturing clients in North America and other parts of the world. While most clients report business to be relatively healthy, Kolb believes it is only a matter of time before a melamine-style scandal hits the glucosamine and chondroitin industry if the supply chain is not cleaned up.
He says adulterated product hailing mainly from China is commonplace because the raw-materials environment "is primitive," and both Chinese and US inspection services are chronically under-resourced. Typical impurities included pathogens and microbes, lead, mercury, and other heavy metals. "The good thing is consumer confidence in the market has stayed strong," Kolb observes, "but this could change quickly, and that is why TSI and other ethical suppliers are calling on the Chinese government as well as the US Food and Drug Administration to up the ante on inspection procedures before something negative happens to a citizen that is going to tarnish us all."
There is greater scrutiny of imports in the European Union, he notes, and this should act as a model for US and Chinese authorities. "It may be harsh to call the FDA procedures negligent," he says, "but the fact is they inspect only one per cent of food imports."
The onus is on companies — both suppliers and manufacturers — to better scrutinise their own materials, he says. "Companies need to be more vigilant but it's a sticky situation. There are a lot of manufacturers being tricked because the suppliers have developed techniques to fool analytical testing. Only a collaborative effort between industry and government is likely to solve this situation. There very badly needs to be a US/Chinese dialogue." Recently introduced GMPs in the US have done little because of the onus being on manufacturers rather than ingredient suppliers, Kolb says.
Demand for alternative sweeteners will grow to $1.1 billion by 2010, up from $935 million in 2005, mainly in diet soft drinks and table-top uses, according to The Freedonia Group. Sucralose (Splenda) and aspartame (Nutrasweet) will continue their reign as the dominant sweeteners, but the small market share held by stevia and agave nectar will register 'strong advances,' the Freedonia report says.
The trend in sweeteners has maintained since Splenda brand sucralose was introduced into the market by Tate & Lyle and distributed in North America by McNeil Nutritionals. That is to say, Splenda is eating the competition for lunch. According to IRI market data, the US market share for Splenda is about 60 per cent (although only 12 per cent of the market in Europe and Asia), while Equal brand aspartame and Sweet'N Low brand saccharin have both fallen to about 15 per cent each.
However, just as fast as it took for Splenda to gain a leadership role, it could be overcome — a lawsuit contesting Splenda's alleged naturalness has apparently forced McNeil to stop using the slogan, "Tastes like sugar because it's made from sugar."
Ready to take the mantle as the true natural contender is stevia. The South American plant has been kept out of the US market except when dubbed a 'dietary supplement,' and Wisdom Natural Brands aggressively pushes its SweetLeaf stevia where it can. However, corporate giants Cargill and Coca-Cola have formed a partnership to get approval — a move that will surely change the nature of the alternative-sweetener market.
"Is it a market-opening moment? It could be," says Cargill's Stauffer. "It takes time and the depths of resources of Cargill and Coke to bring a product like this forward. Coke will introduce the product first in its beverage family. Cargill will introduce the product in food ingredients. These are our core competencies. They're all about beverage formulation, we have a depth of knowledge in ingredient formulation."
The companies say they will introduce the stevia product, branded Rebiana for its Latin binomial, Stevia rebaudiana, in the 12 countries where stevia is currently approved as an additive, while working on getting approved in the major markets of the US and EU.
"Stevia has been both the lightning rod and holy grail for decades," observes Loren Israelsen, president of Utah consultancy LDI Group. "This will be an interesting project to watch and if successful would add an intriguing new flavour to the sweetener industry."
Any approval is expected to take a few more years. In the meantime, Cargill will continue supplying its Eridex brand erythritol, one of the polyols derived from fermented corn.
A 2007 Freedonia report says "products such as sucralose, erythritol and xylitol will gain market share over more established products like aspartame and sorbitol. Newer types such as stevia and agave nectar will grow the fastest, hoping to appeal to consumers wary of high- intensity sweeteners."
Finally, slow-carb entrants isomaltulose releases glucose far more slowly, while polydextrose has unique properties as a bulking agent (so it must be blended with high-intensity sweeteners) as well as a prebiotic fibre source.
Food and beverage manufacturers have a broadening palate of options to choose from, depending on the particular application. For suppliers of sugar alternatives, the future looks sweet indeed.
The co-Q10 industry has seen a lot of change in a short period of time. Two years ago booming demand — primarily driven by US supplements sales; Europe, Oceania and parts of Asia entering the fray; and a healthy foods, beverages, supplements and cosmetics market in Japan — sent the price of co-Q10 skyrocketing as high as $5,000 per kilogram. Co-Q10 was so hard to come by some supplements manufacturers even withdrew products.
With supply monopolised by four major Japanese suppliers — Kaneka, Niishin, Mitsubishi Gas Chemical and Asahi — counterfeit co-Q10 flooded the market and concerns over quality followed.
The situation was still causing concern in March this year when industry players such as Kenn Israel of California-based manufacturer, Robinson Pharma, and formerly of major co-Q10 re-seller, Soft Gel Technologies, told Supply Expo in Anaheim that unless the co-Q10 industry banded together it could come under the kind of media attack that has decimated the vitamin E market. "We need to be much more pro-active in managing media and managing consumer perception and scientific perception than we have been," he says.
To a large extent, these concerns have been addressed as the global supply market — worth more than $700 million — has passed through a major restructuring period. It is true GRAS approvals have been slow in coming and food and beverage solutions have not arrived as quickly as expected, but co-Q10 supplement sales remain buoyant even if product launches have slowed, especially in the US and Japanese markets. Co-Q10, known for its heart health, energy-giving and other health benefits, remains one of the top-10 selling food supplements in the US and is valued at about $400 million per year.Things have certainly stabilised. While spot prices remain relatively low at around $300-$400/kg for Chinese material and $400-500/kg for Japanese material, they are unlikely to fall much further, according to Blair Collins, nutritional products manager at Mitsubishi in the US. "The market seems to have stabilised," he says.
The counterfeit issue is for all intents and purposes a thing of the past as the largely Chinese-oriented problem has been cleaned up with the assistance of the Chinese government. The typical charge that Chinese co-Q10 is low grade simply doesn't stand up anymore despite the premium Japanese material still attracts. Many ingredients suppliers now source from both Chinese and Japanese raw-materials suppliers.
Supply has increased dramatically from start-ups and joint ventures in China as well as Taiwan, India, Israel and South Africa. The likes of Kaneka, Nisshin and Mitsubishi have expanded their production facilities and this added supply has contributed to the decline in price.
Outside of Japan, co-Q10-bearing foods and beverages have been few and far between, and even in Japan co-Q10 dosage levels have been low. "Producers have to use low amounts, mainly because of cost," says Collins. "The holy grail is beverage applications and they are coming on board now as everyone develops water-soluble co-Q10. The market is in a healthy state."
Formulation developments from the likes of Nisshin, Mitsubishi, Kaneka and DSM will see the introduction of many new co-Q10-bearing foods and beverages in the coming year as water-soluble material comes online and US GRAS approvals are forthcoming.
European food makers are becoming more inquisitive, too.
Kaneka has been active in adult cereals, yoghurts and sugar-free gum, according to US national sales manager, Tom Schrier. "We have a focus on food and beverage applications now although supplements remain the biggest part of our business."
Remember St John's wort (SJW)? Remember ginkgo? How about echinacea? Each of these once-and-former kings of the botanicals world has fallen on hard times. Compared to their peaks in the late '90s, SJW is one-sixth off, ginkgo one-third off, echinacea about 40 per cent off and down 18 per cent last year alone, according to NBJ. As a whole, the total herbal-supplements category in the US mass market is basically flat. And with ephedra off the table, there is not a whole lot of money being made in the sector.
"There's not a lot of growth in botanicals right now," agrees Todd Norton, president of Sabinsa. "Overall as a category, nothing is really screaming mad and hot right now. We see in our conversations with manufacturers and marketers that weight management is still a big category for them. Of course nothing is as effective as ephedra to succeed it."
Sabinsa's branded botanical that addresses weight management is ForsLean, derived from the Indian plant Coleus forskohlii and a "bright spot in our product offering," says Norton. "We were up 40 per cent just on that ingredient." Other companies are similarly carving out niches with innovative thinking. BI Nutraceuticals, whose core business is in botanicals and custom blends and value-adds, is "cranking on organic," says Pontiakos. "We're getting in the real-estate side buying organic land, cutting deals with organic wildcrafters, long-term deals to tie up the land."
There is one positively bright spot in the botanicals world — green tea. At present the US green-tea market alone exceeds 1,000 metric tonnes per year with market growth beyond 30 per cent year on year. The market is dominated by DSM's branded Teavigo ingredient.
"Teavigo has certainly had a banner year thus far as a leader in the green tea/EGCG category," says Lynda Doyle, director of new business development at DSM. "It provides all the healthful benefits of green tea without impacting the organoleptic profile of a product, and is caffeine free. Teavigo is unique with its scientific support and a full safety package for the branded ingredient."
Saw palmetto sales have remained steady for a decade at $134 million in 2006, according to NBJ. However, a summer 2007 drought is leading to a "poor" crop and price increases of 20-30 per cent, according to Valensa International, a Florida supplier of the prostate-health herb.
The champion protein and top dairy-derived ingredient in the US and perhaps the world is whey. Once a waste-stream product of cheese, whey has turned the tables — in 2006, nearly one billion pounds were produced in the US, according to DMI, representing annual growth of 7-10 per cent. US exports were up 20 per cent in the first six months of the year.
"Whey is the complete package. It's great nutrition certainly, it functions well in food systems so formulators like to work with it, and it tastes good," says Alan Reed, senior vice president of manufacturing and ingredient marketing for DMI. "Technology over the past 20 or 30 years has really created the market for whey protein."
Reed says better filtration technology allows processors to efficiently pull the protein from whey, separate it from lactose and minerals in whey, and use it effectively in a variety of ways.
"I predict we'll see much more in terms of the whey-protein market, isolates and concentrates, lactoalbumin, and further fractionation of whey protein. They have different benefits — satiety and blood pressure and more digestibility. It's fun to be a part of."
PeptoPro is DSM's water-soluble casein hydrolysate that has changed the rules of the game in the sports-drink category. Since Gatorade strode on the scene in the 1970s, sports drinks were predicated on electrolytes: sodium and potassium to replace salt lost in sweat, and sugar to keep blood-sugar levels from crashing. Latter-day research has shown the beneficial effect protein can have on exercise recovery, and the category has been redefined. DSM has helped launch more than 20 new commercial products in the past 12 months, with 10 more launches scheduled by the end of 2007, according to Reto M Rieder, national accounts manager for DSM.
It's a similar case throughout the sports-nutrition world. Core category ingredients such as creatine have not been making significant growth since the release of data showing carbohydrates can enhance uptake. "As efficacy and dosage become more of an issue following the implementation of maximum-dose limits in Europe, the industry needs innovative products that can optimise bioavailability as well as consumer confidence," says Tallon, also a co-founder of CR-Technologies, a UK supplier of Creasafe, which uses a micro-encapsulation delivery system to enhance uptake without the need for additional calories.
Demonstrating the parallels between sports and weight management, Glanbia Nutritionals has rolled out a whey peptide, Prolibra, marketed squarely at the weight-loss market as a satiety ingredient.
Not to be forgotten in the protein world is soy. Projections for the next five years indicate that per capita consumption of soybeans will increase nearly 25 per cent, and that refined and functional soy proteins produced from the soybean crush will increase by 35 per cent, according to a Soyatech market report released earlier this year.
The soy market in general is facing recent price hikes — more than 37 per cent higher between September 2006 and July 2007. Part of the pressure is due to farmers changing to growing corn for biofuels, which has dramatically altered the agricultural landscape in the US and elsewhere. Volumes are expected to rise six-fold by 2015.
Still, soy enjoys a great deal of research showing benefits not just for cardiovascular health (for which it can boast an FDA health claim), but for such wide-ranging conditions as blood pressure, bone health, metabolic syndrome, prostate cancer, hot flashes and more.
Vitamin A/carotenoids rose from $258 million in 2005 to $313 million in 2006, a healthy rise of 21.6 per cent, more than any other vitamin category, according to NBJ.
"Vitamin A sales remain strong in the food, beverage and supplements industries. We see no downturn whatsoever in the market. There exists a good balance between sales of vitamin A in the palmitate, mainly food, and acetate, mainly supplement, with vitamin A derived from beta-carotene, pro-vitamin A, which mainly supports the beverage and nutritional bar markets," says DSM's Sitkowski. Optisharp, DSM's branded zeaxanthin carotenoid ingredient, is seeing "tremendous growth," he says.
For other carotenoids, however, the market is very uneven. Lycopene, a $100 million-$125 million ingredient, is down nearly 28 per cent in mass-market channels, according to IRI. Lutein, on the other hand, is up nearly 10 per cent to between $125 million to $150 million.
Astaxanthin, the nutrient used predominantly in aquaculture to give farm-raised salmon its characteristic pink colour, has seen benefits in human health for everything from inflammation to eye health and internal beauty. Too many benefits can be a double-edged sword, however.
"You can't tell industry or even consumers that because it becomes snake oil," says Bob Capelli, marketing director for Cyanotech, which produces astaxanthin and spirulina in Hawaii. "We're definitely in the second tier, though our goal is to get toward that first tier. We and our competitors look to get to the $100 million level."
Tate & Lyle, in August 2007, ceased production of astaxanthin at its UK plant, citing falling prices and rising costs of production.
Digestive aids and enzymes in both the natural and mass channels is up 15 per cent, totaling nearly $400 million, according to IRI.
"Things are going very well," says Gary Trimble, national sales co-ordinator for EnzyMedica, based in Florida. "Enzymes are huge worldwide. Supplements are the baby but they work so well that companies like us that specialize in enzymes can hardly keep up with demand. We're up 81 per cent July '07 vs July '06. We anticipate huge growth in the future."
The market for food-processing aids for such products as beer and yoghurt is hundreds of times larger than supplements, Trimble says. EnzyMedica's plant-based enzymes, when blended, are useful for digestive, therapeutic and supportive health, especially for inflammation, but also for such wide-ranging conditions as high cholesterol, diabetes and cancer.
One out of every four chocolate bars the world over is made from chocolate supplied by Swiss-based giant Barry Callebaut. So the fact Barry Callebaut, with annual turnover of $3.7 billion, takes functional chocolate seriously should be spur enough for any chocolate maker, large or small, to take heed of the healthy chocolate revolution that began about 22 years ago when the first 'diet chocolate' hit the market. Almost two per cent of the global market is now sugar free and with an ever-increasing number of entrants the market is expected to boom in the next five years.
Despite raw-materials costs surging 10 per cent or more in the past year due to hazelnut, milk and wheat shortages — and functional-chocolate ingredients often rising by added percentage points — the market remains buoyant with major players like Nestlé, Unilever, Cadbury Schweppes, Mars/Masterfoods and Hersheys offering functional products from sugar-reduced chocolates, to low-fat and lactose-free offerings to herbal and fibre infusions to the re-introduction of cocoa-bean extracts into chocolate products.
Ingredients such as zinc, ginseng, selenium, DHA, EPA and ALA, taurine, guarana, L-proline and creatine have all found their way into functional chocolate bars and slabs of chocolate.
Equally as common, chocolate makers are altering their marketing strategies to alert consumers to the inherent healthful properties in chocolate. For instance, research highlighting widespread consumer awareness of the antioxidant content of dark chocolate shows the success of such measures. Up to 40 per cent of consumers in Western markets want to eat functional chocolate. A European survey found respondents believed chocolate could boost morale (53 per cent) and energy levels (48 per cent), but were less certain about effects on memory (15 per cent), and the heart and cardiovascular system (13 per cent).
While functional chocolate incorporates formulation options mentioned above, the most exciting work is being done within the complex cocoa bean that has more than 600 constituent parts. Hans Vriens, chief innovation officer at Barry Callebaut's Belgian establishment, notes 270 of these 600 constituents have health benefits. "Increasingly they are being isolated and extracted and then put back into chocolate products to boost their healthiness," he says. "They might have antioxidant or mood-boosting properties. We are still finding out about a lot of them but there is little doubt the cocoa bean is a nutritional dynamo."
Low-calorie sweetener options continue to proliferate with the likes of sorbitol, mannitol, lactitol, maltitol, isomalt, xylitol and erythritol all offering chocolate makers the opportunity to reduce sugar content with varying degrees of success in maintaining flavour profiles and physiological side effects. Other innovations include tooth-friendly chocolate, cocoa butter that leaves no fat deposits in the body, low-GI offerings that focus on increasing the feeling of satiety and carotenoids in chocolate drinks.
Additional reporting for this article was done by Peter Rejcek and Shane Starling.