The collaboration to jointly develop functional products between supplier Cargill and natural products leader Hain-Celestial may well herald the next generation of functional beverages. The question is, will the deal succeed in getting consumers accustomed to paying a price-premium for value-added functional products that really work?
?Functional ingredients are not inexpensive. There?s a value-price benefit, and the natural products consumer will recognise that,? said James S. Tonkin, president of Tonkin Consulting as well as BioEssentials, a nutraceutical beverage company. ?But Hain will have to charge for adequate amounts of functional ingredients or it will never be successful.?
Principals in the arrangement talk confidently about leveraging the deal to bring about new functional products. ?Everyone wants to be No. 1 at No. 2, meaning everyone?s quick to duplicate and imitate and are less likely to do something new,? said Paul Paslaski, sales development manager for Cargill Health & Food Technologies. ?Tomorrow?s products are designed for ?use-occasion?—portable, packable, portion-control, that makes your life a little better.?
Historically, the functional beverages sector has seen two results: relatively inexpensive products like SoBe or Snapple that contain only ?label-candy? quantities of functional ingredients; or efficacious drinks like Pulse that have failed to deliver the promising sales, likely because the launch went mainstream first, according to Tonkin. With Hain?s presence in health-food stores and its attendant conscientious, label-reading consumers, Hain is in a better position to deliver healthful products that work.
The future of the category may well rest on whether the two companies can leverage their strengths to engineer price points into their next-generation products—and see consumers respond.