UK Market Set For Buoyant Period

Product and promotional activity in the UK functional foods and drinks sector has continued apace in recent months, although this has not always been reflected in terms of market growth and the sector remains highly fragmented and difficult to define. Sales have risen to more than $1.37 billion a year, and key brands, such as Flora pro.activ, Benecol, Danone Actimel and Yakult, have emerged. These brands have gained mainstream positioning, with a combined sales value in excess of $161 million a year.

Soy Grows With Cholesterol Claim
The potential effect of the Joint Health Claims Initiative's August 2002 approval of a claim relating soy to cholesterol reduction is likely to be significant. The claim ('the inclusion of at least 25g of soy protein per day, as part of a diet low in saturated fat, can help to reduce blood cholesterol levels in products with a minimum of 6.25g soy per specified serving) is similar to that approved in the US in 1999 by the Food and Drug Administration. In the US, it heralded a welter of activity and surging sales of all manner of soy products ranging from soy-milks and desserts, soy bars and cereals to soy-based ready meals, as well as the inclusion of soy in a wider range of products than previously and the active marketing of its use.

The UK soymilk market is still undeveloped, with a current annual value of about $78 million—half of which goes through health food stores and other specialist outlets, with the mainstream grocery market having the other half. Only recently have soy products begun to emerge from a specialist positioning as a dairy alternative, probably due to much greater emphasis going into promoting its health benefits. In comparison, the US market has seen double-digit growth every year since 1999, culminating in last year's 20 per cent increase to a market value of $600 million, of which $200 million is garnered by mainstream supermarkets.

So Good International has pioneered awareness of the link between soymilk and cholesterol reduction in the UK with its So Good soymilk, particularly since the launch of its fresh-chilled variant in early 2001. The packs, both for the established shelf-stable variant and the newer fresh-chilled product, feature three claims on the front: 'actively lowers cholesterol,' 'builds strong bones' and 'maintains a healthy heart.' Sales of the new chilled variant reached $6.5 million in its first year on the market. Throw in the shelf-stable line and brand sales exceeded $11.3 million in 2001, with sales forecast to double in 2002. A chocolate-flavoured variant, launched in September 2002, also has been added to So Good's range.

Calcium Bones Up For Market Growth
Soy's benefits for bone health may drive the market further. So Good's 'builds strong bones' claim is primarily related to soymilk's calcium fortification effect, but promotional literature supporting the brand also relates it to soy protein, claiming that in regard to soy, 'there is mounting evidence of the beneficial effect on bone health.'

Interest in calcium fortification for bone health is still relatively limited in the UK, but there are signs this is changing, particularly the emphasising of on-pack calcium content in the bakery and cereal products markets. Other interesting mainstream calcium-fortified products include Tropicana Calcium orange juice and Danone Activ calcium-rich bottled water. The UK also saw its first calcium-enriched fat spread in early 2002 with the introduction of Calvia from Matthews Foods, while St Ivel extended its Shape range with a calcium-enriched Bio Yoghurt Drink.

Probiotics Winning Battles On Most Fronts
Meanwhile, the highest profile area of the UK functional foods market remains dose-delivery probiotic drinks, a sector that has grown from nothing in 1996 to somewhere in the vicinity of $100 million now and is still dominated by pioneers Yakult and Actimel, with sales of approximately $40 million and $56 million, respectively.

These brands saw their only major competitor, Nestlé's LC1 Go, withdraw from the UK in early 2001, and have continued with product and promotional activity. In early 2002, the Actimel 0% (fat free) range was extended with the introduction of an 8-bottle pack, while a new Yakult Light variant was launched in May. Both brands have been heavily supported, with efforts ranging from in-store promotions and point-of-sale information leaflets to TV advertising campaigns. Yakult also started its first radio advertising in the autumn of 2002.

In the past year, however, Yakult and Actimel have seen other competitors enter the market, notably a dose-delivery probiotic drink using the Müller Vitality branding, formerly confined to spoonable yoghurt products. The product was launched in February 2002 and by August was claimed to have accounted for 38.2 per cent of total category growth since its introduction, having achieved record sales of $6.5 million in that time.

Supermarket chain Tesco's also tested its own dose-delivery probiotic health drink in original and pink grapefruit varieties in selected stores during the year.

The highest profile area remains dose-delivery probiotic drinks, which has grown from nothing in 1996 to $100 million a year
It is, however, the most recent innovation in the UK probiotics market that may open up a whole new sector in the future—the introduction of drinks with attached probiotic straws. Claimed as a world first, the Orchard Maid range of flavoured organic yoghurt drinks in 250ml cartons and featuring the LifeTop Straw was launched in Tesco stores in June 2002. The probiotic straws were developed by BioGaia and are marketed by Tetra Pak in conjunction with its range of ambient cartons. When used to consume the drink, the straw delivers 99m active Lactobacillus reuteri bacteria, which help maintain the body's natural defences and balance the digestive system. If successful, probiotic straws could be extended to use with a whole range of drinks products.

Meanwhile, some other initiatives in the probiotics market have not met with success, notably Arla Foods' Anchor Inner Balance Cheddar cheese with Lactobacillus rhamnosus. It was launched in mid-2001 as the UK's first functional cheese and was claimed to help keep the digestive system in balance. It was withdrawn in August 2002, with premium pricing and lack of advertising support cited as the main causes.

Heart-Healthy Foods Are Endearing Sector
Functional foods claiming benefits for heart health continue to do well in the market. Sales of plant-stanol-enriched spreads for cholesterol reduction, for example, are now well-established. As in probiotic drinks, the market remains a two-horse race, this time between Unilever's Flora pro.activ and Benecol, marketed by McNeil Consumer Products Co. The Benecol spread was first on the market in 1999 but was soon overtaken by pro.activ, which was launched the following year and gained annual sales of $50 million by the end of 2001, equivalent to nearly five per cent of the UK butter and margarine market.

Pro.activ's sales increased a further 20 per cent to about $60 million by the end of 2002. Benecol responded by repositioning itself as a total cholesterol management system, offering a range of products encompassing yoghurts, milk and snack bars as well as the original spread, which now includes the addition of the successful olive oil variant. Benecol re-packaged and re-launched its range in mid-2002 in eye-catching turquoise packs, extending the range even further with flavour additions to its yoghurts. Indications are that Unilever is following suit into cholesterol management ranges with pro.activ, having applied last summer to the Food Standards Agency to use plant sterols in other products.

Functional Pop Hits The Right Notes
The soft drinks market is showing an increasing interest in functionality, although the market remains underdeveloped and fragmented, mainly encompassing a range of herbal drinks and vitamin- and mineral-fortified products. Most aim for a general health positioning rather than focusing on condition-specific health benefits or claims, and many are confined to distribution in the specialist health foods market.

A product to watch was launched in the summer of 2002—Stute Foods' ACE Refresh juice blend, by the maker of one of Germany's most popular juice drinks range. It will be interesting to see if the vitamin-rich juice drink will help extend the market for ACE drinks into the UK, one of the few markets large enough for sales to be quantifiable. ACE Refresh started in Germany in 1994, pioneered by the dairy company Müller, and grew quickly from nothing to four million litres by the end of its first year. High levels of product and promotional activity followed, and 2002 estimates suggest that continued double-digit growth took sales above 300 million litres by the end of last year.

The soft drinks market is showing an increasing interest in functionality, although it remains underdeveloped and fragmented
As with many other products in the functional drinks market, ACE drinks have relied on consumer awareness of the benefits of vitamins A, C and E and their role as antioxidants in the body, rather than on claims for condition-specific benefits. This tends to be the case in the sector, although condition-specific ranges are beginning to appear. Some of these have not fared well, notably the Ealing Juice Company's (part of GlaxoSmithKline) Plenty range, which included Orange C Boost (with extra vitamin C), Balance (for detoxification), Support (for immune support) and Spark (for energy). Launched in February 2002, the range has subsequently been withdrawn.

Other examples include Thorncroft's Wellbeing Cordials in Kombucha and Detox varieties, and Optio's juice drinks range incorporating Shield (for the immune system), Tone (for the complexion), Charge (for the digestive system), and Tempo (for the cardiovascular system).

Mainstream brands also are moving into the functional market by offering fortified additions to existing ranges and familiar brands. Tropicana Calcium and Danone Activ are probably the best-known examples, but there is continued activity, a relatively recent example being the Strathmore Plus functional range, launched by using the well-known mineral water brand as a vehicle. It includes three products—a calcium and vitamin B water, a water with vitamins and minerals, and a hypotonic sports water.

Health and beauty drinks are in a growth area but to date it is largely confined to the Japanese market and specialist dietetic and health products. This was a totally unexploited area of the UK functional drinks market until August 2002, when it was announced that Perrier-Vittel's Contrex Radiance mineral water-based drink was to be sold in the UK exclusively via Waitrose stores. It appears to be based on the French Contrex Beauté brand, first launched there in 2000 and containing Contrex natural mineral water for hydration, a variety of fruit juices providing vitamin C as an antioxidant to help protect against free radicals and skin ageing, and folic acid for cellular renewal. It is claimed to help keep skin radiant.

Targeting Gender And Life Stages
Contrex Radiance mineral water is clearly targeted at women and hints at another avenue of innovation—the development of functional foods for specific genders and lifestages. Women tend to be more informed than men about the links between diet and health and are therefore more likely to alter their diets to address health and well-being concerns. The growing concern about osteoporosis, for example, has been particularly important in driving the market for calcium-enriched and bone-health foods.

A number of functional products have been launched for women in the past, including Allied Bakeries' Burgen loaf with soy and linseed, and William Jackson's Nutribread with plant oestrogens, evening primrose oil, calcium and sea salt, but the sector has otherwise remained undeveloped. This may change if current trends in the US spread across the Atlantic. In the US, the market has seen strong activity in food and drink products targeted specifically at women, with the launch of breakfast cereals, nutrition bars, dairy products, soft drinks and confectionery formulated to cater to the specific nutritional requirements of women. In the wake of that, we are also likely to see formulations specifically for men, as well as for children and people of various age groups, particularly seniors.

Moira Hilliam Research
+44(0)1342 712380
[email protected]

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