America wakes up to probiotics — but what's the best delivery system?

America wakes up to probiotics — but what's the best delivery system?

Dairy products, more than any other category, can be said to effectively "own" the "digestive-health-from-probiotics" message. Can probiotics go into other food forms?

2006 was the year that America woke up to the possibility of a market for probiotic foods and beverages for digestive health; 2007 was the year of frenetic probiotic product launches; 2008 will be the year when we see if American companies have learnt from the experiences of the long-established probiotic markets in Asia, Europe and South America.

In the US, probiotics is still a nascent area, but that is changing rapidly since the sudden success of Danone's Activia spoonable yoghurt in 2006. However, everyone is going to have to play catch-up with Danone. The US probiotic dairy market was worth around $400 million at retail in the year to June 2007 — and 80% of that was controlled by Danone.

The good news is that they will be playing catch-up in a rapidly-expanding market as the US market grows to the same level as on every other continent on the planet. Products with digestive health benefits (almost all probiotic dairy) account for a massive 64% of all sales of approved functional foods (FOSHU products) in Japan.

It's a similar story in Europe, where probiotic dairy products have a retail value of over $2.5bn — and still growing — and account for the lion's share of functional food sales. The explosion of the probiotic dairy market in Europe, Asia and South America has demonstrated that maintaining good digestive health is something that motivates consumers no-matter what their culture.

Dairy products, more than any other category, can be said to effectively "own" the "digestive-health-from-probiotics" message. Can probiotics go into other food forms?

Certainly they seem to have some appeal in beverages and, based on the experience of Japan and Sweden, particularly fruit drinks.

The Pro Viva brand, launched in Sweden in 1994, has shown how successful probiotic fruit juice can be even in a country which has a very high per capita consumption of dairy products and in which lactose intolerance is rare. It has annual retail sales of 20 million litres, worth around $60 million (and still growing at 25% per annum), in a country with a population of just 9.1 million. If such a high per capita consumption were to be translated into the US market it would be equivalent to a $1.9 billion brand.

Can dry food forms succeed with a probiotic messages? Probiotic "dry-form" foods will, of course, achieve some sales — in today's increasingly fragmented market for health, everything does — but such products will be marginal brands with little impact on dairy's dominance. Anyone who invests heavily in technology to create such products had better have a business plan that realizes large profits from very low volume sales.

It's worth bearing in mind that probiotic cereals, bread, sausages, bars and many other food forms have already been attempted — mostly in Germany, Europe's biggest and longest-established probiotic market — and almost all have disappeared from the market.

Dry-food probiotics will fail to challenge dairy's dominance not because technology will hold them back but because such products defy consumer logic. The idea of probiotics is, in consumers minds, associated with "live and active" bacteria. How, consumers reason, can a bug live on a cornflake? Or survive being baked inside a loaf of bread? Dairy already controls consumers' "share of mind."

The future of probiotics in America is — as elsewhere in the world — about dairy drinks and yoghurts with juices and perhaps some other beverages in second place. Probiotic breakfast cereals, breads, crackers and other dry foods are condemned to live as ultra-niche products — just as they do elsewhere in the world, and for the same reasons.

It's no surprise that the visionary who gave birth to the soy milk market — Steve Demos — has also figured out the opportunity for probiotic fruit juice and licensed the active ingredient in Pro Viva from its inventors, Probi AB, for use in a similar product in the US. Demos is right on the money.

What do you need to do to be successful in the digestive health market?
1. Technology that works: a bug that is sufficiently based in science that in a sufficient dose it can deliver a digestive health benefit that consumers can actually feel.

2. Demonstrate the effect: this is where marketing initiatives such as the Activia 2-week challenge, now widely copied, have been very effective in Europe.

3. It's better to be first in the mind than first in the marketplace — Danone's probiotic products have achieved dominance in digestive and immune health in much of Europe thank to a clear and uncompromising brand position with a clear and consistent benefit statement supported by long term marketing expenditure linked to consumer education. Marketing is not a battle of products, it's a battle of perceptions this means that once you have captured and reinforced the position in consumer's minds, then it is very difficult to change. Could someone challenge Activia's position now? Probably. Could they be successful? Probably not, as Activia is now too firmly entrenched.


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