It’s likely that we will look back on 2004 and see that it was the year that—driven by companies like General Mills, Minneapolis, MN, and PepsiCo, Purchase, NY—health became the new standard for the global food industry. From this point forward, every company will find that it has to have a clear strategy to make its products healthier—by reducing fat, salt and sugar, by substituting healthy ingredients for less healthy ones or introducing healthier alternatives to existing lines. We’ll also be able to look back and see that 2004 was the year it finally became crystal clear what the future of functional foods will look like and who will be the winners and losers.
Health is the Future of Food
“Wellness will be to the food business what convenience was over the last 15 years,” said Brock Leach, chief innovations officer for PepsiCo, in a recent interview with New Nutrition Business. “Wellness” is the key trend and every company must have a clear view of how “wellness” is going to impact its products and how it will do business in a world in which wellness is the norm.
Where Pepsi and a handful of its peers are leading, the rest of the industry will eventually follow. PepsiCo has embarked on a major strategic overhaul of its entire product portfolio, intent on reducing the levels of fat, salt and sugars its products contribute to the American diet. Its latest initiative is Smart Spot, a program designed to help American consumers identify more than 100 of the company’s food and beverage choices “that contribute to healthier lifestyles.” Smart Spot is a green symbol that will begin appearing nationally on brands including Tropicana, Gatorade, Frito-Lay and Quaker. Pepsi says that it is “committed to have at least half of its new U.S. products qualify” for the symbol.
Products with the Smart Spot designation meet nutrition criteria including limits on the amount of fat—saturated and trans fats—cholesterol, sodium and added sugar. The symbol identifies products that are nutritious and contribute fiber, vitamins and other important nutrients, PepsiCo says. The criteria also serve to identify products with reduced levels of fat and sugar, or products formulated to have specific wellness benefits.
In some categories we are already seeing companies competing to be “healthier-than-thou.” Earlier this year Kellogg introduced “One-third Less Sugar” versions of some of its leading breakfast cereal brands. Rival General Mills, not to be outdone, reduced the sugar content of some of its cereals by a more dramatic 75%.
Should anyone doubt the momentum of the trend toward companies making their entire product portfolios intrinsically healthy than they should take note of a recent bold move by General Mills, America’s third largest food company, which recently announced its intention to re-formulate its entire breakfast cereal portfolio and make all of its brands with whole grains. As General Mills maintains approximately 33% of America’s $7.7 billion breakfast cereal market (neck-and-neck with Kellogg’s) and is also a player in Europe and elsewhere, it is one of the most significant developments in the global food supply in recent years.
The Power of Public Health
General Mills’ latest move shows that it recognizes the power of connecting to public health messages. Regular consumption of whole grains significantly reduces the risk of heart disease, as well as the incidence of diabetes and obesity. U.S. dietary guidelines recommend the consumption of three servings a day, but 90% of Americans get only one serving. Moreover, updated U.S. dietary guidelines, which will officially be announced in January 2005, are expected to call for an increase in consumption of whole grains.
Assuming that Americans don’t eat any less of General Mills’ cereals in the wake of the change in recipe, then from these brands alone they will be getting an extra 1.5 billion servings per year of whole grains.
General Mills isn’t offering a functional “magic bullet”—a product that will claim to deliver an efficacious disease-fighting “dose” of a novel ingredient (plant sterols, to take one example) in a single serving. What it is doing is simply making it possible for people who start their day with a bowl of cereal to get one of their servings of whole grains, thus contributing to a healthier diet. This is a very different strategy from food targeted at “fixing” a condition, such as lowering cholesterol or blood pressure in a near-pharmaceutical way, for example.
It’s worth mentioning that the whole concept of functional foods was born in Japan in the late 1980s largely in response to clearly identified public health needs—that Japanese needed more calcium and fiber in their diets—which were the basis of public health communication.
It’s also no accident that Finland and Sweden are also world leaders in functional food innovation, as strong diet-and-health messages have been part of these countries’ public health efforts since the 1970s. In addition, the food industries in both countries have a long history of working with public health educators to produce healthier foods.
In the Future ‘All Foods will be Functional’
In 2000, Tropicana—the market leader in America’s $3 billion orange juice category—successfully petitioned the FDA to allow it to use on its orange juice a health claim linking the potassium content of orange juice with reduced risk of stroke. In one move, the entire U.S. orange juice market had become functional because every Tropicana juice box and every other brand that contained sufficient potassium could theoretically make this generic health claim.
Since 1995 the Ocean Spray company has communicated through PR the scientifically-validated benefits of its cranberry juice in eliminating urinary tract infections, which afflict 30% of women.
Meanwhile, since 1994, Heinz has used PR to communicate the benefits of consuming tomatoes in reducing the risk of prostate cancer, thanks to their content of the carotenoid lycopene, and since 1998 has mentioned the lycopene content on the labels of its processed tomato products.
What these foods and many others have in common is that their health benefits are intrinsic to the product. No expensive, specially isolated bioactive ingredients have been added, there is no “magic bullet” new component derived from elsewhere that delivers the benefit, it’s just that the progress of nutrition science has uncovered the intrinsic health benefits of these foodstuffs—as it is also doing for tea, barley, blueberries, olive oil and many more.
General Mills decision to reformulate with whole grains is a strategy along the same lines: the company is delivering a heart health benefit not by using specifically-developed and expensive functional ingredients but simply by using whole grains, an intrinsically healthy foodstuff that brings scientifically-proven health benefits without adding cost to the product.
As nutrition science continues to reveal more about the intrinsic health benefits of everyday foods, the strategy of marketing intrinsic health will become ever more common.
What does the trend toward everyday intrinsic health mean for marketers of functional ingredients? It wasn’t very long ago that “explosive growth” was being forecast for plant sterols, omega 3s, lutein and the like. The reality, however, is of very slow growth in foods and beverages, with some ingredients enjoying much greater success in dietary supplements.
It has been 10 years since the first cholesterol-lowering sterols and stanols were commercialized. What was forecast to be a boom business has turned out to be a bust—at least for shareholders, most of which are still awaiting a return on their investments. You have to work very hard to find companies making profits from supplying sterols and stanols. It’s a salutary tale for anyone looking to commercialize new ingredient science. Canadian-based Forbes Medi-Tech, for example, announced operating losses of $4 million in the first half of this year—the company is now in its 10th year of losing money. Over in Finland, Raisio, the original pioneer in the field, has only just struggled into the black more than 10 years after making its first commercial sale. There’s nothing unusual about this in the world of functional ingredients—a recent survey conducted by New Nutrition Business found that of 50 ingredient companies established in 1995, 47 were still losing money today.
Raisio reports that sales of its Benecol ingredient were up 76% this year, a boost that’s mostly attributable to the fact that companies are beginning to use its stanols in new product formats, such as, to take just one example, the “daily dose” cholesterol-lowering yogurt drink, developed and energetically commercialized by Benecol partner Emmi, an innovative Swiss dairy group. This 100 ml dairy drink delivers the full daily dose of 2 grams of plant stanols—a big improvement over getting them from three servings a day of Benecol spread. The product is a true innovation. It takes its inspiration from the tremendous success enjoyed worldwide—though not yet in the U.S.—by daily-dose probiotic drinks. Emmi’s innovation has been duplicated by other European dairies using Benecol as an ingredient and now even by rival Unilever, which has this year extended its cholesterol-lowering Pro.activ brand with the launch of a 100 gram dairy drink.
The experience of Europe’s probiotic daily dose market shows what is possible when you bring together packaging innovation and marketing based on simple wellness messages. It’s a market that didn’t exist in 1994, which in 2004 is worth, at retail prices, around $1 billion in sales Europe-wide.
Europe’s probiotic daily-dose market was created by Japan’s Yakult Honsha, which launched its 65 ml product in the Netherlands in 1994, soon followed by French dairy giant Danone with its 100 ml Actimel drink. Danone has leveraged its brand and distribution to become the clear market leader in the category in Europe with an estimated 60% market share. These small bottles were an innovation back in the mid-1990s and one that many believed wouldn’t work in the European market (rather as many today say they won’t work in the U.S.).
The success of daily-dose probiotics has this year seen the spawning of new brands with new health propositions, such as the cholesterol-lowering drinks mentioned previously. One of the most interesting is Zen, a Danone brand launched this summer in Belgium and Ireland.
Zen is a fermented dairy drink. Each 100-gram bottle—a highly distinctive spherical shape that is itself an innovation and a world-first—delivers a 90 mg dose of magnesium, equivalent to 30% of the RDI. The product label and promotional materials discuss the benefits of magnesium as an ingredient for relaxation. Taken together, the pack design, the choice of ingredient and the health benefit represent three types of innovation in one product.
Relaxation through a dairy food is a new concept and Danone is going to some lengths to explain what the product does. In-store point-of-sale leaflets provide information about the role of magnesium as a potential relaxing agent and tips for relaxing. A TV campaign invites consumers to call the Danone Careline to obtain a free four-bottle sample of Zen.
Initial results suggest that Zen is not replacing purchases of Actimel, according to Danone, rather consumers are buying both products, to address different health needs. Having conquered Europe’s morning with Actimel, Danone now seems set on conquering the night, and as with Actimel the company is firmly positioning Zen on a simple wellness proposition.
The Role of Science Communication
It’s very easy to fall into the trap of believing that just because your health ingredient has a proven high degree of efficacy that fact constitutes an argument for brand owners to use it in their products.
The challenge is that in today’s marketplace having a stronger body of science for your ingredient than your competitors can’t easily be used to create value in the consumer’s mind.
Take the case of docosahexaenoic acid (DHA) and eicosapentaenoic acid (EPA) from fish oil. These are far more effective types of omega 3s, but they are also terms that mean nothing to most consumers. Print “DHA” on the label of a product and its presence won’t result in a single extra sale, which is why the more generic and better-known term omega 3 is used. The only problem, of course, is that this allows less scrupulous companies to use cheaper and less effective forms of omega 3s.
Products can, for example, be formulated with low-cost, low efficacy, vegetable-derived omega 3 or the higher efficacy, higher-cost marine source. But even Unilever, when fortifying its entire Flora brand of spreads with omega 3, chose the cheaper flax-source omega 3, even though there is scant evidence showing it has same degree of heart health benefits as marine-source omega 3s. As for the consumer, although many have heard of omega 3s, very few understand the different types.
The answer to the question of how to communicate good science is usually to turn to a health claim. Around the world, industry and regulators are preoccupied with an intense debate about health claim regulation. There’s just one little snag, which is that there’s very little evidence to suggest that having a health claim on a product will result in increased sales.
Health claims have two aspects. They are both a statement about the scientifically established benefits of a product—a statement that must not go beyond what the science can substantiate—and they are also a marketing message to tell the consumer what benefit the product will give them and so encourage them to buy the product.
Unfortunately these two goals are often mutually incompatible—as many companies are discovering when looking at the wording of claims under the FDA’s qualified claims process. Many in industry—in North America and elsewhere—fear that they will go through an expensive health claim approval process only to find themselves saddled with a form of words that means nothing to the consumer.
In fact, health claims might even confuse consumers and actively turn them off in terms of buying the product. The UK’s Food Standards Agency (FSA) last year conducted extensive research into how consumers understand claims. The agency concluded that consumers in fact respond to them in a non-scientific way, saw claims that referred to cholesterol-lowering (for example) as identifying products as being for sick people and not the average consumer—and most didn’t even notice the presence of claims on the package. The FSA concluded that issues of brand familiarity, taste, overall product appeal and “naturalness” of ingredients were much more important in consumers’ decision-making.
What’s often overlooked is that some of the world’s most successful functional brands carry no health claims at all. Yakult, for example, a $2.3 billion brand, talks only about “wellness from the inside” and “a healthy start to every day,” as does Danone’s Actimel.
Consuming cranberry juice has long been established in American folklore as an effective way to fight urinary tract infections (UTIs), which affect upwards of 30% of women at some point in their lives. Ocean Spray, the world’s largest processor of cranberries, has long been in the forefront of investment in the science of cranberries and the demonstration of the mechanism by which cranberry juice works against UTIs. But it is good PR about cranberries’ benefits that has assisted the company in building its business in the U.S.—not health claims. In fact, the company has never used a health claim for its products either on labels or in advertising. The absence of a health claim has not prevented sales of cranberries from rising steadily nor from having a very strong health image in relation to UTIs.
In the world of omega 3s, it’s been claimed for some time that an approved health claim will boost sales and take omega 3s from being a niche ingredient in foods and beverages to being a big player in the global food industry. But no one in the world of omega 3s should be getting too excited about the value of health claims in the short term. Even in Australia, where measured consumer awareness of omega 3s is higher than in the U.S. and omega 3 health claims explicitly linking their consumption to reduced risk of cardiovascular disease appear on a variety of products, sales of omega 3 fortified products remain at niche level.
And if anyone thinks that simply having a more simply-worded health claim than the FDA recently allowed will make a big difference to sales then they should look to the U.K., where DHA-fortified Intelligent Eating Healthy Eggs were launched in 2003 by Stonegate Farms, an established market leader in the U.K. egg market. The egg carton carries three prominent health claims, stating clearly and simply that: Omega 3 DHA is proven to play a role in:
• Brain Development & Structure
• Eye Structure & Maintenance
• Heart Health & Maintenance
Yet this is not enough to move the brand beyond respectable niche status. It’s the same story for every omega 3 product in the U.K. market. The issue of the growth of the market for marine omega 3 fortified products is not just about health claims and how they are worded but whether consumers believe an ingredient has a benefit relevant to their health and lifestyle needs. The Australian and U.K. experiences suggest that despite the presence of clear health claims that belief is slow in developing.
Functional Food Predictions
The over emphasis on health claims overshadows the fact that health claims are just one communication tool among the many that are available to companies, and as Ocean Spray and many others have demonstrated, a less effective tool than PR and the word-of-mouth recommendations that follow when a product actually delivers benefits that people can feel.
So where do functional foods go from here and what should companies do? Brand owners, for one, can adopt the wellness-oriented strategies of the most successful companies and use only ingredients and messages with a positive wellness message or they can choose the path of the ultra-niche disease risk reduction message. They can also begin to ask themselves before they add a new ingredient whether their target consumers will really accept the ingredient and understand its health benefits. If they don’t understand the health benefit that means that you have to invest in a consumer education program to get the benefit across.
One very good example of consumer education is New Zealand Milk’s Anlene brand of calcium-fortified milk, which is marketed in Asia. How do you get people to drink premium-priced calcium fortified milk for their bone health if they don’t know what state their bones are in? NZ Milk’s response was to develop Anlene Teams of health professionals, who visit shopping malls and provide a free bone scan to anyone that wants it. People who have a scan get a one-on-one consultation with a dietitian, an information booklet about bone health and a sample of Anlene.
Anlene has carried out 15,000 bone scans in Malaysia alone and across the whole of Asia has provided more bone scans than the entire region’s hospital system. It’s now a highly profitable $125 million annual sales brand and NZ Milk says that this form of consumer education is more effective in advertising in raising awareness of whether people need the product.
Ingredient suppliers, too, should be asking themselves how they can invest in building consumer awareness of the health benefits of their ingredients. Kemin Foods, Des Moines, IA, is a company that has worked hard to achieve this for lutein, but even its efforts have not been enough to get lutein into more than a handful of beverages. In order to build awareness of an ingredient companies must make a long-term commitment entailing heavy investment in consumer education. Unfortunately there’s also no alternative to doing this, since the functional ingredient marketplace is becoming evermore crowded and it is becoming evermore important for companies to stand out from the crowd, either on quality or price. Those that can’t achieve some such point of difference will face a bleak future.
After 10 years of functional foods it’s now very apparent that successful brands are often more the result of innovations in packaging and marketing rather than innovations in science, and are more about broad consumer education rather than narrow health claims. Success is also based on whether the consumer understands the health benefit being offered. If companies get these things right then they’ll be well positioned to take advantage of a world in which health is at last becoming the basis of everything the food industry does.
About the author: Julian Mellentin is an expert on the business of functional foods and has been involved in this area for 10 years. He is director of The Centre for Food & Health Studies, a company that has provided research, analysis and forecasting of the global nutrition business since 1995. The company is based in London, U.K., and has offices in Finland and New Zealand. He is also Editor of New Nutrition Business, the long-established international journal on the global nutrition business, which his company publishes. He can be reached at 44-20-7533-6595; E-mail: [email protected]; Website: www.new-nutrition.com.