Japan's Nutraceuticals Today : Is the Functional Food ‘Boom’ Real This Time?

薬食同源 Japan’s Nutraceuticals Today

By Paul Yamaguchi

Is the Functional Food ‘Boom’ Real This Time?

Or Is It Just Media Hype?
I suspect I’m not only one who has noticed the ton of seminar materials for functional foods these days: Seminars such as, ‘Functional Beverage 2004’, ‘Functional Foods & Beverage Forum 2004’, ‘Nutraceuticals Summit 2004’ and so on.And there are not only seminars, but the industry journals and magazines also seem to be focusing on functional foods. Is functional foods a really hot subject today, and are consumers and the marketplace really responding to it? It does seem that the numbers are showing some growth and movement. “Functional foods category grew by 9 percent over the previous year” says NBJ. And we are also aware that the growth of dietary supplement has slowed down for the past 3 years or so.

Is the Consumer On Our Side This Time?
Could this be a sign that functional foods are taking over from dietary supplements? Is it just hype or the industry media overdoing the topic? What really trigged functional foods as a hot topic? Was it the success of the Red Bull energy drink or Glaceau’s Vitamin Water or the heart healthy cereal commercials on TV? Or are food companies generating a sudden urge after watching Tropicana Pure Premium’s heart health or immune system Essentials Orange Juice flying off shelves? Or maybe the current Low-Carb phenomenon is part of the reason?Whatever it is, the industry is showing an increasing interest in functional foods. And the difference this time, as opposed to the 90’s, is obvious - this time consumer health awareness is higher which is translating to some successes in the marketplace.

Looking Back - History in Japan
When I look back through 30 years of the Japanese functional foods history, progress has not always been uphill. It went up and came back down after a few years of an active market and then went into hibernation only to revive for a few years and then it went to sleep again.But since the late 90’s, the Japanese functional foods market has grown at a steady pace of 9 percent a year. As for the government approved health claim foods, FOSHU has been growing an average of 20 percent a year for the last 8 years, and just for the last 2 years, growth has been at 37 percent. This is the longest growth span we have ever experienced, and there is no sign of it slowing down. When Japanese economic growth was net zero in the late 90’s, functional foods were growing faster than any other industries.

What Happened in Japan in 1997
So what happened in the late 90’s in Japan? It was ‘water’. In 1997, Kirin Supli hit the market. Supli was a slightly fruit flavored water, fortified with dietary fiber, calcium and vitamins. After 6 months of introduction, sales went to $60 million and within 2 years sales had reached $100 million. In the next few years, there were over 50 brands of so- called “near water” crammed into the marketplace and a new generation of functional foods began. Malcolm Gladwell pointed out in his book, ‘The Tipping Point’, just how important is the ‘Law of the Few’. You don’t need a whole lot to open the door of the functional foods market, just a few good products will influence an entire nation.

Starting With the Basics
What is truly significant here, is that we started with water instead of a margarine. Water is the most precious commodity and basic beverage for human beings. People drink water without any hesitation and they need to drink water. If the water has better taste and is better for your health than a bottled water, people will prefer to take something better - Of course, if the taste and the price are right. And it was right. ‘Near water’ producers set the price compatibly with bottled water, the taste was favorable and the rest is history. At the height of the ‘near water’ boom, the market had reached almost $1 billion. From there, the Japanese moved to probiotics, functional yogurt, fermented milk drinks, prebiotics, and sports beverages, to healthy oil, high blood pressure products to cholesterol lowering products and so on, all with the cooperation of ingredient developers and large brand manufacturers who believed, invested and took risks on functional foods.

Stay the Course
Today, the Japanese functional food industry is over $15 billion, just in fortified foods alone. (Functional Foods & FOSHU Japan 2004) If we include broader segments, then the number would be much higher. The Japanese population is one half of the US, yet the Japanese functional food industry is advanced and has a lot of experience. As an industry, what we did was, we started with the basics and built up from there. Perhaps this process wasn’t totally planned. But I am optimistic for functional foods in the US this time, because it too has now started with the basics and we are seeing the involvement of large corporations and ingredients developers working hard to bring new ingredients that are one step ahead. Food companies are realizing that in the conventional food market theremay be little room for growth, and they are looking for new territory, and functional foods is one with potential.

Consumer awareness is high. As the Japanese experience suggests, launch new products with honest statements, and don’t put too much science in front. Position as a food and blend into conventional foods, and most of all, make your product better with a unique and favorable taste. And if you are able to price reasonably and don’t scare away consumers with high prices, then you should be fine.

Paul Yamaguchi is president of Paul Yamaguchi & Associates, Inc., Tarrytown, NY. His company publishes a number of Japanese nutrition market reports, including Nutraceutical Japan 2003, Nutritional Supplement Japan 2003. His latest report is Functional Foods and FOSHU Japan 2004, Market & Product Report. For details and information on the reports, visit: www.functionalfoodsjapan.com or contact Paul at [email protected]

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