The global fermentation ingredients market could be worth $28.4 billion in 2020, growing annually by 3.4%, according to a report from BCC Research
Demand for fermentation ingredients is driven by a growing world population, rising per-capita incomes and increasing food production in developing regions, BCC found. Asia is the fastest-growing market for most fermentation applications, the company reported.
The report profiles some of the largest players in the fermentation industry — Adisseo (Bluestar Group), Charoen Pokphand Foods, J.D. Heiskell & Co., Novus International and Weston Milling Animal Nutrition. BCC said the market has at least 200 suppliers, but only 30 of them have annual sales exceeding $100 million.
Consumer interest in the potential health benefits of fermented foods and beverages is growing around the world as people become aware of how they can positively impact the digestive system, which in turn influences immunity and brain functions. The source of fermented food's gut-healing properties is probiotics, or good-for-you bacteria, that's found in products such as kombucha, sauerkraut, kimchi, kefir and pickles.
Consumers also are interested in probiotics as a value-add, and demand is picking up, according to Michael Bush, the executive board president for the International Probiotics Association. “The U.S. is the fastest growing probiotic market,” he told Food Business News.
Food manufacturers are lining up to take advantage of these trends. PepsiCo acquired sparkling probiotics beverage maker KeVita in 2016 and also recently launched its Tropicana Essentials Probiotics line. Last March, the venture capital arm of General Mills, 301 INC, led a $6.5-million Series D investment round to benefit Farmhouse Culture, a fermented and probiotic food and beverage startup. Peet’s Coffee was recently part of a $7.5-million Series B round of funding for Revive Kombucha last August.
A major reason large companies have been investing in this market is because it's a lucrative segment that appeals to millennials who are more intrigued by probiotic foods and beverages than other demographics. According to a Packaged Facts report, 25% of U.S. adults look for food and drink products with high amounts of probiotics and prebiotics.
And while it may seem strange that millennials — whose younger digestive systems generally function better than those of older consumers — are the most interested in gut health, this demand reflects broader interest in food as medicine, as well as in other holistic health trends.
Millennial hunger for probiotic-infused products began with kombcuha, which served as the gateway of fermented foods to the U.S. market. After the fermented tea debuted here a few years ago, consumers have been more interested in trying other products. As shoppers look for healthier and less-sugary beverages, they are turning to flavored and sparkling products, another area where kombucha and its bubbles helped lead the way.
As the report noted, there is still plenty of room to grow in this emerging space, and Big Food manufacturers would be wise to invest in new product formulations or emerging probiotic-centered brands to stay ahead of the trend. If they fall behind, there is always M&A to consider.