Why functional foods have a healthy prognosis
As consumers want their food to make them healthier, more products touting benefits appear on store shelves and analysts forecast a CAGR of 6.53% in the U.S.
Stroll through any large grocery outlet or specialty store — or go online to any food product site — and there is likely to be an array of protein powders, energy drinks, power bars, probiotics, vitamin water and calcium-fortified beverages to maintain bone health.
These products are enriched or enhanced with nutrients, phytochemicals, botanicals or dietary supplements, and they are known in the industry as functional foods.
Functional foods are defined as those having a potentially positive effect on health beyond basic nutrition and are meant to do more than simply meet daily nutrient requirements — they can also play a role in reducing the risk of disease and promoting good health.
Although the U.S. Food and Drug Administration is charged with regulating functional foods, the agency has not yet come out with an official definition.
"Terms such as 'functional foods' or 'nutraceuticals' are widely used in the marketplace. Such foods are regulated by FDA under the authority of the Federal Food, Drug, and Cosmetic Act, even though they are not specifically defined by law," the agency states.
Regardless, the demand for these foods and their market continues to grow, with many experts saying functional foods is one of the areas that will see the most growth in the near future.
Consumer demand and market growth
As U.S. consumers become more health-conscious, they're looking for natural ingredients and foods and beverages rich in nutrients. Companies getting into the functional foods sector are responding to the trend by continually introducing new products.
"Due to growing consumer understanding and interest in medicinal foods, they are rising in the natural food and beverage space where functional ingredients rooted in the real world (as opposed to labs) are increasingly in demand," said Kara Nielsen, an expert in food and beverage trends wrote in a recent Packaged Facts report on cutting-edge wellness.
According to a report from Technavio, the global functional foods and beverage market is anticipated to grow at a steady rate and will post a compound annual growth rate of close to 8% from 2017 to 2021. For that same period, analysts forecast a CAGR of 6.53% for the U.S. market.
The trend is being driven by an aging population concerned about maintaining health, ever-rising medical costs, and a greater consumer interest in the connection between healthier eating and well-being.
Functional foods are no longer a niche market, and some of the largest food companies are getting into the game. Campbell's CEO Denise Morrison noted the company's interest in expanding into faster-growing spaces such as organic and functional food when it bought Pacific Foods for $700 million earlier this year.
PepsiCo acquired probiotics beverage maker KeVita this past fall and launched its Tropicana Essentials Probiotics line earlier this year, which a company official said made it the first brand to bring probiotics to the mainstream juice aisle. And the venture capital unit of General Mills led a $6.5-million Series D investment round in March to benefit Farmhouse Culture, a fermented and probiotic food and beverage startup.
Major players in the space can be expected to roll out new functional food products as research and development allows. They continue to scan the field for potential acquisitions to help boost profits and share price and, as recent partnerships and purchases indicate, are looking to the smaller and more nimble entrepreneurial startups for the next big thing.
A brief history
The Japanese and the Russians are credited with pioneering the development and application of functional foods to aid digestion and enhance performance. The first commercial application of a functional food in the U.S. may have been in 1924 when the Morton Salt Company began adding iodine to its products at the request of the government.
Officials concerned about the incidence of goiter in the Great Lakes region — then known as the "goiter belt" — were trying to address an underlying regional iodine deficiency. Iodized salt — a practice borrowed from the Swiss — helped alleviate the problem.
Oatmeal played a pivotal role in drawing public awareness to the potential value of functional foods, according to Carol Culhane, president of International Food Focus Ltd. in Toronto. Oats contains beta glucan, the active ingredient in soluble fiber, which has been shown to reduce low-density lipoprotein — also known as "bad" cholesterol. When this news got out, people started paying more attention to the discussion and the research behind it.
"It took many clinical trials to prove the data," she told Food Dive. "In 1997, FDA approved the claim that beta glucan could reduce serum cholesterol. That was the beginning of this."
Product successes and failures
While there were some successful product applications in the beginning, not all functional food debuts could be considered winners in the marketplace.
One example occurred in the late 1990s, when Kellogg started rolling out its Ensemble line of cholesterol-lowering food products containing "natural soluble fiber" — courtesy of psyllium wheat husk. The company discontinued it within a year due to lack of sales blamed on generic packaging and merchandising problems.
Successes increased as the quality of marketing, packaging and distribution of functional foods ramped up. In 1985, General Mills rolled out its Fiber One cereal. In 1987, Danone launched its popular Activia probiotic yogurt in France, and brought it to the U.S. in 2006.
Both of those products are still going strong. For Fiber One, the timing was right to catch the trend toward high-fiber foods. For Activia, marketing efforts managed to overcome initial consumer resistance to the notion of "friendly bacteria" — a concept better received in Europe than in the U.S.
Since then, a huge array of functional foods have entered the U.S. market, with some manufacturers walking a fine line on label claims regarding health and wellness to avoid running afoul of the Federal Trade Commission. The FTC requires any health claims to be backed up by science, and functional food products may not legally tout themselves as disease cures.
Health claims on a food or beverage label must also pass regulatory scrutiny from FDA, and this can be a laborious and expensive process. Companies must also conduct research and safety reviews of functional food substances and petition FDA to acquire GRAS status — generally recognized as safe — to cover the intended use.
The personal experience factor
Customer acceptance of functional foods remains the key factor for the market, and Culhane noted that long-term success hinges on personal experiences that create the incentive to make a lifestyle change.
While lycopene — a powerful antioxident found in tomatoes, watermelon and some other foods — "can definitely reduce prostate tumors," she said that it would not be effective immediately for someone experiencing prostate problems in his 50s.
"They would have to start in their 20s," she said. "The big challenge is to get young adults to start thinking in these terms about how they have to eat to enhance health."
Culhane cautioned that not all functional foods provide the maximum benefits the way they are normally consumed, and that the amount of a serving could impact efficacy.
"Often the serving size and daily dosage are not practical," she wrote in an e-mail. "One need[s to] consume the equivalent of 1 quart of soy milk per day to realize the cholesterol-reducing benefit of the active ingredient, the soy protein. Approximately 3 cups of oatmeal need[s to] be consumed per day to realize the cholesterol-reducing benefit of the active ingredient, beta-glucan."
What's available and what's coming
Today, consumers can buy buttery spreads — such as Lipton's Take Control and Raisio Group's Benecol — containing plant stanol and sterol esters to help reduce the risk of heart disease, along with high-fiber breads and other baked goods — like Schwebel's Roman Meal 100% Whole Wheat and Kellogg's Kashi Soft-Baked Cookies — to help reduce cholesterol.
Stanols and sterols are plant-based compounds naturally found in vegetable oils and cereals that work to prevent the absorption of dietary sources of cholesterol, which in turn helps to lower total and LDL (low-density lipoprotein) cholesterol levels in the blood.
These compounds are increasingly being incorporated into functional foods. Minute Maid Premium Heartwise orange juice contains Cargill's trademarked CoroWise plant sterols, and a Joseph's Bakery line of flatbreads contains ADM's trademarked CardioAid plant sterols.
Other functional food products are in the works as scientists extract beta glucan from mushrooms to help boost the immune system, produce fiber-rich inulin flour from chicory root, and explore numerous beneficial nutrients from algae.
While algal-derived food products can benefit human health, researchers say challenges remain to quantify benefits and understand how harvesting, storage, and food processing techniques impact the nutritive value of algae. The emerging field of phycology — the scientific study of algae — is just one area to explore for those interested in experimenting and collaborating in the development of new functional food ingredients.
"I think [the future of functional foods is] going more in the direction right now of the chemistry and really understanding the composition of native or raw foods," Kristi Crowe-White Ph.D, an associate nutrition professor and registered dietitian at the University of Alabama, told Food Dive. "We have a good 20 compounds that are well incorporated, but that's not the be all and end all. We have others we can be looking out for. It's a very exciting time to be in this field."