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* Functional food products: rebuilding consumer trust and using cross-sector knowledge to drive innovation*

In the battle for market share and brand identity, global consumer goods companies are increasingly turning to nutraceuticals and functional foods to appeal to the changing demands of consumers. ‘Friendly bacteria’-containing probiotic yogurts and drinks, cholesterol-lowering spreads, so-called ‘superfoods’, fibre-, vitamin- or mineral-fortified breakfast cereals, and energy drinks are now prevalent on supermarket shelves. Changing social demographics and the trend towards maintaining health and wellness and boosting personal performance has seen the area expand from niche manufacturers and products to major global FMCG brands.

Key players range from Coca-Cola, PepsiCo or Cadbury Schweppes in sports beverages, juices and waters to Kellogg’s and General Mills in snack foods and cereals. Other major contributors include Unilever, Nestlé, Danone, and some specialist players such as Red Bull. By 2010, global nutraceutical ingredient demand is anticipated to rise to $15.5bn and global functional food and beverage demand will rise to $109bn.

However, the growth of functional foods is slowing to a rate in line with their non-functional counterparts. The UK market for functional foods barely grew in 2007 in stark contrast to previous years, and the popularity of cholesterol-lowering spreads and yogurt drinks declined significantly. This slowing growth is likely to be a consequence of a series of challenges facing the industry. Functional food and beverage introductions are meeting the contempt of consumers and the media, and face the ever-watchful regulatory spotlight. Previously, this has resulted in the failure of multinational brands despite efficient distribution networks and marketing.

Dwindling consumer trust in products, and scepticism over marketing health claims and efficacy, are key issues facing the industry. Exaggerated health benefits, overworked ingredient content claims and aggressive advertisements have dented confidence in products that often contain just one or other nutrient whose levels are far below the Recommended Daily Intake. Procter & Gamble’s Sunny Delight, containing less than 2% orange juice, met severe media criticism in the UK as consumers were mislead by marketing claims suggesting it was a healthy alternative to soft drinks.

Lack of public awareness and understanding of functional foods and their benefits is also an inhibitor of growth. Previously, Nestlé’s LC1 yogurt, designed to promote digestive and gut health, lost considerable market share, and was later withdrawn when Danone introduced its Actimel brand. This was a clear example of an overly scientific marketing approach failing against one which made health benefits accessible and understandable.

Getting tough Tougher European legislation covering all wording and symbols used in labelling, presentation and any advertisements implying food nutritional or health benefits has recently been introduced. Any claims exaggerating a food’s health benefits or lacking supporting scientific evidence will be banned; a significant proportion of the 5,000 health claims presently made on products in the UK will not survive. The European Commission anticipates having an agreed final list of authorised scientifically substantiated health claims by 2010.

Previously, the regulatory spotlight has sparked concerns over specific ingredients. Red Bull performed poorly in the conservative French market and remains banned in other European countries (Norway, Denmark and Iceland) due to regulations and health concerns surrounding its caffeine and taurine content.

To meet these challenges, companies must alter perceptions about functional products, remaining totally committed to the effective communication of health benefits and marketing messages. Companies that learn to communicate the benefits of functional foods and the scientific evidence supporting their use simply and in a meaningful way will gain competitive advantage. Organic foods have been many years in the waiting before becoming successful in recent years; this required a change in perception rather than product as organic food reaped the rewards of the negative GM press.

A balance must be achieved between promoting detailed and specific scientific benefits with a simple and understandable reassurance that a product promotes overall health and wellness. Health claims should be used as a foundation for consumer education. Customers are demanding more information about how products work and there's an increasing interest in specific functional benefits targeting niche population groups and lifestyles. Proactive compliance to new regulations will be a key factor for success in rebuilding consumer trust and awareness.

Manufacturers and marketers also need to continue to apply a rigorous approach to innovation, adopting new approaches, products and services while keeping taste, convenience and cost as priorities. New product development often fails to learn from existing product successes and failures but this is starting to change. Effective innovation requires appropriate market and consumer insight, technology foresighting and an understanding of developments in nutritional science, nutrigenomics, biomarkers, bioactive ingredients and delivery systems. Companies must also draw upon knowledge from a variety of industries and sectors to expand their thinking, develop cross-functional innovation opportunities and strategic alliances.

Coupled with this is the need for rapid prototyping facilities and the capacity to conduct effective proof-of-concept studies. Such breakout innovation is often difficult to accomplish within the constraints of existing company infrastructure, technology and expertise where the product, manufacturing process and packaging are often viewed independently.

Looking ahead Bone/joint health, enhancing mood and mental performance, weight management and cardiovascular health will be major growth areas. Some recent product introductions include additions to the Tropicana Essentials (PepsiCo) product line (calcium, magnesium or plant sterol enriched juices), Danone’s Shape Lasting Satisfaction yogurt and Kellogg’s Special K Sustain, both claiming to enhance satiety, and omega-3 enriched spreads (eg Dairy Crest’s St Ivel Advance) and bread products (eg Kingsmill’s Head Start loaf) aimed at promoting mental performance. Milk, cereal, bread and snack products are important food innovation areas. Ingredient opportunities include soy nutrients, green tea extracts, omega-3, chondroitin, antioxidant vitamins and calcium.

Food manufacturers able to hit the sweet spot between consumer needs, technical feasibility, regulatory compliance and commercial feasibility will be well placed to stay ahead of the competition and gain business advantage.

*Dr Jonathan Gledhill works for PA Consulting Group, a management, systems and technology consulting firm based in Hertfordshire, UK. He's worked for government and private sector clients within healthcare (medical devices, diagnostics and pharmaceuticals) and for the consumer products industry.

He has a PhD in Biochemistry and Molecular Biology from Cambridge University, and consulting expertise in market analysis and foresighting, technology strategy development, competitor reviews, due diligence studies and technical assessments.

He has also been involved in product concept generation and product development programmes. In addition, Jonathan has experience working in the pharmaceutical and biotechnology industry, holding positions with Novartis and the Chiron Corporation in their drug discovery departments.

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