Functional foods are at a crossroads. Next week the European Food Safety Authority (EFSA), European Commission and industry reps meet to hammer out what is required for the health claims of functional food and drink to be approved by the EFSA.
On the one hand there are high hopes the meeting on 1 June in Parma will provide much-needed clarity around the health claims approvals process, which has been criticised for being overly complex, bureaucratic and, most of all, tortuously slow.
However, an almost identical meeting this time last year came to nothing, prompting some manufacturers to withdraw their applications to have health claims approved until the process is clarified.
If that's the case, they warn, it could discourage brands from trying to get new claims approved. At the very least, it could make the process of securing approval more onerous and that would hamper the prospects of what is a large and growing market, worth £556m [Kantar].
Volume growth for the category was 4.6% year-on-year buoyed by aggressive promotional strategies during the recession while value growth was 5.3%. To set this in context, the category reported volume growth of 1.3% the previous year and value growth of 7%, much of which was due to commodity-based price inflation making it more important than ever for the EFSA to get its act together to protect the future growth of the sector.
Ominously, one or two big names have withdrawn health claims applications recently because of the confusion surrounding the process. In April, Danone took the radical step of voluntarily withdrawing from the EFSA process two out of three of its approval dossiers for products sold in France. Dr Connie Hersch, healthcare professional marketing director, Danone, explains the applications were only withdrawn until after next week's meeting, when it hopes the evaluation process will have been clarified.
And Danone is by no means the only manufacturer to have its reservations about the EFSA's procedure. "There has been a lot of discussion about the claims approval procedure because the legislation is complex with several transitional measures and some remaining uncertainties," explains Dr Linda Thomas, science director at Yakult. "It is widely agreed this has been a learning process for all concerned."
The industry is looking for "more insight in the level of substantiation needed", says Alpro Soya UK dietitian Kate Arthur. There is a "disconnect" between what the EFSA is trying to achieve and what the industry wants, adds Michael da Costa, MD of The Food Doctor.
"The EFSA appears to see any health claim as basically medicinal, therefore requiring similar efficacy to what one would expect from a medicinal drug, while most food companies merely wish to claim that a product contains 'such and such' that has been shown to improve XYZ," he elaborates. "The gap in expectation is, to my mind, causing much of the frustration."
And much of the delay, adds Jenny Walton, scientific and regulatory affairs manager at Kellogg's, which produces cholesterol-lowering Optivita. "It is not that the industry has gripes, just that there is a bottleneck; so many generic claims have gone into the funnel and dossiers have had to be put together," she says.
The volume of claims certainly appears to have overwhelmed the EFSA. According to its own figures, as of May it has so far published 125 "opinions" in regards to 900 "general function" health claims, with the first list published back in October.
But it is working through a list of 4,637 claims submitted between July 2008 and March this year, a list that has already been whittled down from an original 44,000 supplied by member states. It says it expects to complete the evaluation of these by the end of 2011.
Manufacturers have adapted their strategies accordingly while they await the EFSA's verdict. Danone has switched to advertising formulae for Activia and Actimel that are less reliant on science and health claims than previously. Activia has switched from medicinal-sounding talk of slow digestive transit to Martine McCutcheon's cheery Tummy Loving Care, while Actimel has dropped the Daily Defences message in favour of 'get the most out of your day'.
In October, the ASA banned an Actimel ad suggesting the product could boost children's immune defences. In such a climate, is the value of making health claims about a product being undermined by the investment in time, money and effort needed to be able to do so?
Not necessarily, says Danone's Hersch. Yes, at the moment the process could do with improving, and might cause smaller companies or start-ups to think twice about their approach, but the principles behind it are sound. Hersch insists Danone wasn't walking away from the table when it withdrew its health claim approval applications in April.
"We hope to put the approval requests back in," she says. "We have always supported the process because Danone has invested a significant amount of time and money into our science. We have had more than 40 clinical trials published in renowned scientific journals."
As well as the worries about delays and bottlenecks, another concern is that the EFSA publishes its decisions in batches, with long time lags between. This means that applications for rival products could have been submitted at roughly the same time and yet one will have had its claim rejected in October 2009, meaning it can no longer market the health claims, whereas a decision on the other is not expected until the summer of 2011 leaving it free to continue marketing the product's benefits in the meantime.
"The legislation relating to these opinions becomes active in stages. This is commercially unfair," argues Yakult's Thomas, who contends that it would be better to have a transition period for all non-approved claims after the final list is completely published.
The intention is to end up with one single European Community list of decisions. But what the likes of Barbara Gallani, FDF food safety and science director, want to see is a transitional period of a year introduced once the final list has been published to allow manufacturers to respond and act.
The EFSA regime is not intended to stifle innovation but, if companies are unable to communicate the benefit of new products, then many may simply find new uses for products that have already been approved, cautions Thomas.
"There is a chance that, during the regulations process, fewer new products will come on the market while approval is sought," she says. "There also may be a greater proportion of products with non-proprietary ingredients that have already received a positive EFSA opinion, such as vitamins," she adds.
Tesco is also expecting to see an upsurge in products containing already improved ingredients such as vitamins and omega-3. Lutein (which is good for the eyes) and glucosamine (good for the joints) are already popular ingredients in supplements and could well start appearing in more functional products, it believes. "There are a lot of supplements available but these nutrients could become the new additions to single-shot pots, alongside probiotics and phytosterols," says a spokesman.
While a stringent approval process could discourage some brands from applying, he says it is vital the process remains robust. Esther van Onselen, marketing manager for Benecol Europe, agrees. In October, the EFSA approved the claim that the plant stanol esters in Benecol have cholesterol-lowering qualities giving the green light for the brand to promote them.
"Approval of the claim is an exciting step in helping consumers make an informed choice about which foods are proven to have a positive impact on health," says van Onselen.
"Without such stringent authorisation processes, consumers and retailers would become less confident in claims and would stop using health claims as a reason to purchase products." However, she adds, the health claims application and authorisation process needs to be "as transparent and as timely as possible" if it is to benefit the industry as well as consumers.
Ultimately, we are unlikely to see the disappearance of health claims altogether, believes Kellogg's Walton. The functional food category is too valuable and established for that, and it continues to resonate with consumers. "Consumers are savvy and know there are limits to what foods can 'cure' or have an effect on," she says. "They also tend to like things they feel familiar with, such as omega-3 or products where the health claims are relatively easy to make and understand."
An inability to make specific health claims will not necessarily mean manufacturers cannot put a product on the market, Walton adds. "In the short term it may well be that fewer people put health claims on products, but I wonder whether in the longer term we may see more health claims coming through and in different areas, once people get a grip of the process," she says.
For shoppers, of course, the tortuous labyrinth that is EU politics is neither here nor there. And when it comes to how the functional foods market has been performing over the past year, yoghurt and yoghurt drink digestive brands such as Danone's Activia and Actimel continue to prop up the category, with products that claim to boast heart or bone benefits following in their slipstream though doing better than they were this time last year [Kantar 52w/e 21 March].
Premium lines hit by trading down
Drilling down, digestive products, which account for 54% of the sector, reported 7.9% value and 6.8% volume growth, a healthy performance considering many relatively premium-priced "healthy" or low-fat products and brands have suffered from trading down during the recession, argues Kantar.
In the "bone" sub-category (covering products with added calcium such as cereal bars or added-calcium yoghurts) sales by value were up 6.8% and 3.4% by volume, a turnaround from last year when it was reporting sales were tumbling. It is a similar story in the "heart" sub-category (blood-thinning, cholesterol-reducing lower-fat butters and spreads), which saw 6% value and 0.3% volume growth, again a turnaround from declining sales this time last year.
One of the keys to the health of the category has been new product launches that encourage consumers to eat functional foods on a greater variety of occasions, according to Kantar. Activia Intensely Creamy, launched at the end of 2008, took functional into more indulgent dessert territory. "That stretched the occasion to take functional food away from the traditional morning or lunchtime snack," says Bryan Martins, customer development controller at Danone.
Price promotions and permanent multibuys have also been a key driver in attracting consumers.
"The priority has been encouraging new and lapsed users back in. It has been about clearer communication, and that has helped reinvigorate the category," says Müller CEO Gharry Eccles.
"Consumers are becoming less tolerant of foods that contain anything other than natural ingredients. They also want something that is easily incorporated into their daily diet. So there are a lot of boxes for suppliers to tick."
Brands continue to dominate the functional foods category, but own-label does have a presence and is growing, albeit from a small base, says Martins.
"It is a good entry price point for bringing consumers into the category and probably accounts for around 1%-2% of the marketplace," he says. "A lot of retailers now have their own ranges of drinking formats, such as Morrisons' Active Yoghurts, which have been around for a while now. Own label tends to be a different consumer profile, but it makes the category more accessible and brings in new people."
However, even in the recession the brands retained penetration and consumer spend, because shoppers bought in to the health messages, says Andrew Nash, sales director, Yakult, which will be hosting a range of marketing activities this year to celebrate its 75th anniversary, culminating in a concert for customers at London's Cadogan Hall in July.
While Yakult will be using prestigious music venues, sports drinks manufacturers will be looking to benefit this year from high-profile sporting events such as the World Cup, says Jonathan Gatward, Pepsi brands director at Britvic, which produces Gatorade.
But that sub-category, which was worth £164m in 2009, according to Nielsen take-home figures (this sector is not covered in the Kantar data), should work more closely with retailers to extend its consumer penetration away from the core young, male market, he says, suggesting that sports drinks could be placed in clearly defined sections in chiller cabinets.
"The category has an important job to do in how it presents itself to be more relevant and accessible to all exercisers, not just males," he argues. "Many exercisers don't fully understand why they need a sports drink and it's up to the category to make the functional benefits clear."
Meanwhile, it's up to the EFSA to make clear how it evaluates functional benefits. The functional food industry is waiting with baited breath to see if next week's meeting provides that much-needed clarity. If it doesn't we may see more brands withdrawing from the process, but if it does the growth we're currently seeing in the functional food category is just the beginning.
Focus On Functional Foods