Functional foods is already a market to be reckoned with, but experts say this is merely a drop in the ocean and predict tremendous growth. Geoff Igharo reports

Functional foods is generating a steady stream of NPD as the most exciting area in food and drink. But the sector is on edge. As The Grocer goes to press, the EU is ­finalising legislation to redefine the industry&'s ability to make nutritional and health claims.
While the size of UK functional foods is unclear - it depends on which products are classed as functional and which as better-for-you - exponential growth indicates it is ­already a market to be reckoned with.
TNS puts the take-home market for functional foods at £508m [52 w/e March 26, 2006], but ACNielsen estimates it is double at £1bn. Yet both agree it has a long way to go. According to TNS, sales were up 28.1% on the previous year, while ACNielsen predicts the market will double in the coming year.
Despite an astonishing growth rate, many experts believe functional foods is barely scratching the surface of its ­potential. Julian Mellentin, head of the London-based Centre for Food and Health Studies, contends that it is already past the tipping point and defines future food and beverage strategy.
Jeya Henry, Professor of Human Nutrition at Oxford Brookes University, echoes ­Mellentin&'s view. &"I believe the growth in functional foods will be enormous,&" he says. &"It dovetails perfectly with social trends.&"
The underlying demographics in the UK also favour future growth. The UK has an ageing and ­increasingly health-conscious population, which is convenience-driven and has drifted from traditional eating habits. Yet chronic health conditions are growing and are ­increasingly expensive to treat. The NHS spent £769m on cholesterol-lowering prescription drugs in 2004 alone.
Even against a positive backdrop, not every­thing is rosy. Some health claims made by manufacturers have come under fire. Studies have contradicted the generally accepted claim that Omega-3 is beneficial to heart health, and there has been controversy regarding its impact on cognitive function.
Functional foods is under intense scrutiny from government. The European Parliament has passed legislation requiring all foods with health and nutritional claims to fit specific profiles approved by the FSA and its ­European counterpart. It will also ban endorsements by individual health-care professionals, such as Professor Lord Robert Winston&'s appearance on &'clever milk&' marketing campaigns. The European Council is now reviewing the legislation and the law could be enacted by September.
While science is the basis for functional foods, it is also a double-edged sword. Companies need to explain that health claims are backed up by ­science, but over-reliance on scientific ­messaging could prove to be a barrier as the target widens from eager, well-informed early adopters to the general population. A survey by ­ACNielsen suggests more than a third of European consumers do not understand the benefits of functional foods and cannot justify paying a premium.
The industry is working to improve consumer awareness and education. Unilever&'s Flora Pro-activ is sponsoring a nationwide campaign by giving consumers free blood pressure and cholesterol checks. Prebiotics producer Orafti has developed the Beneo label it says will help consumers easily ­understand the benefits of its ingredients.
Chris Swire, commercial director at ­Fayrefield Foods, which developed an own-label line of cholesterol reduction products for Tesco, says the industry is simplifying the decision process by developing multi-benefit products that tick the convenience box, such as Müller&'s yoghurt drink.
Mellentin believes convenience is king and, regardless of health claims, if a product is not suitable for consumers, it is likely it will not take off. It is no surprise that portable items, such as drinks, ­account for 55% of functional foods sales, ­according to TNS.
Where will functional foods go from here? Experts say we can expect significant NPD targeted at chronic conditions, such as blood pressure, diabetes, age-related cognitive ­decline, cancer prevention and joint health.
Delamere Dairy recently launched Top Life Prime Time, which it claims is the first milk to contain glucosamine and chondroitin, ­linked with maintaining healthy joints and relief of arthritis-related pain, and Provexis has launched blood-thinning products.
We can also expect new functional foods designed to tap into cosmetics. US ­retailer Sephora already sells an ingestible line from Borba Nutraceuticals that benefits the skin, while ­Shiseido is also preparing a line of edible nutraceuticals. ­
Developments are also likely to spill into the fruit and veg section of the supermarket. Sales of &'super fruits&', such as pomegranate, blueberry and cranberry, have soared due to their healthy credentials. Tesco recently launched a Healthy Living Tomato on the Vine that it claims contains 36% more cancer-fighting lycopene than standard varieties.
How well products do remains to be seen, as the primary driver has been consumers&' reluctance to eat traditional balanced meals.
Peter Wennström, brand consultant at HealthFocus Europe, says its trend reports of consumer attitudes show grocery shoppers fall into six segments: disciples, managers, investors, healers, strugglers and unmotivateds. Success lies in understanding segments and designing products to appeal. A healer, the optimal target for cholesterol-reduction drinks, will compromise taste for health.
The share of own label is also expected to grow. Studies by Datamonitor show UK consumers remain more sceptical than their EU counterparts. They trust retailers more than food companies, suggesting significant ­potential for own-label products to thrive.
Retailers are also exploring other avenues. Tesco recently struck a deal with Multiple Marketing to develop Something Xtra cereal bars, exclusive to Tesco for a limited period.
Warwick Cairns, of brand agency Brandhouse WTC, says the category will be flooded with new brands and extensions, which will require discipline from owners. &"Food manufacturers cannot rely on functional credentials, which can be copied,&" says Cairns. &"They need to build brand stories that can fortify them against competing products.&"n

The buyer's view
The supplier's view
Research Notes
One for the road to recovery
Is Omega-3 mania a fad set to fade away?
Trends & Developement
The expert's view
Functional foods spread across all categories
campaign trail
Mike Luck
Sainsbury buyer for juices, cream, active health drinks
Functional foods, especially products such as active health drinks, have experienced substantial growth over the past few years in the UK.Initially, this growth was primarily driven by brands such as Yakult and Danone's Actimel, that developed the probiotic one-shot drinks sector. However, recently the market has been driven by the launch of products catering for new health needs, such as cholesterol-reducing and blood pressure-controlling drinks.Launches have included Flora Omega-3 Plus drinks from Unilever and a blood-thinning juice drink under the Sirco brand, which was launched in January. Products that have been launched into the developed sectors of the functional foods market have not added significantly to sales, and the market has seen its growth rates slow this year. To ensure the continued growth of the category, new entrants now need to focus on creating new sectors rather than launching 'me too' ranges.
Paul Fraser
Marketing director,
St Ivel Advance
We often forget why people find functional foods attractive in the first place: we paid the price for too many 'quick and easy' food solutions. Inadvertently removing basic foodstuffs from our diets, at the altar of convenience, had nutritional consequences. Back to real foods, I hear you cry. Yes, of course we do - and in many cases we are (witness the success of five-a-day). But people still have very busy lives. Trying to figure out and remember, what's good, what's bad and have we had enough of it recently is confusing and time consuming. People want better nutrition for their kids and their families, but they want, and need, simple, easy solutions.Functional foods is not a replacement for a balanced diet and it is not a fix-all solution for health problems. We shouldn't present ourselves as such. Nor should we be a mask for hiding nutritional nasties behind a health badge. We should focus on providing a boost of missing nutrients in easy everyday formats.In short, nutrition, but convenience too, please!
Paul Fraser
Marketing director,
St Ivel Advance
The take-home dairy functional foods market, comprising yoghurts, milk or yoghurt-based drinks, yellow fats, milk and cheese products, is worth £508.7m in the year to 26 March 2006. The dairy category plays a major part in the total thriving functional foods market, although functional foods are also cropping up in the bakery category and even, more recently, the meat aisles.However, with recent press questioning the health benefits of ingredients such as Omega-3, the market will be worth keeping an eye on to see if the impressive growth rates are retained. The overall market for functional foods, however, continues to return strong growth year-on-year of 28.1%. With penetration of 59.2%, this equates to 14.5 million households buying into the market in the latest year. Consumers are on average purchasing products 13.2 times a year - more than once a month - and spending on average £34.97 in a year.In pursuit of a healthier lifestyle, whether we are attempting to reduce our cholesterol or even up the battle against belligerent bacteria, yoghurt and milk drinks appear as the mainstay in our basket, accounting for 55.5% of market share. The sector matched market performance and sees ten million households across the UK purchasing these products during the year. Yoghurts also takes up a considerable slice of the market, with a share of almost 25%, while yellow fats has 17%. Functional milk and cheese products are still only niche players, with a 3% and 0.2% share of the market respectively.There has also been a rise in the number of own label products hitting the market as retailers look to take advantage of market trends. Danone's Actimel probiotic yoghurt drink remains the market leader, accounting for more than one fifth of all functional foods value sales. New buyers continue to be attracted to the brand, though the rise in volume purchased per trip appears as the key growth driver for the brand's continued success.Breakfast through to lunch time dominates the usage occasion for these products as consumers aim to start the day on the right foot. Fiona Abbott, TNS Worldpanel
DrinksDrinks is the dominant format in functional foods. Milk and yoghurt-based drinks alone account for 55% of the category, according to TNS, and seven of the top ten functional brands overall. Sales of the biggest player in the category, Danone's Actimel, grew by 50% last year to £115m, making it the UK's third largest non-carbonated soft drink. Probiotic drinks, a £262m category in 2005, is the star of the functional category, but growth rates are topping off as drinks offering different benefits, such as lowering blood pressure, steal share. Myles Ford, Unilever category strategy manager, believes that health drinks which help lower cholesterol or control blood pressure are the immediate growth opportunity. He says that those drinks with more targeted benefits will eventually champion over more well being products: "The emphasis will lie in more explicit, rather than general health claims." Benecol has led the cholesterol-reduction drink charge, but own-label products are already present. Tesco, for example, recently launched an own-label cholesterol reduction drink containing Reducol and Flora's ProActiv brand offers similar benefits. Products that offer multiple benefits are also set to grow as consumers become more aware of the types of benefits they can bring. Müller's Vitality probiotic-plus-prebiotic drink recently added Omega-3 to its list of benefits and Chris Swire, commercial director at Fayrefield Foods, says more products will follow. "We will see more of this," he says. "The consumer can't be expected to down six or seven drinks with different benefits at breakfast, or even on the go." He's not wrong. Danone announced this week that it is repositioning its cholesterol-lowering drink Danacol with Omega-3 to appeal to what it says is a wider group of consumers concerned about the general state of their heart. Revamped Danacol will contain 200mg of Omega-3 per 100g and will be the only drink to contain two active ingredients with heart health benefits, the company claims.According to Danone, heart health is the number one concern for consumers 50 years and older. It says that while 10% of adults had been diagnosed with high cholesterol, 52% were concerned about heart health. Brand manager Pam Levin says: "By moving from a cholesterol-lowering platform to a much broader heart health positioning we have the opportunity to treble the value of the sector and attract new consumers to Danacol."Growth will not only be in dairy - fruit and vegetable-based products are also expected to grow in importance, building on consumer interest in antioxidant-rich fruit, such as pomegranates and blueberries. Unilever, however, has been successfully sticking to basics with the launch of Knorr Vie Shot, a 100ml single-shot fruit and vegetable purée drink, which contributes to the five-a-day fruit and vegetable requirement. While the drink is not specifically a functional food, it does tap into the growing desire for healthy products in a simple one-shot format. And Tropicana launched its Essentials with Benecol range, which combines a cholesterol-reduction benefit variant of added fibre, calcium and vitamins. Meanwhile, NPD continues in milk drinks. Delamere Dairy's Top Life Prime Time, the first functional milk designed to improve joint health, is fortified with glucosamine and chondroitin, vitamin D and green tea to target older consumers. Founder Liz Sutton says sales growth has been very encouraging and she is optimistic about the brand's potential for expansion.Even water brands have got in on the act, tapping into the growing UK bottled water market as well as functional trends. New entrant Works With Water Nutraceuticals took the plunge in February, launching a prebiotic-enriched range of drinks, each targeted at specific consumer segments, such as children or active men. For women, there is Delicate Balance and for children Little Squirts, each containing the prebiotic ingredient Beneo, which aids the digestive system.Its male-oriented drinks are Eau Man and Water of Life, with added soluble dietary fibre. Then there are Eau So Cool and Aqua Family, which contain a formula proven to optimise calcium absorption by almost 20%. The drinks, which have taken some two years to develop, claim to offer a refreshing alternative to healthy fruit juices, according to Jules Birch, Works With Water founder and marketing director. "We wanted consumers to really understand the health benefits and enjoy the taste," she says. "Our association with Beneo ensures that the consumer has confidence in our products and can easily identify the positive health benefits."However, some experts doubt if functional waters and juices will expand beyond niche status. The gross margins in the sector are quite competitive, leaving little room for the cost of functional ingredients. Birch points out that formulating and manufacturing functional waters is an extremely complex endeavour.Own label remains a potential factor in the drinks category and is likely to increase its presence in established segments and drive-down prices.
Omega-3The food industry has caught Omega-3 fever, spurred on by the UK's increasingly health-conscious public, eager to buy products enriched with it, and buoyed by recommendations from academics.Independent bodies such as the Joint Health Claims Initiative say that there are heart health benefits in a diet that includes a recommended number of long-chain Omega-3 fatty acids, preferably from eating oily fish, at least once weekly as part of a balanced diet.Yet food companies have gone a stage further, claiming, for example, that Omega-3 has anti-inflammatory properties, helps foetal brain development, can regulate moods and even helps prevent cancer.Consequently, the market has been able to support a range of Omega-3 products as diverse as Sparky Brand's fruit juice, bread and whole chickens, Dairy Crest's St Ivel Gold Omega-3 spread and St Ivel Advance milk, Brainstorm's cereal bars, Dean Foods' Columbus Eggs and Good Products' salad dressing and snack bars. But are Omega-3 enriched products really beneficial to consumers' health, or are companies cynically exploiting it as a passing fad? For one thing, some critics dispute that Omega-3 consumption is beneficial to cognitive function, a claim that Dairy Crest makes for its 'clever milk' brand St Ivel Advance. Adverts for the milk featuring an endorsement from a professor Robert Winston came under fire from the media and has highlighted concerns that companies may be pushing the benefits of Omega-3 too far. Oxford University researcher Alex Richardson, who has conducted studies cited by those who believe Omega-3 has cognitive benefits, says caution is warranted. "To get the amount of EPA and DHA [ingredients that enhance brain activity] ingested in our studies you might need to drink more milk than is practical or healthy," says Richardson. "We know we need more research in this area, but the problem is getting funding."In its defence, Dairy Crest points out that its product meets trading standards requirements and is supported by credible studies. There are also questions about whether consumers understand the full context of Omega-3 health claims. The JHCI-recognised claim that Omega-3 is beneficial for the heart refers to consumption of fish-derived long chain Omega-3 in specific amounts. It also says its benefits need to be taken in the context of a healthy lifestyle - that is, a balanced diet and sufficient exercise. Yet, the growth of functional foods and Omega-3, in particular, is arguably driven by the opposite of a healthy lifestyle, with people using products more as medicine to balance their unhealthy living rather than to complement a health lifestyle.Furthermore, the Omega-3 content of most enriched products is insufficient to fulfil the recommended daily requirements. And many include Omega-3 from sources other from oily fish. Clearly, there is a real risk that consumers may eventually turn away from Omega-3 products. "Awareness of Omega-3 has grown to 72%, from 58% in 2003," says Paul Holden, business manager at Flora. "However, we know consumers do not understand what it does." Richardson started Food and Behaviour Research, a charity which aims to improve the public's access to information on nutrition, in an attempt to help resolve this. Richardson says: "First it depends on the type of Omega-3 taken. Then the ratio of Omega-3 to Omega-6 in the diet is also important. Try asking the average punter to figure all that out." Holden says Flora is running an extensive education campaign to improve consumers' understanding of Omega-3 to coincide with the launch of its Flora Omega-3 Plus spread and probiotic drinks launching this month. He adds that Unilever is helping to make high-quality Omega-3 easily accessible and this, he believes, is critical if the industry is to sustain its success.There are positive signs elsewhere. Many nutritionists believe that several of the wider claims for ­Omega-3 are not yet formally recognised in the UK. For example, Julian Mellentin of the Centre for Food & Health Studies points out that the government of Canada, one of the strictest in this field, recognises claims of cognitive benefits from Omega-3. Once the EU has finalised its changes to the relevant legislation in this area, Mellentin believes, the public's confidence in functional ingredients will strengthen. Nonetheless, some firms are backing off from heavy scientific emphasis, as research suggests that consumers are bombarded with health messages and would prefer a simpler approach. Danone, for example, tries to find a balance with its Actimel brand by reinforcing the benefits while creating a strong lifestyle image.
Omega-3Provexis has launched a heart health drink that naturally thins blood and which could help prevent heart attacks and strokes. Called Sirco, it is claimed to be the first functional drink on the market that benefits blood flow through the addition of a bioactive extract, called Fruitflow, which is taken from ripe tomatoes. Fruitflow works by keeping blood platelets in a normal 'smooth' state, preventing them from clumping to form clots inside blood vessels.St Helen's Farm is making its mark in the probiotic dairy drinks market with the launch of a semi-skimmed probiotic fresh cow's milk called Dancing Daisy.Angus Wielkopolski, MD, says the new line offers consumers a way of including probiotics in their diet without changing their routine or buying anything extra - simply by pouring the milk over their cereal. "A 250ml serving of Dancing Daisy is an easy way for consumers to consume probiotics without changing their diet. If they already consume milk each day, then it is a healthier option for most people," he adds.?Unilever UK Foods is the latest company to jump on the Omega-3 bandwagon by developing a range of lines under its Flora brand. Flora Omega-3 Plus spread and a probiotic mini drink in strawberry and raspberry flavours mark the brand's first entry into the Omega-3 category. Paul Holden, Flora business manager, says: "We have already got Müller in the market and now we have Flora, which brings strong heart health credentials. Launching it under the strong Flora brand will help."Available from this month, Omega-3 Plus will be backed by a £6m marketing investment, including TV and press ads breaking on 3 July and a consumer campaign fronted by model Louise Redknapp.?Danone is targeting its Actimel probiotic dairy drinks at the kids market, with special packs flagging up the products' benefits for youngsters. New packaging and a new banana flavour has been launched, designed to appeal to mums rather than their children, with a cardboard wrap-around bearing the message, 'Great for kids too.'Adam Grant, sales director at Actimel, says: "In the UK, Actimel has a huge latent potential among families and we know that the biggest barrier to kids' consumption is that many mums simply don't appreciate that Actimel is suitable for them."A £4m TV campaign will act as a launchpad for Actimel Kids Packs, backed by in-store activity running from next month through to June. The activity forms part of a £14m media spend for the brand running throughout 2006.
Jeya Henry
Oxford Brookes University
I believe that the growth in functional foods will be enormous. It sits comfortably with our lifestyles and habits. We have a booming middle class and people are on the go. Rather paradoxically, even though celebrity cooks are everywhere, people are spending less time on 'enjoying' food. People are in a rush - they are cash-rich and time-poor - so functional foods have a significant role to play here.However, I think that there is a serious disjoint between scientific rigour and marketing hyperbole. There is a trend of fetishising single nutrients. We all simplify what is a highly complex area. It is a fine balance of getting the consumer to understand the dichotomy of it.There will always be differences of opinion on studies but the key is not to be deflated by criticism. We will get a better scientific foundation only by testing and retesting what we think we know.
Other foodsThere are very few categories that remain untouched by functional foods. Dairy, drinks, spreads and bread all have had the functional treatment, to name a few. Even the meat aisles have been affected with the launch of a Sparky Brand chicken that contains Omega-3 and the egg aisles with Columbus eggs that advertise the fact that they are naturally rich in Omega-3. Categories that appear unaffected by the functional craze sweeping the nation do exist in the UK - pasta and rice, for example - but industry players suggest that there is no reason why all categories, with the exception of alcohol, could eventually contain functional products.This is because many functional ingredients are extremely versatile, according to Christine Nicolay, marketing and communications manager at ingredient company Orafti, which owns the prebiotic Beneo brand. "You can cook our ingredient, freeze or put it through a variety of other food manufacturing processes. We can be present in almost all foods, with the exception of carbonated soft drinks."Beneo can be found in products including yoghurt, milk, cereals, bread, biscuits, fruit drinks and ice-cream.However, the cost involved in adding functional ingredients means that food companies need to be certain of recouping a price premium, which cannot be taken for granted.Nicolay points out: "You can include an ingredient that has a legitimate health claim, but the key is whether is it believable to the consumer. Do you have a value proposition relevant to the consumer?" She says that the success of functional foods will lie in layering sophisticated lifestyle segmentation on to the inherent 'wellness' value of the ingredients. This point of view is supported by an several qualitative studies, which suggest that the optimal positioning for mass-market functional foods may lie in general health and 'goodness' rather than scientific claims. Barilla has taken on the challenge in pasta, launching its fibre and Omega-3-enriched Barilla Plus line in the US. It has achieved success in its first year, carefully targeting a neglected consumer base interested in wholewheat pasta.However, the journal New Nutrition reports that Barilla had to overcome formidable production challenges - the pasta is actually based on chickpeas and lentils. More expensive ingredients mean that Barilla has to sell the resulting product at an 80% premium, backed by significant marketing investment.This is not a task that will be taken up by the majority of food makers in staple categories, says Chris Swire, commercial director at Fayrefield Foods, because of these extra costs. Evidence suggests that products will be developed with health claims based as much on inherent goodness of the food as its functionality. For example, sales of porridge and other oat-based foods have surged, as consumers have rediscovered the value of oats as a 'superfood', high in fibre and heart healthy. Tesco recently launched a functional own-label porridge for its Tesco Kids range, which includes the probiotic ingredient inulin, a model that some experts believe will be more widely repeated in many categories.
Other foodsConsumers clearly understand the difference between products that are better for you and those that can contribute to health. Those with a defined health need, such as having to reduce cholesterol intake, are most interested in any new product that claims a relevant benefit.But we are also seeing growing interest in the young as they look for a positive approach to health beyond concepts such as weight control.Products with an accepted benefit, such as fibre-rich, are easier to evaluate and to accept, particularly if they taste good and are fairly priced. However, many see the addition of functional benefits as an excuse to push up prices. Adding to this cynicism is the constant flow of what is often conflicting information, such as the benefits of Omega-3 and 6, and its ability to enhance child learning.New functional benefits are often poorly explained, which many consumers see as a spurious justification to claim a market share.Les Kol On The Go
Score: 24 Average: 36This 'healthy alternative to mature cheddar' is low in saturated fats by using Omega-3 oils and made with Lo Salt and added calcium. Despite these benefits the eating qualities fell below expectations. Only for those with a defined health need.Tesco Cholesterol Reducing YoghurtsScore: 37 Average: 40This four-pack of fruit yoghurts was considered expensive by all but those respondents with a defined health need. Nevertheless, the product is a good quality yoghurt that is likely to extend its benefits to a wider audience.Danone Activia Fibre - Strawberry YoghurtScore: 46 Average: 40Respondents welcomed such a delicious way to deliver 15% of their recommended daily amount of fibre needs. The virtuous circle was completed by a competitive price point that led to a top quartile rating.
Other foodsBenecolBudget: Part of a £6M SpendManufacturer: McNeil NutritionalsBenecol highlighted that two out of three adults in the UK have raised cholesterol levels in a TV campaign. The ad is set on a sandy riverbank - the sand as a human intestine, the river the bloodstream - while two groups of people, dressed in yellow and blue, symbolise cholesterol and Benecol. The execution shows how Benecol forms a 'cordon' along the intestinal walls to block cholesterol.Yakult
Budget: £3.7mManufacturer: YakultYakult dropped its popular 'geek' advertisements in favour of a no-nonsense TV, radio and press campaign for its standard and light variants. The ads simply focused on a bottle of Yakult and talked up its microbiological benefits to reinforce the scientific position. They also gave the company the chance to have a dig at its competitors with straplines such as, 'Yakult is not a taste sensation'.st ivel gold omega-3
Budget: £4mManufacturer: Dairy crestDairy Crest went straight to the heart of the matter with TV adverts for its St Ivel Gold Omega-3 spread. The advert, which shows 'oily fish' in action swimming around until they form the shape of a heart, was designed to educate consumers about the nutritional qualities of long chain Omega-3, which is derived from fish oils.