Joerg Gruenwald03.01.04
The European market for functional foods and dietary supplements (defined together in this article as nutraceuticals) still stands for promising and growing segments, although at more moderate rates. There is nothing new about health food and health food products. Consumers have been trying to eat their way to eternal life for millennia. However, today's health consciousness may have stronger foundations, as the world gets older and better educated; its willingness to spend money on staying healthy increases. In addition, disposable income and desire for convenience are rising. There is also more scientific information available about health and nutrition. This is party due to the fact that there is more available science and authorities are more willing to allow health claims on products, which in turn increases sales.
The health trend has also provided new ways to promote old products, e.g. Heinz highlights the high lycopene content of its tomato ketchup. The consumer, however, is not that flexible and rather slow to be convinced by new products and stories. As a result, significant purchasing patterns are changing more slowly. Although the consumer is aware of the effect that diet can have on health, the important reasons for buying (functional) foods will continue to be taste, convenience and emotional benefits. Consequently, the hyped nutraceuticals category did not turn out to be the next "big" market that it was predicted to be. For much of the food and beverage industry, functional foods are still described as the future of food. Even if a broader definition is used including more "wellness" products, which already significantly contribute to the food market, this is still a market in its infancy but with promising opportunities.
With the exception of Japan's FOSHU regulation, in Europe, as in the U.S., there is still no official definition for functional foods, as well as no regulatory framework harmonizing the differences between European countries. There exists only a definition from the European Commission funded FUFOSE (Functional Food Science in Europe) project initiated by ILSI Europe (International Life Science Institute, non-profit foundation affiliated with WHO), which says,"A food can be regarded as functional if it is satisfactorily demonstrated to affect beneficially one or more target functions in the body, beyond adequate nutritional effects, in a way that is relevant to either improved stage of health and well-being and/or reduction of risk of disease. A functional food must remain food and it must demonstrate its effects in amounts that can normally be expected to be consumed in the diet."
When this definition is taken literally, few foods can be considered "functional foods." Therefore, whichever way one chooses to define functional foods, one can arrive at bigger or smaller market figures that suit particular needs or interests. Market analysts even warn that the market for functional foods and beverages can vary by a factor of 10. Nutrition Business Journal (NBJ), San Diego, CA, evaluated the European functional food market at sales in the range of $18.2 billion representing 32% of the global market of $57 billion in 2002. Global growth rates are also misleading, due to an increase in the marketing of hidden nutritional assets, with the result that large, well-established brands suddenly become functional by using generic claims (e.g., Heinz tomato ketchup). One thing that all researchers seem to agree on is that the functional food markets grow steadily each year.
Leatherhead Food RA, Surrey, U.K., estimated the penetration potential of functional products into the total foods market to be up to 5% in industrialized countries by 2005. Currently, the sales of functional foods in Europe are said to account for around 1% of the total European food market. In Europe, the U.K., Germany and France remain the biggest markets, representing two-thirds of the total market, followed by Scandinavia, Italy and Switzerland.
According to a recent Datamonitor report (December 2003), the number of functional food consumers in the U.K. has more than doubled and is forecast to grow by almost 40% to 4.7 million in 2007. The U.K., together with Germany, has the highest spending functional food consumers in Europe (spending nearly 176 annually per person for functional foods), while Italy, the Netherlands and Sweden have the lowest. The consumer base is expanding beyond consumers with specific medical needs to include those who are merely concerned with future health risks and even those who think that such products offer lifestyle benefits. This is evident in the growth of gut health products in the European market. Although the diagnosed and at-risk consumer groups are by far larger for both bone and heart health, gut health products generated the highest sales volume in 2002 (111 million), and are predicted to reach 159 million in sales by 2007. The reason for this is that gut health products offer consumers far more benefits than merely improved health. When consumers are asked why they buy gut health products, they give such reasons as "general wellness" and "lightness and energy" for choosing probiotic yogurts. In other words, there are mental and emotional benefits to knowing that one is eating healthy.
The main product categories for functional foods include dairy, cereals and bakery, soft drinks, spreads and confectionery. The most successful products are located in the dairy (probiotic yogurts) and soft drinks (energy and sports drinks) sectors. This is in contrast to the U.S. where intestinal health is relatively underdeveloped and cereal products are the leading category; fortification with calcium and vitamins, and energy-giving products are more pronounced. The main developments in the dairy sector have been in the milk and yogurt categories, while the main focus in the cereals and bakery sector has been on breakfast cereals. Soft drinks are a dominant force in the functional products market with energy and sports drinks being the main driving factors over the next several years. Developments in functional confectionary have been largely confined to calcium-fortified products, with a small number of prebiotic variants. The market for functional spreads is being driven by the growing availability of cholesterol-lowering phytostanol-enriched margarines.
In terms of therapeutic areas, key growth segments include probiotic live cultures and prebiotics, particularly inulin and other fructooligosaccharides, for intestinal health (leading) followed by heart health and bone health products. In Europe the three markets together accounted for around $2.7 billion in 2002, according to NBJ, with the U.K. leading ($1.2 billion) followed by Germany ($500 million), France ($300 million) and others ($600-700 million). Other well performing areas include immune defense, cognitive and mental performance, menopause and sports supporting endurance and muscle growth.
European heart health foods focus on cholesterol-lowering phytostanol-enriched spreads and dairy products, foods and beverages plus omega-3-fatty acids and dietary fiber fortified breakfast cereals. Although this market is active, it is also disappointing, largely due to weak branding and tough regulations governing claims for heart health.
Bone health products are mostly confined to dairy products and soft drinks fortified with calcium and vitamin D. The U.K., for example, is the largest European market for calcium-fortified orange juice. In the future, the combination of calcium and inulin will probably increase as numerous human clinical studies could show a significant increase of calcium absorption and bioavailability when given together with the dietary fiber inulin.
In general, dietary fiber is, aside from vitamins and minerals, one of the most popular natural ingredients used in functional products in Europe. Dietary fibers represent a very heterogeneous group including mainly cellulose, inulin, galactomannan, maltodextrin, oligosaccharides, among others, which originate predominately from wheat, oats and barely, in addition to other sources such as flax, quinoa, spelt, amaranth, seaweed and coconut. The main categories for fiber added products are dairy, bakery and cereals, which are positioned mainly for heart health and weight loss.
Soft drinks have become a major, successful target for functional ingredients. Strong growth is expected to continue as Leatherhead Food RA estimates a growth of 70% by 2005. In Europe, the functional beverage market is dominated by sports and energy drinks. The remainder is comprised of a wide range of different fortified products based on mineral water, fruit juice or dairy: ACE drinks, herbal drinks, enhanced waters, probiotic milk drinks, meal replacement drinks, wellness drinks and vitamin and mineral fortified drinks.
Although sports drinks make up the largest portion of the market, it is also the slowest growing segment. The strongest growth is observed in energy drinks. All other functional drink segments are heavily fragmented and dominated by vitamin and calcium-enriched drinks, however, the use of herbals is also growing.
According to a recent Zenith report on the European energy drinks market, Red Bull has kept its lead, owning two-thirds of the overall volume across Western Europe. The brand is present in 13 European countries and holds the lead in 12 of them. The rest of the top 20 brands took a combined 17% share during 2003. Although slower than previous years, energy drink sales still grew by 6.5% in 2003 to 311 million liters (2340 million). Healthy growth is predicted to remain with an annual growth of 7-9% until 2008, reaching over 450 million liters. The largest energy drink market in 2003 was the U.K. with 26%, followed by Germany (20%), Spain (13%) and Austria (11%).
In Germany the functional juice market plays an important role, due to the long-established tradition of ACE (plus vitamin A, C and E) and multivitamin juices. The new category of F-ACE juices (plus folic acid) is also performing well. By the end of 2002, double-digit growth led to sales of over 300 million liters with a value of approximately $44.8 million, according to Leatherhead Food RA. Germany is one of the few countries in the world with a quantifiable ACE drinks market. In summary, the market for functional drinks has yet to develop to this extent in the U.K. However, now ACE drinks appear to be prospering in the U.K.
In Sweden intestinal-health promoting probiotic fruit drinks are the leading category.
However, while there are numerous success stories, there have also been setbacks. According to France-based Euromonitor, for example, fortified waters failed to take off as consumers prefer pure mineral waters and are distrustful of fortified waters. This was clearly shown when Danone withdrew its Activ brand from France and several other markets. In the U.K., functional waters have been criticized for their unpleasant taste.
The success of the beverage market has also much to do with convenience. In addition, they are not niche positioned, or targeted at consumers with specific health problems, but are mainstream alternatives to carbonated soft drinks with the additional benefit and appeal of health.
The functional ingredients used in beverages span an enormous range of different substances belonging to the following classes:
Vitamins & minerals
Carotenoids (e.g. beta-carotene, lutein, lycopene)
Dietary fiber (e.g. inulin, beta-glucan)
Omega-3 fatty acids (e.g. docosa-
hexaenoic acid-DHA)
Amino acids and derivatives (e.g.
lysine, taurine, L-carnitine)
Flavonoids (e.g. resveratrol, quercetin)
Live bacteria/probiotics (e.g. Lacto-bacillus casei)
Medicinal plants (e.g. ginkgo, balm, St. John's Wort)
Tea plants (e.g. green tea, mat, rooibos)
Spices (e.g. ginger, lemon grass)
Other plants (e.g. aloe vera, guarana,
schizandra)
Fruits & vegetables (e.g. cranberry,
carrots, celery)
Seaweed
In 2002, the market for soy-based drinks, desserts and meat-free products reached 1.3 billion, with further double-digit growth expected for the period 2003-2005, according to a study from PROSOY Research & Strategy, a research organization based in Bilthoven, The Netherlands. Health-conscious Europeans choose soy products as alternatives to dairy and meat products, often due to growing food intolerance and allergies. In addition, the positive health image of soy is rising, because medical research on soy protein and isoflavones has shown positive effects on blood cholesterol and heart disease, bone strength and menopausal problems.
Within Europe, the U.K. market for soy-based milk, yogurts and desserts is the largest, capturing over 30% of the market with a growth rate of more than 20% in 2002. While the U.K. is the largest market for these products, the German market showed the strongest increase in sales with a growth rate of over 40% in 2002.
The growth of functional foods is in sharp contrast to the vitamin and mineral supplement market, currently stagnating in the U.K., and threatened by the new European food supplements directive. Despite this, however, the European nutritional supplement market, according to Frost & Sullivan, still represents a market with strong potential, particularly among female consumers. In fact, 15% of European women today are regular consumers of dietary supplements. Furthermore, growth rates for the category range from 7-30% depending on the country.
According to a new report from Euromonitor, for a functional food or dietary supplement to be successful, the company typically has to adhere to the following positioning as learned from "winners" and "losers" in the nutraceuticals arena:
The health benefit has to appeal to the mass market and address general well being issues.
The health benefit has to be well communicated, either through understandable health claims, or through using an active ingredient, which is readily understood, such as calcium.
The product must be competitive on all platforms and not rely solely on its health benefits. It must also offer taste, convenience and appropriate pricing. Its functionality allows for higher margins, but itself does not guarantee success.
The product must provide a real competitive point-of-difference, a nutrition message for the consumer, which is recognized as truly meaningful from the numerous choices that are already available.
Currently there are three EU proposals and one implemented directive concerning food and medicine laws, which may have a substantial impact on the development and marketing of functional foods and dietary supplements on the European market.
Nutrition and health claims proposal. The European Commission adopted a proposal in July 2003 for the regulation of nutrition and health claims, which, since then, has been widely criticized by food industry members as being too restrictive, and more specifically, impinging on freedom of speech. The regulatory framework covers nutrition claims (e.g. rich in vitamin C) and specific health claims stating a benefit to the consumer by defining their meaning and setting of thresholds. Also reduction of disease claims will be allowed provided they have been proven. In short, all the claims have to be scientifically substantiated. The proposal contains a positive list of generic nutrition claims, which may be made like "rich in dietary fiber" provided the product contains at least 6 grams of fiber in 100 grams.
Some health and nutrition claims will be banned. Specifically, any information about foods and their nutritional or health benefits, which is not clear, accurate and meaningful and cannot be justified, will be prohibited. Furthermore, vague claims referring to general well being or claims making reference to psychological and behavioral functions will not be permitted. Also slimming and weight control claims as well as referring to advice from doctors or health professionals will be prohibited.
In October 2003, the European Commission issued a memorandum titled "Myths & Misunderstandings" in order to clear up the myriad complaints. This document clearly showed that the Commission would not back down from its position and that the regulation will probably come into force in the current version. Seeing as how the industry is not yet 100% in agreement, the debate is likely far from over.
Fortification of Foodstuffs. In November last year, the European Commission adopted the revised proposal for the regulation of the addition of vitamins, minerals and other substances like fatty acids to food (2003/0262 COD). In addition to consumer protection, the proposed legislation was an attempt to harmonize the different rules in member states and to allow the free movement throughout the EU. To date, however, the positive list covers only vitamins and minerals being the same as those outlined in the food supplements directive.
The proposal allows only three reasons for the addition of nutrients to foods: a) restoration to ensure that, in the final product, the levels of nutrient(s) lost during storage, handling and manufacturing are equal to original levels, b) substitution to produce substitute foods (e.g. margarine as a substitute for butter) that resemble other foods in appearance, taste and nutritional value, c) fortification/enrichment meaning the addition of vitamins or minerals due to proven health benefits or nutrient deficiencies in the population. The proposal will not apply to foods for particular nutritional uses (PARNUTS)-i.e., infant formula-to novel foods or to food supplements. The proposal prohibits the addition of vitamins and minerals to fresh foods and to drinks containing more than 1.2% alcohol and proposes criteria for the setting of maximum levels of vitamins and minerals. Similar to the health claims proposal, it includes the concept of "good" and "bad" food. The latter comprise nutrient-poor foods that are high in fat, sugar or salt-i.e., snacks and candies-which should not be fortified. It also includes the regulation of substances under community scrutiny (i.e., guarana, taurine, glucuronolactone), for restricting the use of certain substances (e.g. the concentration of caffeine, quinine in soft drinks) and for prohibiting the addition of some substances to foods (i.e., kava kava, ephedrine alkaloids, St. John's Wort). Critical voices are concerned that fortified foods could be misleading and don't help people achieve a balanced diet. Claims about specific fortification are good for marketing purposes (i.e., "added iron," "extra vitamin C") but don't address the overall healthiness of food products. For example, yogurts aimed at children may be marked "added calcium" but may contain high levels of sugar or fat.
The EU Pharmaceuticals Directive. The EU pharmaceuticals directive (amending Directive 2001/83/EC), if passed in the current version, could seriously threaten the future of food supplements if they are judged as medicines due to the definition of a medicinal product as given in the directive (as a substance that "modifies physiological functions"). Furthermore, the pharmaceuticals directive has actual supremacy under the new laws, so that when in doubt (e.g., high dosage vitamin supplements) it would always classify such products as medicine. Currently, affected industry associations are working on a more specific definition for inclusion in the directive so as to better distinguish medicines from food supplements. The European parliament was supposed to revisit the issue this past January.
EU Directive on Food Supplements. The EU directive on food supplements, which came into force in July 2002 (to be implemented by the member states from August 1, 2003), was challenged in a U.K. court in October last year by the Alliance for Natural Health (ANH), a pan-European coalition of supplement manufacturers, retailers, independent health practitioners and consumers. ANH was pushing for the case to lead to a whole-Europe judicial review of the controversially discussed directive, which restricts several vitamin and mineral substances and dosages in food supplements, which are not included in the positive list of the directive. The marketing of such products, which do not comply with the directive will be banned from August 1, 2005 at the latest. On January 30th, ANH got its wish when it received permission to challenge the European Commission in the European Court of Justice in Luxembourg regarding the legality of the Food Supplements Directive ban on nutrients. The English High Court judge who reviewed the case emphasized that the reference to the European Court be made without delay given that the ban proposed by Brussels legislators takes effect on August 1, 2005.
ANH claims that in the U.K. the application of the directive will result in the ban of more than half of the 420 or so forms of nutrients present in approximately 5000 products on the U.K. market, many of which are sold in health food stores. The ban will have a similar effect on products in countries such as Sweden, the Netherlands and Ireland, which have advanced markets for food supplements. In summary, according to the ANH, natural vitamin and mineral formulations with high bioavailability will be banned, leaving only old fashioned, synthetic versions, which tend to be much less effective.NW
About the authors:
Dr. Joerg Gruenwald is president, Phytopharm Consulting, Berlin, Germany, which is a specialized business consulting company for herbal medicine, dietary supplements and functional food, and author of the PDR for Herbal Medicines. Dr. Cordula Mueller is a scientific consultant with Phytopharm. Both authors can be reached at Phytopharm Consulting, 49-30-40008100, Fax: 49-30-40008500; E-mail: jgruenwald@analyze-realize.com, cmueller@analyze-realize.com; Website: www.analyze-realize.com.
The health trend has also provided new ways to promote old products, e.g. Heinz highlights the high lycopene content of its tomato ketchup. The consumer, however, is not that flexible and rather slow to be convinced by new products and stories. As a result, significant purchasing patterns are changing more slowly. Although the consumer is aware of the effect that diet can have on health, the important reasons for buying (functional) foods will continue to be taste, convenience and emotional benefits. Consequently, the hyped nutraceuticals category did not turn out to be the next "big" market that it was predicted to be. For much of the food and beverage industry, functional foods are still described as the future of food. Even if a broader definition is used including more "wellness" products, which already significantly contribute to the food market, this is still a market in its infancy but with promising opportunities.
Assessing Market Figures
With the exception of Japan's FOSHU regulation, in Europe, as in the U.S., there is still no official definition for functional foods, as well as no regulatory framework harmonizing the differences between European countries. There exists only a definition from the European Commission funded FUFOSE (Functional Food Science in Europe) project initiated by ILSI Europe (International Life Science Institute, non-profit foundation affiliated with WHO), which says,"A food can be regarded as functional if it is satisfactorily demonstrated to affect beneficially one or more target functions in the body, beyond adequate nutritional effects, in a way that is relevant to either improved stage of health and well-being and/or reduction of risk of disease. A functional food must remain food and it must demonstrate its effects in amounts that can normally be expected to be consumed in the diet."
When this definition is taken literally, few foods can be considered "functional foods." Therefore, whichever way one chooses to define functional foods, one can arrive at bigger or smaller market figures that suit particular needs or interests. Market analysts even warn that the market for functional foods and beverages can vary by a factor of 10. Nutrition Business Journal (NBJ), San Diego, CA, evaluated the European functional food market at sales in the range of $18.2 billion representing 32% of the global market of $57 billion in 2002. Global growth rates are also misleading, due to an increase in the marketing of hidden nutritional assets, with the result that large, well-established brands suddenly become functional by using generic claims (e.g., Heinz tomato ketchup). One thing that all researchers seem to agree on is that the functional food markets grow steadily each year.
Leatherhead Food RA, Surrey, U.K., estimated the penetration potential of functional products into the total foods market to be up to 5% in industrialized countries by 2005. Currently, the sales of functional foods in Europe are said to account for around 1% of the total European food market. In Europe, the U.K., Germany and France remain the biggest markets, representing two-thirds of the total market, followed by Scandinavia, Italy and Switzerland.
U.K.: A Real Growth Market for Functional Foods and Beverages
According to a recent Datamonitor report (December 2003), the number of functional food consumers in the U.K. has more than doubled and is forecast to grow by almost 40% to 4.7 million in 2007. The U.K., together with Germany, has the highest spending functional food consumers in Europe (spending nearly 176 annually per person for functional foods), while Italy, the Netherlands and Sweden have the lowest. The consumer base is expanding beyond consumers with specific medical needs to include those who are merely concerned with future health risks and even those who think that such products offer lifestyle benefits. This is evident in the growth of gut health products in the European market. Although the diagnosed and at-risk consumer groups are by far larger for both bone and heart health, gut health products generated the highest sales volume in 2002 (111 million), and are predicted to reach 159 million in sales by 2007. The reason for this is that gut health products offer consumers far more benefits than merely improved health. When consumers are asked why they buy gut health products, they give such reasons as "general wellness" and "lightness and energy" for choosing probiotic yogurts. In other words, there are mental and emotional benefits to knowing that one is eating healthy.
Key Product Areas
The main product categories for functional foods include dairy, cereals and bakery, soft drinks, spreads and confectionery. The most successful products are located in the dairy (probiotic yogurts) and soft drinks (energy and sports drinks) sectors. This is in contrast to the U.S. where intestinal health is relatively underdeveloped and cereal products are the leading category; fortification with calcium and vitamins, and energy-giving products are more pronounced. The main developments in the dairy sector have been in the milk and yogurt categories, while the main focus in the cereals and bakery sector has been on breakfast cereals. Soft drinks are a dominant force in the functional products market with energy and sports drinks being the main driving factors over the next several years. Developments in functional confectionary have been largely confined to calcium-fortified products, with a small number of prebiotic variants. The market for functional spreads is being driven by the growing availability of cholesterol-lowering phytostanol-enriched margarines.
Leading Health
Benefits and the Most Prolific Markets
In terms of therapeutic areas, key growth segments include probiotic live cultures and prebiotics, particularly inulin and other fructooligosaccharides, for intestinal health (leading) followed by heart health and bone health products. In Europe the three markets together accounted for around $2.7 billion in 2002, according to NBJ, with the U.K. leading ($1.2 billion) followed by Germany ($500 million), France ($300 million) and others ($600-700 million). Other well performing areas include immune defense, cognitive and mental performance, menopause and sports supporting endurance and muscle growth.
European heart health foods focus on cholesterol-lowering phytostanol-enriched spreads and dairy products, foods and beverages plus omega-3-fatty acids and dietary fiber fortified breakfast cereals. Although this market is active, it is also disappointing, largely due to weak branding and tough regulations governing claims for heart health.
Bone health products are mostly confined to dairy products and soft drinks fortified with calcium and vitamin D. The U.K., for example, is the largest European market for calcium-fortified orange juice. In the future, the combination of calcium and inulin will probably increase as numerous human clinical studies could show a significant increase of calcium absorption and bioavailability when given together with the dietary fiber inulin.
In general, dietary fiber is, aside from vitamins and minerals, one of the most popular natural ingredients used in functional products in Europe. Dietary fibers represent a very heterogeneous group including mainly cellulose, inulin, galactomannan, maltodextrin, oligosaccharides, among others, which originate predominately from wheat, oats and barely, in addition to other sources such as flax, quinoa, spelt, amaranth, seaweed and coconut. The main categories for fiber added products are dairy, bakery and cereals, which are positioned mainly for heart health and weight loss.
Functional Beverages Still Booming in Europe
Soft drinks have become a major, successful target for functional ingredients. Strong growth is expected to continue as Leatherhead Food RA estimates a growth of 70% by 2005. In Europe, the functional beverage market is dominated by sports and energy drinks. The remainder is comprised of a wide range of different fortified products based on mineral water, fruit juice or dairy: ACE drinks, herbal drinks, enhanced waters, probiotic milk drinks, meal replacement drinks, wellness drinks and vitamin and mineral fortified drinks.
Although sports drinks make up the largest portion of the market, it is also the slowest growing segment. The strongest growth is observed in energy drinks. All other functional drink segments are heavily fragmented and dominated by vitamin and calcium-enriched drinks, however, the use of herbals is also growing.
According to a recent Zenith report on the European energy drinks market, Red Bull has kept its lead, owning two-thirds of the overall volume across Western Europe. The brand is present in 13 European countries and holds the lead in 12 of them. The rest of the top 20 brands took a combined 17% share during 2003. Although slower than previous years, energy drink sales still grew by 6.5% in 2003 to 311 million liters (2340 million). Healthy growth is predicted to remain with an annual growth of 7-9% until 2008, reaching over 450 million liters. The largest energy drink market in 2003 was the U.K. with 26%, followed by Germany (20%), Spain (13%) and Austria (11%).
In Germany the functional juice market plays an important role, due to the long-established tradition of ACE (plus vitamin A, C and E) and multivitamin juices. The new category of F-ACE juices (plus folic acid) is also performing well. By the end of 2002, double-digit growth led to sales of over 300 million liters with a value of approximately $44.8 million, according to Leatherhead Food RA. Germany is one of the few countries in the world with a quantifiable ACE drinks market. In summary, the market for functional drinks has yet to develop to this extent in the U.K. However, now ACE drinks appear to be prospering in the U.K.
In Sweden intestinal-health promoting probiotic fruit drinks are the leading category.
However, while there are numerous success stories, there have also been setbacks. According to France-based Euromonitor, for example, fortified waters failed to take off as consumers prefer pure mineral waters and are distrustful of fortified waters. This was clearly shown when Danone withdrew its Activ brand from France and several other markets. In the U.K., functional waters have been criticized for their unpleasant taste.
The success of the beverage market has also much to do with convenience. In addition, they are not niche positioned, or targeted at consumers with specific health problems, but are mainstream alternatives to carbonated soft drinks with the additional benefit and appeal of health.
The functional ingredients used in beverages span an enormous range of different substances belonging to the following classes:
Vitamins & minerals
Carotenoids (e.g. beta-carotene, lutein, lycopene)
Dietary fiber (e.g. inulin, beta-glucan)
Omega-3 fatty acids (e.g. docosa-
hexaenoic acid-DHA)
Amino acids and derivatives (e.g.
lysine, taurine, L-carnitine)
Flavonoids (e.g. resveratrol, quercetin)
Live bacteria/probiotics (e.g. Lacto-bacillus casei)
Medicinal plants (e.g. ginkgo, balm, St. John's Wort)
Tea plants (e.g. green tea, mat, rooibos)
Spices (e.g. ginger, lemon grass)
Other plants (e.g. aloe vera, guarana,
schizandra)
Fruits & vegetables (e.g. cranberry,
carrots, celery)
Seaweed
Europeans Love Healthy Soy-based Products
In 2002, the market for soy-based drinks, desserts and meat-free products reached 1.3 billion, with further double-digit growth expected for the period 2003-2005, according to a study from PROSOY Research & Strategy, a research organization based in Bilthoven, The Netherlands. Health-conscious Europeans choose soy products as alternatives to dairy and meat products, often due to growing food intolerance and allergies. In addition, the positive health image of soy is rising, because medical research on soy protein and isoflavones has shown positive effects on blood cholesterol and heart disease, bone strength and menopausal problems.
Within Europe, the U.K. market for soy-based milk, yogurts and desserts is the largest, capturing over 30% of the market with a growth rate of more than 20% in 2002. While the U.K. is the largest market for these products, the German market showed the strongest increase in sales with a growth rate of over 40% in 2002.
Dietary Supplements
The growth of functional foods is in sharp contrast to the vitamin and mineral supplement market, currently stagnating in the U.K., and threatened by the new European food supplements directive. Despite this, however, the European nutritional supplement market, according to Frost & Sullivan, still represents a market with strong potential, particularly among female consumers. In fact, 15% of European women today are regular consumers of dietary supplements. Furthermore, growth rates for the category range from 7-30% depending on the country.
Positioning Nutraceuticals-Important Marketing Aspects to Consider
According to a new report from Euromonitor, for a functional food or dietary supplement to be successful, the company typically has to adhere to the following positioning as learned from "winners" and "losers" in the nutraceuticals arena:
The health benefit has to appeal to the mass market and address general well being issues.
The health benefit has to be well communicated, either through understandable health claims, or through using an active ingredient, which is readily understood, such as calcium.
The product must be competitive on all platforms and not rely solely on its health benefits. It must also offer taste, convenience and appropriate pricing. Its functionality allows for higher margins, but itself does not guarantee success.
The product must provide a real competitive point-of-difference, a nutrition message for the consumer, which is recognized as truly meaningful from the numerous choices that are already available.
EU Regulatory Developments
Currently there are three EU proposals and one implemented directive concerning food and medicine laws, which may have a substantial impact on the development and marketing of functional foods and dietary supplements on the European market.
Nutrition and health claims proposal. The European Commission adopted a proposal in July 2003 for the regulation of nutrition and health claims, which, since then, has been widely criticized by food industry members as being too restrictive, and more specifically, impinging on freedom of speech. The regulatory framework covers nutrition claims (e.g. rich in vitamin C) and specific health claims stating a benefit to the consumer by defining their meaning and setting of thresholds. Also reduction of disease claims will be allowed provided they have been proven. In short, all the claims have to be scientifically substantiated. The proposal contains a positive list of generic nutrition claims, which may be made like "rich in dietary fiber" provided the product contains at least 6 grams of fiber in 100 grams.
Some health and nutrition claims will be banned. Specifically, any information about foods and their nutritional or health benefits, which is not clear, accurate and meaningful and cannot be justified, will be prohibited. Furthermore, vague claims referring to general well being or claims making reference to psychological and behavioral functions will not be permitted. Also slimming and weight control claims as well as referring to advice from doctors or health professionals will be prohibited.
In October 2003, the European Commission issued a memorandum titled "Myths & Misunderstandings" in order to clear up the myriad complaints. This document clearly showed that the Commission would not back down from its position and that the regulation will probably come into force in the current version. Seeing as how the industry is not yet 100% in agreement, the debate is likely far from over.
Fortification of Foodstuffs. In November last year, the European Commission adopted the revised proposal for the regulation of the addition of vitamins, minerals and other substances like fatty acids to food (2003/0262 COD). In addition to consumer protection, the proposed legislation was an attempt to harmonize the different rules in member states and to allow the free movement throughout the EU. To date, however, the positive list covers only vitamins and minerals being the same as those outlined in the food supplements directive.
The proposal allows only three reasons for the addition of nutrients to foods: a) restoration to ensure that, in the final product, the levels of nutrient(s) lost during storage, handling and manufacturing are equal to original levels, b) substitution to produce substitute foods (e.g. margarine as a substitute for butter) that resemble other foods in appearance, taste and nutritional value, c) fortification/enrichment meaning the addition of vitamins or minerals due to proven health benefits or nutrient deficiencies in the population. The proposal will not apply to foods for particular nutritional uses (PARNUTS)-i.e., infant formula-to novel foods or to food supplements. The proposal prohibits the addition of vitamins and minerals to fresh foods and to drinks containing more than 1.2% alcohol and proposes criteria for the setting of maximum levels of vitamins and minerals. Similar to the health claims proposal, it includes the concept of "good" and "bad" food. The latter comprise nutrient-poor foods that are high in fat, sugar or salt-i.e., snacks and candies-which should not be fortified. It also includes the regulation of substances under community scrutiny (i.e., guarana, taurine, glucuronolactone), for restricting the use of certain substances (e.g. the concentration of caffeine, quinine in soft drinks) and for prohibiting the addition of some substances to foods (i.e., kava kava, ephedrine alkaloids, St. John's Wort). Critical voices are concerned that fortified foods could be misleading and don't help people achieve a balanced diet. Claims about specific fortification are good for marketing purposes (i.e., "added iron," "extra vitamin C") but don't address the overall healthiness of food products. For example, yogurts aimed at children may be marked "added calcium" but may contain high levels of sugar or fat.
The EU Pharmaceuticals Directive. The EU pharmaceuticals directive (amending Directive 2001/83/EC), if passed in the current version, could seriously threaten the future of food supplements if they are judged as medicines due to the definition of a medicinal product as given in the directive (as a substance that "modifies physiological functions"). Furthermore, the pharmaceuticals directive has actual supremacy under the new laws, so that when in doubt (e.g., high dosage vitamin supplements) it would always classify such products as medicine. Currently, affected industry associations are working on a more specific definition for inclusion in the directive so as to better distinguish medicines from food supplements. The European parliament was supposed to revisit the issue this past January.
EU Directive on Food Supplements. The EU directive on food supplements, which came into force in July 2002 (to be implemented by the member states from August 1, 2003), was challenged in a U.K. court in October last year by the Alliance for Natural Health (ANH), a pan-European coalition of supplement manufacturers, retailers, independent health practitioners and consumers. ANH was pushing for the case to lead to a whole-Europe judicial review of the controversially discussed directive, which restricts several vitamin and mineral substances and dosages in food supplements, which are not included in the positive list of the directive. The marketing of such products, which do not comply with the directive will be banned from August 1, 2005 at the latest. On January 30th, ANH got its wish when it received permission to challenge the European Commission in the European Court of Justice in Luxembourg regarding the legality of the Food Supplements Directive ban on nutrients. The English High Court judge who reviewed the case emphasized that the reference to the European Court be made without delay given that the ban proposed by Brussels legislators takes effect on August 1, 2005.
ANH claims that in the U.K. the application of the directive will result in the ban of more than half of the 420 or so forms of nutrients present in approximately 5000 products on the U.K. market, many of which are sold in health food stores. The ban will have a similar effect on products in countries such as Sweden, the Netherlands and Ireland, which have advanced markets for food supplements. In summary, according to the ANH, natural vitamin and mineral formulations with high bioavailability will be banned, leaving only old fashioned, synthetic versions, which tend to be much less effective.NW
About the authors:
Dr. Joerg Gruenwald is president, Phytopharm Consulting, Berlin, Germany, which is a specialized business consulting company for herbal medicine, dietary supplements and functional food, and author of the PDR for Herbal Medicines. Dr. Cordula Mueller is a scientific consultant with Phytopharm. Both authors can be reached at Phytopharm Consulting, 49-30-40008100, Fax: 49-30-40008500; E-mail: jgruenwald@analyze-realize.com, cmueller@analyze-realize.com; Website: www.analyze-realize.com.