Every year, all year, we review the key trends that are driving the market for healthy foods and beverages. I say “healthy” rather than “functional” because the term functional foods has become meaningless, with no legal or regulatory definition and no meaning for consumers.
The good news for our industry is that companies whose products match up to the key trends are continuing to enjoy surprising growth. With economic doldrums as a constant backdrop in most Western countries, consumers are becoming more price-conscious and eager for a bargain. But value for money is not just about price.
If your brand meets the key criteria of naturalness, good taste, convenience, good marketing and delivers on one of consumer’s key health concerns you have everything on your side. There are around 15 significant drivers of the health trend, some of the most important of which include naturality, energy, digestive health and weight management.
Naturality: Today’s Basic Consumer Requirement
Today it’s the dominant trend. In most Western markets the descriptor “natural” is becoming a basic consumer requirement for the ingredients on the label of any brand, even those without an overt health position. And “natural” is something defined in the mind of the consumer, not by technical or regulatory definitions.
There are the two broad categories—different, yet entirely complementary—of “naturalness” as defined by consumer perceptions:
1. Natural, meaning fewer and simpler ingredients. Foods that are “free-from” artificial colors, preservatives or additives. It can also be used to encompass foods that are free-from other ingredients that your target consumers object to.
2. Natural, meaning “naturally functional.” Rule number one in the current market: the message that a food or food ingredient has a natural and intrinsic health benefit is one of the most persuasive that people can hear.
Understandably, companies worry about what health claims they can make for their products—and if they can’t make a claim, how to get the health benefit message to the consumer. But the good news is they don’t need to. Perceived health benefits from “naturally healthy” ingredients is an easy concept for both consumers and the media to understand.
As Professor David Hughes, Emeritus Professor of Food Marketing at Imperial College London, observes: “If you are pushing in the direction people want to go in, it’s much easier.”
Oats, almonds, cranberries, blueberries and many other foods have already benefited from this key consumer preference. This trend can only strengthen, thanks to constant positive media attention to foods with natural and intrinsic health benefits.
The best part is “naturally healthy” needs no health claims. The attraction for industry of the “naturally functional” trend is that in a restrictive health claims environment, such as now exists in Europe, it makes the marketer’s life much easier. In other words, when consumers can draw their own conclusions, no health claim is needed.
Some examples of the marketing power of “naturally functional” include:
Coconut Water: Sales of coconut water are rocketing, powered by coconut water’s natural advantage—that it delivers “all-natural” benefits. It’s not only the U.S. where the leading coconut water brands are experiencing growth. Germany-based Dr. Antonio Martins Green Coco, Europe’s largest coconut water brand, experienced 90% sales growth over the last year, “without any marketing investment, no advertising,” says Dr. Stefan Reiss, CEO. Dr. Reiss and his colleagues have been astonished by the brand’s growth. So far it has needed no marketing investment because coconut water’s image in the mind of the consumer has been bolstered by a continuous stream of positive press coverage.
Almond Milk: Almond growers and marketers have been particularly successful in communicating the intrinsic healthfulness of their nuts. As a result, almonds have become one of the most popular “health halo” ingredients. This in turn set the stage for the debut of almond milk, which has exploded in the U.S., with sales soaring from zero to more than $160 million (€120 million) in less than three years, despite selling at a premium price. It’s of no interest to consumers that some criticize almond milk for having little of the nutritional value of fresh almonds. After years of marketing and positive media coverage, in the mind of the consumer the almond’s health halo is rock solid.
Greek Yogurt: The explosive growth of Greek yogurt in the U.S. has been powered by the Chobani brand, which has rocketed to an estimated $700 million in annual sales, only four years after it was launched. Chobani’s success comes from many factors—one of them being its natural message. “Some foods are processed so much. Lost nutrients must be added back in. We just use the nutrients nature provides,” says advertising for Chobani, which carries the tagline “Nothing but good” on its products.
Fruits & Vegetables: Back to Basics
As a result of the powerful trend towards “naturality” and “natural functionality” consumer and corporate interest in the natural health benefits of fruit and vegetables is growing rapidly and fruit- and vegetable-based ingredients are set to become the key drivers in many categories. They are already at the heart of corporate strategy for a growing number of companies:
• PepsiCo has made “fruits and vegetables” one of its core platforms for growth
• Danone and Chiquita have formed a partnership to jointly build a new business in fruit drinks and fruit snacks
• Nestlé is working on making fruit a core business platform in selected markets
The advantage for anyone who wants to get in on the ground floor is that the science of fruit and vegetables is today where the science of dairy nutrition was 20 years ago.
Researchers are only just beginning to uncover a wealth of benefits in relation to digestive health, immunity, satiety, sports recovery, glucose uptake and insulin response, energy and mood.
Success is usually the result of bringing together good science and good marketing, such as Ocean Spray’s investment in cranberries or Pom Wonderful’s investment in pomegranates.
In the mind of the consumer, fruits and vegetables create credible health propositions. In the U.K., for example, the Beet It brand has set out to capitalize on the new scientifically established “all-natural” health benefits of beetroot juice:
• Lowers diastolic blood pressure, with no effects on systolic blood pressure
• Reduces the energy expended by muscle and can boost stamina, allowing an individual to exercise for up to 16% longer
This small company has managed to garner huge publicity by making beetroot juice palatable and raising awareness of the growing evidence of its “all-natural” health benefits.
Another example of the power of fruit is The Nature Addicts brand, which has created a new category with a simple, all-natural snack proposition and was one of three successful snack launches of last two years in both Europe and the U.S.
Solinest, a leading player in the confectionery market in France, with particular expertise in the impulse segment, launched Nature Addicts fruit snacks in France in 2009 with a naturally healthy proposition:
• No added sugar
• No sweeteners
• No preservatives
• No artificial colors or flavors
• 100% fruit
• Naturally high in fiber
The products are super-premium priced. In fact, on a price per kilo basis, the brand sells in handy 100 kcal single-serve re-sealable bags at prices that are equivalent to between €50-€65 per kilo—a massive premium over apples, which retail for around €2.50 per kilo.
A heavy investment in merchandising, POS, advertising, PR campaign and social media all drove 2010 retail sales to more than €20 million despite a super-premium price, and despite strong price-sensitivity of French consumers in every category in the supermarket. Bearing in mind that France has a population of 60 million, that’s equivalent to a €100 million (£87 million) brand in a large market such as the U.S.
Energy: Synonymous with Beverages
According to Health Focus International, in the 32 countries in which it conducts its research, “energy” is consistently among consumers’ top-5 or top-6 needs.
Energy drinks are a huge and growing market—possibly the biggest “functional” market in the world. They have become synonymous with Red Bull, which is still the market leader with a 50% share. The benefit of energy has also become synonymous with beverages.
Slow release energy is a benefit reserved for grain-based products. It gives consumers reassurance and permission to consume. However, this trend is not showing signs of being transformative in the way energy has been for beverages.
That such big-name companies as Nestlé and Campbell’s are focused on creating products with a “natural energy” message is a reflection of how high energy—and particularly natural energy—now ranks on many companies’ new product development (NPD) agendas. Creating a product that offers “natural energy”—as opposed to those based on chemical-sounding ingredients such as glucuronolactone, which account for almost 100% of the $15 billion energy drink market—is on the list of ambitions of almost every major company.
That in turn is a sign of how high “energy” ranks on consumers’ list of needs—and the massive extent to which the needs of the majority of consumers remain underserved.
The energy drink market in the West is still relatively new—i.e., it has been 20 years since Red Bull debuted—however, the market is long-established in Asia. But while all types of consumers are catered to in Asia, the energy drink market in the West targets young males almost exclusively, a fact reflected in the brands’ names—e.g., Power Horse, Red Bull, Monster, Freak—and in the high-energy marketing. The core consumers are males aged 18-25, a demographic which accounts for 80% of energy drink sales.
Almost every other consumer opportunity has been neglected and the only major success in the white space so far has been in the U.S., where 5-Hour Energy, a caffeine and B-vitamin-fortified single-serve 100 ml energy shot, went from zero to more than $700 million in retail sales in four years. The success of energy shots reflects the massive untapped opportunities to create new brands and new segments.
Huge swathes of people can’t identify with the existing brands and most don’t like the chemical-sounding ingredients found in most energy drinks. Their preference for naturalness over chemistry is reflected perfectly in the TV advertising message for Nestlé Jamba Juice, launched in early 2011. Its short and very natural-looking list of ingredients encapsulates perfectly what many people are looking for but can’t find.
Here’s a short-list of the opportunities:
• New consumer groups: women and older (35+) consumers.
• New ingredients: to create brands with a higher “natural and healthy” score than the current energy drinks.
• New carriers: a core ingredient with better health credentials, such as Nestlé Jamba Juice’s 70% fruit content or Campbell’s V8’s fruit and vegetable juices.
Note how brands such as these last two are making a crossover with the key trend of fruits and vegetables, one of the most important opportunity areas. Historically, it’s where your product hits two or more trends that the greatest successes are created.
Digestive Health: Move Over Probiotics
For the past decade digestive health has rivaled energy as one of the biggest and most important trends. It isn’t surprising as digestive health also ranks consistently among consumers’ top needs in consumer research.
Digestive health continues to present a huge opportunity, and while the story so far has been dominated by probiotics, with Danone’s Actvia yogurt the world’s biggest digestive health brand, the pendulum has swung towards fiber as the most important ingredient.
It has demographics on its side. The core consumer is 40+ and may be older. In fact the biggest growth will be among the growing numbers of those over 60. Digestive health becomes a more important issue for people as they age. Bodily functions slow down with age and the digestive system is no exception. In fact, people in their 60s are five times more likely than people in their 20s to develop constipation and around half of 70-year-old men struggle with constipation on a daily basis.
Thanks to new technologies that have allowed higher dosages (>25% of the RDA per serving) of fiber without taste and texture problems, demand is set to grow. Further, more exacting demands by regulators will see the marketing of new probiotic products effectively come to a halt in Europe and we can expect U.S. regulators, too, to increase their demands.
However, how you brand and position your fiber-fortified product will be key. Many products now communicate that they deliver 20% of the RDA of fiber per serving, but this message isn’t a point of difference, as it’s so widely used and there’s little evidence that it does much for sales.
Much more successful has been General Mills’ Fiber One’s positioning of itself as “the expert brand” for fiber, with its bars and cereals delivering 25%-55% of the RDA per serving. It’s a dose that enables people to “feel the benefit”—another key trend and success factor. Fiber One has rocketed from $35 million in 2006 to more than $300 million today, despite selling at a premium price and the backdrop of economic recession.
Weight Management: A Moving Target
Weight management is one of consumers’ top needs but it’s a market dominated by supplements and meal replacements, and food and beverage products have struggled to make any lasting headway.
Consumer target is broad, which makes marketing more difficult, and ranges from people who are seriously overweight to people aiming to maintain their existing weight.
The world’s most successful weight management brand is Kellogg’s Special K cereal and bars. The key lesson for us all from Special K is that its success is not the product of science or R&D—but marketing innovation.
Its “drop a jeans size” and “drop a bikini size” campaigns introduced in the U.S. and France back in 2001 are not about clever grains, but about clever positioning and communication of the benefit.
Rolled out to 33 countries, the brand grew from $300 million in 2001 to $1.5 billion in retail sales by 2010. What’s more, Special K challenges the myth that a brand that works in one country won’t work in another. The positioning is the same whether it’s France or the U.S.—two very different countries—or Mexico or Dubai. The flavors are the same—with red fruits and chocolate (this last one developed for France originally) leading in most markets.
It’s worth looking at Special K if considering the weight management market. Combinations of fiber and protein are currently popular for weight management products, but keep in mind that none of these has come anywhere near the success of Special K. In fact, in Europe the dairy industry’s favored strategy of fiber plus whey protein combinations for weight management—delivering a satiety benefit—has failed, despite heavy marketing investment.
Even the marketing muscle of Danone hasn’t helped. In Spain, Europe’s most active weight management market, Danone’s Vital Vitalinea SatisfAcción 0% fat yogurt stalled at €7m (£6.1m) despite a clear “helps to control the appetite for longer” claim, based on a hefty dose of protein and fiber, and marketing spend of €5m. Elsewhere in Europe Danone has withdrawn its satiety brands.
So why has dairy and weight management been an unsuccessful combo? It’s partly because protein and fiber products as presently formulated do not enable people to “feel the benefit” sufficiently.
It’s also the case that: Major companies realize that a single product on the shelf is not enough; Consumers are skeptical about a single-product, “magic-bullet” approach; and most important, people want service and support in reaching their weight management goals.
This last point is a crucial one, since it’s what helps underpin the success of Special K, which offers motivational groups, eating plans, discussion forums, apps and much more for people following its “drop a jeans size” programs.
“Services” are now high on the agenda for many companies—to the extent that we can identify them as a key trend.
It’s no coincidence that Nestlé acquired Jenny Craig—a service with products—and has since rolled out the concept from America to France. Jenny Craig’s services include:
• Smart devices and tools, enabling people to stay connected and get help anywhere anytime
• Community—sharing the experience with others
• Coaching—helping individuals achieve their goals
• Tracking progress
• Customizing to individual needs and lifestyle
Protein’s role in weight management received a major boost from a New England Journal of Medicine article, which detailed the results of the world’s largest-ever diet study. Called Diogenes, it investigated the optimum diet composition for preventing and treating obesity. Researchers found that high-protein, low-glycemic index (GI) diets were the most effective for weight management.
The quality and scale of the study has attracted a significant amount of media attention and it is already having an impact on food marketing. Kellogg’s Special K breakfast cereal for example, today the world’s most successful weight management brand, already communicates in some countries that it is low-GI.
The study has also given companies seeking to use grains a way to communicate the “slow release energy” message. Kraft Foods, for example, took to the U.K. market in the last year a cookie positioned as “a totally new way of having breakfast”—and priced at a more than 400% premium over a standard biscuit.
The U.K. does not have a culture of consuming biscuits for breakfast but that did not stop Kraft from launching Belvita in the U.K. in late 2010. In a crowded and static U.K. biscuit market, creating a new consumption occasion was a way to get a new brand into the market without competing head-on with established brands.
The brand’s message reassures people they can eat sweet biscuits for breakfast and still feel virtuous by emphasizing slow energy-release carbohydrates.
A graphic on the side of the package reinforces the balanced breakfast message and adds:
“They are carefully made and gently baked so that, as part of a balanced breakfast, the carbohydrates are regularly released over 4 hours to keep you going all morning.”
“This has been proven in several clinical studies.”
Belvita Breakfast has been rewarded with first-year retail sales of nearly £21 million (equivalent to $100 million in a much larger market like the U.S.). With science now supporting low-GI, it’s a message that will start to gain traction in grain-based products.
Finding a place in “senior” nutrition is the aim of every major company and it’s a key driver of R&D. But it’s also the case that senior nutrition isn’t a new area because seniors (assuming we take the very young age of 50 as the starting point for defining the senior consumer) are already the dominant buyers of foods with health benefits. In fact you could say functional foods = senior nutrition.
If you think you are going to successfully market a product with a tangible, scientifically proven health benefit to the under-40 crowd, think again. The key lesson of the last 50 years is it’s the over-40 crowd—and in particular the over-50 crowd—that will emerge as your core consumer target.
Indeed, consumers aged 50+ are over-represented among buyers of brands with health benefits—and one of the attractions of marketing to this tough and discerning group of consumers is that once you have won their loyalty, they stick with the brands that deliver tangible benefits.
In Europe, for example, cholesterol-lowering dairy products represent a $1.3 billion market and typically enjoys a very high repeat purchase rate—80%+ is not uncommon, despite also being the most expensive products in the dairy case.
Even a brand such as Activia—the world’s biggest digestive health brand and the world’s biggest probiotic brand—appeals primarily to those over 40. It’s no accident that the face of Activia is the 53 year-old actress Jamie Lee-Curtis.
As the older age groups are more discerning and demanding, and often addressing real issues in their lives, enabling them to “feel the benefit” is one of the most important ways you can show your product delivers value for money.
But the needs of the senior population diverge widely and depend on life stage. Here is an example of segmentation used by several companies:
Boomers (healthy and physically active)—50-60
Grand seniors (fragility, illness as an everyday part of life)—80+
(The middle two groups are in the transition to more health problems, with issues developing in their 60s and becoming tangible lifestyle challenges in the 70s.)
It is because consumer need is growing globally for products that address the medical conditions which affect senior consumers that Nestlé created a new medical nutrition division—Nestle Health Sciences—to challenge market leaders Abbott and Danone.
There will be more overlap between brands that are sold in supermarkets and are consumed by seniors and those sold under the medical nutrition umbrella. Companies such as Danone intend to reposition some of these foods. In fact, it recently unveiled to investors the concept of “OTX”—products that cross the boundary between supermarket foods and pharmaceuticals and which are only retailed in pharmacies and marketed primarily to health professionals.
The company unveiled its first such product, Nutrifit, a high-protein dairy drink to help people maintain muscle strength as they age.
Seniors are over-represented among shoppers in pharmacies, so you are therefore putting the product in front of them in the distribution channel where they are most likely to find it.
Sarcopenia—or muscle wastage—is a condition that affects everybody to a greater or lesser extent as they age, and it is one of the key areas of untapped opportunity for protein.
A health problem that threatens to reach epidemic proportions, sarcopenia refers to loss of muscle strength and endurance, resulting in people tiring more quickly. Sarcopenia afflicts:
• 15% of men aged 70, 25% of women aged 70
• 20% of men aged 75, 33% of women
• More than 50% of people over the age of 80
Fighting sarcopenia is a key component in helping seniors maintain their mobility and therefore independence.
Bone health is another key element in maintaining mobility, and the world’s most-successful—perhaps only truly successful—product in this area is Fonterra’s Anlene brand, which offers 4x as much calcium per serving as regular milk and specifically targets “movement” as its benefit.
Focused on the message that “bone health = active lifestyle,” with clinical studies to prove the benefit, Anlene targets women 40+ and has become the number one bone health brand in Asia, with market share of 70% in Malaysia, 50% in Indonesia and elsewhere, despite selling at a 100% premium to regular milk. Retail sales are perhaps in excess of $300 million a year.
What sets Anlene apart from the competition is that consumers are provided with free bone scans, supported by nutritional counseling. Called the Anlene Bone Health Check, it helps consumers understand their bone health and how they can improve it.
Anlene has provided more than 4 million free bone scans in Asia since 2006 (and many millions more since this initiative began in the early 1990s). Fonterra says that this consumer engagement in understanding the benefit has proven to be five times more effective than advertising alone. This is a perfect example of how powerful it can be to help consumers understand the benefit of a product, especially if it is a benefit they cannot quickly and easily feel.
At Your Service
As already discussed in the section on weight management, it has become clear to many companies that in areas such as weight management, diabetes, sports nutrition and senior nutrition, offering a service as well as a product represents an opportunity for competitive advantage.
A wide variety of services are currently undergoing test marketing. One example is Nestlé HomeCare, which operates in France and provides at-home nutritional support for people who have come out of the hospital. The service includes the delivery of foods direct to their homes and care by health professionals. If successful, the concept will be rolled out to other markets.
About the author: Julian Mellentin is an expert on the business of functional foods, who has been involved in this area for nearly 20 years. He is also the editor of New Nutrition Business, a long-established international journal covering the global nutrition business. He can be reached at firstname.lastname@example.org; Website: www.new-nutrition.com.