The global market for Functional Foods and Drinks is projected to reach US$149 billion by 2018, driven by rising income levels, changing lifestyles, increasing health awareness, and rapidly aging world population, according to a new global report from Global Industry Analysts, Inc.(GIA). Growth would also be spurred by the introduction of innovative products aimed at satisfying the consumer’s nutritional and health requirements.  

Functional foods and drinks market has emerged as one of most dynamics segments of the overall food industry, particularly in developed economies. Worldwide market for functional foods and drinks is expected to witness steady growth in the long run, driven primarily by rising health consciousness among modern day consumers. Rising confidence in food products offering health benefits beyond the basic nutrition among both consumers and health professionals offers a strong business case for functional foods.

Conducive consumption patterns among the younger and older demographic group of consumers are additionally driving market demand. Frequency of purchase is on the rise among younger consumers given the product’s promise of quick energy replenishment, while among the elderly touted product benefits such as minimized risk of diseases such as hypertension and osteoporosis, are helping spur consumption. These foods are finding increased importance, helping consumers, by reducing day-to-day disorders and stimulating energy and performance (physical/mental) levels. Growth in the functional foods market is also driven by the ability of functional ingredients to offer therapeutic benefits. The increased consumption also results from the growing availability of functional foods in the form of bakery and dairy products, which drove leading players to integrate functional ingredients such as probiotics into products such as cereals and chocolates.

The demand for functional foods and drinks slowed down during the recession, with the impact being severe on high-priced, premium functional products, owing to the consumers’ preference for low-cost products. Sales slowed down particularly in developed regions of Europe and North America. The recession also led to fewer new products being launched by market participants. The market scenario improved in 2011, driven by the growing health awareness and the resultant emphasis on self-medication among consumers. Despite this, consumers’ purchasing preferences have changed drastically with most of them continuing to look for products that can offer significant cost savings without compromising on the functional aspects of the product. Going forwards, the market is projected to witness growth driven by the emerging opportunities in the developing countries, particularly in Asia-Pacific region. In fact, Asia-Pacific is expected to become the next growth engine for the energy drinks segment.

The United States represents the single largest market globally. Following the brief slowdown during the recession, the functional foods and drinks market has been witnessing steady growth. While growth in the functional beverages market was at the forefront of this demand growth, robust support also began emerging from the functional snacks market. Economic recovery, growing health consciousness, and technological advances are propelling the demand for functional foods and drinks. Aging population and rising life expectancies are also enhancing the sales of healthy foods, thereby proving beneficial for functional foods with health benefits and disease prevention functionalities. New product developments in functional foods, such as functional juices fortified with superfruits and antioxidants-enriched sports drinks, also augur well for the market.

Functional Cereals & Grains represents the largest product segment in the US functional foods and drinks market. Asia-Pacific, a rapidly growing market for functional foods and drinks, offers enormous potential for functional foods and drinks due to rising demand for health products from countries such as Australia, China, Korea, and Taiwan, India, Singapore, Philippines, and Malaysia, among others. Growth would be driven by rising health concerns, increasing awareness about functional foods, an aging population, and the high proportion of uninsured individuals in the region. Functional Beverages represents the largest and the fastest growing category in Asia-Pacific functional foods and drinks market. Functional snacks including confections are a thriving category in the functional foods market, with significant presence in the US and Japanese markets. Growth in this segment is attributed to the high demand for meal replacement products and increasing trust in adopting the fast food lifestyles among customers.