Digestive Health: The Health Benefit
Of all health benefits, it’s digestive health that offers the most potential for growth, worldwide. Products for digestive health are the biggest segment of the functional foods market—alongside energy drinks—and look set to stay that way.
The opportunities are driven by technological advances in both probiotics and fiber —and the fact that such products address real consumer needs. For example:
• In its survey of consumers and their perspectives on health in 32 countries around the world, research group Health Focus has found that digestive health ranks among consumers’ top-4 health concerns that affect them personally.
• Digestive disorders (ranging from diarrhea to constipation, bloating and discomfort) are felt by everyone from time-to-time, owing to a range of factors including diet, stress and demanding lifestyles. Constipation, for example, affects around 30% of people at any one time—and among seniors that percentage is even higher.
Probiotics: Beyond Dairy
The steady growth of the probiotic dairy market in Europe, Asia and South America has demonstrated over many decades that maintaining good digestive health is something that motivates consumers and it’s a benefit that has become the basis for several successful brands.
In the U.S., however, it took the very successful launch of Danone’s Activia probiotic yogurt in 2006 to shake American marketers into the realization of the digestive health opportunity.
Activia uses an overt digestive health message, one many American marketers have shied away from. This move not only proved Activia a success, but also that digestive health may be a recession-proof sector.
In the U.S., Activia’s sales grew 20% in the year to March 2010—well above the category growth rate of 3% and despite adverse media reporting of a legal threat to Activia’s claims and a difficult economic climate. Total sales hit $412 million.
Activia has been followed by a host of me-too dairy products, none of which is likely to challenge its leadership, in large part because these new products fail to create any point of difference.
One of the best examples of this failed me-too probiotic strategy was Yoplait YoPlus yogurt. Launched in 2007, YoPlus achieved just $40 million in sales by mid-2010, giving it a share of 1% of America’s nearly $4 billion yogurt market, compared to a robust 10% for Activia. YoPlus’s problem was that it brought nothing new to the segment, and hence it has fallen behind Danone irreversibly in the battle for supremacy in the U.S. probiotic yogurt category.
While Activia continues to dominate the probiotic dairy sector, many companies have hypothesized that the next big opportunities for probiotics for digestive health might lie in bars, ice cream or cheese. Unfortunately, these are all formats that have been tried again and again in European markets—and have universally failed. A similar story is unfolding in the U.S. market, with bars (for example) producing weak sales.
Danone will also drive the next big transformation in probiotics, this time with the global rollout of a Swedish innovation that has become one of the most successful functional brands in Europe.
It’s not a dairy product but rather a probiotic fruit drink called ProViva. It has grown its sales consistently every year since it debuted in Sweden in 1994, even growing 8% in the depths of the recession to total sales of more than $75 million—impressive in a country with just 9 million people (pro rata those sales to the U.S. and ProViva would be a $2.1 billion annual sales brand, as big a success as Danone’s blockbuster Activia brand). Consumers could have switched to a 25% cheaper, non-probiotic juice from the same manufacturer, but ProViva’s digestive health benefit was compelling enough to keep their loyalty.
Now Danone has signed a 10-year license agreement with the Swedish probiotic science company Probi—which developed and markets the L. plantarum 299v probiotic strain, the active ingredient in Pro Viva—allowing Danone to use Probi’s technology in probiotic fruit drinks for digestive health. Simultaneously, Danone also acquired 51% of the ProViva brand from the Swedish dairy co-operative that owns the brand, setting the stage for a global rollout of a brand that could be considered one of the most innovative and successful of the past decade.
There’s no secret to ProViva’s success—it has a clinically-proven digestive health benefit that you can quickly feel; it’s an innovative and truly differentiated product that taste so good that by itself it’s a reason for people to buy the product; and it has managed to attract a huge following in a country that’s traditionally highly dairy-focused.
Anyone in probiotics needs not only to be looking at new formats, but also at new benefit areas, such as dental health. BLIS Technologies from New Zealand has created probiotic gums, tablets and powders based on the probiotic K12. This is one very good example of a small ingredient supplier creating a niche for itself that it can dominate.
Needless to say, Danone is also looking at these new niches and at new benefits, recently taking a 26% stake in Canadian probiotic development company, Micropharma, which has developed a probiotic strain clinically proven to lower LDL cholesterol.
Finding the ‘Fantastic’ in Fiber
While there are many probiotic “expert brands” such as Activia, there is really only one fiber-based expert brand (so far)—General Mills’ Fiber One cereal and bars brand, which also showed its recession-defying characteristics by increasing its sales by 20%, to more than $261 million this year.
Consumers’ growing awareness of the need to include more fiber in their diets, and the increasing availability to food formulators of fiber types, which can be added to products to deliver the benefits of fiber with none of the taste disadvantages traditionally associated with fiber, are all driving interest in how to replicate Fiber One’s success in other countries and other categories.
In the case of fiber, being an “expert brand” involves:
• Making the digestive health benefits of fiber the key selling point; and
• Delivering a benefit consumers can feel (i.e., formulating products that deliver a high dose of fiber—such as Fiber One’s 35% of the RDI, and/or a product that is carefully formulated with a combination of fibers in order to be sure it can deliver a tangible effect).
In Europe, fiber is one of the few ingredients European product developers will have at their disposal where there is little dispute about the benefits and how to communicate them. And European regulators have recently indicated they are willing to accept health claims around factors such as improved transit time. In the U.S. market too, a structure-function claim for fiber and digestive health should be uncontroversial.
Fruits, Superfruits & Superfoods
The idea of “superfoods” has certainly caught on, but there’s little agreement on what a superfood actually is. In fact, one challenge lies in the way the term “superfruit” is used, particularly in the beverage market, without restraint as a “marketing label” on a massive array of products—many of which contain only a small percentage of the trumpeted “superfuit.” And many so-called superfruits have only scant amounts of science behind them.
The fruit industry is, in terms of science, where much of the ingredients industry was 15 years ago, but that is changing. Paramount Farms, in pomegranate, and Ocean Spray, in cranberry, showed the way ahead with millions of dollars of investment in the science of their fruit.
Long overdue investment in science is uncovering more and more potential benefits from fruit extracts and these should drive fruit into a host of new benefit areas.
Success isn’t simply a question of using an ingredient that gives a superfood halo. You also need a strategy designed to create a superfood proposition. Here are some key lessons from the experiences of superfoods of all kinds:
• Begin by targeting the most health-conscious early adopters and make these your beach-head into the market.
• Charge a super-premium price, communicating to the target consumer how “special” the product is.
• Deliver the product in packaging, which not only protects the product but also provides strong differentiation on the shelf, as well as extreme convenience.
• Strongly differentiate the product in as many ways as possible, including appearance, to avoid comparison with low-price commodities; move the point of difference from being simply the health benefit to as many other factors as possible.
• And actually be able to demonstrate that your product has an effective level of whatever component confers the claimed benefit.
One of the best examples of an effective superfood strategy is BroccoSprouts, which are very young broccoli sprouts, just a few days old, that deliver a dose of the antioxidant sulforaphane at 73mg per 28-gram serving, much higher than you’d get from mature broccoli plants.
Tony Talalay, CEO of Brassica Protection Products, says his company “deliberately sought to distinguish BroccoSprouts from other sprout offerings on the market.” Sold in high-quality lidded plastic trays, the product label shows a typical serving suggestion and the product provides a small and convenient serving size, perfectly in line with the preferences of today’s health-conscious consumers.
BroccoSprouts also recognized that it was at an advantage in terms of creating credibility with the most informed and most health-conscious consumers to market their brand at a super-premium price. They are roughly three times as expensive as a pack of alfalfa sprouts, but Mr. Talalay insists the target health-conscious consumers are willing to pay, adding that: “We have very broad distribution and we go in every kind of major supermarket, but our typical consumer is someone older, female, with a higher income, and who is educated about food. They’re conscious about what they’re buying—sometimes it’s organic, but certainly it’s high-end healthy products.”
The Power of Protein
If fiber is enjoying a new renaissance in foods and beverages, the next emerging ingredient beyond that will be protein.
Protein-fortified foods have long been the domain of elite athletes and gym-rats. But research indicates that protein’s appeal is growing among “regular consumers” and that it is gaining a better image as part of a healthy diet.
Coupled with this, product developers are doing a better job delivering protein without taste and dryness issues. And the dairy ingredients industry is eager to move whey protein out of the sports nutrition niche and into new markets.
As a result, innovations are emerging in soup and cookie products intended initially for elderly care to help slow muscle loss (sarcopenia—a widespread and growing health problem). One example is Probake by U.K.-based Applied Nutritional Research, a 50% protein cookie for consumers over 60 that offers easily digested whey protein in a convenient biscuit form.
Concepts such as this might begin as niche products but they will evolve into brands in supermarket distribution. An example of the potential market for new high-quality proteins is Quorn. Originally created in the 1970s, it is a protein made by fermenting a mycoprotein—a fungus found in soil. In the U.K., retail sales of foods based on Quorn already exceed $120 million (pro rata that to the U.S. and it’s equivalent to a $180 million brand) with a similar figure in other European countries.
A Future for Extreme Relaxation?
Having pepped American consumers up with energy drinks, entrepreneurial beverage makers are now exploring the embryonic market for drinks promoting relaxation—either to take the edge off anxiety, or as a sleep-promoter.
“America is becoming more stressed, so everyone is trying to relax with prescription drugs and other things,” said Peter Bianchi, CEO of Innovative Beverage Group Holdings, a Houston, TX-based company whose Drank brand posted $6.5 million (€5 million) in sales last year and, he said, is the largest player in the U.S. market for relaxation drinks at this point.
There are already more than 350 items calling themselves relaxation drinks. Although the level of sales is unclear, estimates range from $10 million to as high as $50 million.
Fortitech, which develops custom nutrient premixes for foods and beverages, is seeing “strong interest from our clients” for blends targeting the relaxation segment, according to director of marketing Richard Schleif, “which is typically an indication that we will see a spike in commercial products in the near future.”
At this point, however, consumers don’t seem to have taken to the concept—which may in part be due to the fact that, unlike Red Bull in energy drinks 20 years ago, no one in relaxation beverages has yet established a clear winning strategy for formulation, positioning, packaging, distribution or marketing.
In fact, manufacturers are still figuring out whether the product is meant to promote sleep or just relaxation. For example, Mini Chill relaxation shots focus on promoting stress reduction, not sleep. Its main active ingredient is 500 mg of valerian root per 2-oz. (60 ml) shot. On the other hand, Dream Water is aimed directly at consumers who want help nodding off. Its 2.5-oz Snoozeberry shot (combining blueberry and pomegranate flavors) contains melatonin, GABA and 5-HTP, and promises sleep “usually” within 40 minutes of consumption.
Creating Mass-Market Success: Know Your Niche
One of the key lessons of the last 15 years is that companies who try to jump straight into the mass market with a health innovation usually fail. The mass market was reluctant to pay high price premiums for health, even in good economic times, and it is more price-sensitive than ever now—and the cost of health ingredients makes it difficult to deliver an effective product at low prices.
Rather than aiming at the mass market from day one, it is better to begin by focusing on people for whom health is part of their lifestyle. These people are, at best, only 20-25% of the population in most countries and tend to be older, 40 or 50+—the age when people start to notice changes to how they look or feel and also the age when people have sufficient disposable income to spend on maintaining their health.
Even a company the size of Nestlé has realized this is the best strategy. Take for example its launch of Nescafé Green Blend antioxidant-rich coffee in Germany, Spain, the U.K., Australia, Thailand, Mexico and elsewhere. The brand is based on a patented process that produces a coffee containing 9% polyphenols, compared with the 2-3% found in standard roasted coffee.
Green Blend’s target consumers are 30- to 45-year-old women who currently over-index on tea. And it’s priced at a premium—as much as 50% in some markets over the company’s market leading brand Gold Blend, which is itself a premium coffee. “It’s a premium over a premium,” a Nestle spokesperson explained.
It’s early yet, but in most markets Green Blend has established itself, as intended, as a premium, niche brand—its sales are just a tiny fraction of those of Gold Blend, perhaps 1% of the parent brand, but with high repeat purchase rates.
This is the model—target the early adopters who are willing to pay a high price premium and have high repeat purchase rates (80% and more is common for many health brands compared to a 35% average for “regular” grocery brands) and use them as a platform to grow a brand to be a “big niche” and perhaps one day even go into the mass market.
Antioxidants & Immunity: Regulatory Challenges
While antioxidants represent a key area of interest for product developers, the reality is it’s a term that may soon only be found in the U.S.—in Europe it is fast-disappearing from supermarket shelves. The European Food Safety Authority (EFSA), under the EU’s Nutrition & Health Claims Regulation, has already rejected several claims related to antioxidants, and is likely to remain set against them, arguing that antioxidants have not been sufficiently characterized and their mechanism of action not well-enough understood.
In America, there is a similar issue with the term “immunity”—driven as much by companies’ unwillingness to defend their science and lawyers smelling the opportunity for profitable lawsuits.
The attacks in the U.S. on the use of “immunity” are the canaries in the coalmine for stricter regulation, a requirement for more demanding health claim substantiation.
To be sure, substantiating immunity health claims is by no means straightforward—in fact it may be one of the most difficult benefits to substantiate for any food component, and it is often difficult to demonstrate an immune effect. For regulators and mischievous lawyers, immune health, at least for now, is a low-hanging fruit.
The FTC has also indicated it is looking not only at brand owners, but also ingredient suppliers who should have a robust science base if they are encouraging their customers to make immunity claims on finished products.
Smarter Ways To Take Health To Market
The challenges of how to take new products to market in ways that earn better margins, build better relationships with consumers, and give new ideas a chance to grow—without relying solely on supermarket distribution—are what forward-thinking companies are now wrestling with. If some of the ideas being tried out come to fruition, the decades ahead will see a transformation in way that healthy products go to market.
Your ability to get and keep distribution and merchandise the product well are often more important determinants of whether your healthy product succeeds or fails than branding and advertising.
Danone (of course) is one of the companies thinking “outside the box” about distribution. This summer saw the opening of two Yoghourterías Danone at Madrid’s Barajas international airport. In a joint venture with a Spanish foodservice company Danone has opened two branded retail outlets at Barajas offering yogurt and ice cream, which can be garnished with cereals, fruits or other more indulgent ingredients. And it seems that the openings in Madrid are just the beginning of establishing a new and independent point of sale.
But you don’t need to be a global corporate giant to think about innovative ways to reach the consumer. Comvita is a brand of manuka honey—a honey said to have anti-microbial properties and used in some hospital systems for its benefit as a wound-treatment—and related bee products that are marketed in Europe and Asia by a New Zealand-based company, whose $62 million annual sales makes it a minnow by international standards.
Faced with the question of how to break into the Chinese market with its super-premium products, Comvita wisely avoided committing itself to the clutches of supermarket chains, Instead, it found a way to develop a direct relationship with the consumer and retain the margin that in conventional distribution models goes to the grocery chain. It opened its own-branded stores and today it has 32 stand-alone stores in China, seven of those in Hong Kong. Unsurprisingly, Asia has rapidly become Comvita’s largest and fastest-growing market.
These novel approaches to distribution reflect how important it is that you avoid a me-too approach and choose the path of true innovation—in packaging, health benefits and many other factors, not just in choice of ingredients—if you are to succeed in the business of food and health.
About the author: Julian Mellentin is an expert on the business of functional foods and has been involved in this area for more than 15 years. Mr. Mellentin is the editor of New Nutrition Business, a long-established international journal on the global nutrition business. He can be reached at email@example.com; Website: www.new-nutrition.com.