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    Features

    Key Trends in Functional Foods & Beverages for 2015

    Understanding and connecting multiple trends can lead to long-term market success.

    Key Trends in Functional Foods & Beverages for 2015
    Key Trends in Functional Foods & Beverages for 2015
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    Julian Mellentin, New Nutrition Business11.03.14
    You will find many things described as trends. But the test of a trend’s usefulness is whether you can leverage it to create a new market or category, or boost sales volume or profit margin. Our trend analyses are based on these criteria. Below are the most important trends for 2015, including some that will be stronger in Asia or South America than in Europe or North America.

    Trends don’t exist in isolation. As we will show, they interact with one another, and the most successful brands and ingredients are the ones that stack up against multiple trends. It’s your ability to position yourself at that confluence of a variety of consumer beliefs and wants that will make the difference between success and failure.

    Naturally Functional
    Not only does Naturally Functional remain the biggest trend, it is growing in importance every year and has become the key driver of innovation in health.

    If you want to understand the continuing success of almonds as an ingredient (and a snack in their own right) as well as coconut water—from zero to more than a $1 billion business in the West in 7 years— or the reasons for the emergence of quinoa, chia, blueberries and other would-be “superfruits,” then you need to appreciate consumers’ love of  “naturally functional.”

    People buy benefits, not ingredients. In industry we get excited about “the next hit ingredient,” but consumers are driven by benefits. Ingredients only take off when consumers see the benefit that the ingredient brings as being credible and relevant to their lifestyles.

    Even better for marketers, when consumers can draw their own conclusions about the benefits of your ingredient or product, then you don’t need to make a strong health claim.

    The message that a food or food ingredient has a natural and intrinsic health benefit is one of the most compelling for many people.

    The rise of chia, quinoa and the like are all sub-trends of this larger trend. But how can you predict which ingredients will be a success? The answer is very simple; they are the ones that deliver on these five factors of success:
    1. “Naturally healthy” with some intrinsic health benefit;
    2. Get positive media attention for their “naturally healthy” value;
    3. Have a perception in consumers’ minds of being “natural” and seem less processed than alternatives;
    4. Connect to the other big trends or enable you to create a product that makes the connection;
    5. Very importantly: There’s a secure supply chain that can make these ingredients widely and reliably available.
    To illustrate, let’s use the example of chia. Chia has been hyped over the past five years, but it’s growing importance as a high-value niche ingredient that is universally known by health-conscious consumers (though it is not yet mass, as is often claimed) is based on rational factors, not hype:
    1. Chia is described as an “ancient” grain, with several naturally healthy properties, including: high in fiber, a good source of minerals, high in protein, a source of omega-3s and gluten-free (factor 1).
    2. These naturally healthy properties make it appealing for journalists and bloggers compiling lists of superfoods and it is described as “less processed” than more traditional grains, especially wheat (factors 2 and 3).
    3. Chia’s gluten-free nature makes it valuable for anyone connecting a product to the massive free-from trend. It’s a source of natural vegetable protein (which connects it to the protein trend) and its “natural benefits” and least-processed image make it a  “good grain,” connecting it to another important trend.
    4. The chia supply chain that has made the market possible arose in western Australia, where a number of major wheat farmers began to grow this much more valuable crop, ensuring a secure supply chain.
    A great example of these trends in action is the brand Chia Pod. The Chia Co is an Australian company, founded by the Foss family—a family of wheat-growers who pioneered the commercial-scale cultivation of chia seeds in Australia.

    Chia Pods are snack pots made using chia seeds, coconut milk and real fruit. Marketed in Australia, Europe and North America, it sits in the non-dairy yogurt section of grocery and natural food retailers.

    The brand communicates that it is: gluten-free, dairy-free, a source of protein, has no added sugar, contains fiber and that each 170-gram pot has just 160 calories.

    The health-conscious, informed consumer probably already knows that chia is a “good grain,” but the brand also provides a lot of “good grain education.” What’s more, the brand ambassador is American 11-time world champion professional surfer Kelly Slater, thus making the important connection to sports.

    In short, Chia Pod connects to almost all of the most important trends. Little wonder then that this new brand is on track for $50 million in sales in 2014.

    Look at the growing success of other “naturally functional” foods such as quinoa and you’ll see the same multi-dimensional trend connections at work. And if you want your product to grow, then figuring out how to make those connections will be key to success.

    Protein
    Although protein went mass-market in the U.S. in 2012-2013, thanks to Greek yogurt and the addition of protein to trusted brands like General Mills’ Nature Valley, it’s still at an early stage in Europe and Asia.

    From being seen as something that was an unappealing powder consumed by body-builders, protein has evolved to the position where it is seen as a “good ingredient” by a wide range of consumers, who respond to a variety of messages. According to consumer research by a leading beverage company these include:

    • Helps you meet your weight goals
    • For a firmer, healthier body
    • Balanced diet
    • Feel fuller
    • Energy to get through your busy day

    The growth in the sports nutrition category in both the U.S. (13%, according to Nutrition Business Journal) and Europe (8%, industry data) is largely thanks to the increased availability of ready-to-drink (RTD) protein beverages with better taste and texture and growing consumer awareness. As a result, consumers who exercise perhaps only once a week—as part of a lifestyle of maintaining a healthy weight—choose protein drinks.

    These consumers tend to be younger (aged under 40) and it is younger consumers who will provide future growth. Among those aged under 40, around 60% are interested in raising their protein intake. Older consumers (50 and 60 plus) are still overwhelmingly unaware of the benefits of protein for their health. Any product targeting these age groups will be niche for some time to come.

    Protein is increasingly influencing more companies’ strategies. One very good example is Hormel Foods, the owner of Spam, one of the longest established and most successful meat brands. A multinational meat products company, Hormel had $2.3 billion in sales in 2013.

    Hormel has begun to redefine itself, moving away from being a “meat products company” to becoming a “protein company”—with a strong presence in snacking.

    Given the importance of the trends of snacking and protein—U.S. sales of foods with protein-related claims rose by 50% to $7.5 billion (€5.7 billion) over the four-year period to February 2014, according to Nielsen data. It looks like a smart strategy.

    Hormel took two major steps in 2014:
    1. Introduction of a ready-to-eat high-protein, low-carb wrap, targeting younger consumers;
    2. The acquisition of the Muscle Milk brand, the number one brand in America’s RTD protein drink category.
    Higher Protein, Lower Carbs, Ready-To-Eat: American consumers are used to making sandwiches and wraps with one of Hormel’s branded meats. Now Hormel is supplying a ready-made, on-the-go wrap, assembling cheese, meat and flatbread. Unsurprisingly, Hormel describes it as “one of the biggest product launches in our history.”

    Called Rev, the brand is marketed with the tagline: “Real meat. Real cheese. And more than 15 grams of protein to fuel what you do best.”

    The story of Rev isn’t only a story about selling convenient protein; it also connects with the steadily emerging carb-reduction trend.

    From Meat to Muscle Milk: Hormel has radically broadened its presence in protein through the recent acquisition of CytoSport Holdings, the maker of Muscle Milk products. With retail sales expected to be $370 million in 2014, Muscle Milk is the number one RTD protein brand in the sports nutrition category in the U.S.

    The acquisition of Muscle Milk and the launch of Rev build on the company’s position as a provider of protein and allow it to gain a bigger presence in protein snacking.

    Good Carbs/Bad Carbs
    The reverse side of the protein coin is the emerging search for fewer and better carbs. The most health-conscious consumers—particularly younger age groups—are gradually reducing their consumption of refined carbohydrates, contributing to a 2% annual fall in volume sales of traditional sandwich breads in the U.S., with similar declines in markets as diverse as the U.K. and Spain.

    Traditional breakfast cereals are also in long-term decline in the U.S. and other high consumption markets, by around 2% per annum.

    Meanwhile sales of flatbreads, which have much lower carbohydrate content than traditional loaf breads, are rocketing, with one major bakery group reporting that it now exceeds its sandwich bread business. Sales of breakfast cereals based on grains other than wheat are also increasing.

    Much of this is driven by concern about weight. The desire to consume fewer or “better” carbs is also a driver of the gluten-free trend, which sees people substituting a carb that is gluten-free (such as chia seed).

    The desire for more “good carbs”—those with, for example, more sustained energy release or no gluten and perceived greater healthfulness—has favored “ancient grains,” such as teff, buckwheat and quinoa. They benefit from the lifestyle consumer’s interest in things that are “naturally healthy.”

    The trend to seek out “good grains” has benefited challenger brands such as Grain Berry and Post Foods-owned Erewhon. Also benefiting are better understood and more widely available “naturally functional” grains, particularly oats and convenient formats.

    Colombian dairy group Alpina, for example, markets the Avena line of oat-based dairy beverages in the U.S., leveraging the increasing adoption of drinkable oats by Americans with the advantage of a brand with a Latin heritage and customer base in the U.S.

    The oat beverage, served chilled, has been a staple in many Latin American homes with parents and children alike drinking it. Establishing Avena in the U.S., Alpina has simply been following the influx of South Americans and other Hispanics to the U.S.

    Alpina executives believe they’ll continue to garner an increasing share of their sales from non-Hispanic Americans thanks to consumers’ search for healthy beverages and because drinkable oats hit a sweet spot for U.S. consumers “needing to eat on the go,” especially at breakfast.

    An increasing number of companies in the U.S. have latched onto drinkable oats with the same understanding, including Campbell Soup’s Bolthouse Farms, which offers parfait breakfast smoothies blending fruit juice and yogurt with oat flour, while PepsiCo’s Naked Juice has tested fruit-juice-and-oats smoothies in limited markets.

    Established grain-based companies have been slow to respond to this gradual shift—leaving it to entrepreneurial companies to profit from the changing consumer demand.

    Weight Wellness
    Is Weight Watchers following Jenny Craig and Slim-Fast, losing sales and any hope of future growth? Is it on track to becoming yet another brand made redundant by changing consumer dynamics? Already, Nestle and Unilever have seen their weight management strategies shredded and have sold off their Jenny Craig and Slim-Fast brands, respectively.

    In the first six months of 2014, Weight Watchers’ sales fell by 16%, while operating profit fell by 35%. The changing market dynamics driving people away from Weight Watchers and other programs include:

    • Paid-for weight-loss programs have to compete against free alternatives offered online from a host of websites and apps, and younger consumers expect to get whatever they need free online—as the music download business can testify.
    • Thanks to modern work patterns and time pressures, few people can make the time to turn up at a Weight Watchers meeting the same time each week.
    • People’s interest in weight management has switched from an interest in special programs and products to “weight wellness” as part of their everyday decision making about food.
    • Awareness of health and food and the steadily increasing knowledge level of consumers means that many people feel confident to create personalized healthy eating patterns and dietary choices.

    The trend of everyday choices that support weight wellness is also an important driver of the protein and the good carbs/bad carbs trends.

    Increasingly, science supports both these trends. The turning point was the publication in the New England Journal of Medicine in 2010 of the results of the world’s largest-ever diet study. Called Diogenes, it involved 14 universities and research institutes and investigated the optimum diet composition for preventing and treating obesity.

    Researchers found that higher-protein, low-glycemic index (GI) diets were the most effective for weight management. The study has been supported by many others since, and steadily this science is having a growing impact on food marketing.

    Snacking
    Healthy snacking has become one of the dominant themes of the food and beverage industry, in every market around the world. Every category and every meal occasion is being driven by the trend of “snackification.”

    According to Nielsen data, in Asia, Europe and America alike, sales of snacks are increasing and as many as 40% of consumers will replace lunch with a snack product.

    At the same time, people are trying to eat more healthily, so snacks have to be both pleasurable (the primary need of consumers) and healthy (the secondary need, so that people can give themselves “permission to indulge.”

    Snacking is another place where successful brands are the ones that connect to multiple trends. Here is one example: Nielsen data show sales of meat snacks, which include jerky and dried meat, grew 25% in the Middle East/Africa and 15% in North America in the year to September 2014. They also grew by 20% in the U.K. and almost 20% in France.

    Innovation is being driven by new players in the category led by new brands, such as Krave and Epic Bar, which have a completely different image from those already in meat snacking.

    These brands have connected to three key health benefits that have taken a strong place in health-conscious consumer’s minds:

    • Protein
    • Gluten-Free
    • Natural

    They connected to health-conscious consumers’ growing understanding that protein has benefits for anyone looking to maintain a healthy figure.

    Krave puts gluten-free front and center in its communications and it’s hard to find a brand not using the message.

    The end result of all this activity is that the meat snacking category is growing, drawing in new consumers who are looking for protein and to whom these messages, tastes, textures and packaging all appeal. And overwhelmingly, these new consumers are young and female. “It came as a shock to learn that more than 50% of our consumers are women,” said Krave’s CEO Jonathan Sebastiani.

    No meal occasion has been more subject to snackification than breakfast. Breakfast has become one of the most intensely fought-over battlegrounds in the business of food and health as, worldwide, “away from home” has become the normal way that many people consume breakfast. For example:

    • A New Nutrition Business survey of professional workers in five South Asian countries (Singapore, Malaysia, Indonesia, Thailand, Vietnam) found that 63% ate breakfast away from home three or more times each week, while 20% of those surveyed consumed breakfast away from home every single day.
    • A study in China by respected international consumer research group HealthFocus International found that breakfast was the meal people were most likely to take away from home.

    Identifying opportunities for new snack products for breakfast and finding ways to reinvent and re-position existing products has become a key focus for more and more companies. The role models in this trend are brands that have created new breakfast categories:

    • Mondelez’s Belvita breakfast biscuits, now a $500 million global brand, has made “sustained energy” a successful concept and given birth to a surge of breakfast biscuit me-toos.
    • Australian breakfast drink brand Up & Go, itself a $150 million brand, has given birth to the single-serve breakfast drinks business.
    • Quaker’s “breakfast oat pots” have created a new, super-premium category in Europe, lifting Quaker’s sales by 50% in the U.K., despite the product selling at an 800% price premium to regular oats.

    All of them connect to multiple trends, bring a “good grain” benefit—sustained energy—in a convenient, single-serve snack whose calorie count supports weight wellness.

    Free-From
    Increasingly, gluten-free has become a “free from something bad” message that’s valuable to health-conscious consumers—who mostly don’t have gluten intolerance—ranking alongside “free from artificial additives and preservatives” in its value. And it’s a message that’s as firmly embedded in their minds as the positive messages about protein.

    Enabling people to make a positive choice that is gluten- or wheat-free is almost becoming a hygiene factor—as it has in the fast-growing meat snacking category, for example.  The use of “ancient grains” that are gluten-free, such as chia, is also growing.

    For some consumers, gluten-free means better digestive health, for others it’s about weight management, but the key factor is that it is a driver of consumer choice that shows no signs of going away. One major bakery group estimated that 75% of the buyers of its gluten-free breads are making a lifestyle choice and do not have celiac disease.

    The next step that brands are taking is moving products from a special gluten-free shelf to the main shelf, thus normalizing it as a message. Nestle gluten-free corn flakes in Europe, for example, are now merchandized alongside the regular product.

    Digestive Health: Powered by Asia
    For the past decade, digestive health has rivaled energy as one of the biggest and most important trends, ranking consistently among consumers’ top needs.

    Digestive health is a benefit with wide appeal. For women throughout their reproductive life and men over age 40, maintaining good digestive health is an everyday wellness issue. There is a particularly strong interest in digestive health among seniors.

    Although demand for fiber in products is increasing, in foods for digestive health, probiotic dairy is dominant and it will likely remain so. Probiotic dairy brands such as Activia and Yakult have become the biggest and best known “health brands” globally—these two alone have combined retail sales of about $6.3 billion (€5 billion).

    Although in Europe the effective banning of probiotic health claims has slowed the market, it is a different story elsewhere. In Asia, Danone is making its Activia brand as successful as it became in Europe, using a similar positioning and exactly the same marketing techniques. Meanwhile, Yakult reported sales in Asia (excluding Japan) were up 48% in the year to March 31, 2014.

    Inner Beauty
    Not all trends are global. There are lots of local nuances. For example, in Asia and parts of South America (notably Brazil) drinks for “inner beauty” are enjoying a new growth surge. Sales of beverages mentioning “skin protection” and similar terms have almost doubled in south Asia (Indonesia, Malaysia, Singapore) and according to Mintel’s Global New Product Database, product launch numbers have also doubled. Most of these products are based on hydrolyzed collagen, which is said to improve the moisture content of skin, elasticity and smoothness.

    In Japan, the market is well established and dominated by major skin care brands such as Shiseido and FANCL. In China and Brazil, collagen drinks are gaining momentum. What is more interesting is that these beverages are usually premium-priced, yet sales are rising.

    While this trend is very far from having the same importance in the U.S., in Europe a loophole in the heath claim’s system makes such products possible, leading to a flurry of new launches. However, as in the U.S., the challenge of consumer belief will keep this trend super-niche for some time to come. But for anyone with an ability to market in Asia, it’s a real and durable trend.

    There are some very strong trends that brands can connect to, of which these are only a selection. It is clear that the most successful products are ones that find a way to connect to multiple trends. Making that connection can produce some surprising successes—such as the unexpected renaissance of meat snacking—and turn risky innovations into winners.          


    Julian Mellentin is an expert on functional foods who has been involved in this area for nearly 20 years. He is also the director of New Nutrition Business, a long-established international journal covering the global nutrition business. He can be reached at julian.mellentin@new-nutrition.com; Website: www.new-nutrition.com.
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      04.29.22

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