Function follows form: consumer confusion has been a barrier to widespread growth of functional foods, but manufacturers have an opportunity to communicate the benefits of the market

Dairy Foods, Jan, 2005 by William A. Roberts, Jr.

Much confusion about functional foods is centered upon the very definition of the term. In its report on the functional foods market in the U.S., Mintel International Group (Chicago) defines functional foods as products that make a distinct, written health claim enhanced with added ingredients or through the act of processing. This is a fairly narrow definition, considering the International Food Information Council (Washington) regards them as "beyond basic nutrition." Meanwhile, the Nutraceuticals Institute (Philadelphia) opines, "Nutraceuticals (often referred to as phytochemicals or functional food) are natural, bioactive chemical compounds that have health-promoting, disease-preventing or medicinal properties."

Considering these disparate definitions, the varying estimates of market size should come as no surprise. Some include products not able to make substantiated health claims, while others may choose to include inherently healthful products (oatmeal, for instance). With its strict definition, Mintel estimates the 2003 functional food market at approximately $4.6 billion, a total that has grown an average of more than 10% annually since 1998.

In that time, convenience-oriented products have flooded all areas of the food and beverage industry, and foods pairing that trait with healthful benefits posted the largest gains. Functional bars, for example, enjoyed strong sales, as sales in the bars, candy and snacks segment grew more than 380%. This phenomenal growth can be credited mostly to bar sales, and Mintel regards bars as a functional segment embraced by mainstream consumers.

Functional bar sales represent over 97% of 2003 sales in the bars, candy and snacks segment, as functional bars have established themselves beyond the functional food consumer. Mintel found functional bar sales accounted for 11% of all bars sold in 1998, a share which jumped to 28% by 2002, and functional bar sales are expected to continue growing. Mintel believes the sales potential is augmented further by the higher price point possibilities for bars specifically formulated for women and athletes.

For the overall segment, sales of functional bars, candy and snacks are expected to increase 83% at current prices between 2003 and 2008 (a 63% growth at constant 2003 prices). Again, bars will lead the way, though increased competition and maturation may slow growth.

More important than their healthful aspects, the convenience of bars may be their biggest selling point. If forced to choose. mainstream consumers are unwilling to sacrifice convenience (or taste, for that matter) for health. Further complicating matters is the level of confusion regarding the benefits of functional items. Mintel's exclusive consumer research finds 60% of respondents unconvinced of the benefits of functional foods; however, more than half of those surveyed would like to know more about them.

Most respondents indicate a preference for vitamin/mineral benefits from a pill than from food, but Mintel believes this is because consumers are unaware of how functional ingredients confer benefits. For that matter, consumers remain ignorant about certain ingredients, and Mintel lays the blame for this squarely at the feet of companies. Manufacturers "have not done a good job educating them about the often-complex information," the report finds.

What's Your Function?

Consumers are interested in functional foods, according to respondents, and most are apt to turn to the press or media for information about functional foods, although a quarter gather information from the Internet. However, only 2% report using manufacturers' websites for information. Roughly 10% look to healthcare professionals for information on functional foods, earmarking the healthcare profession as a prime secondary focus of education efforts.

Any such effort would come amid a growing interest in healthful eating. Interestingly, older adults are much more likely to "always try to maintain a healthy diet," yet only 11% of those 55 and older purchase functional food regularly. About half of those never buy functional food, opting instead for drugs or supplements to treat a medical condition. The reason for this could be the fixed incomes of many seniors, and the higher price tag for certain functional food items. Mintel believes a functional cereal targeting this age group may hold promise for two reasons: seniors spend more on cereal than other age groups, and a functional cereal specifically for seniors might attract current as well as future seniors.

For that matter, Mintel regards functional cereals as a possible gateway to other functional products for all occasional purchasers; functional varieties have outperformed nonfunctional counterparts. Mintel's research found occasional buyers just as likely to eat functional cereal as the regular buyers, and yogurt may hold similar potential.

Functional cereals and bakery items account for just less than half of all functional foods' 2003 sales, and consumers seem well aware of the functional aspects of cereal. Unfortunately, the notion of a sit-down breakfast is little more than a memory in many homes, and functional bakery/cereal sales have reflected that trend. Between 2001 and 2003, the functional bakery/cereal area recorded no change in sales.