Pharma companies to penetrate further into functional food market

Related tags Functional food Functional foods Nutrition

Two years ago Leatherhead Food released a report which described
the functional foods industry as a fragmented market dominated by
mainstream companies. However, as Philippa Nuttall reports,
one analyst thinks this is to change in the years to come.

The report entitled "Key Players in the Global Functional Foods Industry"​ was launched by Leatherhead in 2002 and found that "the functional food and drinks industry was fragmented owing to the number of mainstream companies involved in the sector"​.

Savithri Ramalinga, a research analyst working in Frost and Sullivan's India office, agreed that mainstream companies currrently dominate this market, which is worth an estimated $18 billion - $20 billion. But, as she told NutraIngredientsUSA, she expects to see a movement away from this tendancy in the coming years.

"A sizeable portion of the market is likely to become controlled by small and medium sized players and niche organic and pharma companies,"​ she said.

She gave two reasons to explain why pharma companies are moving into the market. First, "the relatively shorter product development time"​ and secondly, their "expertise in conducting clinical trials to validate health claims of specific functional ingredients​.

At present though, the big name players continue to lead the way. Ramalinga picked out Unilever with its Slimfast brand, McNeil Nutrationals, Nestle, General Mills, Kraft Foods, PepsiCo and Stoneyfield Farm as the companies heading up the pack.

Most food areas are experiencing growth as manufacturers start to expand their functional ranges. Ramalinga highlighted oils and spreads, dairy products, bars, confectionary, cereals and bread as being sites of particular growth.

Two years ago Leatherhead drew attention to the fact that functional food products are often marketed as having a specific benefit, mainly for the gut, bone, heart or performance.

Ramalinga thought this tendancy would continue, but would not rule out the possibility of foods being marketed for general health and well-being.

"This is because companies are becoming increasingly aware of concepts like bioavailability and the capacity to combine specific nutrients or ingredients to give them a greater synergistic effect,"​ she said. This means companies are more able to formulate products with greater health benefits - such as benefits for the gut, eye and bone in a single product."

However, she warned that marketing products for general health, or several health benefits, was likely to be less cost effective than producing a single product for a specific problem.

"The challenge faced by the companies would be in terms of product costing,"​ she said. "The product cost for foods and beverages incorporating more than one functional ingredient - to address a whole gamut of health issues - would work out fairly high as most of the functional ingredients are expensive."

She therefore concluded that it was most likely that companies would simultaneously market functional products for specific health benefits and products for general well-being to give customers a wider choice both in terms of product and price.

However, manufacturers are already doing a fairly good job of attracting Americans to their products, with 59 percent of US citizens incorporating some kind of functional foods into their diet.

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