Markets

How to win or lose on the functional foods market

23-Jun-2014
Last updated on 23-Jun-2014 at 16:11 GMT2014-06-23T16:11:42Z - By Sarah Hills
Mismatching health benefits with product is a key area of failure for function food, says report - anyone for Omega-3 yoghurt?
A- A+

Health matters but convenience matters more, according to a report that looked at why functional foods succeeded or failed in the market place.

Relying too much on a health benefit to differentiate a new product is the most common reason for failing, the report Failures in Functional Foods and Beverages has said.

Now in its third edition, the report from New Nutrition Business, suggested that the winning formula seemed to be a combination of convenience, indulgence and wellness.

Together they “earn premium prices and significant sales growth”, the report said. Between 2008 and 2013, customers have shifted towards these products, with Greek yoghurt in the US given as an example. 

Julian Mellentin, director of New Nutrition Business, told Nutraingredients.com: “Consumers are not motivated solely by health benefits. They are looking for other factors.

“Convenience is one of the things you can do to differentiate yourself because everyone believes that the modern lifestyle makes it more and more difficult to consume in traditional meal situations.”

Case studies

He gave the example of BelVita Breakfast Biscuits, which have a sustained energy message and offer breakfast in a convenient format and an indulgent product. 

Mellentin warned of ‘me-too’ products where the health benefit was not truly a point of difference and could already be obtained easily and/or cheaply from other foods or supplements.

He gave the example of Nestlé’s digestive health yoghurt, NesVita, launched in 2006 but withdrawn in 2009 as it was a ‘me-too’ product that relied too much and on too many health benefits.

Another case study was Unilever, which fortified the daily-dose dairy drink variant of the Pro.activ range with omega-3 but was removed from the formula in most countries as it added cost without adding consumer benefit, he said. 

Failure

Key reasons for failure included overestimating the potential market as well as a perceived mismatch between the product and the benefit, such as Omega-3 fish oil in yoghurt.

A pitfall that has become clearer since 2009 is targeting the mass market too soon and going for mainstream supermarket distribution from day one, according to Mellentin.

He said it was better to start up in niche or alternative channels, targeting the most health-conscious and educated consumers with high disposable income, then refine the offering as it took a while to build up confidence in products and supermarkets were “impatient” for them to fly.

Success

New category creation was rare but one of the most successful strategies, he said. However, this depended on the development of a new type of food and consumption occasion, fostering a new type of consumer need.

Initially targeting a brand at a clearly defined group of consumers, and the importance of a focused benefit message that was easy for people to understand were also key to success, the report said. 

Related topics: Markets