A Balancing Act

Finding a balance between what is “urgent” and “important” will be key to the future success of functional foods.

By Greg Kitzmiller

With focus on carbs and fat, are functional foods dead? The answer is no. The question is whether or not firms have an appropriate strategy for dealing with the functionality of foods. If they do, it is important to find out if indeed a functional food category exists.

Some believe that the functional foods market has either disappeared or is in a holding pattern. Those that believe the market is dead tend to reference failed attempts by major companies such as Novartis, Kellogg’s or Heinz to create successful functional foods. However, it is important to realize that health IS the focus of many food product introductions and revisions today. So perhaps it is not the market that is necessarily dead but the term “functional foods.”

All foods are functional, even if the function includes adding fat to our body. What resonates with consumers today, however, is the concept of wellness. As such, several firms have adopted the wellness terminology when designing a strategy.

Foods that offer functional ingredients for wellness have been growing steadily. Nutrition Business Journal (NBJ), San Diego, CA, reports that soy products, supported by a health claim, have reached over $4 billion in sales, with soymilk accounting for 25% of that figure. Speaking of soymilk, The United Soybean Board reports trial of soymilk growing rapidly due to very high consumer awareness. As for fortified foods and beverages, the Natural Marketing Institute (NMI), Harleysville, PA, reports that 25% of the general population buys these types of products. On this basis it can be assumed that functional foods for a wellness positioning is very much alive.

Short-term vs. Long-term Planning

Most of the work being labeled as “strategic planning” is either short-term or reactionary. In the current environment, some experts feel that much of the activity coming from food firms is reactionary. Right now a majority of firms are focused on the low-carb trend and obesity. While there is no question that these are urgent issues, they have caused companies to react rather than plan for the future. Removing fat, carbs and/or calories are important product adjustments to make with respect to the current marketplace but these modifications are neither using functional aspects of food ingredients nor providing long-term differentiation between products. It is important for companies to balance the “urgent” with the “important.”

Firms also have a tendency to expect too much too quickly. Without 50% growth to a $100 million dollar brand some firms declare market entries failures. This relates to what I call a “microwave society,” because everyone is looking for an instant reaction. Some categories, such as soymilk, although now growing rapidly, were built from a very solid base that accumulated slowly over time. When we look at the success of the three B’s of functional food categories—beverages, bars, and breakfast foods—many of the products that are now successful have a lot of long-term development behind them and the firms did not experience instant success.

Long-term planning involves a step-by-step approach to build success of brands and products over a measured period. Some of those products labeled failures in functional foods might have been success stories if left in the market beyond six months or a year. If we were to use Silk soymilk as an example of success, it certainly was not an overnight winner, rather its growth was very deliberate. In addition, the marketers of Silk soymilk understood that five years ago taste was an issue. They’ve combined platforms of taste and wellness and placement in stores to build their success. Long-term planning requires the patience to wait for long-term results.

Using the term “strategy” means you must have one. It is not strategic to say “we want to introduce functional foods.” It is also not strategic to say “our current strategy is to lower fat in our products.” The former statement about introducing functional foods is generic, broad and will not guide an organization. The second statement about lowering fats is tactical.

A good strategy will have multiple points of outcome, a solid timetable and will attempt to address exactly how a firm will accomplish its goals. Some firms operate without strategy and others replace strategy with a planning process that does more to bog down than enlighten. Thus, when it comes to wellness foods that have functionality, firms must set their near term and long-term objectives around specific outcomes that will likely provide a clear difference in the market over various competitors. The management of Tropicana orange juice, long heralded as a successful functional brand, clearly shows deliberate planning to keep the brand’s functional products at the forefront in the category.

Summary

A firm that thinks carefully about what the consumer wants from health and wellness products is more likely to succeed. By balancing the urgent (“reducing fat”) with the important (adding true future benefits via functional ingredients) the firm should have the best of both worlds. If firms fail to plan they are likely to find themselves in crisis mode again in a few years.NW