Julian Mellentin11.01.07
Significant events don't always announce themselves as such. For example, the decision made in 1994 by Swedish dairy company Skanemejerier to launch a probiotic fruit juice named Pro Viva, marketed for its digestive health benefits, was largely ignored at the time. And five years from now, anyone looking back at 2007 will see that the announcement by Boulder, CO-based NextFoods regarding the launch a near-identical product in the U.S. was also largely overlooked. But anyone who truly understands the strongest drivers of the functional foods business will be able to say that Steve Demos, the visionary who created the soy milk market with his Silk brand, was every bit as visionary in understanding where functional foods was set to go next and why that Swedish dairy company had got it right as far back as 1994.
In the near and distant future, digestive health is set to be the biggest area of functional foods, while naturally healthy will remain the most persuasive selling message-especially in relation to fruit (e.g., the "superfruit" trend will continue to gain significant momentum). Packaging innovation will also continue to be a huge product differentiator (e.g., the way companies deliver benefits will matter most). If companies take most of these trends into consideration, premium prices will most certainly be attainable. Finally, if you miss the digestive health boat, don't try to hop on the heart health ship because it's already crowded. Think more along the lines of mood food and beauty, which both have significantly untapped potential.
In Europe, 2007 will be remembered as the year beauty foods debuted, and 2008 will be year that tests whether this new trend will succeed. At the same time, digestive health will continue its great 20-year march forward.
In the U.S., however, 2007 will represent the year that the functional food industry realized how much it was neglecting the digestive health opportunity. In 2008, we'll see if U.S. companies have learned the lessons of past digestive health successes and failures in Europe, South America and Asia.
Interestingly, there's one company whose name keeps cropping up every time you look at the biggest successes and strongest trends in functional foods. It's a company that has over the years discarded businesses in beer and biscuits, and reinvented itself as the most nutrition-focused company in the world-it's also the one that's doing more than any other to influence the future of functional foods. This company is France-based Danone.
The launch of Danone's Essensis brand in February 2007 ranks as one of the boldest moves in the nutrition industry in recent years. Beginning in France and Spain, Essensis got a warm reception from both retailers and consumers. As the launch accelerated, the brand moved quickly into Italy, Portugal and Belgium. One industry source estimates the French retail sales of Essensis at over €8 million ($11 million) in the brand's first three months on the market. To put this into context, if a brand got the same penetration in the U.S. as Essensis has in France, its sales would be equivalent to $55 million in the first three months.
Essensis, packaged in an eye-catching shade of rose, is a 1.5%-fat yogurt that carries the promise on its label that it will "Nourish your skin from the inside," with the claim that this benefit is delivered by the ingredient complex "ProNutris"-vitamin E, green tea, probiotics and borage oil.
Essensis is sold as a spoonable yogurt and in 6-packs of 100 ml bottles of drinking yogurt, retailing for a middle market price. It is available in four flavors, including Natural, Litchi & White Grape, Raspberry & Pomegranate and Peach & Apricot.
Should the brand prove as successful as nearly everything else Danone has done, then companies will be clamoring to get into the beauty foods business very soon. But having a good product won't be enough. The cosmetics business, driven by giants like L'Oréal, is all about massive expenditures on full-page print advertising and at point-of-sale, and Essensis is getting the same treatment.
Not surprisingly, Essensis is selling best in France. Like Japan, Spain and Italy, it's one of the countries where women take the greatest care of their appearance and spend the most per capita on personal care products. Currently, the French cosmetics and skincare market is worth $3 billion, making it the biggest in the world.
Beverage companies are also making several attempts to develop crossovers between cosmetics and nutrition. Most recently, PepsiCo decided to extend its best-selling water brand Aquafina into skincare. Further, Nestlé and Coca-Cola are reportedly planning to jointly launch a beauty beverage in 2008. But the risks in "inner beauty" are high for anyone without deep pockets.
For those looking for a good opportunity with less risk attached, the key focus in all markets should be in digestive health-and nowhere is the opportunity greater right now than in the U.S.
"Like the difference between night and day," is how a senior executive at a European probiotic ingredient supplier characterized the change over the last year in the U.S. food industry's attitude toward the opportunities in probiotics and digestive health. The cause of this change can be summarized in one word: Activia.
In adult nutrition, Danone has proven itself to be a powerhouse of marketing and innovation. Its focused effort has definitely paid off. Consider this: just four nutritional dairy brands account for 29% of the company's total sales and 50% of its entire fresh dairy business.
One of those brands is Activia, a probiotic yogurt that "helps speed intestinal transit time." Clinically proven, anyone who consumes Activia finds that it does exactly what it promises. Launched in 1997, it has grown to be, at retail prices, a $1.4 billion brand in Europe, where it's still growing strongly-by 50% in the U.K. last year alone!
Danone's move to launch Activia in the U.S., where market researchers and dairy companies had refused to believe that digestive health would be a compelling selling point for American consumers, was a logical one. Danone used its first-hand knowledge of Europe and Asia to predict how strong a benefit digestive health could be in the U.S.-in just one year, the company raked in over $130 million in Activia sales in the U.S.
The area of digestive health is so attractive for functional foods because it is firmly tied to wellness, unlike lowering cholesterol, which is more of a "death and disease" issue. And as market trends have dictated over the last 10 years of functional foods, wellness benefits appeal to a wider range of consumers, while "medicalized" benefits appeal only to a niche.
Marketers of digestive health products have another big advantage, which is that consumers are most loyal to products where they can feel the benefit pretty quickly. As long as a digestive health product provides an effective probiotic (or fiber) in an effective dose, consumers will register the improvement in their wellness very quickly. This quick benefit has been one of the key drivers of digestive health markets worldwide-and it is the reason digestive health remains the biggest segment in functional foods in both Europe and Japan.
In Japan, the home of functional foods, digestive health still accounts for over 60% of all FOSHU-approved functional foods-a market worth over $5 billion-some 20 years after the functional food market was created, a situation that is very similar to the European functional food market.
Because Skanemejerier's Pro Viva brand of probiotic fruit juice meets all the criteria of effectiveness, naturalness and taste, while also offering the rare advantage of a probiotic in non-dairy form, it has been able to build major success since 1994, despite limited marketing funds.
Unfortunately, Pro Viva is often overlooked, partly because it has retail sales of "just" €43 million ($59 million) and partly because it is in "far-away Sweden." However, it is important to point out that Sweden has a population of just over 9 million, so if the country's per capita consumption of Pro Viva was translated into a larger country, such as the U.S., it would actually be close to a $2 billion brand-as big as Gatorade, in other words. Pro rata, Pro Viva is as big a success as Danone's blockbuster Activia brand. And what is interesting is that Pro Viva is still growing-by 25% in 2006 and still growing in double digits in 2007. That's a phenomenal accomplishment for a brand that's been around since 1994.
Steve Demos, the visionary who gave birth to the soy milk market, has also recognized the opportunity in probiotic fruit juice. In fact, he licensed the active ingredient in Pro Viva-the bug L. plantarum 299v-from its inventors, Probi AB, for use in a similar product in the U.S.
Demos is right on the money, because in America's future digestive health market it is beverages, especially dairy and fruit juice, and yogurts that will dominate, as they do elsewhere in the world, and for the same reasons of convenience. Probiotic breakfast cereals, breads, crackers and other dry foods are condemned to live as ultra-niche products-just as they do elsewhere in the world, and for the same reasons.
The strategy of marketing the intrinsic healthfulness of foods continues to be the most popular functional food strategy worldwide.
The boost in sales of dark chocolate is a good example of this trend in action. Worldwide consumption of dark chocolate has increased by 18% in the past 10 years, according to cocoa giant Barry Callebaut. In the U.S. specifically, dark chocolate sales rose 42% between 2001 and 2006, according to ACNielsen data. In the U.K., ACNielsen says dark chocolate retail sales grew 50% between 2004 and 2006, reaching £69 million ($139 million) in sales.
This rapid growth is a result of efforts of the confectionery industry to re-position chocolate as a premium, indulgent but healthy item-a trend that is gathering momentum around the world and will accelerate in the coming year.
An excellent example of the marketing of chocolate's "natural healthfulness" is Nestlé Australia's recently launched initiative to highlight "the health benefits of consuming small portions of dark chocolate." The "Switch to Dark" campaign aims to educate health professionals about dark chocolate's antioxidant health benefits. Nestlé's Club Noir Intense 70% cocoa chocolate, for example, contains 1000 mg polyphenols per 100 grams. By comparison, 100 grams of standard milk chocolate contains only 610 grams of polyphenols.
The campaign, which is careful to frame chocolate's benefits in the framework of a healthy, balanced diet, has been launched in healthcare magazines and is supported by a website, www.switchtodark.com.au.
The campaign connects to Australians' awareness of antioxidants, which hovers at similar levels compared to Europe and the U.S. In fact, Nestlé says that the level of consumer awareness for antioxidants in dark chocolate is equal to that of red wine.
The dark chocolate segment in Australia has also grown impressively-up nearly 20% in the past year, with Nestlé's brands (up 43%) being the main driver of this growth.
Also a beneficiary of the rising consumer awareness surrounding antioxidants, green tea has become one of the most fashionable "natural" health ingredients in the space of just two or three years.
Food manufacturers see green tea as offering the healthiest halo when added to products such as yogurt, smoothies, juice drinks and waters. "Green is perceived as the healthiest tea, if you ask consumers to rank different beverages in terms of how healthy they perceive them," a senior marketing executive at Unilever's Lipton business told New Nutrition Business last year. Currently, Unilever is marketing tea for both its weight management and brain health benefits.
In the area of weight loss, Unilever Switzerland this year unveiled a catechin-rich green tea, branded Linea, which encourages women to "Trink dich in form-jeden tag" (Translation: "Drink yourself into shape every day"). The line includes a sugar-free green tea drink sold in 500 ml ready-to-drink (RTD) bottles and pouches of 20 tea bags. The RTD tearetails at a premium of 70% over the regular Lipton ice tea range
Each 500 ml bottle contains 230 mg of catechins, roughly twice as much as in regular Lipton green tea. Lipton's website states that "catechins may support weight management and have a positive influence on the distribution of body fat."
So why is green tea being used seemingly more than any other weight management ingredient? Most companies looking at developing weight management products find themselves presented with ingredients that are new and unfamiliar to the consumer. Most businesses have learned the hard way over the last 10 years that consumers prefer their health benefits to come, whenever possible, from ingredients they have heard of. Using a familiar ingredient and connecting it to a health message that consumers already see in the media-consumers' enthusiasm for green tea is aided by consistently positive media coverage of its health benefits-makes a brand marketer's job much easier.
The connection between green tea and weight will also bode well for the future of green tea as a food ingredient-green tea is already showing up in "beauty foods," notably Danone's Essensis yogurt.
What's more, the list of proposed health claims for the European Union's new health claim regulations includes several that relate to green tea, catechins and weight management. Should they be approved, green tea's popularity will grow even more.
It's a new idea to Western companies, but researchers are beginning to understand the powerful links between nutrition, mood and mental health. This area is so important that Nestlé recently invested $4 million a year for the next five years to research the nutrition-mood connection. Further, New Zealand-based HortResearch has developed a research program to look into the effects that certain fruits can have on mood and mental wellbeing.
While Unilever is communicating the weight management benefits of tea in Europe, the company has been emphasizing tea's brain health benefits in Japan, Australia and the U.K.
Unilever is marketing green tea's natural content of L-theanine-an amino acid found only in tea. According to research, 50 mg of L-theanine (found in two-three cups of tea) naturally stimulates specific kinds of brain activity, causing alpha brain waves-associated with relaxation-to increase in frequency, and beta brain waves-associated with tension, anxiety and irritation-to similarly decrease.
Unilever Australasia's Lipton website has been featuring a "Brain Train" section for the last year, which conveys messages like "Challenge Your Mind. Stay Relaxed and Alert." Visitors can do brain exercises to test their reactions, memory and numeracy skills.
The stimulus for Unilever's recent efforts is more than likely related to its experience with the growth of the "mood food" market in Japan. While ingredients such as GABA (an amino-acid), PS (phosphatidylserine) and L-theanine may not yet be familiar, they soon will. Coca-Cola, Yakult and Unilever are just three companies using these ingredients and touting their mood benefits in the marketing of products. So far, these companies have created a market worth at least $100 million in retail sales, which grew 20% last year.
But perhaps one of the most successful mood food products comes from confectionery giant Ezaki Glico, which develops stress-reducing "Mental Balance Chocolate GABA," a chocolate product that delivers a much larger dose of GABA than most chocolate (chocolate has a natural content of GABA). The product's first year sales of $50 million exceeded all expectations.
Unilever seems to have no doubt that Western consumers are as interested as Japanese consumers in improving their mood and mental wellbeing. European ingredient companies, too, are active in the area. Germany's Degussa, for example, is already a major player in the PS brain health ingredient market in Japan and will be looking to help European and U.S. clients replicate the success of the Japanese market.
The biggest beneficiaries of consumers' desire for "natural foods" have been fruit drinks. Makers of juices and smoothies have been particularly successful in combining convenience, health, taste and "naturally healthy" in consumers' minds.
One of the best examples is the company Innocent Drinks, which pioneered the smoothie category in Europe. Using a combination of savvy marketing and distribution, this excellent tasting product, positioned as a "natural superfood," witnessed sales rocket from zero in 1999 to over $240 million by 2007. Currently it accounts for 70% of the U.K. smoothie market, and it maintains strong toeholds in eight other European countries.
Even more surprising, the smoothie market has been thriving despite the fact that product pricing is entirely "super-premium"-Innocent's smoothies sell for premiums between 80% and 300% more than market leading premium brands such as Tropicana.
The fruit and health trend has been most striking in relation to the rise of the "superfruits"-blueberry, pomegranate and mangosteen. While scientific support for a health benefit matters-and most have a surprising amount of science behind them-to have superfruit status there are two factors that outweigh all others:
1. The fruit must have some novelty value or relative newness in the eyes of the consumer (i.e., pomegranate, mangosteen, goji, açaí).
2. The claim of superfruit status should be supported by a consistent marketing effort for its actual or claimed health benefits.
Pomegranate was unknown to most Western consumers five years ago, but today it is the most fashionable of fruit. Mangosteen (from Thailand) is also unknown to most people, yet in the U.S. alone mangosteen juice has retail sales in excess of $300 million.
The combination of health, newness, rarity value and convenience enables such fruits to command massive price premiums-400% in the case of pomegranate and 800% in the case of mangosteen-compared to regular juice.
One of the most important factors in functional food success is the packaging innovation. Strongly differentiated packaging design helps brands achieve better market positioning and thus achieve premium prices. Putting a new product in a standard 1-liter gable-top carton makes it look like every other brand on the shelf, making it harder for it to stand out and making it much more difficult-if not impossible-to command a premium price.
Until recently, U.S. functional food efforts have been dogged by dull packaging-it's one of the single-biggest reasons why the European market for sterol-based cholesterol-lowering foods has been so successful, while the U.S. market has languished. And it's the reason why, in a bid to revive the market, that Unilever this year brought the successful European packaging concept to the U.S. when it launched Promise Activ, its daily dose 100 ml (3 fl. oz) cholesterol-lowering dairy drink-modeled on the company's highly successful European product.
The following represent examples of other products that stand out and connect to the strongest functional food trends:
• Hero's Actifruit: Hero is one of the most innovative companies in Europe, and in the Netherlands it markets a drink which ticks all the boxes for functional food success-a fruit drink, based on a digestive health platform, featuring a highly innovative pack design (the drink comes in a 100 ml bottle, offering "all-natural" benefits from its high content of pectin (fruit fiber). When you put all of this together, it is hardly surprising that the product can command a 300% premium over other juices.
• Unilever's Knorr Vie: a 100 ml daily dose drink offering two of the recommended servings of fruit and vegetables. This ultra-convenient way to get a dose of health sells at a 200% premium over Tropicana Pure Premium and has grown to be a $140 million brand in Europe.
• XanGo's Mangosteen Juice: This is probably the biggest superfruit brand of its kind in the world, despite a selling price of a massive 800% price premium to regular supermarket juice. The price premium is in part related to the company's approach to distribution. But the products is also helped by the fact that the XanGo bottle is one of the things that helps set the brand apart-it's long and curvaceous, and closer in appearance to a bottle of wine than to the conventional gable-topped packs in which competing juices are sold. XanGo put a great deal of time and effort into choosing a package that would set its brand apart and help justify a super-premium price.
• Dark Chocolate: This is another good example of premiumization through health. Dark chocolate retails at a 100% premium over milk chocolate when compared on a price per 100-gram basis.
Anyone who doubts that trends from Japan inevitably find their way into Western nutritional markets, and who doubts the relevance of Japanese products to Western consumers, should reflect upon the fact that the whole concept of functional foods originated in Japan. Skeptics will find that many of the most successful products in Western markets, from energy drinks to probiotic products, were established in Japan long before anyone in the West had even heard of them. The same goes for mood foods and beauty foods.
The trends in Japan and Europe are remarkably similar, and looking back on 20 years of functional foods it is easy to see why these markets have been so successful. Now it's America's turn.
In the near and distant future, digestive health is set to be the biggest area of functional foods, while naturally healthy will remain the most persuasive selling message-especially in relation to fruit (e.g., the "superfruit" trend will continue to gain significant momentum). Packaging innovation will also continue to be a huge product differentiator (e.g., the way companies deliver benefits will matter most). If companies take most of these trends into consideration, premium prices will most certainly be attainable. Finally, if you miss the digestive health boat, don't try to hop on the heart health ship because it's already crowded. Think more along the lines of mood food and beauty, which both have significantly untapped potential.
In Europe, 2007 will be remembered as the year beauty foods debuted, and 2008 will be year that tests whether this new trend will succeed. At the same time, digestive health will continue its great 20-year march forward.
In the U.S., however, 2007 will represent the year that the functional food industry realized how much it was neglecting the digestive health opportunity. In 2008, we'll see if U.S. companies have learned the lessons of past digestive health successes and failures in Europe, South America and Asia.
Interestingly, there's one company whose name keeps cropping up every time you look at the biggest successes and strongest trends in functional foods. It's a company that has over the years discarded businesses in beer and biscuits, and reinvented itself as the most nutrition-focused company in the world-it's also the one that's doing more than any other to influence the future of functional foods. This company is France-based Danone.
Jumping on the Beauty Bandwagon
The launch of Danone's Essensis brand in February 2007 ranks as one of the boldest moves in the nutrition industry in recent years. Beginning in France and Spain, Essensis got a warm reception from both retailers and consumers. As the launch accelerated, the brand moved quickly into Italy, Portugal and Belgium. One industry source estimates the French retail sales of Essensis at over €8 million ($11 million) in the brand's first three months on the market. To put this into context, if a brand got the same penetration in the U.S. as Essensis has in France, its sales would be equivalent to $55 million in the first three months.
Essensis, packaged in an eye-catching shade of rose, is a 1.5%-fat yogurt that carries the promise on its label that it will "Nourish your skin from the inside," with the claim that this benefit is delivered by the ingredient complex "ProNutris"-vitamin E, green tea, probiotics and borage oil.
Essensis is sold as a spoonable yogurt and in 6-packs of 100 ml bottles of drinking yogurt, retailing for a middle market price. It is available in four flavors, including Natural, Litchi & White Grape, Raspberry & Pomegranate and Peach & Apricot.
Should the brand prove as successful as nearly everything else Danone has done, then companies will be clamoring to get into the beauty foods business very soon. But having a good product won't be enough. The cosmetics business, driven by giants like L'Oréal, is all about massive expenditures on full-page print advertising and at point-of-sale, and Essensis is getting the same treatment.
Not surprisingly, Essensis is selling best in France. Like Japan, Spain and Italy, it's one of the countries where women take the greatest care of their appearance and spend the most per capita on personal care products. Currently, the French cosmetics and skincare market is worth $3 billion, making it the biggest in the world.
Beverage companies are also making several attempts to develop crossovers between cosmetics and nutrition. Most recently, PepsiCo decided to extend its best-selling water brand Aquafina into skincare. Further, Nestlé and Coca-Cola are reportedly planning to jointly launch a beauty beverage in 2008. But the risks in "inner beauty" are high for anyone without deep pockets.
Digestive Health Dominates
For those looking for a good opportunity with less risk attached, the key focus in all markets should be in digestive health-and nowhere is the opportunity greater right now than in the U.S.
"Like the difference between night and day," is how a senior executive at a European probiotic ingredient supplier characterized the change over the last year in the U.S. food industry's attitude toward the opportunities in probiotics and digestive health. The cause of this change can be summarized in one word: Activia.
In adult nutrition, Danone has proven itself to be a powerhouse of marketing and innovation. Its focused effort has definitely paid off. Consider this: just four nutritional dairy brands account for 29% of the company's total sales and 50% of its entire fresh dairy business.
One of those brands is Activia, a probiotic yogurt that "helps speed intestinal transit time." Clinically proven, anyone who consumes Activia finds that it does exactly what it promises. Launched in 1997, it has grown to be, at retail prices, a $1.4 billion brand in Europe, where it's still growing strongly-by 50% in the U.K. last year alone!
Danone's move to launch Activia in the U.S., where market researchers and dairy companies had refused to believe that digestive health would be a compelling selling point for American consumers, was a logical one. Danone used its first-hand knowledge of Europe and Asia to predict how strong a benefit digestive health could be in the U.S.-in just one year, the company raked in over $130 million in Activia sales in the U.S.
The area of digestive health is so attractive for functional foods because it is firmly tied to wellness, unlike lowering cholesterol, which is more of a "death and disease" issue. And as market trends have dictated over the last 10 years of functional foods, wellness benefits appeal to a wider range of consumers, while "medicalized" benefits appeal only to a niche.
Marketers of digestive health products have another big advantage, which is that consumers are most loyal to products where they can feel the benefit pretty quickly. As long as a digestive health product provides an effective probiotic (or fiber) in an effective dose, consumers will register the improvement in their wellness very quickly. This quick benefit has been one of the key drivers of digestive health markets worldwide-and it is the reason digestive health remains the biggest segment in functional foods in both Europe and Japan.
In Japan, the home of functional foods, digestive health still accounts for over 60% of all FOSHU-approved functional foods-a market worth over $5 billion-some 20 years after the functional food market was created, a situation that is very similar to the European functional food market.
Because Skanemejerier's Pro Viva brand of probiotic fruit juice meets all the criteria of effectiveness, naturalness and taste, while also offering the rare advantage of a probiotic in non-dairy form, it has been able to build major success since 1994, despite limited marketing funds.
Unfortunately, Pro Viva is often overlooked, partly because it has retail sales of "just" €43 million ($59 million) and partly because it is in "far-away Sweden." However, it is important to point out that Sweden has a population of just over 9 million, so if the country's per capita consumption of Pro Viva was translated into a larger country, such as the U.S., it would actually be close to a $2 billion brand-as big as Gatorade, in other words. Pro rata, Pro Viva is as big a success as Danone's blockbuster Activia brand. And what is interesting is that Pro Viva is still growing-by 25% in 2006 and still growing in double digits in 2007. That's a phenomenal accomplishment for a brand that's been around since 1994.
Steve Demos, the visionary who gave birth to the soy milk market, has also recognized the opportunity in probiotic fruit juice. In fact, he licensed the active ingredient in Pro Viva-the bug L. plantarum 299v-from its inventors, Probi AB, for use in a similar product in the U.S.
Demos is right on the money, because in America's future digestive health market it is beverages, especially dairy and fruit juice, and yogurts that will dominate, as they do elsewhere in the world, and for the same reasons of convenience. Probiotic breakfast cereals, breads, crackers and other dry foods are condemned to live as ultra-niche products-just as they do elsewhere in the world, and for the same reasons.
The Marketing Power of 'All-Natural'
The strategy of marketing the intrinsic healthfulness of foods continues to be the most popular functional food strategy worldwide.
The boost in sales of dark chocolate is a good example of this trend in action. Worldwide consumption of dark chocolate has increased by 18% in the past 10 years, according to cocoa giant Barry Callebaut. In the U.S. specifically, dark chocolate sales rose 42% between 2001 and 2006, according to ACNielsen data. In the U.K., ACNielsen says dark chocolate retail sales grew 50% between 2004 and 2006, reaching £69 million ($139 million) in sales.
This rapid growth is a result of efforts of the confectionery industry to re-position chocolate as a premium, indulgent but healthy item-a trend that is gathering momentum around the world and will accelerate in the coming year.
An excellent example of the marketing of chocolate's "natural healthfulness" is Nestlé Australia's recently launched initiative to highlight "the health benefits of consuming small portions of dark chocolate." The "Switch to Dark" campaign aims to educate health professionals about dark chocolate's antioxidant health benefits. Nestlé's Club Noir Intense 70% cocoa chocolate, for example, contains 1000 mg polyphenols per 100 grams. By comparison, 100 grams of standard milk chocolate contains only 610 grams of polyphenols.
The campaign, which is careful to frame chocolate's benefits in the framework of a healthy, balanced diet, has been launched in healthcare magazines and is supported by a website, www.switchtodark.com.au.
The campaign connects to Australians' awareness of antioxidants, which hovers at similar levels compared to Europe and the U.S. In fact, Nestlé says that the level of consumer awareness for antioxidants in dark chocolate is equal to that of red wine.
The dark chocolate segment in Australia has also grown impressively-up nearly 20% in the past year, with Nestlé's brands (up 43%) being the main driver of this growth.
Green Tea Too
Also a beneficiary of the rising consumer awareness surrounding antioxidants, green tea has become one of the most fashionable "natural" health ingredients in the space of just two or three years.
Food manufacturers see green tea as offering the healthiest halo when added to products such as yogurt, smoothies, juice drinks and waters. "Green is perceived as the healthiest tea, if you ask consumers to rank different beverages in terms of how healthy they perceive them," a senior marketing executive at Unilever's Lipton business told New Nutrition Business last year. Currently, Unilever is marketing tea for both its weight management and brain health benefits.
In the area of weight loss, Unilever Switzerland this year unveiled a catechin-rich green tea, branded Linea, which encourages women to "Trink dich in form-jeden tag" (Translation: "Drink yourself into shape every day"). The line includes a sugar-free green tea drink sold in 500 ml ready-to-drink (RTD) bottles and pouches of 20 tea bags. The RTD tearetails at a premium of 70% over the regular Lipton ice tea range
Each 500 ml bottle contains 230 mg of catechins, roughly twice as much as in regular Lipton green tea. Lipton's website states that "catechins may support weight management and have a positive influence on the distribution of body fat."
So why is green tea being used seemingly more than any other weight management ingredient? Most companies looking at developing weight management products find themselves presented with ingredients that are new and unfamiliar to the consumer. Most businesses have learned the hard way over the last 10 years that consumers prefer their health benefits to come, whenever possible, from ingredients they have heard of. Using a familiar ingredient and connecting it to a health message that consumers already see in the media-consumers' enthusiasm for green tea is aided by consistently positive media coverage of its health benefits-makes a brand marketer's job much easier.
The connection between green tea and weight will also bode well for the future of green tea as a food ingredient-green tea is already showing up in "beauty foods," notably Danone's Essensis yogurt.
What's more, the list of proposed health claims for the European Union's new health claim regulations includes several that relate to green tea, catechins and weight management. Should they be approved, green tea's popularity will grow even more.
Mood Food: A Trend in the Making
It's a new idea to Western companies, but researchers are beginning to understand the powerful links between nutrition, mood and mental health. This area is so important that Nestlé recently invested $4 million a year for the next five years to research the nutrition-mood connection. Further, New Zealand-based HortResearch has developed a research program to look into the effects that certain fruits can have on mood and mental wellbeing.
While Unilever is communicating the weight management benefits of tea in Europe, the company has been emphasizing tea's brain health benefits in Japan, Australia and the U.K.
Unilever is marketing green tea's natural content of L-theanine-an amino acid found only in tea. According to research, 50 mg of L-theanine (found in two-three cups of tea) naturally stimulates specific kinds of brain activity, causing alpha brain waves-associated with relaxation-to increase in frequency, and beta brain waves-associated with tension, anxiety and irritation-to similarly decrease.
Unilever Australasia's Lipton website has been featuring a "Brain Train" section for the last year, which conveys messages like "Challenge Your Mind. Stay Relaxed and Alert." Visitors can do brain exercises to test their reactions, memory and numeracy skills.
The stimulus for Unilever's recent efforts is more than likely related to its experience with the growth of the "mood food" market in Japan. While ingredients such as GABA (an amino-acid), PS (phosphatidylserine) and L-theanine may not yet be familiar, they soon will. Coca-Cola, Yakult and Unilever are just three companies using these ingredients and touting their mood benefits in the marketing of products. So far, these companies have created a market worth at least $100 million in retail sales, which grew 20% last year.
But perhaps one of the most successful mood food products comes from confectionery giant Ezaki Glico, which develops stress-reducing "Mental Balance Chocolate GABA," a chocolate product that delivers a much larger dose of GABA than most chocolate (chocolate has a natural content of GABA). The product's first year sales of $50 million exceeded all expectations.
Unilever seems to have no doubt that Western consumers are as interested as Japanese consumers in improving their mood and mental wellbeing. European ingredient companies, too, are active in the area. Germany's Degussa, for example, is already a major player in the PS brain health ingredient market in Japan and will be looking to help European and U.S. clients replicate the success of the Japanese market.
Fruit: The Future of Functional Foods
The biggest beneficiaries of consumers' desire for "natural foods" have been fruit drinks. Makers of juices and smoothies have been particularly successful in combining convenience, health, taste and "naturally healthy" in consumers' minds.
One of the best examples is the company Innocent Drinks, which pioneered the smoothie category in Europe. Using a combination of savvy marketing and distribution, this excellent tasting product, positioned as a "natural superfood," witnessed sales rocket from zero in 1999 to over $240 million by 2007. Currently it accounts for 70% of the U.K. smoothie market, and it maintains strong toeholds in eight other European countries.
Even more surprising, the smoothie market has been thriving despite the fact that product pricing is entirely "super-premium"-Innocent's smoothies sell for premiums between 80% and 300% more than market leading premium brands such as Tropicana.
The fruit and health trend has been most striking in relation to the rise of the "superfruits"-blueberry, pomegranate and mangosteen. While scientific support for a health benefit matters-and most have a surprising amount of science behind them-to have superfruit status there are two factors that outweigh all others:
1. The fruit must have some novelty value or relative newness in the eyes of the consumer (i.e., pomegranate, mangosteen, goji, açaí).
2. The claim of superfruit status should be supported by a consistent marketing effort for its actual or claimed health benefits.
Pomegranate was unknown to most Western consumers five years ago, but today it is the most fashionable of fruit. Mangosteen (from Thailand) is also unknown to most people, yet in the U.S. alone mangosteen juice has retail sales in excess of $300 million.
The combination of health, newness, rarity value and convenience enables such fruits to command massive price premiums-400% in the case of pomegranate and 800% in the case of mangosteen-compared to regular juice.
Packaging Innovation Invites Premium Pricing
One of the most important factors in functional food success is the packaging innovation. Strongly differentiated packaging design helps brands achieve better market positioning and thus achieve premium prices. Putting a new product in a standard 1-liter gable-top carton makes it look like every other brand on the shelf, making it harder for it to stand out and making it much more difficult-if not impossible-to command a premium price.
Until recently, U.S. functional food efforts have been dogged by dull packaging-it's one of the single-biggest reasons why the European market for sterol-based cholesterol-lowering foods has been so successful, while the U.S. market has languished. And it's the reason why, in a bid to revive the market, that Unilever this year brought the successful European packaging concept to the U.S. when it launched Promise Activ, its daily dose 100 ml (3 fl. oz) cholesterol-lowering dairy drink-modeled on the company's highly successful European product.
The following represent examples of other products that stand out and connect to the strongest functional food trends:
• Hero's Actifruit: Hero is one of the most innovative companies in Europe, and in the Netherlands it markets a drink which ticks all the boxes for functional food success-a fruit drink, based on a digestive health platform, featuring a highly innovative pack design (the drink comes in a 100 ml bottle, offering "all-natural" benefits from its high content of pectin (fruit fiber). When you put all of this together, it is hardly surprising that the product can command a 300% premium over other juices.
• Unilever's Knorr Vie: a 100 ml daily dose drink offering two of the recommended servings of fruit and vegetables. This ultra-convenient way to get a dose of health sells at a 200% premium over Tropicana Pure Premium and has grown to be a $140 million brand in Europe.
• XanGo's Mangosteen Juice: This is probably the biggest superfruit brand of its kind in the world, despite a selling price of a massive 800% price premium to regular supermarket juice. The price premium is in part related to the company's approach to distribution. But the products is also helped by the fact that the XanGo bottle is one of the things that helps set the brand apart-it's long and curvaceous, and closer in appearance to a bottle of wine than to the conventional gable-topped packs in which competing juices are sold. XanGo put a great deal of time and effort into choosing a package that would set its brand apart and help justify a super-premium price.
• Dark Chocolate: This is another good example of premiumization through health. Dark chocolate retails at a 100% premium over milk chocolate when compared on a price per 100-gram basis.
Thank Japan
Anyone who doubts that trends from Japan inevitably find their way into Western nutritional markets, and who doubts the relevance of Japanese products to Western consumers, should reflect upon the fact that the whole concept of functional foods originated in Japan. Skeptics will find that many of the most successful products in Western markets, from energy drinks to probiotic products, were established in Japan long before anyone in the West had even heard of them. The same goes for mood foods and beauty foods.
The trends in Japan and Europe are remarkably similar, and looking back on 20 years of functional foods it is easy to see why these markets have been so successful. Now it's America's turn.
