It appears as if the market for functional foods is not going to explode with significant incremental revenue and profits in the very near term. The negotiation of the regulatory claims process and the need to change consumer attitudes and usage make the marketing of functional foods a tedious and expensive undertaking. As technological research and clinical research forge ahead, consumer awareness still lags somewhat as marketers have been unsuccessful in expanding functional foods into the mainstream. According to David Vladyka, project manager at Kline & Company, Inc., a Little Falls, NJ-based management consulting firm, “Commercialization of functional foods on a large scale will take some time, but most large companies have committed to the exploring the area.”
As discussed in Kline & Company’s study FUNCTIONAL FOODS: A COMPETITIVE LANDSCAPE, the most prevalent business models that are emerging have been somewhat conservative. While a few companies such as Unilever and Johnson & Johnson have jumped in with significant investment in new product launches, most tend to be taking less risky approaches. Fortification of existing brands with proven ingredients, licensing agreements with ingredient suppliers, and acquisitions of small but growing brands seem to be the most popular methods for testing the waters in functional foods. There have been notable new product successes, such as Viactiv candy calcium supplements from Bristol-Myers Squibb’s Mead Johnson Division.
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Companies also seek to protect their investments and minimize risk. Over two-thirds of all companies in the functional foods market, and those planning to enter it, are trying to develop proprietary positions either through protected processes, unique ingredients, or utilization of an existing brand equity. A strong research foundation is considered beneficial. “The companies that are in the best position are those that best understand the area of nutrition, as well as those companies with broad product portfolios,” according to Vladyka.
A battle is also being waged between nutritional supplements and foods. Some of the best success stories to date are in the areas between, such as meal replacements and supplements that are not in drug form, but rather deliver benefits in a shake, snack bar, or candy. But the jockeying for position is not limited to the marketers of functional foods. Ingredient suppliers have also become very active in bringing new ingredients and technologies that will play a key role in shaping the functional foods market. Many of these companies are building long-term equities directly with consumers through the branding of proprietary ingredients.
FUNCTIONAL FOODS: A COMPETITVE LANDSCAPE will help current and potential marketers of functional foods, as well as ingredient suppliers, better understand the competitive organizational models that are emerging, identify potential partners/acquisitions, or benchmark their efforts against those of the competition. For details on how to subscribe, or for more information on the study or Kline’s other capabilities, please visit the company’s Web site at http://www.klinegroup.com or contact David Vladyka at Kline & Company, Inc., Overlook at Great Notch, 150 Clove Road, Little Falls, NJ, 07424, via phone at 973-435-3402, or via e-mail at david_vladyka@klinegroup.com.
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