Health awareness boosts growing demand for functional foods

The exceptionally good growth in the Indian economy, coupled with a strong desire among the Indian consumers to maintain a healthy lifestyle, and the growing awareness of functional ingredients such as herbs, minerals, vitamins, omega fatty acids and probiotics is driving the Indian functional foods and beverages market.

While the market is still in its infancy, the demand for sports and energy drinks will increase, since these drinks are considered a fashion statement and are a socially accepted alternative to alcoholic drinks. Functional foods are also likely to witness an expanding consumer base due to their specific health benefits.

There are very few commercialised functional products in the Indian market presently. Nonetheless, with the large number of existing as well as upcoming retail outlets, this situation is likely to change, since consumers are becoming increasingly aware of a number of imported new-age health and well-being products. The highest growth is likely in sub categories such as energy drinks, enhanced shelf stable juices, probiotics, and omega fortified food and beverages.

'However, it is difficult to convince Indian fast moving consumer goods (FMCG) companies to fortify their products with innovative ingredients,' says Frost & Sullivan Research Analyst Aditi Paul. 'The vague regulatory and industry approval protocols for functional foods further dampen the speed of market growth.'

Survival in the functional foods business requires cutting-edge R&D and high technical expertise, and most of the Indian companies do not invest enough in research. Due to a lack of product differentiation in terms of ingredients, it becomes difficult to convince end users to fortify their products. However, this situation is likely to change in the near future.

'Even though much scientific evidence links various botanicals to health benefits, more research must be targeted to understand the mechanism,' notes Paul. 'This will help manufacturers determine the efficacy of the product and the ingredients and come up with optimal dosage levels.'

Eventually, this knowledge would help manufacturers develop tailor-designed products. These foods and beverages, personalised to manage certain health conditions of specific people, are the future of the functional health foods market.

A competitive monitoring programme can be set up to analyse and measure competitor activities across all strategic areas, which could reveal any new product development plans and technology evaluations. Along with development work for individual consumers, companies must also focus innovation and research work on food industry trends, which include short-life products, pro-biotic/healthy/nutritional products, and anti-obesity products (low fat and others).

'Partnerships amongst functional beverage manufacturers, pharmaceutical companies, nutrition companies, and food additives companies is the right strategy for the formulation of a product that is healthy, offers great flavours, and is palatable along with being affordable,' says Paul.

Synthetic food preservatives

Meanwhile, rising environmental consciousness and safety concerns are driving Chinese consumers to increasingly prefer natural food preservatives to synthetic ones. With greater technological advances, natural preservatives' sales will increase further.

Chinese Food Preservatives Markets analysis, finds that the market earned revenues of $370.0 million in 2007 and estimates this to reach $829.4 million in 2014.

Despite the success of natural preservatives, the food preservatives market should work toward dispelling the misapprehensions among consumers regarding the benefits and safety issues of synthetic preservatives. Negative press has swayed consumer opinion.

'In many instances, misperceptions persist despite findings of little or no safety threat from synthetic preservatives, when used in small quantities,' says Frost & Sullivan Research Manager Alina Sun.

Consumers are not adequately educated about the need for food preservatives. To stimulate market growth, companies should invest in promotion campaigns that include the mass media or seminars to explain the necessity of food preservatives in food products.

Market participants should also extend these campaigns to include food producers and other constituents of the supply chain. Once these campaigns succeed, food processors will be more willing to label preservatives on their products.

Currently, the food preservatives market is riding the success wave of heat-and-eat foods, which are greatly preferred by urbanites leading increasingly busy lifestyles. Preservatives not only help retain the food's colour and flavor, but also extend their shelf life by inhibiting the activity of microorganisms.

There has been sustained demand from food processing companies for a variety of commonly used food preservatives including organic, inorganic, and biological preservatives. There are also other kinds of preservatives that are used extensively as bactericide to preserve fruits and vegetables.

The most frequently used organic preservatives, benzoates, sorbates, and propionates, are witnessing impressive demand from international markets, as local manufacturers have proven their competitiveness. They also enjoy a price advantage over their substitutes.

'Inorganic preservatives such as nitrites are preferred for their efficiency in preserving meat from bacterium clostridium botulinum as well as their ability to impart a pink, fresh look to cured meat, functioning as colour fixatives,' notes Sun. 'Meanwhile, biological preservatives are also finding considerable uptake, since they are generated by antiseptic microorganisms.'

Consumers' preference for healthy and safe organic products over conventional foods that are likely to contain lethal pesticides, chemicals, additives and possible allergens, is significantly driving growth in the US organic foods market. The market rapidly strengthens its presence as organic foods such as dairy products, confectionery, snacks, bakery, non-dairy beverages, meat, baby foods and multi-ingredient processed foods gain immense popularity and register booming sales.

'Increased occurrence of diseases combined with a general perception of a healthier lifestyle to include organic products can reduce the development of diabetes, particularly in obese people,' notes Frost & Sullivan Research Associate Sneha Pasricha. 'This has further boosted the sales of organic products.'

Analysis from Frost & Sullivan, Road Map of US Organic Food Markets - An Industry Outlook identifies that several multinationals are vying for strong positioning in the US organic foods market by either offering new organic food products or by strategically acquiring or partnering with flourishing major organic brands.

Unlike conventional agriculture, organic farming employs healthy agricultural practices. It uses natural fertilisers, such as manure or compost to feed soil and plants instead of chemical fertilisers. As an alternative to insecticides, organic farmers use beneficial insects and birds, mating disruption, or traps. Animals for organic dairy and meat are raised on organic feed and a balanced diet in a cleaner and healthier environment.

As demand for organics increase, manufacturers are forced to look overseas for raw materials. Increasing volumes of organic fruit, vegetables, grain, seeds, beans and herbs are being procured from other places. This not only increases the final price of the end product, but also raises issues such as food miles.

The constraints in the supply of organic ingredients are a matter of grave concern for the organic food manufacturers, as this can undermine the long-term stability and growth of this otherwise booming market.

In order to provide consumers with the best quality of organic products, active food processors in the organic foods market must integrate backward to minimise supply and quality challenges. It is important to make strategic alliances with organic ingredient suppliers of organic flavours, colours, sweeteners, fibres, dairy cultures and others.

Additionally, both the food processors and the ingredient companies can establish long-term alliances with the farmers involved in organic farming to ensure regular supply. Well-heeled food processors can also set up their own organic farm fields to address quality issues related to the ingredients.

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