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Trend Watch: Functional Foods Creep into Private Label Realm

August 17, 2009
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The messages attached to functional foods are often puzzling and complicated, which makes it hard for shoppers to know how to choose their functional fare.

The term “functional” has become a common buzzword in the food and drink marketplace over the past few years. This is evident in the growing number of new product launches in this category, as well as the frequency of this claim on restaurant menus and supermarket shelves. It is a category in the food and drink industry that is making its way out of the health niche and entering into mainstream.

The majority of people asked in a recent Mintel survey claimed to eat functional foods to “make up for my sometimes less than healthy eating habits” or to “supplement my already healthy eating habits” (45 percent and 37 percent, respectively). However, with this growth, consumers also are beginning to feel a sense of confusion.

The messages attached to functional foods are often puzzling and complicated, which makes it hard for shoppers to know how to choose their functional fare. In addition, consumers often are skeptical about the benefits and efficacy of many functional foods, and are deterred by high prices.

According to Mintel’s recent report, 38 percent of consumers do not eat functional foods, but say they take a vitamin supplement instead. Thirty-seven percent of those same consumers believe functional foods are over-priced, and 32 percent say they don’t believe the claims functional foods make.

Despite the confusion consumers are feeling in this market, there still has been growth in this sector. Private label food and drink product launches touting a functional claim saw an impressive growth rate of 322 percent between 2005 and 2008. Non-private-label functional products are trailing behind, with a growth rate of just over 200 percent during the same timeframe.

Some of the larger or more sophisticated retailers have begun to introduce new products more rapidly, but not all retailers have kept pace. Functional foods typically have not been in the domain of private label, but retailers recognize they need to be active in this area to stay competitive with their branded counterparts.

Functional cereal and yogurt purchases experienced the most growth between 2006 and 2008, as additional manufacturers began to operate in these categories. However, private label products have been launched to compete with the functional yogurt products offered by national brands such as Yoplait, Breyers and Weight Watchers.

Safeway’s Eating Right brand has been among the most active and progressive private label brands to embrace functional foods. Products such as Heart Healthy Apple Cinnamon Granola and Light Yogurt claiming to regulate digestive health and enhance the immune system are perfect examples of everyday products with a boost of healthfulness and a reduced cost. Target’s Archer Farms and Trader Joe’s own labels are other examples where retailers are making strides in adding functional foods to their repertoire.

But when it comes to functional and store brand grub, maybe age does matter. The propensity to purchase store brands decreases with age. Younger respondents are considerably more likely than their older counterparts to purchase store brand foods.

This detail partners with the fact that the use of functional foods also is highly age-dependent. Those aged 18 to 34 are significantly more likely to purchase functional food and drinks, as older consumers select products more relevant to their specific health needs. These two statements send a clear message to retailers and manufacturers that functional private label products should be targeted to young adults.

While the private label presence in functional foods is relatively small, and most likely will not have a large growth surge because of the high-cost of manufacturing, it still is a growing segment that garners attention from retailers. One of the constant complaints about functional foods is their high price. If retail outlets can find a way to supply their shoppers with private label functional fare at a fraction of the cost, they also will be likely to find willing consumers waiting to take them off the shelf. PLB


Krista Faron is a senior analyst with the Research Consultancy group of Mintel International Group Ltd., Chicago. Her work primarily is focused on identifying trends and leveraging them to foster innovation and new product development.Contact Faron at kfaron@mintel.com.

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