Too busy to eat? Functional foods to the rescue...

Americans today are obsessed with eating healthier. This trend, along with the hectic lifestyles of consumers, has heralded the arrival of functional food and beverages on the market. The idea here is that consumers are looking for a combination of convenience and health properties.

This is where functional foods come into play. Functional foods can be defined as "foods that are enhanced with added ingredients to provide specific health/disease benefits beyond general nutrition". The popularity of these foods across age segments is both an opportunity and a challenge for traditional food and beverage companies. As of 2007, the functional beverage market alone is valued at $9.8 billion, with the highest use among consumer aged 18 to 34. Energy drinks come to mind, with a different energy drink for every target market.

Candy makers are among the latest to take advantage of this opportunity, with a slew of new chocolates that promote the potential benefits of antioxidants. Keep in mind that antioxidants have not been proven to improve one's health (in fact, very high doses can have a negative effect!). Nevertheless, functional foods are appearing everywhere. The bulk of the growth is actually taking place in the beverage market. One success story is that of Glaceau's Vitamin Water, which grew at a staggering rate of 433% from 2004 to 2006. Vitamin Water is an enhanced water drink with added vitamins and nutrients. Unsurprisingly, Glaceau's parent company, Energy Brands, was acquired by the Coca-Cola Company in June 2007. Many other drinks focus on "healthy" fruit combinations such as acai and blueberry (apparently some fruits sound "healthier" than others). And some drinks incorporate up to 200% of the daily recommended amount for certain vitamins, without scaring anyone off apparently.

Other attempts have been more controversial. Enviga, a sparkling green tea, was launched by Coca-Cola in 2007. The company claimed that Enviga would burn up to 100 calories if the consumer drank three cans a day. In February of 2007, the Center for Science in the Public Interest filed a lawsuit against Coca-Cola, asserting that Enviga's calorie-burning "properties" amount to fraudulent claims (losing calories by drinking ice tea was too good to be true apparently). This type of backlash exemplifies the sensitive nature of functional foods in general. Consumers are looking for actual benefits, and even the suspicion that these claims are just part of a marketing ploy can potentially affect the market in a negative manner.

Just as interesting is the way in which beverage companies such as PepsiCo and Coca-Cola have approached the branding process for functional beverages. In most cases, the solution has been to acquire independent companies and essentially leave the brand unchanged. Odwalla and Vitamin Water products, for example, bear no mention of the Coca-Cola company name. From this we can infer that the strategy is to position these drinks as independent and possibly more authentic. More traditional drinks such as soda tend to be viewed as unhealthy. Nonetheless, Pepsi and Coke have been adding functional benefits to their flagship drinks, with Diet Pepsi Max and Diet Coke Plus appearing on shelves recently.

What does all this mean? For the manufacturer, it means continually innovating with new drinks and new functionalities while making sure that the consumer still has a clear understanding of what the product does. Manufacturers will also need to deal with the problem of economies of scale: how to produce so many different foods and beverages in a cost-efficient manner? For the retailer, it means a growing diversity in the products that appear on the shelf. For the consumer, it means even more choice (and probably more confusion) and a food for every ailment.

In the future, we might see manufacturers merge the benefits of several drinks into one as the number of variations becomes hard to cope with. In any event, the consumer must be able to trust the manufacturer and understand the benefits of the drink.

Welcome to the age of functional foods...