The Apocalypse of the US Functional Food Market


At present, the food industry's attention to functional food is rising. The development of the third generation of functional food, the functional food with Chinese characteristics supported by the theory of traditional Chinese medicine and health culture, and the rapid digestion of health products continue to arouse people's thinking and discussion. How can China's functional food take a good road to the future driven by favorable policies, capital intervention and consumption upgrading? How can we absorb the experience of excellent overseas markets and make foreign things serve China?
 
Recently, at the "CNIC2018: The Rise of Health in the Next Decade" Industry Summit Forum, Mr. Li Yunfei, Content Director of Foodaily Daily Food Network, shared his thoughts and reflections on the global functional food leader in the US market.
 
文:Frank Li
Source: Foodaily Daily Food Network (ID:foodaily)
 
Reading points:
 
(1) Why is the United States a market that we should study and learn from?
 
(2) What are the concerns of food innovation in the United States? How to define and classify functional foods? What is the current market size? Which product categories are mainly involved?
 
(3) Starting from the 10 major trends of functional foods in the United States, what new trends are worth paying attention to and what are the latest product cases worth studying?
 
(4) Cold thinking: What can we learn from the development of functional foods in China and the United States?
 
1 Why the United States?
 
When it comes to learning models for overseas functional food markets, many people may think of Japan first. Indeed, Japan has similarities with China in terms of cultural concepts and eating styles. Japanese functional foods focus on intensive cultivation under a flexible and humanized management system, and each one is the ultimate. This way of thinking and product development concept even runs through the development of the entire Japanese food industry. Foodaily Daily Food Network (ID:foodaily) also conducted a very in-depth analysis for everyone in the previous Japanese functional food topic.
 
For the American market, this is also a large country of population and nation, with extremely rich culture, food and consumption concepts. Coupled with a complete business culture and a strong scientific research foundation, the development of functional foods in the United States covers a wide range of forms and types, reflecting a strong technical nature. Although it is not as exquisite as Japan in product form, packaging design and humanistic performance, it is still the object of learning for all countries in the world because of its diversity and universality.
 
The following two sets of data to further reflect the advantages of functional foods in the United States.
 
First of all, from the perspective of the overall market size, the British market research organization Statista made statistics and forecasts on the global sales of functional foods in 2015-2024. As can be seen from the chart, Asia-Pacific has outpaced North America in both growth and absolute volume. But subdivided into individual countries, it is still the United States. The U.S. functional food market has always accounted for more than 30% of global sales.
 
Secondly, in terms of the number of new products on the GNPD global market, after taking into account national strength, population size, and commercial performance, we have counted the number of products on the market in the last five years in 10 important markets for functional foods. As can be seen from the figure, the United States, India and the United Kingdom firmly occupy the top three. The global share of U.S. products has remained largely at around 10 percent.
 
Therefore, from these two aspects, the United States should be the market that China should study and learn from.
 
2 Overview of the functional food market in the United States
 
Focus on American Food Innovation
 
To understand the overall state of the U.S. functional food market, we might as well take a look at the direction of innovation in the U.S. food industry.
 
KantarTNS, a market research organization, recently released the statistical results of food innovation concerns in China and the United States in 2017. In all 15 options, sensory diversity, complexity, pharmaceutical efficacy, natural and easy to make and eat these 5 items ranked high. China and the United States have shown consistency. However, there are differences in the specific ranking and the degree of concern. In general, China is more taste-oriented, while the United States pursues naturalness and pharmaceutical-grade effects. After understanding this background, it is easier to understand the specific performance of the functional food industry in the United States.
 
Definition and Classification of Functional Foods in the United States
 
There is no official conceptual and regulatory framework for functional foods in the United States. Functional foods on the market are regulated through the existing food regulatory system. The "Dietary Supplement Health and Education Act (DSHEA)" promulgated by the US FDA in 1994, as well as laws and regulations involving different levels of nutrition labeling and food safety, jointly regulate the functional food market.
 
Although there is no direct regulation from the government, there are many versions of the definition of functional food by industry associations and commercial organizations. Two of these statements are recognized as authoritative, from the American Dietetic Association and the American Council on Science and Health.
 
The interpretation of the two institutions is similar and can be summarized as follows: functional foods include whole foods as well as fortified, concentrated or enhanced foods. They are an integral part of the daily diversified diet. When people consume a certain amount or dose, these foods can have potential beneficial effects on health [1].
 
There are five main categories of functional foods in the United States: regular foods with specific claims, dietary supplements, fortified foods, special dietary foods, and therapeutic foods.
 
Dietary supplements are the largest category. Nutritional health care products (nutraceutical) are considered to be a unique branch of dietary supplements. From the morphological point of view, it is still a tablet, capsule or oral liquid, but the contents are different. It is not a simple nutrient or extracted ingredient, but the reprocessing of whole foods, such as garlic capsules and whole spinach powder. The functional foods mentioned in a large number of commercial reports generally include functional foods, functional beverages and dietary supplements with common food forms.
 
Market Size and Category Distribution of Functional Foods in the United States
 
According to Grand ViewResearch's statistics and forecasts for the overall sales of functional foods in the United States, its sales in 2015 will be approximately US $63 billion. The total will double by 2025, with an average annual growth rate of about 6.5 percent, higher than the 5 percent average annual growth rate of the entire packaged food industry in the United States. Dietary supplements are the largest category in the entire market, and their share is basically stable at 50%. Functional beverages are growing relatively fast.
 
In 2015, the market size of dietary supplements in the United States was approximately $29.3 billion billion. By 2024, it will reach a size of $57 billion. In terms of product categories, vitamins account for 40%. This is followed by plant components, amino acids, minerals and enzymes.
 
3 Future innovation trends in the functional food industry
 
Talking about the Ten Trends of Functional Food
 
Sloan, a well-known market research institution in the United States, publishes ten trends of functional foods in the United States every two years. These trends truly reflect the changes in the demands of American consumers for functional foods, as well as the judgment of industries and enterprises on market hotspots.
 
The three versions of 2014, 2016 and this year are listed at the same time. Among the 30 keywords mentioned in them, they are mainly divided into the following categories:
 
(1) Population orientation, such as Hispanic health, silver hair, etc;
 
(2) functional appeal, such as motor function nutrition, personalized nutrition, (nutrients) absolute lack;
 
(3) Consumption concept, such as obtaining real materials, full-spectrum diet, edible plant food.
 
It can be seen that not only China is calling for consumption upgrades, the United States is also facing the intergenerational change of functional food consumer groups. From focusing on specific physiological functions to highlighting personalized lifestyles and concepts, this is the inevitable result of the continuous development of human society.
 
If the ten trends are more from a macro perspective on consumer demand. So what happens from a micro perspective, or specifically to product demands?
 
A consumer survey from the "PackagedFacts" divided functional food consumers into four categories: ordinary adults, those who need to improve their health, weight managers and medical purposes. The top five demands are high cholesterol, weight control, hypertension, weight management and digestive health. This is a function that all four groups of people focus on, and the proportion of their attention exceeds 20%.
 
The lower ranking items, including improving energy and vitality, immune system health, heart health, bone and joint health, diabetes, and alleviating hunger (full stomach instead of meals), are also development goals that cannot be ignored for functional foods, and their attention ratios are also above 10%.
 
Referring to the ten major trends of functional foods over the years, and combined with the current new trends in the U.S. food market, we have summarized six industry innovation trends. It should be pointed out that although the most important product form in the current functional food system in the United States is dietary supplements, considering that the younger generation of consumers are becoming the main consumers of functional foods, catering to their consumption habits, and broadening the consumption occasions of functional foods, Ordinary foods with functional claims are undoubtedly more in line with the future development direction. Therefore, the following examples use more of this type of product.
 
Trend 1: Return to Natural
 
The biggest consumer trend at the moment is a return to nature. People prefer to obtain nutrition in the most traditional way. This tide has spawned many hot concepts such as plant-based, clean labels, HPP, and ancient diets. Such as tree water drinks, cold brewed coffee, kompule tea, turmeric milk, etc., are all forms of products born under this tide.
 
In the United States, more and more brands are following this trend, and in order to achieve product differentiation, they are beginning to get formula inspiration from traditional medicine and health concepts. The two most typical types of raw materials are adaptogenic herbs and fermented plant proteins.
 
The concept of adaptogens was put forward by former Soviet scientist Lazarev in 1947, and now it has received widespread attention in the global medical community. Many traditional Chinese herbal medicines can be regarded as adaptogenic drugs, such as Ganoderma lucidum and ginseng. After fermentation, plant protein produces a large number of peptides, amino acids and small molecules, which improves the bioavailability and overall nutritional value of protein.
 
Examples of innovative products: turmeric milk with natural "adaptogen" herbs, protein powder with sprouted beans, ready-to-drink tea made from organic super herbs and adaptogen herbs, and almond vegetable protein milk with turmeric.
 
Trend 2: Focus on special diets
 
In the United States, in the world, more and more people are beginning to accept and try the current popular diet, including vegetarian diet, ketogenic diet, raw diet and so on. In addition, people who advocate active lifestyles, including exercise and fitness, outdoor activities, weight management, improving sleep, and managing stress and emotions are also looking for functional foods that are more suitable for them. These two types of people have different general requirements for diet, such as high protein, low carbon water, high fat, or ingredients that relieve stress and help sleep.
 
This category of products is quite abundant on the market, such as plant protein shakes, ketogenic shakes and plant-based yogurts, which are adapted to the needs of vegetarians, ketogenic dieters and primitive dieters respectively. There are also protein drinks for professional sports people, sports drinks for outdoor activities and travel people, and chocolate for people who want to improve sleep quality.
 
 
Trend three: portable and ready to eat
 
The pursuit of portability is an important trend in current food consumption. This is not only due to today's fast-paced life and work mode, but also due to the change of the consumption concept of the new generation of consumers, from relieving discomfort symptoms to daily health preservation. This requires functional food to make changes in the packaging form, small-weight portable packaging, ready-to-drink ready-to-eat product form, closer to the daily diet experience.
 
Here are four examples of products, which are in different forms such as protein bars, energy glue, regular volume protein drinks and small bottles of juice shot.
 
Trend 4: Accurate crowd positioning
 
Accurate positioning refers to understanding the needs of more subdivided groups and understanding the needs of consumers in different occasions and different states. This demand not only refers to the physiological effects brought by the product, but also the sensory and edible experience, as well as the psychological changes brought about, and even involves additional needs such as social and entertainment.
 
If functional food wants to attract consumers with more choices and more ideas, it needs to be accurate in positioning. Take this group of functional soft candy from OLLY as an example. Its products are designed and positioned from two dimensions. One is for the different physiological needs of the general population, including relieving stress, protecting skin and improving sleep. The other is for the general physiological needs of different groups, such as women, prenatal women, children, men, etc.
 
In addition, there are many products for special segments of the population. The three products shown in the figure below are aimed at gout patients, drunkenness, and people who are engaged in copywriting work that causes skin irritation and dry eyes. The effective ingredients are mainly fruit juices and plant extracts. The other three are aimed at children who watch TV and have excessive computers, women who exercise and exercise, and coffee addicts who want to stay healthy.
 
These all belong to a fairly subdivided group. This highly subdivided and precise positioning has achieved product differentiation, brought high consumer satisfaction, and will have good market performance.
 
Trend 5: Full-spectrum food and full nutrition
 
Total nutrition in the past is more of a nutritional concept, refers to the food in the selection and processing, as far as possible to retain the integrity of the core raw materials in the physical composition and nutritional value. However, it has now become more of a consumer concept.
 
Quite a lot of consumers feel: I don't need to deliberately supplement certain nutrients, I want a comprehensive and balanced dietary nutrition, so I hope that the functional foods I eat can meet my requirements. The change of consumption demands puts forward new requirements for functional food, which should have the diversity of food materials, highlight the complete composition and sufficient amount of daily nutrients, and pursue a balanced diet and comprehensive nutritional intake.
 
The consumption concept of full nutrition is not as popular as vegetarian and ketogenic diets, but it is slowly being accepted by the public. Perhaps in the near future, it will be a very large market.
 
We have selected four examples of full-nutrition products, namely, dietary supplements for women, full-food meal replacement sticks for people who go out, full-nutrition ice cream for athletes, the elderly and patients, and full-food dietary supplements for people over 40 years old.
 
In addition to the above five trend points, personalized nutrition in full swing is opening up a new development direction of functional food.
 
Personalized nutrition refers to the formulation of highly targeted dietary health solutions based on the results of genetic testing based on various factors such as individual physiological characteristics, living habits, environment, genetics and psychological emotions, including the development of suitable nutritious foods. The United States is the earliest and most mature country for personalized nutrition.
 
The products provided by personalized nutrition have two distinctive characteristics: 1) the product is aimed at individuals, not groups; 2) the product is no longer a single packaged food, but a combination of different functional products, which is a specific solution.
 
At present, the personalized nutrition industry is limited to nutritional solutions. In the future, there will be functional foods that are highly developed based on individual characteristics.
 
4 Cold thinking.
 
Analysis of the success factors of functional food in the United States
 
Generally speaking, when it comes to the success factors of the development of a certain industry in the United States, it is often necessary to consider the technology, system and business aspects, and the same is true for the functional food industry.
 
We attribute the success of the U.S. functional food industry as a global leader to four aspects: the development of nutrition and food science, the continuous improvement of the regulatory system, the emphasis on market research, the business culture that encourages and supports innovation, and the change of consumption concept with millennials and generation Z as the main force.
 
When it comes to the role of science in promoting the development of functional food industry, patent application is a good measure. These patents reflect the industry's ability to commercialize research results and are the most fundamental competitiveness of a country's industrial development.
 
Here we count the patent applications in major countries around the world from 2014 to 2017, around the four popular functional ingredients of probiotics, functional dietary fiber, omega-3 fatty acids and whey protein, as well as the two application markets of food to enhance satiety and blood sugar control. As can be seen from the table, the United States and Japan have patent applications in all six fields, and the total amount of the United States accounts for 1/4 of the total amount of TOP20, which is 2.5 times that of the second Japan. Among them, the United States has an absolute advantage in the four areas of functional dietary fiber, omega-3 fatty acids, whey protein and enhanced satiety. Here, leading big companies become the biggest contributors.
 
The second driver comes from consumers. In particular, millennials and Generation Z have more awareness of nutrition and health, and their more active pursuit of functional foods has directly driven the development of the industry. This chart clearly shows that the younger generation of consumers care more about ingredients and health claims in products than previous generations. In fact, many diet concepts and product concepts that are popular all over the world from the United States, such as ketogenic diet, kompu tea, MCT, etc., have a huge fan among young people.
 
Reflections on the Development of Functional Food in China
 
Back to the original question. What does China learn from America?
 
The United States and China are the two largest economies in the world. They are both population and ethnic countries. One has high consumption power and the other is rising. A new generation of consumers born after 80 years are dominating the consumption of functional foods in their countries. American regulations and standards, scientific research results, and business models have penetrated into all aspects of China's food industry. American food culture and packaging products are profoundly affecting us through the Internet and cross-border e-commerce. In order to develop the functional food industry with its own characteristics, China needs to carry out localization transformation on the basis of absorbing the advanced ideas and management system of the United States.
 
The success of the functional food market in the United States, on the whole, is nothing more than focusing on consumer research, product research, and support at the government and industry levels. Therefore, if China's functional food wants to take a good road in the future, it also needs to think deeply on these three levels.
 
First of all, for consumers, it is necessary to dig deep into consumer demands, accurately analyze various consumption scenarios, conduct consumption education in the way that consumers, especially young people, like, and cultivate scientific health concepts and consumption concepts.
 
Secondly, at the product level, the drug image of functional food should be completely stripped off, and the product should be made into fast consumer goods, which can be eaten anytime and anywhere. We should make full use of the rich theory of traditional Chinese medicine and plant resources to develop functional food with Chinese characteristics. Quite a lot of functional foods in the United States will use what we call the same raw materials as medicine and food. Chinese medicine and health culture have studied these raw materials for more than a thousand years. They have a research foundation and a more edible foundation. What is missing is to use modern processing technology to make them into what consumers are willing to eat, instead of a pack of powder or a few pills! In addition, the scientific research level of the product should be further improved. Many functional foods in the United States pay great attention to the synergy between ingredients and strive to improve bioavailability. In China, there have been many related studies, such as microcapsules, compounding, cyclodextrin encapsulation, slow and controlled release, and several ways to achieve through intestinal flora metabolism. Only due to various reasons, these research results are still difficult to land!
 
Finally, from the industrial level, standards and regulations need to better connect with the market and keep pace with the times. More policy guidance and capital intervention are needed. Here I would like to mention in particular the issue of new technology dividends. The Internet has been very popular in China in recent years, such as big data analysis, unmanned retail, blockchain, and artificial intelligence, which are all affecting the development of the food industry. So, how do functional foods run fast? The personalized nutrition mentioned earlier is an example. In addition to obtaining consumer demands and formula design, product marketing and quality management can use new technology to improve efficiency and increase output.
 
5 Summary
 
In the decades of development, China's functional food has never stopped learning from the advanced market. At present, the tide of consumption upgrading is sweeping the whole society, and every industry is giving birth to the driving force for change. The functional food industry has ushered in a development opportunity to change the traditional face and take advantage of the opportunity to upgrade. At this time, we re-propose the introduction of Western learning to the east, which is to use a development perspective, a new way of thinking to look at the gap between us and advanced markets and advanced ideas, and to look at the feasibility and applicability of imitation and reference.
 
Source: Foodaily Daily Food Network (ID:foodaily)
 
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