Opportunities for Australian Functional Foods Abound in the ASEAN market
2018-11-28 11:10 Wednesday
As functional foods become more popular in the ASEAN trading bloc, many companies have begun developing foods rich in probiotics and ω-3 fatty acids. According to the Commonwealth Scientific and Industrial Research Organization (CSIRO) and KPMG, the Asian market offers abundant opportunities for Australian functional food companies.
A report noted that health foods are one of the fastest-growing food categories in the world, accounting for 20% of the $2.18 billion global packaged food market.
The increased popularity of health food products has been driven by lifestyles and diets in East Asia that put populations at risk to chronic diseases such as obesity, type 2 diabetes, cardiovascular disease and cancer.
Non-communicable diseases (NCDs) are expected to cause more than 70% of deaths in Southeast Asia by 2030. Therefore, both government and non-profit institutions have great interest in increasing health food consumption to reduce the incidence of chronic diseases.
The rise in chronic disease is not only driving demand in ASEAN markets, but also increasing food diversity - particularly in countries such as Singapore, Indonesia and Thailand where quality health food is increasingly popular.
The aging population in the region also contributes to the development of health and health-related food categories. To meet the increasingly diverse needs of consumers, increasingly more companies are using personalized nutrition to provide precise solutions to different health problems.
Across the ASEAN market, the health and care sector is expected to grow at compound annual growth rates ranging from 3% (Singapore) to 9% (Malaysia) between 2017 and 2022, the report states. It proceeds to highlight four consumer-led market opportunities for Australian health food manufacturers: stealth health, alternative proteins, gut health and precision nutrition.
Be Stealthy, get Healthy
The first opportunity is in the form of "Develop[ing] health promotion policies for food ingredients and formulations", featuring subtle variations in product formulations, including those that "have not promoted healthy ingredients before".
"Global food companies in the Asian region are beginning to adjust their product mix, with more than 180,000 products having been recalibrated since 2016," the report said. Companies that have adjusted their product lineup include such big names as Mondelez International, Nestle and PepsiCo.
At the same time, many companies are developing foods rich in probiotics, follicles, vitamins, minerals and other nutrients to meet a wide range of health needs. In this context, CSIRO has developed the Favor Model, a patented new formula that reduces sugar and salt content without changing overall flavor and taste.
Using conventional plant breeding techniques, CSIRO developed BARLEYmax, a new type of barley that contains twice the dietary fiber of conventional grains and four times the resistant starch of conventional barley. Australian company FREEDOM FOODS is selling BARLEYmax products in ASEAN markets.
To Meat or not to Meat
The second opportunity stems from a wide variety of non-animal protein sources in Asian cuisines.
ASEAN's total population is expected to be one of the fastest growing in the world, leading to increased demand for protein - in fact, ASEAN's daily protein consumption has increased by 50% over the past 30 years, higher than the global average. Asians have also become accustomed to non-animal protein, meaning that Australian companies have plenty of opportunities in this field.
"Between 2016 and 2017, there was a significant increase in non-animal protein consumed by Thai people and Indonesians," the report states, also noting that more Indonesians and Thais believe that non-animal protein is the healthier option.
This phenomenon has led to manufacturers developing and utilizing a growing number of meat substitutes, including insect protein, plant-based "meat", algae protein, seafood substitutes and beans.
One Australian company leading this trend is Lupines, which has had considerable success in Asia reusing lupines, which contain protein content of 40% and a fiber content of 37%.
Marketing for the Microbiome
A third opportunity comes from gut health, which has become increasingly known to consumers in recent years. According to the report, the annual growth rate of the ASEAN probiotics global market was 7.19%, mainly driven by dairy products.
However, non-dairy probiotics products are expected to grow robustly as well in the near future, with a compound annual growth rate of 9.6% from 2017 to 2022.
Gut health research has recently become commercialized, with a wide range of new probiotic patents and strains. The probiotic market has also seen a notable acquisition - the Australian company Life-Space, which was bought by China's BY-HEALTH in February for $690m.
In June, CSIRO announced its collaboration with Nanyang Technological University (NTU) in Singapore, which aims to provide gut health solutions for the elderly through intestinal microbiome research.
With the growing demand for personalized nutrition products, health food companies have a fourth opportunity to achieve growth: precision nutrition products.
To meet the increasingly diverse needs of consumers, increasingly more companies are providing personalized nutrition solutions to address various health problems. The report states: "nutrition recommendations have evolved from mass market information to real-time and personalized nutrition programs. Personalized nutrition will be a combination of medicine and nutrition aimed at preventing and controlling chronic diseases."
A recent survey by Herbalife showed that 33% of ASEAN consumers are enthusiastic about personalized nutrition programs, a number that is expected to grow steadily in the coming years. In fact, personalized nutrition has been identified as one of the four major health trends in the ASEAN region.
Nutritional genomics - the study of how genes interact with nutrition - provides the theoretical basis for many personalized nutritional products, and is the focus of attention of CSIRO- NTU, which is committed to providing targeted nutrition advice to the elderly.
The Australian Approach
In addition to outlining the four main opportunities in the Asian market, the report also presents two approaches for Australian companies to take when entering the region.
The first approach is centered on personalization, which the report notes is "the key to customer satisfaction". ASEAN's diversity across its 10 member states means there are many opportunities in the area of health and wellness. Specific flavor preferences mean that producers need to meet the specific needs of a particular market. Developing marketing and sales channels, most notably e-commerce, will help food producers and exporters succeed in the ASEAN market. "
The second approach is to take advantage of increasing consumer health awareness and spending power. At the same time, ASEAN consumers' soaring purchasing power means that Australian companies have the opportunity to provide quality supplements and healthy food products that are well received.
The report also recommends that Australian companies work with local industry stakeholders in the ASEAN region. Research show that there are many benefits to multinational companies collaborating with and investing in local food producers. By doing so they can gain consumer insights, familiarize themselves with local regulations, and create instant distribution channels.