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The Thriving & Diversifying Functional Food Market

2018-08-21 13:48 Tuesday

In today's functional food market, a wide range of products, ranging from protein powders, energy drinks, power bars, and vitamin water, to probiotic foods vitamin water can be found both online and in brick-and-mortar retailers.Functional food products are richer in nutrition than traditional food products, often containing plant extracts and vitamins. Regular consumption of functional foods not only satisfies dairy nutrition demands, but also improves long-term health outcomes.

traditional food products

The Fastest Growing Food Sectors

Thanks to an increase in consumer demand, functional foods are expected to be one of the fastest-growing segments in the food industry over the next few years. A report from Technavio forecasts growth in the global functional food market at 7% CAGR from 2017-2021.

functional food

Within the functional food industry, medicinal foods, with specific health functions, have grown increasingly prominent. As food & beverage industry expert Kara Nielson noted:“Due to growing consumer understanding and interest in medicinal foods, they are rising in the natural food and beverage space where functional ingredients rooted in the real world (as opposed to labs) are increasingly in demand.”

Analysts attribute the rapid expansion of the functional food market to aging population, and rising medical costs, which have incentivized consumers to find proactive and preventative health solutions.

The Diversifying Functional Food Market

Due to the growing preference for natural and nutritional foods, prominent food enterprises have been active, an attempt to seize market share in a promising sector.

Last July, the Campbell Soup Company, announced that it would acquire Century Pacific Food Inc. for $700 million USD. CEO Denise Morrison stated that the acquisition was an attempt by Campbell to optimize its product portfolio based on consumers' increasing demand for natural and healthy foods.

Beverage giant Pepsi entered the functional food market even earlier with its acquisition of KeVita, a probiotic beverage manufacturer, and launch of the Tropicana Essentials Probiotics series just months later. As a brand that has made use of innovative distribution channels, Tropicana Essentials has redefined the probiotic beverages sector through its unique reach. Furthermore, Pepsi's subsidiary company Frito-Lay has developed yogurt chips with probiotic properties, and registered associated patents in the field.

General Mills has likewise engaged in the functional food market through a probiotic foods and beverage startup Farmhouse Culture, which recently raised $6.5 million USD in Series D financing from General Mills' risk investment department.

Kellogg, which used to focus on the intestinal health market, has repositioned itself with upgraded products in three subsidiary brands: Special K, Mini-Wheats and Raisin Bran, all of which are in the adult nutrition field.

To reinforce market share in the thriving functional food market, and increase long-term profits, foods industry giants have undertaken a flurry of acquisitions, and adjusted their product layout. Based on recent activity, we find that prominent food companies prefer to acquire small and flexible startups as opposed to major companies. Within the constantly evolving functional food industry, full of unknown risk, they have not waded too deep beyond their comfort zone.

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