The functional food and beverages market is arguably one of the best performing F&B segments during the pandemic, as consumers are increasingly concerned over their mental and physical health during the more than 2 years of social lockdowns and restrictions.
Many of us felt that the 2 years – 2020 to 2021 – were probably the longest years in our lives – as social activities were down to a trickle and most of our communications were reduced to virtual at the comfort of our homes. With lesser outdoor activities, and the health risk posed by COVID-19, we became increasingly concerned over our health and started to explore on food and beverages that could boost our mental, immune and physical health.
Currently, with the more infectious Omicron variant, the risk of being infected with COVID-19 is no longer a probability but has become more real than ever. In Singapore alone, more than 20% of the population has already been infected and in the US, more than half of the population had already been infected at least once by the virus. As such, guarding our health and ensuring that it is in its best condition, is the aspirations of many people. To do that, one of the avenues is to consume more food and beverages that are healthy and have functional benefits to our overall health, as part of our regular diet.
A research report done by BCC Research a year ago, provided a good overall overview of the functional food and beverages industry. This industry is growing at a rapid rate as a result of extensive industry research which demonstrates a clear link between diet and health, supported by a barrage of media attention – both public and private – that echoed this link. This industry is experiencing unprecedented growth, all thanks to the pandemic, which has increased consumer attention.
Nevertheless, this industry is not without challenges. Regulatory authorities in different countries are scrambling to set standards and regulations for the promotion of safe and healthy functional food and beverages. A universal standard which can be broadly applied to the world is yet to be implemented, as different countries have their own set of rules and principles when defining food with functional properties.
The following chart showed the breakdown of the Functional Food market by various categories (segments). It showed that the bakery and confectionery segment dominated the market with almost 50% share. AFBR has the opinion that this segment primarily look into one of our main staple food, bread products which now offers added nutrients like more calcium, protein and probiotics among others. (see Table 1.0)
Meanwhile, in the Functional Beverages market, prebiotic/probiotic and energy drinks dominated the market with more than 60% share. The beverage segment however offers the highest number of innovations due to rising competition in this category. Dairy companies for instance are constantly innovating to fortify their products amidst growing competition from the plant-based dairy players. (see Table 2.0)
Functional foods and beverages are a mixture of supplements and products derived with or without industrial processing. They can be fresh, preserved or natural; and they can be either organic or conventional products. BCC Research has also identified this market by source i.e. either plant-based (43%), animal-based (43%) or microbial-based (14%) in 2020.
Food and beverage manufacturers employ various techniques to produce their products from fortification, nanotechnology, microencapsulation etc. and the choice of production techniques very much depend on the type of ingredients used. Apparently, vitamins and minerals are the most highly sought after ingredients within this market. With growing disposable incomes in developing countries like China, Indonesia and Vietnam, consumers are willing to pay a premium for products which have the stated ingredients and benefits in them. (see Table 4.0)
Consumers buy functional food and beverage products due to the perceived benefits in these products. This is the most important purchasing consideration, and manufacturers have to highlight the product benefits on the front of the packaging, or through media advertisements. With rising health issues like cardiovascular diseases, digestive problems, diabetes and obesity affecting a vast minority of our population, consumers are looking for products that can promote lower cholesterol and blood pressure, as well as those that can help boost fat burning while regulating their mood (stress). There is also an increasing popularity of products with prebiotics/probiotics to support gut health. Better overall health also signifies better ‘outcomes’ to fight potential viral infections in the future. (see Table 5.0)