Trends in the functional dairy market
Functional dairy products need to have a strong marketing message and follow trends in convenience packaging in order to succeed in a poorly regulated environment.
The legislative environment
At present the most regulated market with regards to functional foods is Japan, where the FOSHU (Food for Special Health Use) category is well established and strictly controlled. FOSHU products go through a lengthy registration process and as a consequence just under half of all functional-type products are not FOSHU registered.
The majority of non-registered foods tend to be enhanced with vitamins, minerals or fibre, while over 80% of FOSHU productsrelate tointestinal health, the vast majority of these being fermented dairy drinks like Yakult, the category leader.
In the US, health claims for foods are regulated by the FDA, which has specified a number of generic permissible health claims including the beneficial link between calcium and osteoporosis or fibre and cancer.
In Europe, by contrast, medical claims indicating that foods can prevent, treat or cure a specific disease, are prohibited. Nonetheless, general health or physiological claims inhabit a grey legal area between food and drug legislation and are either regulated by voluntary codes, or not at all.
Latest proposed regulation misses the lifestyle trend
In March 2003 the European Commission discussed its draft proposal for the regulation of the addition of vitamins and minerals to foods, moving closer towards a more structured functional environment.
However, this legislation does not cover fermented or probiotic products, or those containing other non-vitamin/mineral complexes, such as plant-sterols. Indeed, the proposed legislation is primarily concerned with the enhancement or fortification of foods for general public health reasons, whereas the market has already moved into the realm of lifestyle rather than specific health issues.
Lowering cholesterol or maintaining intestinal well-being are not medical issues, but deal rather with health-maximisation. They primarily tap into a trend of almost holistic well-being attitudes which emphasise a food’s or its ingredients’ natural health properties. This is in direct contrast to products to which a foreign ingredient has been actively added, for example Omega-3.
Emphasising dairy’s inherent properties
A fatty acid normally found in fish, Omega-3 has beenadded to dairy products for a number of years now by companies like Parmalat and Puleva. Purportedly good for the heart, modern diets contain ever decreasing amounts of oily fish and Omega-3 fortified products respond to fears that increasingly urban lifestyles mean a decline in essential nutrients.
However, foods fortified in this manner will always retain an aura of artificiality which is at odds with consumer trends which focus on the natural and pure properties of foodstuffs, particularly in the dairy market and most strongly in Europe.
Thus campaigns which emphasise the inherent positive properties of dairy products, such as its calcium content, tap into consumer fears more effectively. Indeed the healthy aspects of milk are often utilised to promote products which are less healthy, but in which milk is a key ingredient, such as chocolate.
Some of the newest functional developments use the inherent properties of milk, with two separate dairies in Finland and the UK naturally enhancing its melatonin content through a special regime for the cows. As described by Dairy Industries International, melatonin helps regulate our body clock, and the extra quantities found in enhanced milk aid sleep.
The cost-benefit ratio
Functional products typically carry a good-for-you premium which is particularly apparent in dairy, where prices and margins are normally low. Following convenience trends means that manufacturers can make their product even more marketable, while also disguising the price differential. Red Kite has done this with its Slumber milk, sold in single-serve 330ml bottles with a significant profit margin.
Yakult and Actimel (Danone) of course pioneered this trend with the introduction of multipacked gulpfuls, rather than offering litre bottles which consumers could portion out themselves. A little more difficult to achieve with other dairy products, tapping into trends for pre-sliced cheeses or other new convenience-formats can also make functional and non-functional pricing less immediately comparable.
A strong functional message is key
For probiotic yoghurts there has been less innovation in packaging, with the sector relying largely on the health message, although some attempts have been made to acknowledge premiumisation trends such as Danone’s Bio brand which comes in see-through plastic containers with fruit at the bottom. This approach, however, means that organic yoghurts also benefit from the overall health message, to the detriment of other functional brands.
In Sweden Skånemejerier Dairy launched Primaliv in 2002, the country’s first product to have had its functional claims approved under a new code of practice for health claims. The yoghurt is said to balance blood sugar levels and lower cholesterol, although the active ingredient is found not in the yoghurt itself, but in the accompanying muesli. Thus a product which is known to be healthy, ie yoghurt, is being used as the vehicle to introduce other functional ingredients, in this case oat beta glucans. Everything about the product, including pack graphics, emphasises its functional nature.
Functional food for all?
Despite the rapid initial success of products like Slumber milk or Primaliv, however, they risk restricting usage occasions and target by being too specialised. Yakult and other fermented dairy drinks were and remain successful because they tapped into a consumer desire to maximise health generally, rather than having a specific medical benefit.
Although sleep aids are a fast-growing sector in the OTC market, consumers who do not suffer insomnia are unlikely to purchase melatonin-enhanced milk, while those who do will only drink it at night.
While Primaliv aims to increase sales on the back of fears over developing diabetes, it faces stiff competition from more general healthy lifestyle messages which promote exercise and a rounded diet. Moreover, the product risks diluting and confusing its message by also claiming to lower cholesterol.
The message for dairy manufacturers is clear. Merely being functional is not enough. Products need to take advantage of other trends in the market such as quality and naturalness, and need to be at the forefront of trends in convenience and packaging, in order to maximise margins. Most importantly, however, products need to be supported by a clear and strong marketing message, which a wide range of consumers can relate to.