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3A Business Consulting 11

November 13, 2008

MAPP conference 2008Functional Foods

Historical development of concept and industryTage Affertsholt


Agenda

1. Introduction

2. Historical development of concept 1998-2008

3. Development of market and industry 1998-2008

4. Claims

5. Outlook


3A At a Glance

Food, drink and nutrition industry specialist consulting companyConsumer products B2C and food ingredients/food technology B2BThe value chain from research to market

Strategy, business development and innovationStrategy & marketingRegulatory issues & claims Food science & technology

Customer/clientsScandinavian & international companies Public sector organisations

Managing Partner - Tage Affertsholt with extensive industry experience

Associate partners & consultantsCore team & international network


Invest in Denmark / Danish Ministry of Business - Promoting Denmark as a base for Japanese and US companies with European commercial ambitions

Specific business development projects for individual companies

European market analysis and global conference on Functional Foods in co-operation with Leatherhead Food RA

International benchmarking of regulatory situation regarding health claims for the Danish Ministry of Food and the Danish Ministry of Business and Industry

Study on nutritional health and ethical claims in 15 EU countries for the EU Commission

Together with Leatherhead Food RA publication of report : Functional Foods - International Regulatory Trends and Developments

Articles and presentations on Functional Foods in trade magazines and at food conferences

3A Business Consulting and Functional Foods


Hippocrates (400 BC)Ancient Greek scientistConsidered to be the father of modern medicine

Functional Foods – No New Invention

“Positive health requires knowledge of man’s primary constitution and the powers of various foods, both those

natural to them and those resulting from human skills”


Functional Foods Global Conferencein Copenhagen in 1998

“Global development and opportunities in functional foods and nutraceuticals 29-30 October 1998”

3A in cooperation with Leatherhead

Concept of conference:Commercial / regulatory developmentsResearch initiativesUS, UK, France, Germany, Scandinavia, NL, Canada, New Zealand, Australia, Japan

Global audience of more than 150 participants


Global Conference - Conclusions 1998

Market at an early stage but strong growth ratesIn terms of consumer products, markets are fairly nationalDairy/probiotic yoghurts is the major product category followed by spreads and drinksEvolving cross country strategic links in functional foods e.g. MD/Arla and Valio/TineGlobal perspective by some functional foods companies e.g. Chr. Hansen Ltd., Cultur Ltd., Valio, RaisioInternational business development by MD Foods, Arla, Skane dairy a.o.Regulatory environment regarding health claims fairlyrestrictive and not really supportive for NPD


Global Conference – Copenhagen Declaration 1998

The parties involved agreed to disagree on definitions andterminology for functional foods and nutraceuticals

Future work is needed with the aim to obtain consensusbetween

Main countries involvedMain interst groups, ie.

ConsumersFood and pharma companiesRegulatory agenciesThe scientific community


Agenda

1. Introduction



4. Claims

5. Outlook


Funktionelle Fødevarer / Berigelse – Pervertering?

Billede af Præsident for Gastronomisk Selskab –tidligere projektleder Måltidets Hus


Sundere Fødevarer?


Food industry

Foods Functionalfoods

Prevent Treat Cure

NutraceuticalsDiet. Supp. Drugs

Pharma./Diet. Supp.

Industry

Concept of Functional Foods and Nutraceuticals

Source: 3A Business Consulting / Year 2000


Forskellige Kategorier af Fødevarer og Beriget Mad

Fødevarer med dokumenterede sundhedsmæssige fordele, der kvalificerer til en sundhedsmæssig anprisning

Fødevarer beriget med andre ingredienser,eks. mælkesyrebakterier og fibre

Fødevarer beriget med vitaminer og mineraler

Ernæringsmæssigt modificerede produkt, eks. kalorielet m.v.

Almindelige fødevarer

Alle fødevarer er funktionelle……..


Mad eller Medicin

”Beriget Mad” (FF)Food +Food -

KosttilskudVitaminer / mineraler

Planteekstrakter

Medicinal-produkter

Føde- og drikkevarer

Både kosttilskud og beriget mad / funktionelle fødevarer er omfattet af EU’s og Danmarks fødevarelovgivning


Functional Foods

Foods that by virtue of

physiologically active

components provide health

benefits beyond basic nutrition

Definition - ILSI

Source: International life Science Institute


Nutraceuticals Definition

Nutraceuticals are defined as naturally derived bioactive

compounds……that are found in foods,

dietary supplements & herbal products…

…and have health promoting, disease preventing, or medicinal properties

Source: The Nutraceuticals Institute, USA


Functional Foods / Nutraceuticals

Functional foods/nutraceuticals are products with scientifically based nutritional or health benefits

Nutraceutical/functional food ingredients is the terminology used for ingredients providing nutritional or health benefits

Key target industry segments for nutraceutical ingredients

Food industry

Dietary supplements industry

Nutrition/Pharma industry


Evolution of Need States in Food

Good Food WellbeingHealth & Wellness

Taste/PleasureVariety BalanceSafety/Qualityfor all

+ PerceivedNutritional value

+ Feeling goodTaking ControlEquilibriumBody & Mind

Source: Nestlé


Functional Food is one Element in the overall Health & Wellness Categories

Organic Fortified / functional Better-for-you

Reduced sugar/ sugar-freeLow fat/ fat-freeLow carb

Food intolerance products

Diabetic Gluten-freeLactose-free

Naturally healthier

H&W FoodsH&W Beverages

Organic Fortified / functional Better-for-you

Reduced sugar/ sugar-freeLow fat/ fat-freeReduced caffeine Combination

Naturally healthier

Vitamins Dietary supplements Tonics and bottled nutritive drinks

Vitamins/ Dietary supplements

Slimming tablets Slimming teasMeal replacement slimming products Other slimming products

Source: Euromonitor


Basil Mathioudakis, EU Kommissionen – Citat fra møde om berigelse i Levnedsmiddelselskabet 1999:

”Såfremt produkterne ikke udgør nogen sundhedsmæssig risiko og deres mærkning er korrekt og ikke vildledende – hvem skal så bestemme om berigede fødevarer skal være tilgængelige?

Er det myndighederne eller forbrugerne gennem valget af produkter?”

Beriget Mad Ernæring eller Politik?


Agenda

1. Introduction



4. Claims

5. Outlook


Value Mio US $ / % share

Dairy products 916 65

Spreads 330 23

Bakery and cereal products 126 9

Drinks 39 3

Total 1411 100

Source: LFRA/3A Business Consulting

European Functional Foods Market by Sector 1997


Functional Foods Markets at an Early Stage - 1997

Strong growth rate

Risk reduction / Disease prevention perhaps still niche market

However, major European brands have been created

Actimel 150 Million EUR

Benecol 75 Million EUR

Bio Danone 150 Million EUR

Gaio 30 Million EUR

LC1 150 Million EUR

Vifit 30 Million EUR

Yakult 100 Million EUR


Functional Foods - Market Trends

• The functional foods market is no longer just a nichemarket; Market size depends on definition whereasconsensus about growth rates of 10%- 20%

• Functional foods are extending into all major foodcategories

• The multinationals are all dedicating large resources todevelopment of functional foods

• Product development in the functional foods market willinclude both “real” functional foods products as well asmore lifestyle orientated healthy products

• In terms of new product development, healthier foods isthe most important trend


Industry push

Consumerattitude

Regulatory support

Scientificpush

The Functional Foods Market in the New Millennium

Developingscientific

backup fornutrition

Acceptance that food influences

health

A new approach to

health claims

2000 2010

Value adding


Health & Wellness Sales in Europe

0

10000

20000

30000

40000

50000

60000

70000

80000

Organic Fortified/functional Better for you Naturally healthy For foodintolerance

Total H&W Industry

Co

nsu

me

r S

ale

s in

€ M

il

2005 2009

+2,5%

CAGRSource: Euromonitor/3A Business Consulting

+6,3%

+3,5%

+2,9%

+3,6%

+3,9%

http://www.enterprise-ireland.com/


Major Health Areas Targeted by Functional Foods

Gut health

Heart and cardiovascular health

Bone health

Immune function

Age/gender specific health issues

Weight management and others

http://www.dimensionshealthstore.com/subcategory.php?id=25


Product Example - Weight Management

Diminishing the role of the word ‘Diet’ but driving the ‘Plus’ value in consumer’s minds. Going beyond cutting into the diet market:- Products launched

claiming to actually help metabolism & burn calories

- Products launched claiming to suppress appetite - Satiety craze

FitSmart Bar in cranberry and apple flavor is a convenient, all-natural and

nutritionally balanced snack bar.

Claims: Natural ingredients. No added refined sugars. No soy, gluten or

GMOs. No trans fats, 10 grams of fiber, and 10 grams of protein. Beneficial whey protein and natural acacia fiber work together to keep you feeling satisfied between meals.

Source: The Innova Database

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K20 Protein for Satiety

Special K2O protein water mixcontains 5g protein and 5g fiber per packet. Special K protein products are designed to promote a feeling of fullness when part of a diet high in protein and fiber.

Ingredients: Polydextrose, whey protein isolate, citric acid, caramel coloring, contains two percent or less of black tea extract, natural flavoring, soy lecithin, sucralose, acesulfame-K, ethoxylated monoglycerides and diglycerides, tricalcium phosphate, niacinamide, pyridoxine hydrochloride (vitamin B6), vitamin B12. Contains milk and soy ingredients.


29


Wellness - Trend Words

Point-of-connection words attract the consumer to the brand on the shelfThe keywords that marketers are employing…..

Better-for-youWell-beingVitalityFitnessLifestyleStress-freeDetoxMental clarityEnergy boostOptimal healthOptimal performanceBalanceEat PositiveEat RightHarmony


30


Some Danish Examples of Functional Foods

Cultura - ArlaGrøn Gaio - ArlaBlå Gaio - ArlaProBio - ArlaBenecol - McNeil/RaisioProViva - Skåne DairyOmega-3 brød - Palsgård/KohbergWasa fiberbrød - WasaIsis produkter - IsisJuice - Rynkeby/ArlaBecel pro-activ - Unilever


Significant Market Growth for Functional Foods

Japan, US and Europe are the biggest markets comprising 86% of global demand for functional foods in 2006

Definition of functional foods makes it difficult to estimate the size of the market – global market size has been estimated between US$30 billion and US$60 billion depending on terminology

The growth rates of functional foods are certain to outperform those of the food and drinks market as a whole

Sources anticipate that the full potential of functional foods is 5-10% of the food and drinks market as a whole

Currently, the global functional foods comprise approx. 1-3% of the total market

Global functional foods market

0

10

20

30

40

50

60

70

1998 2000 2002 2004 2006 2008

Ma

rke

t siz

e (

US

$ b

illio

n)

CAGR 8,8%

Source: Mintel & Euromonitor


To be Successful in Functional Foods New Complementary Skills are Needed

R&D

• Nutrition scienceExisting skills• Enzyme science• Biotechnology• Food safety• Microbiology

Application

• Efficacy testing• Regulatory issuesExisting skills• Product technology• Process technology• Formulation

Consumers

• Consumer science

• PR Media / consumer

“Keep it serious and scientific”

“High Tech”

R&D

“Keep it soft and sentimental”

“High Touch”

Marketing

“Kiss principle”


”Functional Food” - Puzzle

Source: Unilever


Agenda

1. Introduction



4. Claims

5. Outlook


Health Claims in Europe has been a Grey Area

Codex: Claims related to dietary quidelines or healthy eating patterns

MedicinesFoodsMedicinal

ClaimsHealth ClaimsNutrition Claims

PreventionTreatingCuring

Functional Risk reduction

ContentComparative


Regulation (EC) No 1924/2006 Classification of Claims

Nutrition claimsNutrient content: ‘high fibre’, ‘low fat’, ‘reduced salt’, ‘light’

Health claimsFunction claims

‘calcium is needed for normal bone structure’– based on generally accepted scientific evidence (Art. 13.1)– based on newly developed scientific data/proprietary data (Art.

13.5/18)

Reduction of disease risk claims (Art. 14)‘substance A reduces blood cholesterol which may reduce the risk of heart disease’

Claims for development and health of children (Art. 14)scope now defined by EC, transition arrangements in place


Claims on the Way

European Regulation on nutrition and health claimsThe European Food Safety Authority (EFSA) will examine over 2,800 existing claims on food and beverage products.

General conditions:Claim has to be substantiated with generally accepted scientific data which demonstrate the beneficial physiological effect as claimed Ingredient should be present in an adequate form and amountShould be understandable for the average consumerShould fit within certain ‘nutrient profiles’ to be established by the EC with input from EFSANutrient profiles avoid health claims on foods with a high content of saturated fat, salt or sugars

38


EFSA to be tough on Claims

231 new product claims have thus far been submitted to EFSA under Article 14 (205 Children, 26 Disease risk reduction, 28 adopted)and 9 under Article 13.5, so far 2 adoptedEFSA has been critical about omega claimsThe Authority disputed that dairy products promote good teeth and healthy body weight in childrenProducts, where plant sterols were used for lowering blood cholesterol, received acceptance from EFSAIt is clear that high standards are being set and very strong dossiers being demanded to meet EFSA’s intense scrutiny

Nutrition Claims

• Nutrient composition• Comparitive• Other substance• Annex

Health Claims Article 13

Article 13.1: Based on generally accepted scientific evidence.

Article 13.5: Based on newly developed scientific evidence or requesting data protection.

Health Claims Article 14

• Disease risk reduction claims• Claims on the development and health of children.

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Agenda

1. Introduction



4. Claims

5. Outlook


4 Bud på Fremtidenfor Functional Foods i Danmark

KRYSTALkugle mejeri har bedt fire personer give deres bud på fremtiden for functional foods i Danmark

AnalytikerenTage Affertsholt, 3A Business Consulting”Hen over de næste 5-10 år vil danskernes holdning til fødevarer med sundhedsmæssige virkninger gradvis blive mere positiv. Der kommer ingen ’over night’ revolution”.

FremtidsforskerenJesper Bo Jensen, Fremforsk”Fremtiden ligger i functional foods, som forstærker det, der naturligt er af gode ting i fødevaren. Der er fx ikke noget i vejen med mælk med ekstra meget calcium, for det er noget, vi i forvejen forbinder med mælk. En oplagt mulighed er at lave en sportsmælk med mere protein, lavt fedtindhold og en tyndere substans.”


4 Bud på Fremtiden for Functional Foods i Danmark

InnovationsdirektørenCarsten Hallund Slot, Arla Foods”Fremtidens mejeriprodukter bygger på naturlighed. Vi vil se mælken i andre udgaver, men det vil være produkter, som er bygget på mælkens egenskaber. Et eksempel kunne være mælk med øget proteinindhold. Vi vil også se mere målrettede produkter, som fx ProBio.”

MarketingchefenSarita Bairoliya, Chr. Hansen”Jeg tror, at probiotika vil blive stort i Danmark om 2-5 år. Det går jo meget godt i andre lande, så hvorfor ikke i Danmark? Desuden bliver der forsket i probiotikas effekt på mange områder, fx børneeksem og weight management, med spændende resultater. Hvis man kan finde en løsning på weight management, er potentialet kæmpestort.”


Vision for Future Research: From “One Size Fits All” to Personalised Nutrition

Objective is to develop: Personalised, Predictiveand Preventive foods or diets

Nutrigenomics Biomarkers Health

Current research program

Industry partners:

5 SMEs

4 MNCs – Danone, Kraft, Nestle and Unilever

What is Diogenes?

An innovative multidisciplinary, multicentre research project to advance the understanding of how obesity can be prevented and treated from a dietary perspective


Industry Leaders are Active in Personalised Nutrition

Own R&D and a partner in various joint research projects

Investment in genomics company Pulegen

Investment in nutrigenomics company WellGen

Investment in nutrigenetics company Sciona and Advanced BioNutrition

Investment in nutrigenetics company Sciona and IntegraGen

Collaborative R&D efforts in several EU frameworkprogrammes

http://www.danisco.com/cms/connect/corporate/home/index_en.htm

http://www.dsmnutritionalproducts.com/

http://www.richthofen-symposium.de/BASF_LOGO.jpg


Nestlé - the Global Leader in Health and Wellbeing

“I’m convinced that with food you can find out more about nanotech than from semiconductors”.

Prof. Heribert Watzke, Head of Nestlé Food Science department

Building on this statement, I am convinced that Functional Foods is THE area where the most exciting knowledge in physics, chemistry, biology and engineering is currently being built …


Summing up

Foods and beverages with health benefits will be a long term megatrend globally, however taste, pleasure, convenience and price for food products will remain key factors

Functional foods is just one category in the overall health and wellness arena – in fact new consumer research points towards a strong perceived correlation between natural products/ingredients and health

Functional foods and beverages needs to be backed by solid science to substantiate the health benefits, however communication of consumer benefits may well take the form of more soft and wellness oriented claims


Thank you for your [email protected]

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