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Capitalizing on Evolving Consumer,

Product and Ingredient Trends in

Functional Foods and Drinks

By: Tom VierhileDirector, Datamonitors Product Launch Analytics

May 3, 2011


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Datamonitors Proprietary

Knowledge

Market Data Analytics

Country Statistics Product Launch Analytics New Consumer Insights

Primary & SecondaryResearch

Consumer Surveys

Trade Interviews Retail Store Audits Desk Research

Integration of Information &Analysis

Datamonitor: custom analysis

capabilities

Actionable Insights and Recommendations

Presentations

Electronic reports Hard copy reports


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3

Agenda

Consumer trends in functional health

Consumer purchase behaviors and preferences

Changes in preferences and behaviors

Review & analysis of key functional areas

Heart health Digestive & immune health

Bone & joint health

Cognitive health

Energy & alertness health

Beauty Health

Conclusions


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Trend: Consumers are more interested

in functional health

The diet / health link is clearer than ever

65% of consumers are more concerned than they were five

years ago about the foods they eat

This translates into more concern regarding specifics 56% of consumers are paying a high or very high

amount of attention to food & drink ingredients

Prevention vs. Treatment: interest is shifting to

prevention to reign in healthcare costs

Products to improve general wellbeing are more popular

than items that combat specific conditions, illnesses

Sources: Datamonitor analysis, 2010 Deloitte survey


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But consumers are talking the talk

better than walking the walk

Source: 2010 IFIC Food & Health Survey

26%

19%

48%

5%2%

Somewhat

healthful Neither

healthful nor

unhealthful

Not very

healthful

Extremelyhealthful

Not at all healthful

Q: How would you rate the healthfulness of your overall diet?

Extremely or

somewhat

healthful = 53%


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Putting food & drink functionality into

perspective: what drives buying

28%

32%

24%

43%31%

34%

53%

28%Convenience

Healthfulness

Price

Taste

Some impact Great impact

56%

58%

73%

86%


Question:

How much

of an impact

do thefollowing

have on

your

decision to

buy foods or

beverages?


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Consumers are gradually moving from

avoidance and moderation, to

positive nutrition behaviors

Source: 2009 IFIC Food & Health Survey, Functional Foods Survey

56% 13%

I am more

interested hearing

about what to eat,

rather than what

not to eat

Agree Disagree

Awareness of functional foods is at an all-time high. According to the

International Foods Information Council, 90% of U.S. consumers agree that

certain foods have benefits that extend beyond general nutrition.


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The continuum of healthy eating

EXCLUSION MODERATION ENHANCEMENT

What:Free from or

zero variants of

foods or drinks

- Calorie free- Fat free

- Sugar free

- Sodium free

- Gluten free

What:Better for you

foods & drinks

making low,

less, reduced

type claims

- Low calorie

- Reduced sugar

- Less saturated fat

What:Foods & drinks rich

in nutrients

- Probiotics

- Omega-3s- Whole grains

- Collagen

- Protein

- Fiber


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Functional nutrient consumption

varies based on consumer knowledge

37%

6%

61%

46%

25%

25%

8%

43%

49%

72%

73%

31%

2%

4%

11%

58%

45%

5%

Less Neither More


Question: Please indicate whether or not you are trying to consume

more or less of the following (select one)?

Whole grains

Fiber

Protein

Omega 3 fattyacids

Mono-

unsaturated fatsPoly-

unsaturated fats


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Intrinsic healthfulness is favored over

added healthfulness

25%

27%

40%

15%

19%

25%

Iron Added

Rich In Iron

Omega-3 Added

Rich in Omega-3

Antioxidants Added

Rich in Antioxidants

Source: Decision Analyst survey, released March 22, 2010

Q: How often do

you consume foodsand beverages that

are

Percentage of

consumers who

frequently consumeproducts described

as


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Consumers are skeptical about the

health credentials of processed foods

Source: Datamonitor Consumer Survey, 2010

22%

32%

27%

14%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Strongly agree

Tend to agree

Neither agree nor

disagree

Tend to disagree

Strongly disagree

Question: Pre-prepared or ready-made meals are just as healthyas meals cooked from scratch? USA consumer responses

18%


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What key factors are driving interest in

functional foods?

Societal issues: obesity, stress & lack of energy

Diet can have an impact on these vexing issues

The aging of society

Older consumers are more prone to heart, bone and jointhealth problems, fueling interest

Desire for quick fix solutions

Much easier than committing to large-scale lifestyleadjustments

Product innovation - new formats, enhancedportability, efficacy improvements, etc.

Expansion into new areas: confectionery, snacks


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Functional foods:

gauging USA consumer interest

18%

18%18%

19%

27%

29%

25%32%

32%

35%

40%

50%

57%57%

57%

51%

50%

56%50%

52%

50%

49%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Appetite control

Levels of relaxationAlertness

Concentration

Bone and joint health

Appearance

Physical energyDigestive system

Immune system

Heart health

General health

Interested and actively buying Interested but not actively buying

Even in the

mostappealing

functional

food

market,

more

lookers

thanproduct

buyers

Source: Datamonitor Consumer Survey, 2009


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Scaling by benefit: hard vs. soft

Bone & Joint HealthCalcium-rich foods, vitamin D,

glucosamine, chondroitin

Heart HealthFoods with plant sterols, coenzyme

Q10, resveratrol, omega-3s

Digestive HealthProbiotics, prebiotics (inulin), fiber-

rich foods, whole grains

Cognitive HealthOmega-3s including EPA and DHA,

amino acids, choline, folic acid

Immunity HealthAntioxidant rich products, probiotics,

prebiotics, vitamin E

Beauty Health Skin boosters including collagen,biotin, hyaluronic acid, elastin

Physical HealthEnergizing ingredients like protein,

antioxidants, caffeine, etc.

Emotional HealthMood foods & ingredients like

GABA, L-theanine, melatonin

Hard

health

Soft

health

Benefit Key product/ingredient trends


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Review of Key Functional Areas:

Heart Health


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Heart health quick summary

Cardiovascular health has broad appeal

Seniors the biggest consumers, but heart health

appeals to all age groups

Omega-3 remains the standout ingredient

But polyphenols and flavanoids are rising stars

Both are found in many types of food from tea and

vegetables to chocolate, broadening the market

Lack of knowledge a stumbling block Replacing saturated fats with polyunsaturated fats

could reduce heart disease by 20%

Sources: Datamonitor analysis, Harvard Medical School study, 2010


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Heart healthy foods and beverages,

market size & projected growth

Country 2009 sales ($m) 2014 sales ($m) CAGR 09-14

USA 5,600.0 7,076.5 4.8%

Japan 4,054.2 5,211.6 5.2%

Germany 467.5 585.3 4.6%

UK 271.8 339.4 4.5%

France 236.0 282.4 3.7%Russia 154.0 219.1 7.3%

Source: Datamonitor analysis

The purchase rate for heart healthy products in the USA is significantly

higher than the global average, as measured by Datamonitor


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Heart health product highlights

Source: Datamonitors Product Launch Analytics

Odwalla Heart Health

Smoothie: USA

Product has 0.4g of plant sterols

per serving, and has Concord

grape juice, purple carrot and

lignonberry extracts

Product uses a combination of

Coenzyme Q10, omega-3s and

lecithin to support heart

function

Beverage has 15mg of

resveratrol per serving

plus Concord grape juice,

red grape juice and other

juices

Max Vita Vital Heart

Supplement: Slovakia

Genesis Today 100%

Fruit Juice: USA


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Digestive & Immune Health


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Digestive & immune health summary

Contemporary diets are causing problems

Diets high in refined carbohydrates one culprit

Digestive issues can be debilitating

Nearly 20% of consumers have avoided work or

social situations due to digestive issues Immune health favored over digestive health

USA consumers are more interested in immune vs.digestive products, 50% to 32%

Seniors and women are driving the market

Digestive concern especially skews female

Sources: Datamonitor analysis, MarketTools Inc. survey


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Digestive & immune foods and beverages,

market size and projected growth


USA 9,733.9 14,127.5 7.7%

Japan 5,533.8 7,529.3 6.4%

Germany 1,622.8 2,119.3 5.5%

UK 1,152.0 1,482.2 5.2%

France 1,061.6 1,348.1 4.9%Russia 102.3 159.8 9.3%


The increasing palatability of products containing probiotics and fiber

is driving sales growth in various world markets


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Digestive & immune health highlights


Bravo Friscus Probiotic

Orange Passionfruit

Juice: Finland

Drink has a double bacteria

culture with two Lactobacillus

strains said to provide support

to the immune system

Frozen dessert extension of

Activia brand contains

DanRegularis, a bacteria that

aids digestion

Danone Activia

Frozen Fermented

Milk: Brazil

Vibranz Kombucha

Drink: USA

Raw, probiotic drink claims

to support digestion,

metabolism, liver function

and the immune system


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Bone and Joint Health


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Bone & joint health quick summary

Joint health is a widespread problem

46 million Americans (20% of population),have arthritis or other rheumatic conditions

But interest in functional products lags

Perception that foods like milk deliverenough calcium or vitamin D is an issue

Women are the biggest buyers

But gender focus not as strong as expected

Newer ingredients like collagen and vitamin Khave potential


Stur-D


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Bone and joint food and beverage,



USA 3,337.8 4,147.8 4.4%

Japan 1,263.5 1,532.1 3.9%

Germany 363.8 454.5 4.6%

UK 241.1 300.3 4.5%

France229.4 281.1 4.1%

Russia 111.6 134.0 3.7%


Growth potential for bone and joint health is lower than most other

functional health categories due to a lack of product innovation


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Bone & joint health product highlights


Triglosamine Joint

Health Beverage: USA

Product is a liquid concentrate

sold in plastic tubes & contains

glucosamine, chondroitin and

hyaluronic acid

Product has granola clusters &

yogurt coated raisins, helping

deliver 10% of the Daily Value of

calcium and magnesium

This supplement contains

marine Bionovex oil from

New Zealand Green Lipped

Mussel (with ETA omega-

3s) plus hyaluronic acid

Planters Nut-trition

Bone Health Mix: USA

Regenovex Joint

Health Supplement:

UK


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Cognitive Health


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Cognitive health quick summary

Cognitive health has one of the larger gaps

between interest & actual purchase behavior This despite fact that 55% of boomers are worried

about loss of mental capacity

Younger consumers driving the market Skeptical Seniors least likely buyers

Cognitive health more impacted byeating right, than avoiding wrong foods

Berries linked to improved mental functioning

Grapes also shown to have a positive impact


Nawgan

h l h f d d b


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Cognitive health foods and beverages,



USA 1,198.1 2,095.8 11.8%

Japan 1,143.7 1,440.1 4.7%

Germany 414.9 557.8 6.1%

UK 308.6 442.6 7.5%

France259.6 386.2 8.3%

Russia 28.6 47.5 10.7%


The lions share of cognitive product growth is expected to be in the

beverage sector, growing at 2x the rate of foods in many markets


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Cognitive health product highlights


Suntory Inteligen

Energy Drink: Japan

Aimed at people with desk jobs,

Inteligen contains 200mg of

theanine per bottle, along with

caffeine and B vitamins

Dark chocolate orange truffles

have DHA, folic acid and

vitamins A, C, D3 and E to

stimulate your grey matter

Each 100ml serving of milk

contains 10ml of natural

DHA to support brain

development

Coco Brain

Chocolates: USA

Dongwon DHA Brain

Milk South Korea


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Energy & Alertness Health


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Energy & alertness quick summary

Consumers arent satisfied with energy levels

80% say they dont have enough energy to do all

that they want to do

Thanks to versatility, energy drinks dominate

But energy bars & other food forms are growing

Energy shots have grabbed a functional niche

Shots are convenient, but can have taste issues

Ingredient issues more focused on health than

efficacy

Sources: Datamonitor analysis, NMI study (2008)

E f d & d i k k i &


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Energy foods & drinks, market size &

projected growth


USA 14,771.7 20,303.3 6.6%

Japan 2,285.5 2,594.4 2.6%

Germany 540.6 553.9 0.5%

UK 2,888.3 3,294.9 2.7%

France 147.3 255.2 11.6%

Russia 217.1 319.6 8.0%


Beverages account for the vast majority of energy product sales, but

energizing foods are catching on in some markets


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Energy & alertness health highlights


NutriBreads P28

Bread: USA

Bread contains 28 grams of

protein per two slices as well as

7 essential amino acids for

growth and energy

Targeting energy for the

morning, yogurt contains milk

protein, royal jelly (100mg) plus

vitamins B1 and B6

Six of these mice are said

to be like an energy

drink. Product has niacin,

energy blend, folic acid

and vitamins B6 and B12

Meiji Morning Energy

Yogurt: Japan

Borba Mighty Energy

Gummi Mice: USA


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Beauty Health


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Beauty health quick summary

Major crossover with natural/organic market

72% of women that buy natural or organicpersonal care products believe in beauty fromwithin vs. 49% of mainstream product buyers

Very fuzzy understanding of nutricosmetics Fewer than 1 in 10 understand the definition, but

nearly three times that claim to be buyers

Beverages dominate the category

Antioxidants top ingredient lists; collagen rising

More trust in soft benefits in drinks vs. foods

Sources: Datamonitor analysis, Pink Report (2008)

B t h lth f d & d i k k t


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Beauty health foods & drinks, market

size & projected growth


USA 76.7 133.9 11.8%

Japan 660.8 890.6 6.2%

Germany 107.0 164.1 8.9%

UK 85.6 136.3 9.7%

France 193.4 264.1 6.4%

Russia 2.1 11.4 40.3%


Only Japanese consumers appear to be inclined to purchase beauty

health products in any great numbers at the present time


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Beauty health product highlights


Shiseido Beauty

Exhortation Functional

Drink: Japan

Grapefruit flavor drink has

brown rice vinegar (rich in D

amino acids), collagen,

hyaluronic acid, fiber and more

Product calms the body and

helps the skin with AlphaWave

L-theanine plus biotin, collagen

and hyaluronic acid

Drink contains 2600mg of

HTC collagen per bottle

and apple polyphenol plus

ceramide, vitamin C,

coenzyme Q10, hyaluronic

acid and vitamin E

BeautyFoods Nightly

Beauty Drink Mix: USA

Fancl HTC Tense-Up

Ex Collagen Drink:

Japan

N P d S d


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New Product Scorecard

0255075

100125

150175200225250

Hearthealth

Digestive&

immunity

health

Bone &joint

health

Cognitivehealth

Energyhealth

Beautyhealth

New product reports in USA in 2010, by functional food &

beverage benefit per Product Launch Analytics


l


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Conclusions

Health and indulgence can go together

50% of USA shoppers believe that healthy food can betasty and enjoyable

Skepticism is dampening functional sales

Simplified nutritional labeling can build trust

Make sure front-of-pack marketing is consistent withnutritional details on the back of the pack

Build on what consumers already believe

Consumers already see fruits/vegetables, fish/seafood and

dairy as functional Ensure consumers are aware of consumption targets

Targets like five a day fruits/vegetables give consumerssomething to shoot for


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Thank you!

Tom VierhileDirector, Product Launch Analytics

Datamonitor

[email protected]

585-396-5128
mailto:[email protected]:[email protected]

Tom Vierhile Updated Onsite

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