U.S. consumers are getting the message about eating right. Increasingly, consumers are looking for healthy options and this trend is expected to push growth in the functional foods category to between 8.5% and 20% annually. In their report, “Leveraging Growth in the Emerging Functional Foods 635952_vitamin_cIndustry: Trends and Market Opportunities,” PricewaterhouseCoopers LLP (PwC) analysts value the U.S. market for this category at between $20-$30 billion in annual sales. According to PwC, functional foods are “fortified with nutritional and disease-preventing qualities that aim to promote better health and well-being, prevent the onset of chronic diseases and increase longevity.”

By product type, the U.S. market breaks out as follows:

  • Soft beverages (think vitamin water) $9.6 billion
  • Dairy (especially yogurt) $6.8 billion
  • Bakery & cereals $4.6 billion
  • Confectionery $2.3 billion
  • Savory snacks $0.5 billion
  • Other $3.4 billion

Advertising these foods is all about appealing to consumers’ sense of health. Here’s how the market breaks out by health ‘benefit’:

  • Energy $7.9 billion
  • Heart health $5.0 billion
  • Bone health $3.7 billion
  • Gut health $0.7 billion
  • Other $9.9 billion

According to PwC, as competition heats up, smart marketers will be following these fundamentals:

  • Position the product as having an easy-to-feel effect – i.e. energy boost
  • Use innovative packaging to justify premium pricing
  • Educate through advertising so consumers learn the benefits of the products
  • Target a consumer niche

PwC analyst Glenn Pappalardo explains that functional foods is a fast-changing industry but one that is expected to last. Consumers are anxious take control  of their health and he sees the Baby Boomers as a large potential market. In addition to branded products, private label options are appearing on the market. The study notes ample opportunity for niche players in this industry. As competition heats up, so will marketing.

[Source: PWC release August 2009]