2 Insights Into Tomorrow’s Nutraceutical Consumers Good morning.My name is John Band, I’m a Senior Analyst with Datamonitor.And Im here to talk to you about “Insights into Tomorrow’s nutraceutical consumers”John BandMarch 2006
3 Agenda Market context Consumer insights Conclusions Lifestyle health problems are on the riseHealthy eating is increasingly part of consumers’ livesPeople do not believe manufacturers’ health claimsConsumers have an attitude-behavior gap over healthy eatingConclusionsThe Purpose of this presentation…To talk to you briefly about current consumer trends and industry developments driving the market,then look at some relevant consumer insights regarding healthand then finish of on some conclusions and possible actions
4 Nutraceutical consumption is growing fast Market contextNutraceutical consumption is growing fastThe nutraceuticals market is much larger in the US than in EuropeThe US nutraceutical market was worth US$18.9bn in 2004, with annual growth averaging 7.2% betweenThe European nutraceuticals market is less developed than that in the US with sales of US$5.0bn in 2004, but is growing slightly faster at 7.4% a yearDespite Europe's larger population, its nutraceutical sales are less than one-third of the US value. This partly reflects Europeans' greater tendency to consume natural, unprocessed food rather than making up their health needs with fortified processed foodstuffs - however, it also reflects a less sophisticated nutraceutical product range.
5 What are the consumer trends driving growth? Market contextWhat are the consumer trends driving growth?3 VERY STRONG CONSUMER TRENDS UNDERPIN THE POTENTIAL FOR FUNC F/Ds MARKETEuropean and US survey of 3,200 consumers we took last year:91% agreed that “Improving your physical health” is ‘important’ or ‘very important’64% have taken ‘more’ or ‘significantly more’ “active steps to improve their physical health” compared to the previous yearSales of OTC products, VMS, herbals and use of alternative therapies are up in Europe, particularly UKPeople are taking more responsibility for their own health:Shift from state to individual – people are encouraged to self-diagnose and take a more active interest in maintaining healthMore information is freely available (Web, helplines) and more info available in magazines, newspapers.Consumers aged 50+ are a large and fast growing demographic.Account for ~1/3 of Europeans. In 20 years time will account for 48% (almost half!)And those who grew up in 1960s have no intention of aging gracefully – want to enjoy a “2nd youth”- they want fun, active lives and see themselves on average as being years younger – so care about their looks too.TAKE OUT – There are substantive, Long Term drivers positively impacting the functional foods industryRising consumer awareness of, and active interest in healthGrowing trend towards self-medicationAn aging population concerned with health and beauty
6 What are the key developments within the industry? Market contextWhat are the key developments within the industry?Technological advancements in ingredients:New functionalityEfficacyTaste & usabilityIndustry push creating more opportunities for creating ‘better’ functional products and targeting more health conditions.
7 Formulation developments have affected a number of ingredients Market contextFormulation developments have affected a number of ingredientsRecent data has linked calcium consumption to increased weight lossStudies showed that subjects ingesting lowest levels of calcium were six times more likely to be overweightPlays large role in energy productionRecent findings show that CoQ10 supports oral and gum healthCoQ10 depletes with ageAssociated with prostate health, eye health and cancer preventionNew application in skin health and anti-aging have been developedCALCIUMCoQ10LYCOPENEHERE ARE JUST A FEW EXAMPLES1) New uses for established ingredients:Calcium – linked to weight lossCoQ10 – new uses for oral and gum healthLycopene – new applications in skin health and anti-aging2) Improved formulations for existing ingredients:Omega 3 – heat-stable + tasteless formatBlack Cohosh – increased efficacy in treating female health issuesGlucosamine – usable in more product categories (beverage and confectionery)SO…the industry is in increasingly better position to meet consumers functional health needsFishy taste, texture and instability have kept growth relatively lowNew powder form of omega-3 is heat-stable and tasteless and can be used in foods and drinksEffective remedy for female health issues such as estrogren imbalance and menopauseNew studies are encouraging for efficacy in treatment of hormonal shiftsArthritis and joint disease are increasingly concerns for Baby BoomersNew formulations are not shellfish-derived and can be used widelyBeverage and candy forms are growing in popularityOMEGA-3BLACK COHOSHGLUCOSAMINE
8 Market contextRelationships are tightening between ingredient suppliers and CPG manufacturersFood and drink manufacturers are much more cautious and bound by more formulation constraints than supplements manufacturers, who can quickly adapt to new trends and experiment with new formulations and productsIngredients suppliers fall into one of two groups with the latter slowly growing in popularityTraditional suppliers (75%)Full-service providers (25%)Partnerships and joint ventures are often the most effective way to develop new functional products and stay ahead of trendsPartnerships and joint ventures are often the most effective way to develop new functional products and stay ahead of trendsCollaborating companiesProductGeneral Mills and DuPont8th Continent SoymilkHain Celestial and CargillRice Dream HeartwiseP&G and PharmaviteOlay VitaminsSource: Datamonitor
9 Strong growth in the usage of nutraceutical claims Market contextStrong growth in the usage of nutraceutical claimsThe number of nutraceutical claims made on-pack on new launches30%25.3%20012005This chart shows the trend in the usage of nutraceutical claims by CPG mfrs.Its based On Productscan tracking of new product launches.Can see in the space of 4 years there has been significant growthUS is ahead of Europe in this respect…but it tends to lead food and drink trends and can see that Europe is following the US’s lead.Demonstrates how much attention manufacturers have been giving to functional foods + drinks and hence the importance the industry attaches to themProductscan: Nutraceutical = any fortified or functional food claims (High Amino Acids, Calcium, Collagen, Fiber, Fluoride, Minerals, Omega-3, Polyphenols, Vitamins, Antioxidants)Why Beverages higher? 1) Sports & Energy drinks 2) drinks are a more convenient format for nutrient delivery25%23.7%% of new product launches20%16.1%15.1%15%11.5%10.5%10%9.9%5.5%5%0%FoodBeveragesFoodBeveragesEuropeUSSource: ProductScan analysis of 30,000 launches tracked per year across Europe + US
10 Agenda Market context Consumer insights Conclusions Lifestyle health problems are on the riseHealthy eating is increasingly part of consumers’ livesPeople do not believe manufacturers’ health claimsThere is an attitude-behavior gap over healthy eatingConclusionsSo that provides a bit of background context to functional food and drink developmentNow I want to focus on some relevant consumer insights so you can more successfully market your productsExamine consumers thinking and behavior with respect to functional food and drinks
11 Lifestyle health problems drive nutraceutical consumption Insight: lifestyle health problems are risingLifestyle health problems drive nutraceutical consumptionWhich of the following are you concerned about on a regular basis?0%10%20%30%40%50%60%70%Oral healthEnergyGut healthSkin, hair,nailsMoodHeart healthEye healthAnti-agingBone healthAlzheimer'sBased on a survey of 1000 US adults in 2005Shows which health concerns people care about most on a day-to-day basisEssentially, peoples health concerns are short-termistIts these “lifestyle” needs on the lefthand-side that are what matter most to consumers on a day-to-day basis. Not the medical, long term health needs (on the right)The reason being is that it is the things that affect our life today, not in the distant future, that concern us most:“I want the energy to do all the things I need to do today”“I want to be presentable when I meet my date”“I want to make up for all that rubbish I ate the other day”“I want to get rid of that hangover”Performance and presentation concerns have the highest daily relevance, and not the more medical concerns such as heart or bone healthTAKE OUT: Conditions that most people care about regularly, not those that are most important = largest addressable market.% of US adults, 2005HIGHERDaily RelevanceLOWERSource: Datamonitor / Nutraceuticals World survey 1,002 US consumers, 2005
12 Gut health concerns motivate mainstream consumers Insight: lifestyle health problems are risingGut health concerns motivate mainstream consumersThe number of people who regularly consume specific heart- and bone-healthy nutraceuticals in Europe is far lower than the number of people suffering from associated conditions.The reverse is true for gut health, because gut concerns are important to all consumers.One of the biggest growth areas in European functional foods market is gut health (probiotic yoghurts etc.)Analysis of this market reveals powerful consumer insights….The gut health market for functional products is not primarily driven by illnessWe compared the number of regular users of functional foods/drinks (prolonged repeated pattern of use of FF/D) that target a specific health condition with those that suffer from related illness and those at risk of suffering.Number of gut health consumers outnumber consumers diagnosed with specific gut health problems by more than double.The use of probiotic is not only driven by those who are suffering from poor gut health but those who find that these products add value to their lives. There are a number of reasons for this widespread use of gut health products:· gut health products have been heavily marketed to all health-conscious consumers;· gut health products often claim to offer other benefits, such as boosting immunity;But importantly, gut health has high daily relevance – for many it offers a “quick fix” for their junk diets, without needing to make drastic lifestyle changes.(millions of people)Nutraceutical consumersThose with illnessAt-risk populationHeart health4.0107.4191.4Bone health2.273.0117.3Gut health220.127.116.11
13 Gut health concerns motivate mainstream consumers Insight: lifestyle health problems are risingGut health concerns motivate mainstream consumersThere is another v important reason behind the success of the gut health market:And that is that gut health offer immediate mental well-being – Gut health products have adopted a lifestyle rather than a strictly medical positioning.This chart shows the result of an in-depth study among Swedish and Finnish consumers of probiotic foods, (Nutrition and Food Science in 2003), shows how consumers relate to probiotic yogurts:Pleasure was important, but so was well-being both in terms of physical and mental wellbeingPhysical wellbeing was concerned with the effect of the yogurt on the gut and its direct health effects.Mental wellbeing, by contrast, was a reflection of how consumers felt about their healthier diet.In terms of mental well-being benefits, the yogurts offered consumers:· a feeling of control over their life and health;· a feeling of superiority in their healthier than average lifestyle;· general feelings of lightness, energy and contentment that reflected their sense of better health.Physical well-being = SCIENCE BIT – provides the base / foundation for credibilityTaste = SENSORY BITMental well-being = FEELGOOD BIT – Feelgood today about looking after yourself for 2mrwThese lifestyle benefits to the consumer are indirectly related to the physical wellbeing issues but in many ways they are more important because they affect how consumers think and feel about the product. They get emotional benefits knowing that this is doing good for them.This demonstrates the likely future development path of functional foods – consumers being attracted to products not just for the specific benefits but also for the feeling of wellness it gives them.This is how the gut health market gets those 2.3m extra loyal consumers – offering feelgood allows them to target a broader market beyond those who are ill or at riskAnd gut health products are marketed ‘positively’ not focusing on the problem or being threat-based, but offering solutions and benefitsConsumers enjoy “indulging” in health – they want to feel good nowReasons to choosefunctionalyogurtsWellbeingTaste and sensoryqualityPhysical wellbeingMental wellbeingPromotes healthPromotes healthLightness, energy,Lightness, energy,Pleasure andPleasure andeffectseffectscontentmentcontentmentenjoymentenjoymentGut friendliness,Gut friendliness,Healthiness,Healthiness,Freedom of choice,Freedom of choice,microbesmicrobessuperioritysuperiorityvarietyvarietyImprovedImprovedControl over lifeControl over lifeFruit and berries,Fruit and berries,digestiondigestionand healthand healthsugarsugar
14 There is a market for targeting long term health Insight: lifestyle health problems are risingThere is a market for targeting long term healthOf course, there are potentially large addressable markets for targeting medical / long term health concernsThis isn’t to suggest that only immediate markets like gut health have relevance – clearly a sizeable proportion of nutraceutical consumption is seen in other categories. And it’s these categories that have the largest audience potential, with a large and increasing number of people suffering from serious lifestyle conditions.
15 Heart health is a growing unmet need Insight: lifestyle health problems are risingHeart health is a growing unmet needThe number of people suffering from heart disease is rising as the population agesNumber of heart disease sufferers, :Starts to affect significant numbers of people in their 40s and aboveApproximately 20-30% of people in most European countries suffer from hypertensionSource: Datamonitor
16 Bone health concerns are also driven by an ageing population Insight: lifestyle health problems are risingBone health concerns are also driven by an ageing populationThe number of people suffering from bone health conditions is risingEuropean osteoporosis and osteopenia sufferers (millions)More than 1 in 6 people in the UKNB: Osteoporosis = brittle bones; osteopenia = weak but not brittle bonesSource: Datamonitor Healthcare Business Unit
17 Insight: lifestyle health problems are rising However, consumers are less convinced of efficacy to target long term healthConsumers are less convinced that functional foods and drinks can effectively treat long term / medical health conditions.They have greater faith in their efficacy to treat short term lifestyle conditions such as energy boosts and presentationMaking your job harder to target the medical conditions
18 Healthy eating is increasingly part of consumers’ lives Insight: healthy eating is part of everyday lifeHealthy eating is increasingly part of consumers’ livesIn all countries, around 30% of consumers consider it ‘very important’ to improve physical health through dietThis suggests a hard core of healthy living and healthy diet advocatesThe extent to which mainstream consumers follow their lead depends strongly on local and cultural factorsPeople increasingly understand the importance of a healthy dietEuropean and US Consumer Survey
19 Successful products focus on desires for a healthy lifestyle Insight: healthy eating is part of everyday lifeSuccessful products focus on desires for a healthy lifestyleDanone:“Keep your Inner-self healthy and happy”“Thick and creamy yoghurt”A couple of examples of a more “lifestyle” than “medical” positioning:Danone’s ads don’t focus on the science part, in fact no explanation whatsoever – purely on feeling better, being happier – mental well-being“Keep you inner self health and happy”Yakult’s “friendly bacteria” ads with the ‘Nerd’ and the attractive girl.In the ads: she appears happy and as if she’s having fun (by looking after her gut health!) and doesn’t care what others think to be seen with the ‘nerd’ when at a party / café – because she has gained confidence (from looking after herself) – In Control, Feeling Superior.These are some of the messages these ads portrayYakult:“Friendly bacteria”Ads about not caring what others think – feeling superior to the average Joe
20 Consumers want quality of life not just longer life Insight: healthy eating is part of everyday lifeConsumers want quality of life not just longer lifeWhy consumers want the ‘feelgood’ factor:Life expectancy is rising, we expect to live longerBut it’s not enough to just prolong an average / unfulfilled lifeWorld Values Survey data shows that consumers values are shifting from materialism to post-materialism – from security to quality of lifeWe want to be happier, be in control, live the celebrity lifestyle, have satisfying careers not just secure ones… = Quality of lifeWhy is that feelgood factor, that mental wellbeing so important?Because it increasingly ties into some fundamental values that consumers now hold.Life expectancy to rise from 77 years (in 2000) to 81 years by 2020.But we want a good quality of life, not just to prolong an average/hum-drum life.WVS data - Ronald Inglehart, studying shifts in socio-cultural values since shows that consumers values shift from materialist to post-materialist – Materialism is characterized by possessions, money and security…post materialism is characterized by emotional fulfilment, new experiences and quality of life.SO…if you can offer consumers mental wellbeing – be it through offering greater control of their lives, a feeling or esteem, confidence etc – then you are adding, in whatever small way, to their quality of life. That is something that consumers can relate to very strongly.
21 People do not believe manufacturers’ health claims Insight: people do not believe health claimsPeople do not believe manufacturers’ health claimsConsumers across the US and Europe are skeptical of the product claims made by food and drinks manufacturersThey view them as less trustworthy than banks, insurance companies, utilities or car dealers.European and US Consumer Survey
22 People do not believe manufacturers’ health claims Insight: people do not believe health claimsPeople do not believe manufacturers’ health claimsPeople are especially skeptical of health-boosting claims (rather than general nutritional claims), which is a serious barrier to wider nutraceutical adoption.Snake-oil salesmen, psuedo-science and promises of ‘miracle cures’ have eroded public confidenceEuropean and US Consumer Survey
23 Insight: people do not believe health claims Consumers do not value specific ingredients as highly as manufacturers thinkManufacturers’ perceptions of consumers’ awareness of and purchasing driver for Omega 3, and actual consumer survey dataEXPLAIN CHART.Awareness – Blue – the % of consumers that Manufacturers think are aware of ingredientRed - how many consumers are actually aware of ingredientPurchasing - Blue – the % of consumers that Manufacturers think would be strongly influenced to buy product with this ingredientRed - how many consumers would actually buy food/drink if contained the ingredientSO:Mfrs underestimate consumer awareness but overestimate the importance they attach to the ingredient.So there is a role for manufacturers to educate consumers about the BENFITS and VALUE of functional ingredientsManufacturers80%74%Consumers70%60%56%60%Manufacturers need to focus on educating consumers about the benefits of functional ingredients50%36%40%30%20%10%0%AwarenessPurchasing DriverSource: Datamonitor / Nutraceuticals World survey 1,002 US consumers; local trade interviews, 2005
24 Insight: people do not believe health claims Consumers do not value specific ingredients as highly as manufacturers think88%79%96%69%0%10%20%30%40%50%60%70%80%90%100%AwarenessPurchasingDriverManufacturersConsumersCalcium75%74%Antioxidants52%38%67%22%GlucosamineIt is a similar story with a number of other ingredients – such as Calcium, Antioxidants and Glucosamine.So there are consumers, who, despite being aware of ingredients to not rate them as being that important.This leaves an information gap that manufacturers can help fill:If consumers don’t appreciate benefits of ingredients – so educate them – do they understand what specifically it can do for them – the more specific the claim the more likely its benefits will be understood and believed and hence appreciatedIf consumers aren’t that convinced of benefits of ingredients are so important to their lives – so convince them of well-being – both physical AND mental. (mental well-being benefits, makes them more relevant to their daily lives.SO: to increase importance of these ingredients -need to EDUCATE consumers as to the BENEFITS it provides and tell consumers how this adds to their quality of life.Source: Datamonitor / Nutraceuticals World survey 1,002 US consumers; local trade interviews, 2004
25 Insight: people do not believe health claims Manufacturers must communicate effectively with consumers to gain their trustFocus tightly on specific health benefitsFunctional food and drinks cannot adopt a general wellness position: although consumers believe that certain ingredients can benefit specific areas of wellness, they tend to reject claims that a product can produce change for the better across a range of health conditions.Seek endorsements from reputable organizations40% of consumers say that specialist advice would make them more likely to buy a cosmeceutical product. This is also the case for nutraceuticals, which tend to have similar functional benefits.For example, Novartis’ Aviva range, which claimed to be able to help bone, heart and gut health, was withdrawn partly because consumers were not ready for an ‘umbrella’ health range.Related to this is the establishment of credible labeling schemes. Part of the reason for the success of Japan’s nutraceutical market is that nutraceuticals have had specific government designated status (FOSHU, or Foods for Specific Health Use) since 1991
26 Consumers have an attitude-behavior gap concerning healthy eating Insight: the attitude-behavior gapConsumers have an attitude-behavior gap concerning healthy eatingYounger consumers show the biggest gap concerning general healthIn both Europe and the US, consumers are highly likely to say they believe that improving physical health is important, but are less likely to take active steps to improve their physical health – the spirit is willing, but the flesh is weak.Young Adults are almost 20% less likely to have taken steps over the last year to improve physical health than they are to believe that physical health is important, whereas this gap is as low as 4% among Late Senior consumers.Consumers’ likelihood of taking active steps to improve physical health as % of stated importance of improving physical health, Europe and US, %
27 Consumers have an attitude-behavior gap concerning healthy eating Insight: the attitude-behavior gapConsumers have an attitude-behavior gap concerning healthy eatingMen show the biggest gap when it comes to healthy eatingThere are deep-seated differences in attitudes: while attempting to follow a healthy diet is expected for women, many men view this as un-masculine and as a waste of time.This difference is particularly pronounced in the US, but it also exists in Europe.
28 Consumers want good taste and ‘fit’ with their lifestyles Insight: the attitude-behavior gapConsumers want good taste and ‘fit’ with their lifestylesTaste is still more important than healthConvenience dominates lives – the demand for quick fix solutionsFew people like making significant lifestyle changes (e.g. only 1% of dieters achieve permanent weight loss) - people want quick fixesSo make products simple and easy to useDoes the product meet the occasion? – portable, ready-to-use, single serve etc.One cant get into a mindset thinking that people are completely health obsessed. Taste still edges health in terms of consumers choice of food and drink:in 2004 Adweek reported a poll that showed that 68% of US respondents believe that “eating is one of the pleasures in life”According to 2003 research by InsightExpress, 80% of Americans are not willing to sacrifice taste for healthier, less-flavorsome foodsWhen Datamonitor asked European and American consumers in September 2004 what the most important factor was for their choice of a light meal, taste was #1 reasonSo no matter how good you product is, if it doesn’t taste good you will lose customers.Its also vital to not overlook the importance of creating products that conveniently ‘fit’ with consumers hectic lifestyles.Everyone is time-pressured these days. So don’t make using your products overly complicated (for example complex regimes too follow)And ensure that your products match the “occasion” they are targeting – e.g. for OTG – portable, resealable, single serveUltimately you are providing a food or drink, not a medicine, so its got to taste good like all food should.
29 Products that address the attitude-behavior gap Insight: the attitude-behavior gapProducts that address the attitude-behavior gapUse natural ingredients for taste and authenticityTargeted functional products can be made from natural ingredients, but many natural products currently just make general health claims.Tap into demand for ‘accessible premium’ productsSome nutraceutical categories can be marketed as strongly aspirational even at a relatively low price point.SmartFX Snax bar is an energy product promoting alertness that features 100% natural ingredients with no chemical additives or supplements.Aloe Vera is naturally functional, as evidenced in Natural High’s Aloe Vera Juice; however, marketers could benefit from stressing its specific rather than general functional benefit.Virgin Lands Avocado Oil aims to simultaneously position itself as an exotic, trendy product for conspicuous consumption and a heart healthy functional food.Carmen Creek Bison Burgers follow a similar route, also appealing to male consumers’ desire to consume upscale but masculine product.
30 Agenda Market context Consumer insights Conclusions Lifestyle health problems are on the riseHealthy eating is increasingly part of consumers’ livesPeople do not believe manufacturers’ health claimsThere is an attitude-behavior gap over healthy eatingConclusions
31 ConclusionsThe largest addressable market is in ‘high daily relevance’ areas such as performance boosts and presentation rather than long term disease prevention / treatment.Long term health needs can be exploited, but you need to show immediate benefits (mental well-being) to reach the broadest market among those that are interested.In either case, offer consumers immediate benefits – mental well-being / feelgood factor and communicate these in a positive, non-threat based way.Consumers are skeptical of product claims, so build your products’ functionality on credibility – offer specific health benefits, don’t be general.To overcome the attitude/behavior gap, the product needs to taste good and ‘fit’ with their lifestyle.Immediate mental wellbeing = make people feel good today about what they are doing for tomorrow.
32 Don’t forget: is your offering better than alternative solutions? Does your offering really provide a better consumer solution than existing options?Often you will be up against some powerful competitors:Medical functional food/drink vs.Over-the-counter medicinesEnergy boost food/drink vs. CoffeeAnti-stress functional food/drink vs. Cigarette; AlcoholOften it won’t be. So don’t invest in hasteIn many cases you will be up against alternatives that aremore crediblemore efficaciouscheaper ormore pleasurable for consumers to use.So consider carefully who is in your competitor-field, especially from non-food and drink categories.Its important to be a better alternative at the right occasion.For example, teeth cleaning chewing gums are a better solution for between-snacking when on-the-go than the alternative = nothing; carry around toothbrush/mouthwash. This is one of the key success factors behind those products.
33 Checklist for success Your offering has: Why it’s important to consumers:High daily relevanceSpecific, clearly communicated benefitsOffers immediate mental well-beingPositively marketed, lifestyle positioningTasteConvenient fit with lifestylesBest vehicle / format for delivery“Something I care about”“I understand it, I believe it”“Makes me feel-good now”“It’s yum” - (I’ll buy it again)“I can get it, it’s easy to use”“It’s my best bet for getting this”And I’ll leave you with this checklist of what your product offering should contain to maximize chances of success.
34 Contact us for your research requests… John Band Managing AnalystJill-Marit Lerum Cornes, Lead ConsultantGiles Watts Sales DirectorGordon Cousland, Client Services DirectorAnd I’ll leave you with this checklist of what your product offering should contain to maximize chances of success.
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