UK Functional Foods

UK Functional Foods

Functional foods — i.e. those that claim to have other health benefits in addition to their nutritional value — tend to be promoted mainly as being able to help prevent heart disease, digestive problems and certain bone conditions. As these particular ailments are often age-related, the ageing profile of the UK population will continue to support and promote sales of such products. Furthermore, functional foods largely represent healthier versions of mainstream foods and drinks, and are sold through major grocery outlets. Thus they allow consumers to eat and drink more healthily without radically changing their diet.

One of the principal food types in this market are functional breakfast cereals. These are fortified with extra fibre (and often vitamins and minerals) to aid digestion and improve bone health. In addition, the wheat and other grains they tend to contain also have properties beneficial to the heart. Other major functional products in the market are yoghurt drinks and yoghurts with probiotic bacteria. These improve digestion, with some now also containing plant stanols or sterols, which lower cholesterol levels and are `good for the heart'. Cholesterol-lowering margarines are also an important functional food sector, as are soya milks. The latter improve heart and bone health, and are claimed to reduce the risk of some cancers.

Smaller product sectors within the functional foods market include functional cereal bars and breads, Columbus eggs, and functional fruit juices. The health-giving ingredients of all these, including vitamins, minerals and supplements, continue to be added to other foods. Notably, omega-3 fatty acids were added to a range of products in 2005 and 2006.

The functional foods market grew by 14.9% by retail sales value in the 12 months to September 2006. However, growth in value terms varied widely between the different sectors over this period: there were strong increases in sales of yoghurts and bread (although the latter was still only a relatively small product sector); a rise of around 10% was registered in each of the breakfast cereals, yoghurt drinks and soya milk sectors; and there was lower growth in sales of margarines and cereal bars. These trends identify some possible maturity in the formerly more rapidly growing sectors of cholesterol-lowering margarines, probiotic yoghurt drinks and soya milk.

Combined, functional breakfast cereals and probiotic yoghurt drinks and yoghurts accounted for more than three-quarters of the functional foods market by value in 2005/2006, with cholesterol-lowering margarines, soya milk and cereal bars representing much of the balance.

According to Nielsen Media Research (NMR), main media advertising expenditure on functional foods (excluding functional breakfast cereals and cereal bars) fell by 8.9% in the year ending June 2006, although it had risen by nearly 50% in the year to June 2005. Two-thirds of expenditure in 2005/2006 was on advertising of probiotic yoghurts and yoghurt drinks, and much of the balance was spent on promotion of cholesterol-lowering margarines and soya milk.

Major food manufacturers involved in the market for functional foods are: Kellogg, Nestlé, Weetabix and Quaker in the functional breakfast cereals and cereal bars sectors; Danone, Müller, Yakult Honsha, Yeo Valley and Onken in the probiotic yoghurts and yoghurt drinks sectors; Unilever and McNeil Nutritionals in the cholesterol-lowering margarines sector (and now also in the yoghurts and yoghurt drinks sectors); Alpro and So Good in the soya milk sector; Noble Foods in the Columbus eggs sector; Allied Bakeries in the functional bread sector; and Tropicana in the functional fruit juices sector.

Growth in the functional foods market is forecast to slow over the next 5 years (to 2010/2011), with the rate of increase becoming more similar to that for traditional food products. The market for functional versions will mature over this period, as most of the potential consumers for these types of products become purchasers of them.

1. Introduction
background
DEFINITION
INFORMATION SOURCES

2. Strategic Overview
MARKET DYNAMICS AND SEGMENTATION
Factors Driving or Affecting the Market
The Claims of Functional Foods/Healthier Eating
The Ageing Population
Table 1: The UK Population by Age Group (million and %), 1971, 1981, 1991, 2001, 2004e, 2011f, 2021f and 2031f
Figure 1: Proportion of the UK Population Aged 45 and Over (%), 1971, 1981, 1991, 2001, 2004e, 2011f, 2021f and 2031f
Table 2: Trends in Life Expectancy by Sex (years), 1900, 1971, 1976, 1981, 1986, 1991, 1996, 2001 and 2003
Figure 2: Trends in Life Expectancy by Sex (years), 1900, 1971, 1976, 1981, 1986, 1991, 1996, 2001 and 2003
The Regulatory Situation
Market Size
Table 3: The Functional Foods Market in Great Britain by Product Sector by Value at Current Prices (£m at rsp and %), 2003/2004, 2004/2005 and 2005/2006
DISTRIBUTION
COMPETITIVE STRUCTURE
ADVERTISING
THE CONSUMER
MARKET FORECASTS
Table 4: The Forecast Functional Foods Market in Great Britain by Value at Current Prices (£m at rsp), 2006/2007-2010/2011†

3. The Functional Foods Market
BACKGROUND
Health Benefits
Table 5: Health-Giving Components in Foods by Health Sector
MARKET SIZE
The Total Market
Table 6: The Functional Foods Market in Great Britain by Product Sector and Brand by Value at Current Prices (£m at rsp and %), 2003/2004, 2004/2005 and 2005/2006
Product Sectors
Figure 3: The Functional Foods Market in Great Britain by Product Sector by Value (%), 2005/2006
Breakfast Cereals
Yoghurt Drinks
Figure 4: The Functional Yoghurt Drinks Sector in Great Britain by Brand by Value (%), 2005/2006
Yoghurts
Figure 5: The Functional Yoghurts Sector in Great Britain by Brand by Value (%), 2005/2006
Margarines and Spreads
Figure 6: The Functional Margarines and Spreads Sector in Great Britain by Brand by Value (%), 2005/2006
Soya Milk
Figure 7: The Functional Soya Milk Sector in Great Britain by Brand by Value (%), 2005/2006
Cereal Bars
PUFA-Enriched Eggs
Bread
Figure 8: The Functional Bread Sector in Great Britain by Brand by Value (%), 2005/2006
Fruit Drinks and Water
Figure 9: The Functional Fruit Drinks and Water Sector in Great Britain by Brand by Value (%), 2005/2006
Milk and Cheese

4. Advertising and Promotion
MAIN MEDIA ADVERTISING EXPENDITURE
Table 7: Main Media Advertising Expenditure on Functional Foods† by Brand (£000), Years Ending June 2004-2006
PROMOTIONAL ACTIVITY
EXHIBITIONS AND CONFERENCES

5. Distribution
DISTRIBUTION BY RETAIL OUTLET
Table 8: Distribution of Major Functional Food Types in Great Britain by Retail Sales Value (%), 2003/2004 and 2004/2005

6. An International Perspective
THE GLOBAL MARKET
WESTERN EUROPE
THE US
JAPAN

7. PEST Analysis
POLITICAL AND ECONOMIC FACTORS
SOCIAL AND DEMOGRAPHIC FACTORS
TECHNOLOGICAL FaCTORS

8. Consumer Dynamics
OVERVIEW
Table 9: Summary of Research Findings Regarding Consumers' Habits and Attitudes Concerning Functional Foods and Related Health Issues (% of respondents), October 2006
CONCERN ABOUT THE INCREASING NUMBERS OF OVERWEIGHT PERSONS/LEVELS OF OBESITY, AND ABOUT THE IMPACT ON HEALTH
Table 10: Concern About the Increasing Numbers of Overweight Persons/Levels of Obesity, and About the Impact on Health (% of respondents), October 2006
EFFORTS TO EAT MORE HEALTHILY
Table 11: Efforts to Eat More Healthily (% of respondents), October 2006
ATTITUDES TOWARDS FOODS WITH HEALTH CLAIMS
Interest in Buying Foods With Health Claims
Table 12: Interest in Buying Foods with Health Claims (% of respondents), October 2006
Lack of Belief in Health Claims Made by Food and Drink Manufacturers
Table 13: Lack of Belief in Health Claims Made by Food and Drink Manufacturers (% of respondents), October 2006
PRODUCT USAGE
Probiotic Yoghurts
Regular Eating of Probiotic Yoghurts
Table 14: Regular Eating of Probiotic Yoghurts (% of respondents), October 2006
Occasional Eating of Probiotic Yoghurts
Table 15: Occasional Eating of Probiotic Yoghurts (% of respondents), October 2006
Probiotic Yoghurt Drinks
Regular Drinking of Probiotic Yoghurt Drinks
Table 16: Regular Drinking of Probiotic Yoghurt Drinks (% of respondents), October 2006
Occasional Drinking of Probiotic Yoghurt Drinks
Table 17: Occasional Drinking of Probiotic Yoghurt Drinks (% of respondents), October 2006
Cholesterol-Lowering Margarines
Regular Eating of Cholesterol-Lowering Margarines
Table 18: Regular Eating of Cholesterol-Lowering Margarines (% of respondents), October 2006
Occasional Eating of Cholesterol-Lowering Margarines
Table 19: Occasional Eating of Cholesterol-Lowering Margarines (% of respondents), October 2006
Soya Milk
Regular Drinking of Soya Milk
Table 20: Regular Drinking of Soya Milk (% of respondents), October 2006
Occasional Drinking of Soya Milk
Table 21: Occasional Drinking of Soya Milk (% of respondents), October 2006
Fortified Bread
Regular Eating of Fortified Bread
Table 22: Regular Eating of Fortified Bread (% of respondents), October 2006
Occasional Eating of Fortified Bread
Table 23: Occasional Eating of Fortified Bread (% of respondents), October 2006
CURRENT DIET VERSUS EATING FOODS WITH HEALTH CLAIMS
Table 24: Current Diet Versus Eating Foods with Health Claims (% of respondents), October 2006
DEMAND FOR MORE PROMOTION OF HEALTHY FOODS AND LESS PROMOTION OF UNHEALTHY FOODS
Table 25: Demand for More Promotion of Healthy Foods and Less Promotion of Unhealthy Foods (% of respondents), October 2006

9. Company Profiles
INTRODUCTION
ASSOCIATED BRITISH FOODS PLC — ALLIED BAKERIES LTD
Profitability
Table 26: Financial Results for Associated British Foods PLC (£000 and %), Year Ending 13th September 2003, 53 Weeks Ending 18th September 2004 and Year Ending 17th September 2005
ALPRO (UK) LTD
Profitability
Table 27: Financial Results for Alpro (UK) Ltd (£000 and %), Years Ending 31st December 2003-2005
COCA-COLA ENTERPRISES LTD
Profitability
Table 28: Financial Results for Coca-Cola Enterprises Ltd (£000 and %), Years Ending 31st December 2003-2005
DAIRY CREST GROUP PLC
Profitability
Table 29: Financial Results for Dairy Crest Group PLC (£000 and %), Years Ending 31st March 2004-2006
DANONE LTD
Profitability
Table 30: Financial Results for Danone Ltd (£000 and %), Years Ending 31st December 2003-2005
W JORDAN (CEREALS) LTD
Profitability
Table 31: Financial Results for W Jordan (Cereals) Ltd (£000 and %), Years Ending 28th February 2003, 29th February 2004 and 28th February 2005
KELLOGG MARKETING AND SALES COMPANY (UK) LTD
Profitability
Table 32: Financial Results for Kellogg Marketing and Sales Company (UK) Ltd (£000 and %), Year Ending 27th December 2003, 53 Weeks Ending 1st January 2005 and Year Ending 31st December 2005
MCNEIL NUTRITIONALS LTD
Profitability
Table 33: Financial Results for McNeil Nutritionals Ltd (£000 and %), Year Ending 28th December 2003, 53 Weeks Ending 2nd January 2005 and Year Ending 1st January 2006
Müller DAIRY (UK) LTD
Profitability
Table 34: Financial Results for Müller Dairy (UK) Ltd (£000 and %), Years Ending 31st December 2003-2005
NESTLé UK LTD
Profitability
Table 35: Financial Results for Nestlé UK Ltd (£000 and %), Years Ending 31st December 2003-2005
NOBLE FOODS LTD
Profitability
Table 36: Financial Results for Deans Food Group Ltd (£000 and %), Years Ending 30th September 2003-2005
ONKEN DAIRY (UK) LTD
Profitability
Table 37: Financial Results for Onken Dairy (UK) Ltd (£000 and %), Years Ending 31st December 2002-2004
QUAKER OATS LTD
Profitability
Table 38: Financial Results for Quaker Oats Ltd (£000 and %), Years Ending 31st December 2002-2004
RACHEL'S ORGANIC DAIRY (RACHEL's DAIRY LTD)
Profitability
Table 39: Financial Results for Rachel's Dairy Ltd (£000 and %), Years Ending 31st December 2003-2005
SKANE DAIRY UK LTD
Profitability
Table 40: Financial Results for Skane Dairy UK Ltd (£000 and %), Years Ending 31st December 2004 and 2005
SO GOOD INTERNATIONAL LTD
Profitability
Table 41: Financial Results for So Good International Ltd (£000 and %), Years Ending 31st December 2003-2005
TROPICANA UK LTD
Profitability
Table 42: Financial Results for Tropicana UK Ltd (£000 and %), Years Ending 31st December 2002-2004
UNILEVER PLC
Profitability
Table 43: Financial Results for Unilever PLC (i000 and %), Years Ending 31st December 2003-2005
Table 44: Financial Results for Unilever Bestfoods UK Ltd (£000 and %), Years Ending 31st December 2003-2005
WARBURTONS LTD
Profitability
Table 45: Financial Results for Warburtons Ltd (£000 and %), Years Ending 30th September 2003, 25th September 2004 and 24th September 2005
WEETABIX LTD
Profitability
Table 46: Financial Results for Weetabix Ltd (£000 and %), Year Ending 31st July 2003, 73 Weeks Ending December 2004 and Year Ending 31st December 2005
YAKULT UK LTD
Profitability
Table 47: Financial Results for Yakult UK Ltd (£000 and %), Years Ending 31st December 2003-2005
THE YEO VALLEY ORGANIC COMPANY LTD
Profitability
Table 48: Financial Results for The Yeo Valley Organic Company Ltd (£000 and %), Year Ending 27th May 2001, 53 Weeks Ending 2nd June 2002 and Year Ending 1st June 2003
RETAILERS' OWN LABELS

10. The Future
FORECASTS 2006/2007 TO 2010/2011
Table 49: The Forecast Functional Foods Market in Great Britain by Product Sector by Value at Current Prices (£m at rsp), 2006/2007-2010/2011
Figure 10: The Forecast Functional Foods Market in Great Britain by Value at Current Prices (£m at rsp), 2006/2007-2010/2011

11. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Slips Slightly
Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), November 2005-2006
Significantly More Adults Are Willing to Borrow
Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), November 2005-2006
SPENDING FROM SAVINGS
Little Change in Spending from Savings
Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), November 2005-2006
Saving Grows in Relative Importance
Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), November 2005-2006

12. Further Sources