Food companies headstart in functional foods

Food companies are using their marketing muscle to take an early lead over drug makers in the battle to sell "functional food"​ to health-conscious consumers, Reuters reports. Food companies see the booming business as a way to boost sales and sharpen slim margins in an overall slow-growing market. Drug companies see it as a way to parlay their health expertise into new sales channels with access to a mass market. But early evidence suggests food firm have a leg up when it comes to getting products on shelves for the "nutraceuticals"​ market worth at least US$ 12 billion a year now and growing fast. "The food companies are better off in that they have distribution power. We are talking about consumer products and this is where distribution is extremely important,"​ said Alois Zimmermann, of Geneva private bank Lombard Odier's Nutrition Fund that invests in both pharma and food stocks. In general drug companies have few brands in supermarkets, and this is their big challenge, he said. The number of people over 65 will nearly double to 830 million in the next 25 years, making them an attractive market for health-enhancing foods and drinks. At the health care group Novartis, officials said they had pulled their Aviva line of functional foods from the British test market after consumers shunned the products supposed to lower cholesterol, strengthen bones and improve digestion. But Novartis - makers of Gerber baby food and the Isostar sports drink - is to continue with their U.S. functional foods joint venture Altus with Quaker Oats Co. Christoph Streit, food analyst at Bank Leu, said the example showed food companies were more in tune with the market. In general, analysts are positive about sales prospects for functional foods given that half of all Americans are overweight and more and more consumers are focusing on health foods. "People want to believe that they can do something healthy in a comfortable way to be able to soothe their consciences,"​ Streit said. "I think more new products will be launched on the market and that on average they can get real growth of eight per cent, more than normal foods,"​ he added. "But I don't see super growth. Over 10 per cent is unlikely," he said, but that is still two to three times faster than the rest of the food industry is growing. Source: Reuters