Functional food growth slows

June 29, 2009

Consumers are more proactive about their health, which spurred the U.S. retail market for functional foods and beverages to a 6% gain with sales totaling about $30.7 billion in 2008, according the Packaged Facts report “Functional Foods and Beverages in the U.S., 4th Edition.” However, this growth is slower than reported in 2007, in which the segment experienced an 8% growth to reach $29 billion. To some extent, the numbers reflect category maturation after an extended period of accelerated growth. Sales of the largest functional categories grew at a compound annual rate of 8% between 2003 and 2008 in retail outlets tracked by Information Resources Inc. The slowdown also reflects the weak economy in which consumers are not able to afford non-essential and more costly specialty items.

Though the market has not proven to be recession proof, it has advantages that could prevent it from being as vulnerable as most other markets. Namely, in the short term functional products may save consumers money since these foods and beverages carry nutrients that shoppers would otherwise seek in expensive nutritional supplements. While in the long run, functional products save consumers money on medical expenses by helping to prevent illness and chronic conditions.

During the five-year period from 2003 to 2008, several functionally oriented food and beverage categories performed well, including yogurt, energy drinks, nutritional snacks and trail mixes, milk substitutes and soymilk, and refrigerated blended fruit drinks, among others. Those showing significant declines included other snack/granola bars, refrigerated cranberry cocktail/drink, and juice/juice blends. Breakfast/cereal/snack bars and shelf-stable cranberry juices continued to show sales increases, however. Packaged Facts projects that total U.S. retail sales of functional foods and beverages will continue to grow at a steady pace through 2013, and reach approximately $43 billion.

Packaged Facts report