More Than Simple Sustenance

Consumers are turning to functional foods and beverages to treat and prevent illnesses and ailments. And opportunity is knocking within the store brand arena.

As defined by the Institute of Medicine's Food and Nutrition Board, functional foods (and, by inference, functional beverages) "encompass potentially healthful products, including any modified food or ingredient that may provide a health benefit beyond the traditional nutrients it contains." But many industry players and consumers have been stretching that definition a bit.

Steve Fay, executive vice president and sales team leader of Roscoe, Ill.-based Berner Food & Beverage, believes the line often is blurred between "health and wellness" foods and beverages and functional foods and beverages. In general, all health and wellness products are functional, he says, but, in contrast, not all functional products are healthful.

'Consumers can wrap their heads around a beverage delivery form easier than a food form.'

— Jeff Hilton, cofounder and partner. Integrated Marketing Group

"We make a high-protein recovery drink that has great functionality in speeding up recovery after a workout, but probably has very little health benefit," Fay explains. "Energy drinks function in a major way, but again, one could hardly call them healthy."

So perhaps an expanded definition is called for. Brandon Malacara, marketing director for the Benelact division of Sturtevant, Wis.-based Alliance Enterprises of SE Wisconsin LLC, asserts that functional foods and beverages have some sort of added value that allows them to work better for the consumer.

Mike Kirk, senior vice president of business development for Lathrop, Calif.-based California Natural Products, agrees, noting that a product must do something positive for the consumer (behind providing basic nutrition and easing hunger and thirst) to qualify. And that "something positive" could be anything from lowering cholesterol to boosting energy levels.

Drinks deliver

A number of trends currently playing out in the functional food and beverage space present potential store brand opportunities. And many of these trends can be found in the drink aisles because beverages are leading the way in terms of functional formulations.

"Consumers can wrap their heads around a beverage delivery form easier than a food form," explains Jeff Hilton, cofounder and partner with Integrated Marketing Group of Salt Lake City. "Beverage formulations are easier to create, and consumers view it as a one-time outlay of cash to experiment with something new. The most popular beverage health benefits are cognition/memory, energy, weight management and skin/beauty."

Beverages also make a quick and easy delivery system for functional ingredients. Fay points to Ensure as a great example — and one that also conveys its functional message very well via advertising.

"We lose so much muscle each year as we age, and Ensure has a bannered ingredient that slows that process," he says. "Every 60-year-old I know is interested in that."

Coconut water — associated with anti-aging, weight loss and other benefits — is really hot now, Kirk notes, and has room to grow.

"I think if all the forecasts come true, we'll all be bathing and washing our cars in coconut water by next July," he jokes, noting that his company is helping retailers meet growing demand here.

Also of high consumer interest are protein drinks, as well as various teas with added functional ingredients, Kirk says. Indeed, consumers may now choose among a sea of teas promising to deliver functionality ranging from a calming effect to liver detox.

But no beverage is really off limits when it comes to a functional fix. Sleep-inducing coffee might seem a bit oxymoronic, for example, but Berner produces just such a product for one client, Fay notes. The decaffeinated coffee contains a sleep-enhancing ingredient — and shoppers are buying it.

Foods get a boost

Many foods, too, now are sporting added functional ingredients. Among the functional ingredient "darlings" here are omega-3 fatty acids, which are associated with improved brain function, enhanced cardiovascular health and much more. According to an August report from Rockville, Md.-based Packaged Facts, the number of U.S. consumers who are seeking out high-omega-3 products (excluding fish) has increased dramatically over the past few years.

As promoters of a healthy digestive system, probiotics and fiber ingredients also are on-trend on the food side. Some yogurts now serve up both to pack a double digestive punch.

Speaking of yogurt, the whole dairy arena represents a particularly strong opportunity for functional food development on the store brand side, Malacara contends.

"Dairy products are already densely packed with nutritional benefits," he says, "and people have come to expect value-added dairy."

But his company's Benelact technology uses a mechanical all-natural process instead of an ingredient or ingredients to put a functional spin — in this case, cholesterol reduction — on dairy products. The resulting cholesterol-free skim milk and reduced-cholesterol butter and cheese retain the taste, texture and functionality of the original products.

"While this is not the only solution for people with issues of high cholesterol, it offers a tool in a healthy diet toolbox to help control the amount of dietary cholesterol without making sacrifices in nutritional sources, food preferences and flavor."

Take on opportunities

Retailers that wish to get into — or expand their presence in — the functional food and beverage space will want to pinpoint the opportunities that make most sense on the store brand side. Kirk recommends looking to the national brands and identifying which functional products among them are the fastest movers within your stores.

"Then I would try to develop something that has more benefit to the consumer — whether it's better taste; whether it's more vitamins or more nutrients; whether it's a lower cost," he says. "Have some differentiator that allows them to compete against the national brands."

But Fay also sees an opportunity to grab onto emerging trends early on — something he believes Minneapolis-based Target Corp. does very well.

"I think one of the greatest mistakes done in the past regarding store brands has been the retailers waiting for new products to fully mature before considering them," he says. "I feel they miss a lot of opportunities. If an item over a reasonable amount of time is showing a trajectory toward becoming a viable store brand item, I say get in early."

But when it comes to functional claim categories, Hinton believes store brands could compete best in areas where the consumer is able to notice the product's benefits shortly after consuming it. So ingredients that promise to boost energy, improve mental focus, control appetite or enhance digestion make for a good start as value-added food or beverage additives.

In the functional food and beverage area, product-related messaging and claims also can be just as critical to success as the product itself. Messaging that provides compelling solutions to consumers' urgent concerns or fears over bone or muscle loss, for example — like the Ensure brand does in its advertising — can be very effective, Fay contends.

But watch it when it comes to wording on-pack product claims for any new functional products, Hinton stresses.

"Health claims and benefits are the best messaging [to answer], 'How will this product facilitate or improve my lifestyle?'" he says. Still, "retailers should avoid over-promising and getting too technical about the science or proof of claims. Consumers can go online to dig deeper; the retail setting is a place to explore functionality and label-shop."

Kirk agrees that overpromising and under-delivering is a big no-no. He says some of the national brands have stretched the truth a little bit when it comes to product claims, something retailers will want to avoid — unless they wish to attract negative attention from federal regulators.

"Follow the leader, but be careful," he adds. "Make sure the leader is telling the exact truth about the product. And if they are and you have a product that's national-brand-equivalent or better, then you can make those statements as well."

Position them to sell

The right products — labeled with defendable claims — are critical to a successful store brand functional food and beverage line. But consumers also want to be able to locate such items quickly and easily.

Although functional foods and beverages are coming of age, Hinton maintains they do not yet make for a standalone destination category.

"Consumers look for functional products right next to their less-functional counterparts," he says. "They need to be merchandised and differentiated where the consumer expects to shop for a particular class of product."

"Fantastic" packaging graphics also stop shoppers at the shelf, Kirk notes. His company packages all of its private label products — a range of nutritional, organic and natural rice and soy beverages, soups, broths, teas and wine — in aseptic Tetra Pak cartons, which allow for more billboard space.

"It allows not only for a single billboard, but you can put four or five packages together and run a design across them that will look fantastic on the shelf," he says. "Not many people do it, but it can be done."

End caps, too, are always effective, Fay says, pointing to H-E-B of San Antonio as a general standout here.

"They do end caps with store brands that shout at customers," he says. "It is brash; it is in your face; and it is wonderful to see."

Because much of the target market for energy drinks and certain other functional beverages consists of millennials, retailers also need to rethink marketing efforts to speak their language.

"They're going into stores and they're scanning products; they're getting price competitive," Kirk says. "I think retailers need to use social media more."

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