In a new report entitled The International Market for Functional Foods - Moving into the Mainstream, the UK-based food market intelligence provider says that although it may seem fragmented, with companies launching one or two products alongside mainstream ranges, in reality investment in products and marketing is largely dominated by multinational players.
For instance, Danone is a key player in functional dairy, which is proving the most popular product type for functional attributes followed by cereals and beverages. Unilever dominates in yellow fats and Kellogg in cereals.
"These major multinationals are increasingly setting up nutrition, health and well-being units to ensure that the products they launch will meet the increasing demand for good-tasting fods and drinks with a healthy nutritional profile," said the authors, noting that companies previously perceived as marketing 'unhealthy' products, such as Mars, have also got in on the act.
The report looks at the functional foods market in the five major European markets (the UK, France, Germany, Spain and Italy), plus the US, Japan and Australia.
It identifies two layers of functional foods - those making specific health claims on their packaging or in advertising, and a broader definition encompassing healthy foods that are often perceived as functional but that do not necessarily make claims, such as antioxidant rich fruits.
According to Leatherhead, the strictly-defined market in the countries analysed had a value of US$16.1 bn in 2005, and the broader-defined of $36.2 bn. In both cases Japan is the biggest market (with 35.5 and 43.8 per cent shares respectively), followed by the US.
Over the next year it expects the strictly-defined market to grow by 9.5 per cent, and the broader by 7.6 per cent. Impending Europe-wide health claims legislation will no doubt boost the strict market in that region.
Despite all the attention, Leatherhead sees the market to be developing more slowly than originally expected. It has been suggested that functional foods could eventually make up 10 per cent of the overall food and drinks market, but it now seems unlikely that it will reach even the five per cent mark within the next 10 to 15 years.
Penetration is currently only 1.6 per cent using the broad definition, including in Japan.
"However it will undoubtedly continue to outperform the food and drinks market as a whole," it said.