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Insights into the APAC functional foods space: Part 2

Supporting consumers’ desires for more traceable, transparent supply chains, while delivering unique solutions for well-being.

Nandini Roy Choudhury, Client Partner, Food and Beverage

April 12, 2022

5 Min Read
APAC consumers seek wellness beverages
© AdobeStock

Editor’s note: Part 1 of this article looked at some of the broader trends supporting adoption of functional foods across the APAC region, including economic factors, consumer interest in ‘natural’ ingredients, and demographic trends.

There are myriad competing trends impacting the functional foods industry across the Asia Pacific region. A recent report by Future Market Insights called out the opportunity, noting the APAC functional foods and natural health products market should reach US$8.14 billion by the end of 2032. That said, there are issues that companies must address to take advantage of this potential.

The top three markets for functional food ingredients market are Japan, China and India, Japan is currently home to the third-largest health food market in the world and first in Asia Pacific region. The country is expected to garner a market value of $1.767 billion by the end of 2026. In recent years, Japanese manufacturers in the functional food ingredients market have been trying to make their products more nutritious following the ongoing high protein trend in the food and beverage industry.

Consumers’ awareness in Japan for addressing health concerns, focusing on anti-ageing solutions, and especially interest in weight management by consuming naturally sourced protein is enabling many producers to offer protein-fortified products with health benefits. This trend has been an extensive driver for the growth of the functional food ingredients industry in Japan.

However, it is still a complex process to translate scientific advances, nutritional benefits, and innovation of functional food to consumers through a simplified product. In addition, the absence of proper definitions and categorization of functional foods is hampering the market growth. Thus, policymakers, brands, manufacturers, and governments of different countries in Asia Pacific need to focus on providing proper regulations and labeling of products that will gain consumers’ trust.

Further, product visibility is important to increasing sales. It is very important to identify the relationship between food components and their purported health benefits. Thus, the future success of functional food relies on establishing a sound scientific basis for the relation between the finished product and claimed health benefits.  Brands must introduce food products by providing clear information to consumers. Two factors that play a key role in increasing sales are providing accurate information regarding the sourcing of raw materials, and enabling tracking of ingredients.

Traceability meets technology

Asian consumers and governments have been putting pressure on agri-food companies to be more accountable and transparent about food sources and improve safety checks. According to FMI, over 40% of Asian consumers are likely to trace food sources due to safety concerns going forward.

In addition, 81% of Chinese respondents indicated they would trace food sources over the next 12 years. This has led to more firms leveraging technology to provide safe and traceable food solutions to gain consumer trust. Thus, manufacturers need to invest in the traceability and authentication of food through digitization and serialization. This, in turn, will gain credibility among consumers.

For instance, New Zealand dairy giant Fonterra adopted a cloud-based technology to improve its food chain quality operation. The company also uses X-ray technology to enhance the traceability of food products. And Australian firm Two Hands has developed tamper-evident smart tags to authenticate products. The company also offers a platform for food providers to directly interact with the end customers.

This technological shift implies that businesses will have to work harder to gain the trust of the consumers using various technological formats in the future. Thus, companies need to enhance the transparency of their supply chain to address persistent safety concerns.

Energy products: Go-to opportunity

The presence of multiple products in the market has created tough competition between functional food manufacturers. The current trends suggest that natural or organic beverages will observe a heightened demand in the upcoming years. Thus, beverages are forecasted to be the fastest growing segment as they will possess 56% market share in 2022. Two key drivers for the rapid increase in the sales of beverages are the convenience and the versatility of the beverage.

Energy drink beverages are expected to remain popular owing to their “feel the benefit” factor. Energy drinks such as isotonic energy drinks are being widely consumed as they are highly preferred by sports enthusiasts and athletes.

Manufacturers of sports and energy drinks are attempting to find their right footing in the market by not being associated with soft drinks or negative health associations. Manufacturers are avoiding being grouped with more traditional energy drinks that are under intense scrutiny for potential health concerns related to high caffeine levels.

Products such as nutrition bars used by athletes and sports are rapidly evolving from dessert-like sweet food with added nutrients to more inherently nutritious products including savoury flavour combinations as well. Sport drinks, enhanced water and other low calories beverages will observe a rise in demand in the upcoming years.

Changing lifestyles and a shift toward a healthy life—especially in the post-pandemic time—is increasing the consumption of functional foods in Asia Pacific. Consumers are investing in functional food products for fighting against ageing and managing weight. Thus, manufacturers are researching and focusing on offering products that are high in protein and will provide health benefits.

Moving ahead, introduction of innovative and clean label packaging is a must. The claim and the nutritional benefit should clearly come along with product labeling. In addition, manufacturers should focus on providing daily dose claims. This will contribute as an advantage over regular products. 

To meet consumer demand over the next decade, investors and brands need diverse investment strategies to deliver to Asia’s heterogeneous market and fast changing food palate. To sustain in the market, manufacturers need to undertake research for understanding the changing demands of consumers. This, in turn, will help them to offer a wide variety of functional food products for different consumer bases.

Nandini Roy Choudhury is client partner, Food and Beverage, at Future Market Insights. She is an experienced research professional and client research partner at ESOMAR-certified market research and consulting firm Future Market Insights (FMI). FMI is headquartered in Dubai, with offices in the US, UK, and India. MarketNgage is the Market Research Subscription Platform from FMI that assists stakeholders in obtaining in-depth research across industries, markets, and niche segments.

About the Author

Nandini Roy Choudhury

Client Partner, Food and Beverage, Future Market Insights

Nandini Roy Choudhury is client partner, Food and Beverage, at Future Market Insights. She is an experienced research professional and client research partner at ESOMAR-certified market research and consulting firm Future Market Insights (FMI). FMI is headquartered in Dubai, with offices in the US, UK, and India. MarketNgage is the Market Research Subscription Platform from FMI that assists stakeholders in obtaining in-depth research across industries, markets, and niche segments.

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