The popularity of functional foods has increased in the post-pandemic era, as seen in changes in food consumption patterns and adoption of a healthy lifestyle. Heightened awareness of the ability of certain dietary changes to support immune health is a key reason for the growing inclination towards functional foods.
Future Market Insights states that the Asia Pacific (APAC) functional foods and natural health products market is expected to register a compound annual growth rate (CAGR) of 7% leading to a market value of US$8,141.5 million by the end of 2032. Key innovations in the food and beverage industry have led to the emergence of functional foods. Thus, the growing prevalence of a healthy lifestyle along with increasing trust in organic food is creating lucrative opportunities for manufacturers of such products in the region.
Food and beverage manufacturers are customizing products for different population categories for health-conscious consumers, baby boomers and millennials. As protein and fibre enrichment is taking centre stage, manufacturers are producing drinks, bars, and yogurts to supplement the demand for functional foods.
Nutrition: Key to adoption of functional foods in APAC
Nutrition is a key consideration in this market. The growing inclination toward vegetarian and vegan food owing to its nutritional value and easy availability is one driver in the functional foods market. Consumers are consciously choosing food products that have adequate nutritional value and cater to their specific needs. Consumers are determining healthy food on an ingredient basis.
Thus, to understand what needs to be done, manufacturers need to understand the new Asian consumer and provide information regarding the ingredients used to make products. This, in turn, will help to maintain transparency and motivate consumers to invest in functional food products.
Demand remains diffused
Around 55% of incremental food spending is estimated to be actively driven by consumer-conscious behaviour in the Asia Pacific region. Macroeconomic trends such as increasing population and ongoing food inflation are driving Asia’s food consumption market. These factors will account for a $2 trillion economy for the total incremental opportunity of $4.4 trillion by 2030.
Taste and price are no longer the key factors determining and differentiating food products. Consumer surveys show marked differences in the willingness to pay for food products. For example, shoppers in Singapore and Japan are considerably less committed to paying a premium than consumers in China. This can be attributed to existing perceptions among consumers about the quality of available food products and safety standards.
Various reasons come to bear when looking at the difference in willingness to pay between different countries. Growing concern regarding food safety and lack of understanding of the composition or importance of a healthy diet are affecting consumer choices. Consumers are relying on information about the food products that they are already aware of. Thus, manufacturers of functional foods need to focus on providing precise information regarding food products that help consumers to choose them easily.
As food consuming habits are strikingly opposite in different countries, catering to the diverse market of Asia Pacific is a challenge to manufacturers and marketers. Thus, manufacturers are focusing on understanding regional taste to inculcate the same in food products. An amalgamation of regional food that possesses high nutritional quality will help manufacturers to penetrate the Asia Pacific market.
Health is wealth
Consumers are increasingly becoming aware of the nutritional content of functional foods and beverages. Companies that merely package food products as healthy are unlikely to gain traction. Diverse culture and socio-economic conditions are giving rise to a spectrum of diets and lifestyles in the region. Most people in Asia are not only inclined towards a balanced diet but also have shown a growing inclination towards exercise and a healthy lifestyle. Thus, consumers are investing in products that complement their daily habits and lifestyle.
For example, Japanese consumers prefer a well-balanced diet whereas those from Malaysia and Thailand are focusing on reducing their sugar intake by purchasing food products that have lower sugar levels. Thus, manufacturers in those areas are focusing on offering sugar-free bakery products, spicy breads, and desserts made from dry fruits. This, in turn, has created lucrative opportunities for food manufacturers. In China, 57% of consumers check the nutritional content of food more frequently than they did three years ago. As Chinese consumers prefer a well-balanced diet with premium ingredients, the inclination toward investing in functional foods has increased.
Eating to stay fit in Singapore and focusing on nutrition is the key challenge; consumers are largely focused on the quality of ingredients and their nutritional value. And with the fourth highest rate of acute malnutrition in the world, Indonesians are more open to reformulated food that offers high nutrition content without compromising on the taste.
Natural = Real = Recognizable ingredients
The global functional foods and natural health products market is expected to register a CAGR of 5.3% between 2022 and 2029, reaching a market value of $32.5 billion by the end of the period. The market for functional food in Asia Pacific grew from 6.9% from 2015 to 2022, and the organic market has risen 5.4%. Thus, the natural-based functional food market is expected to grow to a staggering $4 billion. Consumers are relying on natural ingredients that are real and recognizable, as well as food products that are highly sustainable. They are relying on organic products which use naturally sourced ingredients. Around 44% of consumers from Asia have stated the presence of chemicals in foods is a food safety issue, and 39% stated artificial flavour is a major concern.
Consider the potential for fibre. Fibres are topping the health perception of whole grain, plant protein, probiotics and omega-3 fatty acids. Thus, big food brands are committing to launch new high fibre products. More than 50% of consumers are trying to consume more fibre in their everyday meals. Around 59% of global respondents believe that food that is high in fibre is essential, compared to 50% who believe that of protein-rich food; 47% of people believe that whole grain food should be consumed or the food should be fortified with calcium, vitamins or minerals to fulfil their nutritional needs. Consumers are learning more about the rule of these microbiomes that ensure their overall health and well-being. Thus, manufacturers should focus on introducing products that are rich in fibre, protein, functional fruits and vegetables in order to both lose and maintain weight.
There are other key growth categories. Omega-3 fatty acids and probiotics are currently dominating the functional food ingredients in Asia Pacific. Key functional food manufacturers are focusing on introducing omega-3 ingredients and blends primarily for certain applications such as dairy, breakfast cereals, confectionery, and other products. Increasing demand for clean label and natural ingredients and vegetarian products are pushing the demand for carotenoids and probiotics as well.
Rising demand for less processed foods with a taste akin to normal food is widely altering consumption patterns across Asia. Snack products are bridging the gap between nutrition and indulgence. Consumers are investing in snacks that have an absence of ingredients rather than an addition to them. Consumers want snacks that are sustainably sourced, organic and stick to the basics. Around 45% of consumers indulge in snacks that do not contain artificial ingredients. Research has shown that millennials seek functional candies and chocolates whereas Generation X prefers coffee, cookies and brownies. On the other hand, baby boomers have shown a preference for indulging in cheese and cheese alternatives. Thus, to cater to a wide variety of audiences, manufacturers should focus on producing less processed foods without compromising on taste.
Addressing generational opportunity
The consumption of functional foods and beverages declines with age; however, when older adults use them, they tend to consume those products more regularly. Older adults are least likely to believe in phytochemicals or to use fortified foods. Moreover, they are the heaviest users of dietary supplements. Seniors are twice as likely as the rest of the population to consume omega-3, vitamin E, and calcium, and they are heavy users of vitamin C, B complex vitamins, and of herbals and antioxidants. In addition, 56% of prime timers consume functional food to address a specific health concern as the top reason to buy functional food and 44% are investing in functional food to supplement their daily diet.
In recent research, 78% of respondents stated that lowering cholesterol is the key reason for investing in functional foods. Other desired benefits include strengthening immunity, digestion, lower blood pressure, maintaining a healthy weight, and promoting healthy blood sugar levels. As baby boomers confront a greater risk of heart attack and stroke, a change in everyday diet through functional food will find a receptive audience in the upcoming years.
Part 2 of this article will delve into some of the challenges and shifts in the market, including technology enhancing traceability, the energy drinks opportunity, regulatory considerations, and product development.
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.