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The global functional food and beverage market size was valued at USD 216.25 million in 2018 and is projected to reach USD 412.22 million by 2026, exhibiting a CAGR of 8.49% during the forecast period.
Functional food and beverages are enriched with functional nutrients, in addition to the basic nutritional value of the product, to provide health-related benefits. These nutrients include amino acids, vitamins, minerals, proteins, fatty acids, and prebiotics. Functional products have gained importance in recent years due to the rising awareness of their health benefits among consumers.
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Rising Spending on Healthy and Nutrious Diet Products to Fuel the Market
The functional food and beverage market trends are driven by the rising demand for healthy and nutritious diets. The evolving lifestyle and increasing income of consumers across the world have fueled the demand for products with superior nutritional profiles. Functional beverages, for instance, are designed to be consumed on-the-go, providing enhanced nutrition. Increasing product development and innovation activities, availability of a wide variety of products, especially across e-commerce platforms, and the adoption of unique promotional strategies by market players are collectively furthering the growth of this market.
Rising Consumption of Nutrient-enriched Foods to Improve Overall Health and Well-being to Fuel the Market
Increasing demand for nutrient-enriched foods due to the hectic lifestyle and rising awareness of their health benefits among consumers is fuelling the market growth. There is a growing demand for on-the-go snacks containing additional nutrients that provide instant nutrition. Consumer interest in the relationship between diet and health has increased the demand for functional foods. Consumers are inclined towards foods containing functional ingredients to reduce the risk of certain health conditions such as obesity, weight management, diabetes, and cardiovascular diseases. Hectic lifestyles and increasing stress have contributed to the increasing prevalence of such health disorders. Various functional foods trends, such as hemp-infused food and beverages, probiotics, and prebiotics, are emerging to boost the growth of the functional food and beverages market.
Innovation and New Product Developments to Aid Growth
Increasing research and development activities to introduce innovative functional products are responsible for driving the growth of the market. Companies are creating products that suit growing consumer needs. Manufacturers are developing functional confectioneries such as gummies and toffees for children, nutrition bars, and functional drinks that attract fitness enthusiasts and consumers looking for quick nutrition. Consumers are increasingly becoming aware of digestive health driving innovation in probiotic and prebiotic product offerings. Due to health conscious people, functional foods are gaining striking growth in the globe.
The development of several novel processing technologies for the formulation of functional foods products is driving product innovations in the functional and beverages market. Technologies such as encapsulation technology, enzyme technology, vacuum impregnation technology, and edible coating technology are increasingly being utilized for the development of functional foods & beverages. Enzymes such as lipases can be used for the production of certain fatty acids as flavoring and antioxidant esters. Likewise, encapsulation in probiotics allows storage at ambient temperature and higher water activity and reduces the loss of viability. Manufacturers are developing innovative products by using such technologies to keep up with the market demand. For instance, in June 2019, Robertet, a natural ingredient producer in France, launched an encapsulation technology which uses the prebiotic inulin as a carrier for transporting essential oils into powders for improved absorption.
Off-taste and Flavour of Functional Ingredients to Hamper Market Growth
Functional ingredients such as botanical extracts and herbs, when added to food or beverage, generally impart off or bitter taste to the product. Taste is a critical factor in the purchase decision, even when consumers are looking for healthy products. The challenge faced in masking the bitterness, off-tastes, and flavors of botanical extracts and herbs, is impeding the growth of the market. Manufacturers use various approaches such as the utilization of taste and flavor modifiers, to tackle these challenges. Flavour addition to the reduction of bitterness and taste masking is one of the most significant trends in the functional foods and beverages industry. Flavors that complement functional food ingredients and nutrients added in the product are mostly used for masking purposes. For example, citrus flavors and astringent berry flavors work especially well with antioxidant fortifications as they blend well with the acidity that is inherent in vitamin C and other antioxidant ingredients. Natural fruit flavors are generally used in functional foods and beverages due to the rising popularity of plant-based ingredients.
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Functional Cereals & Grains are Among the Leading Types in the Global Marketplace
The global market for functional foods and beverages includes functional cereals and grains as one of the leading product types. Fortification of cereals and grains is one of the most effective methods to tackle nutrient deficiencies. Governments and regulatory authorities world over have been taking initiatives to tackle nutrient deficiencies with fortified foods. The addition of iodine in salt, vitamin D in milk, and vitamin B and iron in flour and bread are some of the examples of fortification for nutrient deficiencies.
In June 2019, the U.K. government announced mandatory fortification of flour with folic acid (vitamin B9) to prevent congenital disabilities of the brain and spinal cord, called ‘neural tube defects.’ Cereals can be potentially used as vehicles for functional compounds such as antioxidants, dietary fiber, minerals, prebiotics, and vitamins. The key players in the functional food and beverages market are also focused on developing fortified cereals to tackle micronutrient deficiencies. For instance, in April 2018, Nestle Nigeria launched a new breakfast cereal containing a combination of vitamins and iron as a solution for micronutrient deficiency in the region.
Functional fats and oils are expected to further contribute to the growth of the market in the foreseeable future. The recent sales traction in this category has encouraged manufacturers and processors to fortify a wide variety of food matrices with a plethora of nutrients to create products with healthy indulgence. Concepts such as fortified butter and margarine are gaining popularity among consumers.
Supermarkets/hypermarkets are Dominating the Distribution Landscape; Online Retail to Witness Significant Growth
Mass merchandisers (supermarkets/hypermarkets) are dominating the distribution space of functional foods and beverages. These giant retailers are intensively capitalizing on market penetration by targeting underserved locations, offering distinct retail shelves to superior nutritional products, and developing a bundling strategy for such products. The e-commerce boom has effectively provided strong headwinds to online retail sales of functional foods products. Key manufacturers are actively tapping popular e-commerce platforms with a mix of attractive discounts, robust sales & support, and enhanced shopping experience.
Asia Pacific Functional Foods and Beverages Market Size, 2018 (USD Million)
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Asia-Pacific is Leading the Global Market with the Fastest Growth Projection
Asia-Pacific functional food and beverage market valued at USD 82.81 million in 2018 and is projected register a CAGR of 9.20% during 2019-2026 owing to rising health awareness and increasing discretionary incomes in the region. The consumption of fast-food is causing adverse changes in health conditions and increasing the prevalence of chronic diseases such as diabetes and obesity. Rising awareness of such health issues is driving consumers to spend more on nutritional foods to improve overall well-being.
Asia-Pacific is the fastest-growing region with immense potential for functional foods and is experiencing the fastest growth rate as compared to the global average. Rapidly evolving food & beverages sector with new product innovations and increasing research activities are driving this market across the region. The increasing trend of healthy hydration is fuelling the demand for functional beverages. Functional beverages are becoming popular among millennials as they provide health benefits and can be consumed on-the-go. The increasing popularity of herbal products in the region is driving the demand for botanical extracts and herb-infused eatables and beverages. Growing awareness of digestive health among people is fuelling the demand for probiotic dairy products and prebiotics in the Asia-Pacific, ensuring that the region dominates the functional food and beverage market share.
North America is the second-largest market for functional foods and beverage products and is projected to grow at CAGR of 7.06% during the forecast period.
Moderately Consolidated Industry Structure to Influence Market Competition
The functional foods & beverages market analysis states that at the global level, the market is moderately consolidated with few key players such as Danone S.A., Nestle S.A., General Mills, Glanbia Nutritionals, and Tyson Foods Inc. operating internationally. These players are focusing on research and innovation activities to cater to the growing consumer demands for innovative products. The key companies are focused on mergers, acquisitions, and developing partnerships to consolidate the market further. For example, in December 2019, International Flavours and Fragrances, Inc. and DuPont’s nutrition and bioscience division announced a merger to create high-value functional ingredients and solutions in the global food, beverage, health and wellness market. New players are likewise entering the market to meet the growing demand for more affordable products, as functional foods become mainstream. The arrival of new players in the market is responsible for intensifying competition within the market, which is acting as a positive factor for the growth of this market.
The functional foods and beverages industry is witnessing promising growth owing to the rising trend of healthy snacking and healthy hydration. Fitness enthusiasts and enlightened consumers are driving the demand for products that promote better health and prevent the onset of chronic diseases. Furthermore, the rising per capita income of consumers is encouraging them to invest in wellness products.
An Infographic Representation of Functional Foods Market
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The functional food and beverage market report provide quantitative as well as qualitative insights into this market. It has a detailed analysis of the market size and growth rate for all possible segments in the market. Along with this, the report also offers an elaborative summary of the market dynamics and competitive landscape. Different key insights presented in the report are an overview of related markets, recent industry developments such as mergers & acquisitions, the regulatory scenario in critical countries, and key industry trends.
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Value (USD Million)
By Distribution Channel
Fortune Business Insights says that the functional food and beverage market size was valued at USD 216.25 million in 2018 and is projected to reach USD 412.22 million by 2026.
Growing at a CAGR of 8.49%, the market will exhibit steady growth in the forecast period (2019-2026).
The functional dairy products segment is expected to be the leading segment based on type in the market during the forecast period.
Rising trend of consuming nutrient-enriched foods to improve overall health and wellbeing is the key factor driving the market.
Danone S.A., Nestle S.A., General Mills, Inc., Glanbia plc, and Tyson Foods, Inc. are few of the leading players in the market.
Asia-Pacific dominated the market share in 2018.
Supermarkets/hypermarkets segment is expected to grow at the fastest pace during the forecast period.
Rising trend of consuming nutrient-enriched foods to improve overall health and wellbeing and innovations and new product developments are some of the trends in the global market place.
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