The Rise of Functional Foods: Trends, Innovations, and Market Growth in Health-Enhancing Products
Take a walk through any large grocery store or specialty shop, or browse online food product sites, and you’ll likely encounter a wide selection of protein powders, energy drinks, power bars, probiotics, vitamin-infused waters, and calcium-fortified beverages aimed at promoting bone health. These items are often fortified with nutrients, phytochemicals, botanicals, or dietary supplements and are referred to in the industry as functional foods. Functional foods are characterized by their potential positive influence on health that goes beyond basic nutrition; they are intended to do more than simply fulfill daily nutrient needs, as they can also help lower disease risk and enhance overall well-being. While the U.S. Food and Drug Administration is responsible for overseeing functional foods, it has yet to provide a formal definition.
The FDA acknowledges that terms like “functional foods” and “nutraceuticals” are prevalent in the market and that these foods fall under FDA regulation based on the Federal Food, Drug, and Cosmetic Act, even if not explicitly defined by law. Nonetheless, the popularity and market for these foods continue to expand, with many experts forecasting significant growth for functional foods in the near future. As American consumers become increasingly health-conscious, they seek out natural ingredients and nutrient-rich foods and beverages. Companies entering the functional foods market are responding to this trend by consistently launching new products.
Kara Nielsen, a food and beverage trends expert, noted in a recent Packaged Facts report that consumer interest in medicinal foods is rising, particularly in the natural food and beverage sector, where functional ingredients derived from real-world sources (rather than labs) are becoming more sought after. A Technavio report predicts that the global market for functional foods and beverages will experience steady growth, with a compound annual growth rate nearing 8% from 2017 to 2021, while the U.S. market is expected to see a CAGR of 6.53% during the same timeframe. This trend is fueled by an aging population increasingly focused on health maintenance, soaring medical costs, and a heightened consumer awareness of the link between healthy eating and well-being.
Functional foods are no longer confined to a niche market, and major food companies are now entering this space. For instance, Campbell’s CEO Denise Morrison highlighted the company’s interest in expanding into rapidly growing sectors like organic and functional foods when it acquired Pacific Foods for $700 million this year. Additionally, PepsiCo purchased probiotic beverage maker KeVita last fall and launched its Tropicana Essentials Probiotics line, claiming it to be the first brand to introduce probiotics into mainstream juice aisles. General Mills’ venture capital branch also led a $6.5 million Series D investment in March to support Farmhouse Culture, a startup focused on fermented and probiotic foods and beverages.
As research and development advance, we can expect major players in the functional foods market to introduce new products. These companies are continuously on the lookout for acquisitions to enhance profits and share prices, and recent partnerships and purchases suggest they are particularly interested in smaller, agile startups for the next big innovation. The development and application of functional foods, particularly for digestive health and performance enhancement, has roots in Japan and Russia. The first notable use of a functional food in the U.S. dates back to 1924, when the Morton Salt Company began adding iodine to its products to address a regional iodine deficiency associated with goiter.
According to Carol Culhane, president of International Food Focus Ltd. in Toronto, oatmeal significantly raised public awareness of functional foods. Oats contain beta-glucan, a soluble fiber shown to reduce levels of low-density lipoprotein (LDL) cholesterol, often referred to as “bad” cholesterol. The approval of the claim linking beta-glucan to cholesterol reduction by the FDA in 1997 marked a pivotal moment for functional foods.
While some early functional food launches were not commercially successful, the landscape has improved as marketing, packaging, and distribution have evolved. General Mills introduced its Fiber One cereal in 1985, and Danone launched Activia probiotic yogurt in France in 1987, which made its way to the U.S. in 2006. Both products remain strong in the market today, with Fiber One benefiting from the high-fiber food trend and Activia overcoming initial consumer skepticism about “friendly bacteria.”
A wide range of functional foods has since entered the U.S. market, with some manufacturers carefully navigating health claims to comply with Federal Trade Commission regulations. The FTC mandates that any health assertions must be scientifically substantiated, and functional food products cannot legally claim to cure diseases. Health claims on food or beverage labels must also undergo regulatory assessment by the FDA, a process that can be both lengthy and costly. Companies must conduct research and safety evaluations of functional food substances and seek GRAS (generally recognized as safe) status from the FDA for their intended uses.
Consumer acceptance remains a critical factor for the success of functional foods, and Culhane emphasizes that long-term success relies on personal experiences that motivate lifestyle changes. For instance, while lycopene—a potent antioxidant found in tomatoes and watermelon—can reduce prostate tumor risk, it may not yield immediate results for individuals experiencing prostate issues in their 50s, necessitating a proactive approach to diet starting in their 20s.
Culhane also warned that not all functional foods deliver maximum benefits when consumed in typical amounts, and serving sizes can impact efficacy. For example, one would need to consume about a quart of soy milk daily to achieve cholesterol-lowering benefits from soy protein or three cups of oatmeal daily to gain the cholesterol-lowering effects of beta-glucan.
Today, consumers can find buttery spreads, such as Lipton’s Take Control and Raisio Group’s Benecol, containing plant stanol and sterol esters to help reduce heart disease risk, along with high-fiber breads and baked goods, like Schwebel’s Roman Meal 100% Whole Wheat and Kellogg’s Kashi Soft-Baked Cookies, aimed at lowering cholesterol. Stanols and sterols, which are naturally occurring compounds in vegetable oils and cereals, help block dietary cholesterol absorption, thereby reducing total and LDL cholesterol levels in the bloodstream. These compounds are increasingly integrated into functional foods, such as Minute Maid Premium Heartwise orange juice featuring Cargill’s CoroWise plant sterols and Joseph’s Bakery flatbreads with ADM’s CardioAid plant sterols.
Additional functional food innovations are on the horizon as scientists explore extracting beta-glucan from mushrooms to enhance immunity, producing fiber-rich inulin flour from chicory root, and investigating various beneficial nutrients from algae. However, researchers note that challenges persist in quantifying benefits and understanding how harvesting, storage, and processing techniques affect the nutritional value of algae. The burgeoning field of phycology—the scientific study of algae—offers exciting opportunities for those interested in developing new functional food ingredients.
Kristi Crowe-White, Ph.D., an associate nutrition professor and registered dietitian at the University of Alabama, shared her perspective on the future of functional foods. She believes that the focus is shifting towards understanding the chemistry and natural composition of foods. While there are about 20 well-established beneficial compounds, she contends that many more remain to be discovered, marking an exhilarating time to be engaged in this field. Notably, among the various functional food innovations, calcium citrate malate supplements are gaining attention for their potential to enhance bone health, further underscoring the growing interest in nutrient-rich products that support overall well-being.
