Functional foods may be key to food industry's future
June 8, 1999
From Financial News Correspondent Susan Lisovicz
(CNN) -- It used to be the way to good nutrition was following the food pyramid, but today food companies say the key to optimal health is high-tech value-added groceries called nutraceuticals.
Following in the wake of less junky junk food and lite foods are the nutraceuticals, foods marketed as medicine. This new food category claims to provide health benefits and can include everything from dietary supplements to engineered foods and specifically prepared meals.
Analysts say these designer foods have the potential to mushroom into a $250 billion empire -- or half the estimated size of the current food industry.
"You're looking at a $500 billion domestic food industry that is struggling for growth. And to the extent you have a growth opportunity in nutraceuticals, I think everybody is waiting with anxious breath for the industry to really start, mostly because it's in such bad need for growth," said John McMillin, Prudential Securities food industry analyst.
Kellogg's just introduced a line of foods, called "en-sem-ble," that claim to reduce the risk of coronary disease. Johnson & Johnson says its new margarine, Benecol, can lower LDL, or bad cholesterol. The same is true for Take Control, a margarine made by Unilever's Lipton unit, which like Benecol recently won approval from the Food and Drug Administration.
"At this point, there is no mandatory process by which food companies work with the FDA on functional foods," said Lipton Vice President of Research and Development David Blanchard. "We chose to work with the FDA in terms of the safety, in terms of the labeling, and in terms of effectiveness, so that we would have their full confidence in the safety and labeling of our product when we chose to market it."
Marketing and credibility will be crucial to the success of these new foods, because they do not come cheap to consumers.
"From the most basic we've seen the calcium-enriched orange juice sell at just a slight premium to other orange juice," said William Fiala, Edward Jones pharmaceuticals analyst. "Now we see Benecol, Johnson & Johnson's margarine, selling at up to four times the traditional margarine cost."
Nutraceuticals are geared toward America's biggest demographic group -- baby boomers -- who may be willing to pay more to stay healthy, but still don't want their food to taste like medicine.
Margarine claiming to reduce cholesterol passes FDA review
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