functional food ingredients-7oct2005
TRANSCRIPT
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Functional Food Ingredients A Strategic Review of the Key Challenges that are
Shaping the Industry
CASE STUDY: The Omega-3 Fatty Acid Market
Presented by: Kathy Brownlie
October 2005
Agenda
• 01: Frost & Sullivan - Introduction
• 02: Market Overview
• 03: Setting the Scene – Omega-3 Fatty Acid Market
• 04: Supply Side Analysis – Key Market Engineering Measurements: Omega-3 Fatty Acids
• 05: End-User Analysis
• 06: Consumer Analysis (proposed research)
• 07: Reviewing the Options
• 08: Summary
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Information for Sales Strategy
Company Core
Competencies
MarketMeasurements
& Dynamics
MarketCharacteristics
SalesStrategy
Decision Making Framework
Communication
CompanyCulture
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Frost & Sullivan – A Holistic Approach to Research
Frost & Sullivan’s has global data collectioncapabilities for both quantitative and qualitative methods .
State-of-the-art qualitative and quantitative analysis derive deep insights into customer behaviour and attitudes.
Frost & Sullivan’s thorough knowledge of the context in which your business operates, combined with world-class Global Customer Researchcapabilities provides the insights necessary to support your growth strategy.
Frost & Sullivan’s Growth Partnership Servicesprovides a complete and comprehensive range of services, integrating demand-side and supply-side insights, to support strategic action across the value web.
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Frost & Sullivan GPS Product Offering
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Content DimensionContent from the Food & Beverage Ingredients Research Team:
• Market Engineering Reports• End-user Studies• Technical Insights Alerts & Reports• Country Industry Forecasts• Decision Support Database• Market Insights
Deliverables covering all regions and countries in the Americas, EMEA and Asia Pacific.
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Research Services – Market and Customer ResearchFood Ingredients and Additives, Nutraceuticals, Animal Nutrition
Market segment analysis that provides drivers and restraints, industry challenges, forecasts and competitor analysis
Strategic SnapshotsLegislative Reviews, Opportunity Analysis, Industry Outlooks
Issue based research titles
Technical InsightsInformation on current and emerging technologies
Country Industry ForecastsDiscussion of specific industries in selected countries along with supporting
quantitative market measurements
Decision Support DatabasesKey market data, export and import data on selected industry sectors
GPS SUBSCRIPTION DELIVERABLES
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Types of Research
Technology Assessment• Technology trends• Evaluation of existing & emerging
technologies
Market Environment• Market drivers & restraints• Industry challenges
Market Sizing & Forecasts• Demand analysis• Pricing trends• Application analysis
Competitive Profiling• Product analysis• Competitive strategies• Market share analysis
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KEY FOCUS AREAS
Nutraceuticals(and Supplements)
Food Ingredients &Additives Animal Nutrition
Emerging Markets VariousCommodity Markets
EXAMPLESLive Content:
The US Sports and Fitness Nutrition Market (A663)
European & US Prebiotics Market (B187)
New titles(available within 6 months):
Strategic Analysis of the European Nutraceuticals Market (TBD)Opportunities in the GlobalPhytosterol Market (TBD)
EXAMPLESLive Content:
European Animal Feed Acids Market (B286)
Eastern and Central European Feed Additives Market (B462)
New titles(available within 6 months):
Strategic Review of the European Ban of Antibiotic Growth Promoters
in Animal Feed (TBD)
EXAMPLESLive Content:
European Emulsifiers Market (B193)The US Enzymes for Food Applications Market (A660)
New titles(available within 6 months):
European Protein Ingredients (B461)US Vitamin A, C, and E markets (TBD)
Customer analysis (can cover any of these sectors)
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Presentation Objectives
Through a case study looking at the Omega-3 fatty acids market, this presentation will illustrate the complexities of conducting business in today’s food ingredients industry. This presentation will provide an overview of:
The challenges facing the food industry
What end-users really want from their suppliers
Examples of tools that can be used to assess various opportunities in the market
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Food Ingredient - Key Challenges (examples)
Limited understanding oftechnology capabilities
Shelf life and other
stability issues
Achieving an acceptable flavour and taste profile
Not enough success stories in the functional food sector
Market Size and
Growth
Costly clinical development process
End-User Perceptions:
e.g. quality, safety
Uncertain RegulatoryEnvironment (health claims)
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Deciding on what market to enter
• Nutrition vs. “pharma like” approach• Potential for mainstream food• Prevention vs. Wellness• Consumer Awareness
Adding Value
Enteral NutritionEnteral Nutrition
Animal NutritionAnimal Nutrition
Dietary SupplementsDietary Supplements
Food and BeveragesFood and Beverages
API API -- PharmaPharma
Increased Risk for New Market Entrant
$$$$
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In order to achieve greatest ROI - we need to position the product within the most appropriate application
Product Positioning: Identifying the Source and Applications
• Flax Oil
• Omega-6 oils – Evening Primrose, Borage
• Low concentrates, or high concentrates
• Powder or Oil
• Branded Products
• Tuna oil vs. sardine oil vs. menhaden oil
• Animal Feed
• Pet Food
• Dietary Supplements
• Bakery Products
• Beverages
• Enteral Nutrition / Medical Food
• Pharmaceuticals
= > APPLICATION SUPPORT
• Emerging Markets: Eastern Europe
• Age Segmentation: Children, Young Woman, Elderly
• Pet Food Supplements
• Sports Nutrition
• Health Platform Segmentation: Heart Health, Joint Health
• Multivitamin Solutions
What Omega-3 source should we investigate ?
What application should we target ?
What application should we target ?
How should we position the product ?
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Frost & Sullivan – Research Capabilities
Frost & Sullivan Analysis MARKET ENGINEERING
INDUSTRY STRUCTURE
Trader
Oil Refinery
Supplement manufacturer Food / Beverage manufacturer
CONSUMER
Ingredient Supplier
Crude Oil extractor/manufacturer
Crop grower/Fishing company
Frost & Sullivan Analysis END-USER ANALYSIS
Frost & Sullivan Analysis CONSUMER ATTITUDES
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Flax OilFlax Oil Marine OilMarine Oil Algae OilAlgae Oil
Omega-3 Fatty Acid: Sources
Adv:- LC EPA and DHA- Traditional history of use
Dis:- Sensory Profile- Quality Issues- Negative end-user
perception
Adv:- DHA only- Niche Market High Value
Applications
Dis:- High Cost- No EPA- Threat of Substitutes
Adv:- Low Cost- Contains other active components e.g. fibres
Dis:- SC Fatty Acids (ALA) –
limited nutritionalproperties
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Flax OilFlax Oil Marine OilMarine Oil
Omega-3 Fatty Acid: Sources
Algae OilAlgae Oil
Competition: MediumBarriers to Entry: MediumMarket Potential:
Short term Medium term
High term
Competition: HighBarriers to Entry: HighMarket Potential:
Short term Medium term
High term
Competition: MediumBarriers to Entry: MediumMarket Potential:
Short term Medium term
High term
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Frost & Sullivan have identified that marine oils have the highest market potential in the global Omega-3 fatty acid market
Flax OilFlax Oil Marine OilMarine Oil Algae OilAlgae Oil
Omega-3 Fatty Acid Sources
Critical Success Factors: Technical Know-How, Development Support, Product Positioning
Dietary Supplements Nutraceuticals Pharmaceuticals
Risk
Investment
OPPORTUNITIES
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INDUSTRY STRUCTURE
Trader
Oil Refinery
Supplement manufacturer Food/Beverage manufacturer
CONSUMER
Ingredient Supplier
Crude Oil extractor/manufacturer
Crop grower/Fishing company
Frost & Sullivan Analysis MARKET ENGINEERING
Frost & Sullivan Analysis END-USER ANALYSIS
Frost & Sullivan Analysis CONSUMER ATTITUDES
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The Size of the Global Omega-3 Fatty Acid Market
Europe: $195 Million
(28%)US: $200 Million
(29%)Rest of the World: $295 Million
(42%)
US vs. Europe Prices:
- Prices generally lower in the US.
- There is an increasing demand for high concentrates in Europe. US market still dominated by low concentrate products.
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Product Life Cycle
Omega-3 Fatty Acid Market (2004)
Europe
Rest-of-World
Overall Market
Mar
ket P
rogr
essi
on
Stage in PLC is dependent on: a) product type
b) application sector
North AmericaMaturity DeclineIntroduction(Emerging)
Growth
Market Development Stage
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Top 3 Industry Challenges:• End-User Perceptions, Uncertain Regulatory Environment, Threat of Substitution
Flax OilFlax Oil Marine OilMarine Oil Algae OilAlgae Oil
Omega-3 Oils
Marine oil Market (Europe) – Critical Data (2004) Marine oil Market (US) – Critical Data (2004)CAGR total market (value 2005-2011): 12%CAGR total market (value 2005-2010): 7 %
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Omega-3 Market Supply Side Analysis – Summary
Forecasts are dependent on a number of factors:
• Label claims/legislation changes• Competitor activity• GM Product Developments• Limited Supplies• Health Concerns• Demand – Supply Balance• Substitute Ingredients
• Other EFA + nutraceuticals• Technology Innovations
“…on the whole the European market is mature. There is excellent consumer awareness in countriessuch as Spain and Germany. However, end-user perception still limits growth”
- Omega-3 Ingredient Supplier
“…The potential for Omega-3 products in the US is considered to be high. We have been unable to meet demand over the last year. We have been growing at over 50% per year since 2001”
- Omega-3 Ingredient Supplier
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Global Omega-3 PUFA Marine Oil Market: Competitive Environment (2004)
Buyer power is dependent on:a) Availability of substitute
productsb) Consumer awareness of
Omega-3 benefitsCompetition from other nutraceutical ingredients.
Companies traditionally involved in the commodity market are trying to enter the value added product market.
The demand for fish oil globally has increased. However, resources are limited. The consolidated nature of the industry may make it more difficult to remain dynamic in the long term.
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Omega-3 Ingredients Market – Leading Industry Players
Critical Success Factors:Excellent Raw Material Supply, Technical Know-How, Product Quality
Denofa, Pronova,
Croda, Puleva, DSM
Omega Protein, ONC,
Martek
NuMega
“The rapidly growing Omega-3 market has increased the competitive intensity of the market and we are looking for alternative, less costly sources of Omega-3 in an
attempt to reduce the price pressure.“- Fish Oil Ingredient Supplier
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Value ChainINDUSTRY STRUCTURE
Trader
Oil Refinery
Supplement manufacturer Food / Beverage manufacturer
CONSUMER
Ingredient Supplier
Crude Oil extractor/manufacturer
Crop grower/Fishing company
06: End-User Analysis – Market Insights
1. Objectives
2. Key Findings – Purchasing
3. PUFA ingredients: Algae oil vs. Marine Oil
4. GM Issues
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INDUSTRY STRUCTURE
Trader
Oil Refinery
Supplement manufacturer Food / Beverage manufacturer
CONSUMER
Ingredient Supplier
Crude Oil extractor/manufacturer
Crop grower/Fishing company
Frost & Sullivan Analysis MARKET ENGINEERING
Frost & Sullivan Analysis END-USER ANALYSIS
Frost & Sullivan Analysis CONSUMER ATTITUDES
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1) Objectives
• Objective analysis of end-users’ key purchasing criteria and supplier selection process• Examples of the types of questions asked:
• How do you foresee the market development of PUFAs in the long term? • What are your key purchasing criteria?• What processes do you have in place for selecting new ingredients or
suppliers?• How much technical support do you expect from a supplier?• Would you consider using a GM PUFA ingredient ?
• Ultimately, this type of analysis will identify the key drivers for growth as seen through the eyes of the end-user
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2) Key Findings – Product Type (examples)
• Powder vs. Oil“…final products are in liquid form, hence oils are the logical choice”
- Omega-3 ingredient supplier
• Concentration Preferred“…Omega-3 concentrations and product formulations are really dependant on our end-users and what application sectors they are active in”
- Omega-3 ingredient supplier
“…Consumers are demanding supplements with higher concentrations”- Omega-3 ingredient supplier
• Types of concentrate: Triglycerides vs. Ethyl Esters vs. Reconstituted Triglycerides. “…there is a perception in the market that triglycerides are more natural but it hasn’t been proven”
- Omega-3 ingredient supplier
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3) Developing a PUFA Fortified Product
Have you developed your products on your own or in co-operation with your PUFA supplier ?
“Independently” 60%
By Application:
Beverage Products 50%Dairy Products 40%Bakery Products 50%Dietary Supplements 60%Clinical Nutrition 80%Infant Nutrition 60%
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4) GM PUFA Ingredients
“….this would not suit our marketing strategy since GM food has to be declared in Germany and is not perceived as healthy food”
“…we would be interested, especially if the concept is accepted by society”“…we position our products at the health conscious consumer market. Using GM ingredients would
contradict the message we are trying to send out to consumers.”- End-Users (Food and Beverage Industry)
30% Companies said that they would consider the use of GM PUFA ingredients. Breakdown by application:
• Beverage Products 25%• Dairy Products 20%• Bakery Products 50%• Dietary Supplements 10%• Clinical Nutrition 60%• Infant Nutrition 40%
Factors that this response was dependent on include: Cost, Consumer acceptance. Regulatory restraints
Genetic modification could lead to cheaper sources of Omega-3 fatty acids. Would you be interested in these new developments or ingredients ?
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End-User Analysis – Summary
End-users have different needs. These are dependent on: Application, previous experience
with product, existing processing facilities, local country regulations etc. Ingredient suppliers need to adapt their marketing strategy according to the end-user base
they are targeting.
• Focus on supplier support. • Still negative perception in the use of Omega-3 Ingredients in food and beverage
products
EXISTING USERS
NEW USERS
• Focus on price, and reliability of supply
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INDUSTRY STRUCTURE
Trader
Oil Refinery
Supplement manufacturer Food / Beverage manufacturer
CONSUMER
Ingredient Supplier
Crude Oil extractor/manufacturer
Crop grower/Fishing company
Frost & Sullivan Analysis MARKET ENGINEERING
Frost & Sullivan Analysis END-USER ANALYSIS
Frost & Sullivan Analysis CONSUMER ATTITUDES
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Study Background
“…. consumers’ preference has now undergone a paradigm shifted from synthetic ingredients toward natural and organic foods, beverages and supplements. Present
day’s consumers are more informed and this could be attributed to current day media, which keeps consumers abreast of the latest scientific developments in health and wellness. Consumers are now moving toward food products that are obtained from
natural non-GMO (genetically modified organism) extracts.” – Frost & Sullivan Global Advances in Nutraceuticals (Technical Insights), 2005
Since the introduction of Genetically Modified (GM) food, consumers have been increasingly concerned about the potential health risks associated with the long term consumption of such products. Consumer perceptions vary by country but are more pronounced in Europe where the issue has received strong media coverage. These have had a profound and controversial effect on perceptions and attitudes to GM products which has fuelled, at least in some countries, much anti-GM sentiment.
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The aim of the study is to:
• Understand consumer attitudes to GM foods and whether these have changed over recent years?
• Determine the influence of the media, government and manufacturers on consumer attitudes and behaviour.
• Identify main concerns of consumers to GM food, and establish means of overcoming any barriers to acceptance.
• Identify and measure opportunities through consumer segmentation
Study Objectives
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Deliverables: What influences consumer attitudes towards GM foods?
TV news
Press
TV programme
Magazine article
Internet
Manufacturers
Government
Negative InfluencePositive Influence
Sample Figure Only
Reinforce messages Reassess messages
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EXAMPLES
Will help the companies position their products correctly using the
appropriate messages
“What factors influence consumers decision to purchase GM food
products?”
Will help with lobbying governments that are either for or against GM
products
“How does consumers perceive the government position on GM
products?”
“Which media can be used by consumers to find out about GM-
related products?”
Will help to identify the most effective communication channels
“What types of GM products would consumers consider purchasing?” Will help to identify new opportunities
and platforms for GM foods
“What type of consumers would consider GM products?”
Will allow for more targeted product positioning
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Deciding on what market to enter
Challenges:• Nutrition vs. “pharma like” approach• Potential for mainstream food• Prevention vs. Wellness• Omega-3 Awareness
Adding Value through the addition of Omega-3 Fatty Acids
Enteral NutritionEnteral Nutrition
Animal NutritionAnimal Nutrition
Dietary SupplementsDietary Supplements
Food and BeveragesFood and Beverages
API API -- PharmaPharma
Increased Risk for New Market Entrant
$$$$
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Key Market Indicators – Omega-3 Fatty Acids
High
Competition High
Top five companies <20%
Product Life Cycle Growth
Restraints Low
Drivers High
Time to Market Short
Barriers to Entry Low
Cost of Product Low
Medium
90%
Developing
Medium
Long
CriteriaCriteria Dietary Dietary SupplementsSupplements
High
50%
Growth
Medium
High
Medium
Low
Low
NutraceuticalsNutraceuticals
High
PharmaceuticalsPharmaceuticals
High
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Identifying the best fit product with application is crucial for successful introduction
NutraceuticalsTechnical and application support is a must for any company
considering entering this market.
CRITICAL SUCCESS FACTORSCRITICAL SUCCESS FACTORS• Development of food prototypes
with optimal taste and functional
properties
• Technology know-how
• Nutritional and clinical scientific
evidence
• Product development, process and
product launch support