Drivers of consumer behaviour
Functional food

Summary

• Functional foods convey health benefits by adding or concentrating ingredients that contribute to preventing or treating illness, disease and/or promote health and well-being. However, consumers have minimal knowledge of functional foods. 

• The functional food market in the USA has tended to be associated with lifestyle and convenience.  In Japan and Europe the association has been more with medical conditions.

• Sales of functional foods are expected to grow strongly through to 2006 and slow by 2010 as the market matures. After that time the market size is expected to constitute about five per cent of the total developed world food expenditure.

• Increasingly, genetic modification is linked with functional food.  However, whatever technology is used, consumers are most positive toward upgrading naturally occurring ingredients.

• Rising health cost is an economic driver of the functional food market. In contrast, quality of life and disease prevention are considered to be general consumer drivers.

• In the USA, personal motivators include physical effects with the drivers being illness prevention, performance, wellness, nurturing and cosmetics. Regardless of culture, there is a strong consumer needs relationship with taste, convenience, naturalness and health.  Naturalness in an unadulterated form is sought.  Knowledge of the positive attributes and personal consequences of consuming functional food will promote acceptance.

• Barriers to purchase include a perception that functional foods are an easy, lazy, unnatural way to healthy living and an abnormal creation. Suspicion is held about taste, price, the means to evaluate, dosage and reservations about manufacturers and marketer's intentions.  Lack of education, awareness and absence of real health benefits are also deterrents.

• A number of different regulation systems exist.  Regulation will initially be important until a competitive market exists.

Who buys, who doesn't and why

Introduction

Functional foods have become recognised as a separate food category only in recent years.  There are a number of definitions.  Poulsen (1999) defines functional food as:

A product, which has been modified or enriched with naturally occurring substances with a specific physiological preventative and/or health-boosting effect. The product must also be part of the normal daily consumption of food/fluids.

Similarly, Goldberg (1994) defines functional foods as:

…any food that has a positive impact on a person’s health or performance in addition to its nutritive values.

Central to the definitions is that they are foods with incorporated components or substances that impart added health benefits.

Functional foods can be classified in four ways (Poulsen, 1999):

• Upgrading, by adding more of a substance that the food already contains;
• Substitution, by replacing a substance with a similar but healthier component;
• Enrichment, by adding an ingredient not normally found in the food product;
• Elimination, by removal of an unhealthy ingredient from a food.

Explicitly defining what is and what is not a functional food is difficult since conventional foods are often promoted to offer health benefits.  For example, anti-oxidants occur naturally in items such as blueberries and vitamin B is found in certain fruits and vegetables providing health benefits without additional value adding or modification. 

Figure 1 illustrates the positioning of functional foods among other similar food categories.

Figure 1: Scalar market positioning of functional foods

Source: von Alvensleben, 2001

Consumer awareness and connotations

Consumer knowledge of functional foods is limited.  In 1997 research undertaken in USA concluded that only 23 per cent of consumers had a lot or some knowledge of the term functional foods (Gilbert, 1997).  Another study in 2001 showed no change with only 22 per cent of consumers aware of the term (Wansink, 2001). 

However, research indicates that providing information about functional foods stimulates significant consumer interest.  Canadian consumers were introduced to the concept of functional foods. They were informed about the food health benefits and that the food had properties that reduce specific diseases.  As a result, 88 per cent of the consumers showed an interest in discovering more about functional foods (National Institute of Nutrition, 2000).

Market and industry

Rural production and processing industries are providing more value-added products in response to growing consumer demand for healthier food. Existing foodstuffs are being repositioned to respond to this trend.  Examples of this trend can be seen in dairy and egg production. In the dairy market, functional food development has been identified in margarines, spreads, yoghurts and lactose replacement products. In the egg market in Europe, eggs have been developed containing extra vitamins and omega-3 (Anonymous, 2000b). 

In the USA, recent drivers of functional food sales have been snack products, and in particular, nutrition bars. There, it is expected that the functional food product category will grow strongly until 2006, and then taper off by 2010 as the market matures (Nutrition Business Journal, 2002). 

It has been estimated that in 2001 the global market for functional foods accounted for more than US$30 billion. The majority of this is taken up the USA and Japan. This estimate includes a wide variety of health related products that may not be making health claims but are often perceived as functional foods.  It is expected that the market share for functional foods will eventually reach five per cent of the developed world’s food expenditure (Desai, 2001).

The direction of the functional food market in the USA has been particularly associated with lifestyle and product convenience.  For example, it is seen that the marketing of items such as sports drinks enhance energy, relieve stress and support certain choices of lifestyle. In contrast, in Europe and Japan, functional foods hold a stronger association with medical conditions: helping treat ailments connected with digestive needs.  Examples of these foods include fibre-enriched foods and cultured dairy products (Nutrition Business Journal, 2002).  Aging populations however, may generate a new group of consumers who focus more on health aspects.

Biotechnology and functional foods

As well as biotechnology-based improvements in the nutritional value of foods, there has sometimes been a fusion between functional foods and genetically modified (GM) foods. Modified fats and oils, fermented and augmented dairy products and various sports drinks are included in this range.

Elkington and Hailes (1999) suggest that the future will find more GM foods being united with functionality. One recent example is genetically modified carrots, developed in Germany, which contain a vaccine against hepatitis B as an additive functional food element (Foodlineweb, 2002).  Examples of anticipated functional products include GM foods armed with anti-aging antioxidants and fruits specifically designed to combat medical ailments (Elkington & Hailes, 1999).

Buyer profile

There is a variety of motivations across different nations. In Denmark, a study revealed that the elderly and females were more interested in purchasing functional foods with the elderly more willing to pay higher prices given a food’s positive health effects (Poulsen, 1999). 

In the USA, a series of studies undertaken by Gilbert (1988; 2000) revealed a set of mixed findings and motivators.  These found that:

• Younger consumers are more likely to be concerned with combating stress and enhancing physical performance;
• Those seeking functional food benefits come from smaller households, tend to have some college education and are over 55 years of age;
• Those under 30 and healthy seniors over 70 look for physical and performance benefits;
• Forty to 65 year olds and seniors in poor health are looking for medical and preventive benefits;
• One segment, termed ‘food as medicine’ shoppers, representing 11 per cent of the population, holds functional foods labelling in high regard.

Purchase drivers

General motivators

From an economic perspective, one driver for purchasing functional food is rising health costs in developed countries. Industry sources estimate that sterol enriched margarine, which naturally reduces cholesterol, has the potential to save the United Kingdom's (UK) health system almost 90 million pounds a year (Desai, 2001).

From a consumer perspective, improvement and maintenance of quality of life motivates purchasing behaviour.  As consumers age they are increasing concerned with issues such as cancer, heart disease, diabetes, high cholesterol, hypertension and reduced mental capacity.  The possibility of reducing the chances of chronic disease and age-associated physical impairments strongly motivates consumers to seek out benefits offered by functional foods (Goldberg, 1994).

The increased demand for functional foods can be partly attributed to a combination of lifestyle changes and increased life expectancy.  In affluent societies, where food availability is not an issue, consumers have the luxury of making a range of alternative purchasing decisions.  At times they are based on higher order needs, which may include health and time-saving benefits, as opposed to simple survival needs (Bender & Westgren, 2001). 

In a study of the acceptance of functional foods in Denmark, Finland and the USA, it was found that Finland had the highest levels of acceptance. However, in all three countries, wholesomeness was closely associated with taste and naturalness. Also, consumers were more positive toward enrichments that had well known nutritional effects (Bech-Larsen, Grunert & Poulsen, 2001).

Personal motivators

Consumers are attracted to different attributes of functional foods. Five personal motivators for purchasing functional food among US consumers have been identified:

1. Prevention as a method of reducing disease: for example, foods with low fat, few calories, reduced sugar and added calcium;
2. Performance to boost physical and mental ability;
3. Wellness, where food is used as a method of balancing body, mind and spirit;
4. Nurturing and satisfaction derived from providing wholesome food for others;
5. Cosmetics, where eating functional foods enhances self-esteem and creates an improved appearance: for example, weight control, reduced aging effects and stress reduction (Gilbert, 2000).

Consumers in Denmark were more positive about adopting a functional food product if it was supplemented with nutrients normally present in the conventional version of the food (Poulsen, 1999). Consumers would accept, for example, calcium-enriched milk over echinacea-enriched pink lemonade.  This indicates that functional foods need to be positioned similarly to, or close to, the natural product to facilitate wider acceptance. 

A consumer’s perception of food quality is determined by a strong interdependent relationship between taste, convenience, naturalness and health.  Perceptions of food health qualities are also likely to vary between regions based on cultural differences (Bech-Larsen, Grunert &Poulsen, 2001).  There are a number of health issues that are also relevant to the functional food debate:

• In many European countries and the USA, prevention of cardiovascular disease was the most preferred benefit consumers identified with functional foods;
• In the UK, France and Germany prevention of heart disease, cancer, immune system deficiencies and cholesterol were the identified benefits;
• In Denmark, the majority of consumers’ intentions to purchase enriched bread could be explained by:
  • dietary convenience, 42 per cent;
  • price, 21 per cent;
  • naturalness, 18 per cent;
  • nutrition effect, 14 per cent;
  • dosage, five per cent;
  • family expectations and concerns, nine per cent (Bech-Larsen et al, 2001;.Poulsen, 1999).

Attributes and consequences

In deciding to make a purchase, functional food consumers analyse information in two stages. The first stage identifies the attributes of the food product, including assessing information from labels on the derived health benefits. The second stage correlates the information with valued personal consequences (Wansink, 2001).

Focusing on product attributes enhances and reinforces the understanding of the consumer.  However, it is likely that purchasing rates will only increase significantly if legitimate information is communicated about how the product features can be translated into consumer benefits.  In order for a consumer to make a decision to purchase functional foods there is a need to understand both the attributes and beneficial consequences.  Research has shown that those who understand the link between attributes and beneficial consequences show stronger purchase intentions (Wansink, 2001). 

Consumers are more likely to consider the products’ consequences when they hold personal relevance.  Also, consumers are deterred by what they do not understand. A lack of relevant information will not enable the linking of product attributes with personal consequences.  However, one area of research using Soy products in the USA has shown some contrary findings:  Only seven per cent of consumers linked the products' attributes with personal consequences.  In addition, those who are aware of functional foods mainly cite attributes and not benefits (Wansink, 2001). This indicates the need for more research in this area.

Barriers to purchase

Consumers form beliefs and expectations of functional food products before electing to purchase. However, this does not appear to be an enduringly complicated thought process that is adopted on every occasion. Often it is an unconscious immediate analysis that accompanies an habitual purchasing behaviour. 

Respondents of one study in Denmark believed that functional foods provided convenience by enriching the daily diet. This convenience may be perceived as promoting an ‘easy way’ of healthy living (Poulsen, 1999). However, consumers  also perceived unnaturalness and uneasiness toward taste changes, higher prices, doubt about the enrichment effect, enrichment dosage questions, and uncertainty toward eating functional food products. These perceptions are seen as potential barriers to favourable purchasing behaviours. On the other hand, attitudes were seen to be more positive toward the tangible aspects of functional foods. Some of these aspects, included enrichment with supplements of calcium and vitamins (Poulsen, 1999).

Price and lack of information are often quoted as barriers to purchasing functional foods. Many consumers are concerned that the functional food concept could be used as a marketing ploy to justify higher prices. Acceptance appears to depend on the perceived convenience, naturalness, expected health effects and the price/benefit ratio (von Alvensleben, 2001). 

Higher prices for functional foods are a barrier to mainstream consumer acceptance. It is thought that a mass market for functional food is unlikely to develop unless prices are positioned more towards lower socio-economic groups. Even when functional food provides proven health benefits their relatively high price may dissuade these groups from purchasing them (Desai, 2001).

Poor consumer education and awareness also deter the success of functional foods, and if they are to be accepted the foods must offer tangible health benefits (Tenerelli, 2002).  A study undertaken in the USA found that 43 per cent of research and development, marketing and general management personnel, identified lack of awareness as a major obstacle to acceptance of functional foods (O’Donnell, 1998).

Regulatory constraints

Because functional products are a comparatively new category of food, regulatory approvals may initially account for the largest barrier to market entry. Once regulations have been properly adapted however, competitive rivalry is likely to be the main barrier to entry (see Figure 2).

Figure 2: Functional foods entry barriers over time

(Anon, 2002)

As the boundary between food and drug health benefits becomes blurred, functional foods face a worldwide challenge in industry regulation. With health benefits integrated into the claims made about functional foods, the pharmaceutical industry is expected to play an increasingly influential role in the market. However, the regulatory issues are expected to be complex, especially in the early stages (Goldberg, 1994; International Association of Consumer Food Organizations, 1998).

As an example of just one of the regulatory problems, the UK specifically prohibits medicinal claims on foods . In contrast, in the USA producers are allowed to make claims for dietary substances contained in conventional foods.  The USA appears to be the first country to adopt that approach (International Association of Consumer Food Organizations, 1998).  Taking a midway position, the Japanese Government sets strict standards to permit certain foods to be labelled Food Of/for Specified Health Use (Goldberg, 1994).  However, other health food products can be marketed in Japan as long as they do not claim to reduce the risk of disease or a health-related condition (International Association of Consumer Food Organizations, 1998).  

Current Australian regulations are established by the Australian New Zealand Food Authority (ANZFA). These are enforced by State agencies in Australia and prohibit the promotion of health-related claims with food products. Both State and Federal authorities are responsible for packaging statements. The Australian Quarantine and Inspection service recently enforced the regulations by stopping shipments of Dilmah green tea because packaging made claims of health benefits (Choice Magazine, 2002).

Various studies have indicated that consumers enjoy peace of mind knowing that health requirements are regulated. However, it has been indicated that most people do not read labels (ICFO 1998). Therefore, while the regulatory environment can be a barrier to purchase, if people do not read labels the overall impact of regulation and labelling requirements may be diminished.

Overcoming barriers – the case for honest communication

Simplicity should be promoted. It is easier to swallow a pill than change an entire diet and lifestyle (Anonymous, 2000a).  Consumers prefer functional foods when their forms are close to raw or in relatively unrefined states, such as bread or cereals.  This can be compared with those goods that are manufactured for convenience such as sports bars and snack foods (National Institute of Nutrition Canada, 2000). 

European and USA studies indicate that marketing strategies for functional foods are most effective when not promoting the food product directly.  Rather, functional foods gain credibility by publishing clinical research and attaining regulatory approval for health claims. Promotion by health professionals is likely to provide the highest levels of consumer acceptance (Desai, 2001).  Scientific research produces reliable support for health claims and can be effectively used to communicate the benefits and consequences. 

As there are no clear definitions, the term ‘functional food’ may be seen as a marketing term. Sceptical consumers may question the effectiveness and safety of functional foods that have been created by food marketers and not food scientists (Hunter, 2002). Failure to convince consumers of the truthfulness of performance and health-related benefits represents a threat to the expansion of the functional food market.

Maintaining clear communication will guide positive public perceptions toward functional foods.  Suggested communication strategies include:

• Clear labels that list dosages and ingredients;
• Package inserts detailing clinical tests and promoting benefits; 
• Press and literature reports that target physicians and pharmacists with realistic scientific data (Tenerelli, 2002).

Implications

• Consumers are increasingly looking for additional health and disease prevention functions from food. Products that deliver these functions are likely to be in increasing demand over the medium term.
• Health food products that are natural or are upgraded with natural ingredients are best positioned to take advantage of this trend.
• Functional food products such as healthy snacks and whole meal solutions are potential growth areas.  This is in addition to other significant market trends such as convenience foods and those that are easy to prepare.
• Marketing disease prevention capabilities of fresh and natural food is a strategy to target changing needs of the consumer especially with respect to the ageing population of developed countries.
• The boundary between genetically modified, functional and traditional foods is not always clear in consumers understanding.  Further, the evidence suggests that there is two fold division of food products.  The divisions comprise one broad classification of genetically modified, functional and traditional foods, the other organic food.
• Food producers and processors, however, need to take into account that consumers often have reservations about the accuracy of health benefit claims of functional foods and may see such benefit claims as nothing more than a marketing ploy.
• Regulation and labelling are policy areas that are becoming increasingly important to ensure consumer confidence is maintained in the integrity of functional food products.

References

Anonymous. (2000a).  Functional food appeal grows among aging, health-conscious consumers.  Drug Store News, 22, 33-36.

Anonymous. (2000b). Where is the market going? http://www.just-food.com . Accessed June 2002.

Anonymous (2002). Kline & Company. http://www.klinegroup.com/ . Accessed June 2002.

Bech-Larsen, T., Grunert, K.G. & Poulsen, J. (2001), The acceptance of functional foods in Denmark, Finland and the United States, MAPP Working Paper, www.mapp.asb.dk/wppdf/wp71.pdf, Accessed May 2002.

Bender, K. & Westgren, R. (2001). Social construction of the market(s) for genetically modified and nonmodified crops. The American Behavioral Scientist, vol. 44, 1350-1370.

Choice Magazine, May 2002, www.choice.com.au .

Desai, R. (2001). Functional Food: Meeting the Marketing Challenge. http://www.just-food.com/features_detail.asp?art=347. Accessed June 2002.

Elkington, J. & Hailes, J. (1999). The new foods guide: what's here, what's coming, what it means for us. UK: Gollancz.

Foodlineweb. (2002). GM carrots to vaccinate against hepatitis B. Leatherhead Foods RA. www.foodlineweb.co.uk/foodweb

Gilbert, L. (1997).  The consumer market for functional foods. Journal of Nutraceuticals, Functional  & Medical Foods, vol 1, 3.

Gilbert, L. (1998) Defining the nutraceutical/functional foods customer. http://www.healthfocus.net/previous.htm . Accessed May 2002.

Gilbert, L. (2000).  Marketing functional foods: how to reach your target audience. AgBio Forum,  vol 3, 20-38.

Goldberg, I. (Editor) (1994). Functional Foods: Designer Foods, Pharmafoods, Nutraceuticals. London: Chapman & Hall.

Hunter, B. (2002). Functional foods are poorly regulated. Consumers’ Research Magazine, vol 85,14-17.

International Association of Consumer Food Organizations (ICFO). (1998). Functional foods: public health boom or 21^st century quackery? CSPI Reports: International.  http://www.cspinet.org. Accessed June 2002.

O’Donnell, C. (1998). From regs to riches. http://www.preparedfoods.com/archives/1998/9807/9807funcfood1.htm. Accessed May 2002.

Nutrition Business Journal. (2002). National Business Journal’s Functional Foods Report 2002.  San Diego: Penton Media, Inc. www.nutritionbusiness.com

Poulsen, J. (1999). Danish consumers’ attitudes towards functional foods. MAPP working paper, 62. Aarhus School of Business. www.mapp.asb.dk/wppdf/wp62.pdf

National Institute of Nutrition (Canada) (2000). Consumer awareness and attitudes toward  functional foods. http://www.agr.gc.ca/food/nff/cffr/ffnconen.html . Access May 2002.

Tenerelli, M. (2002). Nutraceutical trends: The inside story. Global Cosmetic Industry, vol 170, 40-47.

von Alvensleben, R. (2001). Beliefs associated with food production. In Frewer, L., Risvik, E., & Schifferstein, H. (Eds.). Food, people, and society- a European perspective of consumer’s food choices, 381-400. Berlin Heidelberg New York: Springer-Verlag.

Wansink, B. (2001). When does nutritional knowledge relate to the acceptance of a functional food? http://www.consumerpsychology.com/insights/pdf/funcfoodsknow.pdf. Accessed May 2002.

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Last reviewed 06 April 2005