Building Your Functional Brand
By Adeline Lim, Consultant, StrategiCom
28 Aug 2008

Cleopatra looking to fill her bath with milk will be spoilt for choice today. High-calcium, lactose-free, low fat, or fat free? Milk simply isn’t plain old milk anymore.

Today’s food is increasingly enhanced to provide additional health benefits to consumers. The British Nutrition Foundation and the American Dietetic Association defines functional food as ‘a food having health promoting benefits and/or disease preventing properties over and above its usual nutritional value’. Although functional foods have been in existence from as early as the 1980s, many researchers such as those from the University of Wollongong still find that there is no universally accepted definition of Functional Food. To most, functional foods just fall into a grey area between foods and medicines.

Despite the lacking universal definition, the functional foods category is experiencing exponentially growing demand – on a global scale. Considering the potential preventive benefits that functional foods offer, vis-à-vis escalating global health epidemics such as “globesity”, the increasing demand comes as no surprise. Sales figures in various functional foods segments such as probiotic drinking yoghurt strongly support the blooming of this category into a hypercompetitive industry.

In Europe, the retail sales figure for probiotic drinking yoghurt was a staggering €1 billion in 2004 – a mere 10 years after its first launch. In Asia, since Anlene hi-calcium milk made its debut in 1991, annual turnover has reached NZ$300 million in 2007. Looking ahead, Anlene’s parent company Fonterra Cooperative Group anticipates creaming the profits as China’s milk consumption alone continues to double every year.

Datamonitor Market Analyst Michael Hughes explained the steady global growth of the functional foods industry: the association of functional foods has gradually shifted from that of minimising illness in the aged to that of supplementing people’s busy lifestyles. What was once thought to be “For Senior Citizens Only” is gradually being accepted as an important dietary supplement for people of all ages.

The Category Called FUNCTIONAL FOODS

Since the bone-scan program’s South-East Asian launch in 2006, Anlene has carried out more than 1.2 million bone scans. Anlene’s parent company Fonterra acknowledges that this form of consumer education is indeed effective in raising awareness of whether people need the product. From Anlene’s last annual turnover of NZ$300 million (in 2007) accountable by Asia alone, many now know better about their bone health needs. And when they think of osteoperosis and calcium-fortified milk, they will now think of Anlene.

In the case of functional foods, promoting the category is not only about educating the public on functional foods. There is also the need to rebuild trust in the functional foods, after misuse of the term by errant food companies.

In 1999, the International Association of Consumer Food Organizations published a report on how Japan, United States and United Kingdom’s food regulatory authorities were failing to clamp down on companies making unsupported functional food health claims. Nearly a decade later, companies are still using the same gimmick to boost product sales.

In October 2007, the National Advertising Division (NAD) of the Council of Better Business Bureaus, United States reported that a company called Sera-Pharma Labs had been making unsupported advertising claims for a dietary supplement aimed at aging men – Amidren. The advertiser had claimed its product can “decrease body fat, gain lean muscle, improve mood, improve energy, and prevent thinning hair”. It was further implied that “Amidren is effective in increasing male sexual arousal and/or performance”.

NAD’s review found that there was insufficient evidence in the record to support the advertiser’s claims, and eventually recommended that Sera-Pharma Labs discontinue its advertisements. So the message is clear. Brand Responsibly. Or your sins will catch up with you.

Fortunately, or unfortunately, it was the advertising industry’s self-regulatory online forum mechanism which started the probe. The public is indeed becoming more informed about functional foods.

The way to your customer’s stomach is through the mind: Group Danone
When it comes to promoting a category, there is no bigger functional food champion who understands it better than Danone. Few would have imagined the evolution and success of the original glass and packaging manufacturer when Danone was first established in 1966.

In its first 30 years of existence, Group Danone grew and expanded through vertical integrations of businesses such as Kronenbourg beer, Evian mineral water, and the European biscuit operations of Nabisco. When Franck Riboud (current Chairman and CEO) took over Group Danone’s reins from his father in 1996, he had a food and beverage conglomerate in his hands. Faced with the challenge of taking the juggernaut into the 21st century, Riboud then made some of the most drastic decisions for the business – to focus the Group’s business activities; and to leverage the company’s product brands by promoting the functional foods category. Franck Riboud’s Vision: Sustainable Development.

This simple Vision translated into a variety of million-dollar social business enterprises and corporate social responsibility efforts, which brought the message of functional foods to the masses. Wherever Danone was, people heard of the goodness of functional foods.

The single vision of Sustainable Development gave birth to the Danone Institute International in 1997, a not-for-profit organisation focused on advancing the science of human nutrition. Every year €140 million are pumped into Research and Development activities, including the awarding of scholarships to individuals who had contributed to the advancement of functional foods.

In 2006, Group Danone the functional foods champion embarked on a Corporate Social Responsibility drive, teaming up with Grameen Bank in a food venture to reduce poverty – by offering affordable and healthy nutrition to the poor in Bangladesh.

In 2007, TNS Media Intelligence estimated Group Danone’s advertising expenditure to be in the tune of €234 million advertising expenditure in 2007.

From the information pamphlet handed out at the supermarket, to the Grameen ladies selling Danone’s Shoktidoi yoghurt in the slums – rich or poor were hearing about the goodness of functional foods. And along with each and every message, there was the logo of Danone.

The tangible value of an intangible Vision
In 2002, 6 years after Franck Riboud’s took over leadership, Group Danone’s brand value was assessed to be US$4 billion in the BusinessWeek/Interbrand 100 Top Global Brands survey. In 2007, the Group’s brand value had risen to US$5 billion in the same survey. Danone’s last reported net sales for 2007 was €14 billion. Being the functional foods champion has earned this company more than a remarkable 10% organic growth in a year – today it is one of the world’s most recognised brands in the dairy and water consumables categories.

Danone is one such champion of a category called functional foods. And look at how it has become one of the world’s leading dairy and drinking water brands today.

At the United Nations Environment Program Finance Initiative (UNEP FI) 2005 Global Roundtable, United Nations officials and representatives from the private sector concurred that as health problems (such as obesity) grow into political and social issues, brands which leverage on embodying ‘health’ and ‘wellness’ to build a long-term competitive advantage would probably achieve sustainable sales growth and margin expansion in the long run. In the long run, such brands would also enjoy growth and expansion from being differentiated from “passing-off” companies too.

As the category of functional foods matures into universal acceptance, Wellness looks set to become the future of food. And as more manufacturers crowd the market with innovated fat-reduced, salt-reduced, sugar-reduced foods, how are you differentiated from the rest?

If Danone and Anlene’s successes are anything to go by, start your campaign on your functional food today. Have you started telling the world about your food of the future?