Sample provided by
Research enquiries: Liz Hague, Sales Manager
email: [email protected] tel: +44 (0)1527 573 604
US toll-free: 1-866-545-5878 fax: +44 (0)1527 577423
Zenith report - July 2007
© Zenith International Ltd 2007 1
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CONTENTS
Brief definition 5
Executive summary 5
Introduction 8
Functional dairy drinks – market analysis 11
Table 1 – Functional dairy drinks volume sales in million litres, 2004-11 11 Table 2 – Functional dairy drinks volume growth, 2005-11 12 Table 3 – Functional dairy drinks volume sales in million units, 2004-11 12 Table 4 – Functional dairy drinks per person consumption in units, 2004-11 13 Chart 5 – Functional dairy drinks regional volume shares, 2006 13 Chart 6 – Functional dairy drinks predicted regional volume shares, 2011 14 Table 7 – Functional dairy drinks market value in million Euros, 2004-11 15 Table 8 – Functional dairy drinks value growth, 2005-11 15 Table 9 – Functional dairy drinks price per litre in Euros, 2004-11 16 Chart 10 – Functional dairy drinks regional value shares, 2006 16 Chart 11 – Functional dairy drinks predicted regional value shares, 2011 17
Category origins 18
The Yakult story 18 Yakult today 19 Table 12 – Yakult product portfolio 21 Table 13 – Yakult Honsha Co. Ltd timeline 23
Dairy: inherently functional 25
What causes osteoporosis? 25 Who is most at risk? 25 Ageing population: further statistics 27 Table 14 – Nutritional properties of dairy 28
Profitability of dairy 28
Dairy: added functional 29
Typical functional ingredients and their benefits 29
Probiotics 29 Prebiotics 30 Plant sterols 31
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Omega-3 32
Emerging ingredients 34
Green tea catechins 34 Co-enzyme Q10 35 Aloe vera 36 Glucosamine 36 Chondroitin 37 Whey protein 38
Functional growth areas – stretching category boundaries 40
Beauty/cosmeceuticals 40 Weight management 41 Sports/energy drinks 42 Niche consumer groups 43
Further examining the emergence of functional dairy 44
Challenges: dairy industry as a whole 44
Increasing raw material prices 44 Climate change 45 Negative dairy industry publicity 45 Sexing up the image of milk 46 Calcium and the weight loss debate 48 Lactose intolerance 49 Dairy alternatives 49
Challenges: functional dairy drinks 50
Crowded market leads to consumer mistrust and confusion 50 Increasing regulation surrounding nutrition and health claims 51 Table 15 – Main aspects of EU nutrition and health claims regulation 51 Advertising authorities 52
Regulation: regional systems surrounding functional claims 53
Europe – EU nutrition and health claims regulation 53 US – Food and Drug Administration 55 Asia – FOSHU 56
Regional review of functional dairy drink markets 58
Asia 58
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Europe 60 US 62
Functional dairy drinks SWOT analysis 63
Strengths 63 Weaknesses 63 Opportunities 63 Threats 63
Future and development 64
BRAND PROFILES
Alpenmilch Salzburg 66
Bravo! Brands 67
Campina (with DSM Food Specialties) 68
Dairy Farmers of America 69
Dairy Farmers of Britain 70
Emmi 71
Groupe Danone 72
Danone SA 73
Lactalis 74
Leche Celta SL 75
Mars Incorporated / Masterfoods UK 76
Nippon Milk Community 77
Parmalat 78
Raisio 79
St Helen's Farm 80
Stonyfield Farm 81
Unistraw International 82
Valio 83
Wimm-Bill-Dann 84
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Yakult Honsha Co. Ltd 85
Appendix – symbols and abbreviations (general) 86
Appendix – symbols and abbreviations (ingredients) 87
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Introduction
The fundamental aims of this report are to examine the main trends and developments across the global
functional dairy drinks category by looking at a number of key markets in greater depth, understand its origins
and principal reasons for being, and to examine the extent of future potential the category holds.
The study will be simplistic yet comprehensive in its approach, with its analysis based around basic forms of
interrogation such as how, why and what, as the set of questions below portray:
♦ How have functional dairy drinks appeared?
♦ Why has the category emerged and shown such impressive growth rates?
♦ When and where did it originate, and when did it really start to take off?
♦ Who or which target groups are functional dairy drinks marketed towards?
♦ What does the category have in store for the industry as a whole, and how can dairy producers best
leverage these opportunities?
The present day functional or 'active health' sector of the combined West European, US and Japanese dairy
drinks industry is currently estimated at a volume of over 999 million litres, as achieved in 2006. In terms of
the why and how, the functional dairy drinks category may clearly not have been able to emerge and grow to
such an extent were it not for the early influences of Japan's Yakult Honsha Co. Ltd. We look at the
history behind the market leading yogurt drink in more detail further later, but it is important to point out
here that it is thanks to this pioneering company's strong, scientific foundations and the probiotic product's
'tried and tested' benefits, that so many other firms have been able to follow suit and share the success.
Although consumers may not always understand exactly how probiotics benefit their bodies' digestion and
general immunity, they are nevertheless aware – thanks to Yakult's global presence and the continued
marketing efforts of other manufacturers such as Danone – that these little yogurt shots have some positive
health implication and work some kind of magic on their internal mechanisms.
The early impact of Yakult, the effects of which proliferated on a global scale, is undeniably one of the essential
reasons that many other dairy companies have so readily and so fluently followed suit. But is it such a natural
progression or more a case of ‘do or die’?
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Dairy processors and producers have been, and indeed still are, under constant pressure from rising costs on
the one hand and retailer/consumer pressure on the other to keep prices for a basic commodity, such as fresh
milk, as low as possible. The dairy industry is a relatively uneventful category in the grand scheme of things;
very little has happened over the past few years other than market consolidation. Milk – the conventional
‘white stuff’ fresh from the cow – can and will only ever generate break-even prices at best. With volumes in
decline and increasing costs, maintaining value is close to impossible. Consumers’ increasingly proactive
attitudes towards their own and their families’ health, coupled with changing shopping habits and more choice,
‘personal touch’ services such as home milk delivery, other avenues for potential added revenue, could soon
also become a thing of the past.
Declining sales and rising costs are amongst a growing number of problems
affecting the dairy industry. The anti-dairy lobby, dairy alternatives,
misguided and ill informed health information from varied – and often
somewhat ‘dubious’ – sources, more expensive packaging and a growing
burden of government legislation all present a challenge to maintaining sales.
And all this whilst also being faced with climate change and pressure to
improve environmental awareness and responsibility.
So, is tapping the ‘added value’ or functional dairy sector the only way to offset rising costs, gain a strategic
advantage over competitors and the only value real growth engine? The decision to add such an offering (St
Ivel Advance with Omega-3) to its portfolio certainly helped Dairy Crest find its point of differentiation and
reinforce its leading position on the UK market.
However, the functional dairy drinks category is not necessarily an easy industry
to crack. Many have seen it as the answer, but herein lies the problem. The dairy
aisles, whereas previously comprised of a small number of key products by key
manufacturers, such as Yakult and Groupe Danone, are now bursting at the
seams with a rapidly increasing amount of alternatives. Moreover, these all appear
with varying functional positionings and suggested health claims, be they digestive,
immune or heart health, or even ‘satiety-boosting’ weight management.
Although the functional dairy drinks market – or the active health drinks or yogurt drinks market as it is
otherwise known – has shown strong growth rates over the past few years, and whilst successful operators
have continued to enjoy strong performance, sales for the dairy category as a whole are thought to have
declined somewhat during the last year or so. While the positive consumer intentions and interest are there,
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people are becoming more and more confused by just the sheer amount of choice. What is more, with tighter
scrutiny over claims by both governmental and advertising bodies alike, consumers – who on the one hand
turn towards functional food and drink as they become health conscious but on the other hand may turn away
from them if there is any element of doubt – are now more sceptical about products’ alleged health benefits.
In a market that is constantly edging its way to saturation point, innovation and strong product concept
delivery are imperative to ensuring success. This is where dairy giant Danone excels. Its ability to remain at
the forefront of innovation and adapt to – or even accurately anticipate – consumers changing needs are the
essential reasons for its unrivalled success. Its market leading Actimel, Activia and Danacol yogurt products for
immune, digestive and heart health respectively, have achieved international recognition thanks to their
powerful concept and effective delivery.
Despite growing competition and increasing challenges, the functional dairy drinks industry still holds a great
deal of possibilities: its movement towards the mainstream is yet to fully blossom; scientific developments are
stretching category boundaries and highlighting relatively uncharted territory in other functional sectors such
as sports and energy drinks; and the added value margin potential is – and looks set to remain – very enticing.
Despite the opportunities it holds, the category still represents a challenge, but an interesting one nonetheless.
It’s all about grasping opportunities, responding to and predicting changes in demand, developing pioneering,
well-substantiated product concepts and successfully delivering their message, combined with strong brand
equity and correctly identifying – and marketing to – a definite target consumer group.
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Functional dairy drinks – market analysis
In undertaking its research, Zenith International depends upon the goodwill and co-operation of firms in the
marketplace to provide accurate figures on their activities and thus the market overall. Due to the short time
frame and topical nature of this report, direct contact with every individual category operator has not been
possible. Ultimately Zenith has had to make its own judgment and therefore all figures presented should
realistically be regarded as Zenith estimates. Yet, with the extent of crosschecking involved in the report,
Zenith believes a high level of accuracy has been achieved. (Numbers expressed may vary due to rounding.)
♦ Zenith estimates that the combined functional dairy drinks markets of West Europe, the US and Japan
reached xxx million litres in 2006.
♦ West Europe claimed the xxx% majority of volume sales, having overtaken the Japanese market some
years previously. In 2006, Japan generated xxx% of category volume with the US market, still in its
early infancy, accounting for xxx% of combined volume sales.
♦ Volume sales across West Europe, the US and Japan are projected to reach xxx million litres by
2011. (This figure could well prove conservative if the category is afforded renewed impetus by the
increased marketing efforts of existing, as well as new, operators, and if the impending EU nutrition
and health claims regulation impacts positively on functional product sales in West Europe).
Table 1 – Functional dairy drinks* volume sales in million litres, 2004-11
* Volumes cover probiotic daily dose yogurt drinks and the like. For the purposes of accurate market quantification and like-for-like comparisons, enriched more 'mainstream' fresh milk drinks have been excluded. Source: Zenith International
♦ Although West Europe is the largest of the three regional markets and sees good double-digit growth
year-on-year, the strongest growth rates are being generated on the emerging US market.
Vol, mln litres 2004 2005 2006e 2007f 2008f 2009f 2010f 2011f
West Europe
US
Japan
Combined
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Appendix – symbols and abbreviations (general)
... Negligible, less than 0.05
e Estimate
f Forecast
ASA Advertising Standards Authority
CAGR Compound Annual Growth Rate
CHF Swiss Francs
FDA (US) Food and Drug Administration
FHC Food with Health Claims
FOSHU Foods for Specified Health Use
FNFC Food with Nutrient Function Claims
FSA Food Standards Agency
JHFNFA Japan Health Food and Nutrition Food Association
GDA Guideline Daily Amount
MHLW Minister of Health, Labour and Welfare (Japan)
mg Milligram
na Not available, not applicable
NR Non returnable packaging
OA Osteoarthritis
oz Ounce
PET Polyethylene terephthalate
RDA Recommended Daily Allowance
rBST Recombinant bovine somatropin (growth hormone (for cattle))
Vol Volume
WHO World Health Organization
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Appendix – symbols and abbreviations (ingredients)
CoQ10 Coenzyme Q10
DHA Docosahexaenoic acid
EGCG Epigallocatechin gallate (most potent of potent of green tea polyphenols)
L. casei Lactobacillus casei
LGG Lactobacillus GG (a Lactobacillus rhamnosus probiotic strain)
MBP Milk Basic Protein
NAG N-acetyl glucosamine
Omega-3 Generic name given to group of essentially fatty acids
Omega-6 Also part of a group of essential fatty acids
Research enquiries:
Liz Hague, Sales Manager
email: [email protected]
tel: +44 (0)1527 573 604
US toll-free: 1-866-545-5878
fax: +44 (0)1527 577423