Nathan: How Big Trends Play into Functional Food Developments

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Written by: Shirley Liu, Esther Yu

Edited by: Anna HU (Wechat ID: Nana-annahu), Hailee Bu, Olivia Huang,Clair Tian

“Does obesity also lead to malnutrition?”Senior editor Nathan Gray of NutraIngredients addressed on this topic in the keynote speech of FBIF2017 · Product Innovation B Functional Food Session, and explained that about one third of the world’s undernourished population is caused by obesity. Many people have enough food but do not have a balanced nutrition take-in, or they “eat the wrong thing”, which results in the failure to obtain necessary nutrition. This is the “hidden problem of starvation”.

NutraIngredients is a journal on ingredient and nutriology published in Europe, UK and China, with a circulation of more than 500,000 volumes. As senior editor at NutraIngredients, Nathan has a BSc Human Biosciences in the UK, where he specialized in immunology and wellness, and he has written on key areas in science for years. We are honored to have Mr. Gray to share with us his profound understanding in the development trend of functional food industry.

Microbes, the Newest Healthcare?

Numerous scientific researches have proven that our health is closely related to intestinal bacteria. It is thrilling that the more we study microbes, the more we realize how poorly we know about them. People nowadays improve intestinal health by obtaining the so-called intestinal bacteria in yogurt. Recently, however, there are more fermented foods such as enzyme and they have already become popular in Japan, Europe and the US.“It is a good thing in that probiotics can not only be found in yogurt but also in natural food; we are looking for natural food, especially probiotics.”Data shows that current global market value of probiotics has reached 40 billion Euro (about 292 billion RMB), and it will increase by 38% every year till 2021. Most of the increase comes from water and beverages instead of dairy products, which initiates the innovation of multi-microbeinstead of mono-microbe, and changes the bacteria in our own intestine. Not only probiotics is involved, some ingredient in traditional Chinese medicine will also be included. Thus the study of probiotics must be a promising field in the future and we should pay more attention to the non-dairy products market and the innovation of probiotic strain, and try to find a new way to improve intestinal bacteria in our body.

New Way of Working and Business Model: Joint Corporations and Mass Merger

In recent years, realizing that they cannot launch idealized innovative products by themselves, many corporations are actively engaged in exploring new way of research and work and more than willing to innovate. Many corporations are opening their own VC or innovative platforms and take open actions mainly in two ways: first, cooperating with small businesses; and second, mass mergers. There are an increasing number of company mergers in recent years. The year of 2016 witnessed 707 company mergers and financial transactions in fields of nutrition and wellness, according to NutritionCapital Network Data.It is the highest ever in recent years. Not only the quantity, but the share of each transaction is huge. The amount of repay only in last year’s M&A has reached 275 billion US dollars. Over the recent years, many “really huge transactions” which would not appear in the past few years have been made, such as the acquisition of Swisse, Mead Johnson and Synbiotics. “Why not have some M&A to change the old way of working?”

Due to the emergence of digitalization, network, and Internet of Things, many industries find their old business model out of date. Anyway, we can see that our industry is being greatly influenced by technology, and that the field of food and wellness must find a place in this digitalized world. Social media is a big trend in that there are more and more digitalized technologies providing us with mobility and convenience, including the commonplace spreading of online shopping such as Amazon of Europe and the US and Alibaba of China. The influence of digitalization is not only shown in consumption; it is also directly penetrated into food production, from farms to supermarkets, digitalization provides us with efficiency and changes our business model. This big trend will constantly develop and change the way of work in food industry.

“While Trend is Important, You Will Lose by Following Blindly”

We are deeply influenced but constantly ignored some global trends.

First of all, the sharp increase of global population.The estimated global population will soar to 9 billion by the year of 2050, which will result in resources shortage, food price increment and great challenge for the supply chain. Second, the commonplace aging society. Almost every country and region in the world faces the aging problem. Data from Eurostat shows that the amount of people over 65 in Europe will increase to 30% from the current 17%, and almost one fifth of world’s population will be over 60 by the year of 2030. Faced with multiple problems about wellness and nutrition, as well as drawbacks in healthcare and medical treatment, people are inflicted with “medicine fatigue”, which leads to their dependency on food to settle their health problems.

“Every single big trend and global issue will influence our industry; but some of them are more influential than others.” While global trend is important, you will lose by following blindly.Only focusing on one field or expanding the market access is not the best choice; it is more important to focus on consumers’ feelings about products and the message bared by products. Niche markets perhaps won’t guarantee a thorough reformation for the food industry, but “sometimes small innovations are as valuable as the big ones, and even more humane and focused on the niche.”

Exclusive Interviews

FBIF Shirley Liu： Many food corporations have now realized the importance of nutrition and wellness market and tried to step in. For example, Nestle established the Nestle Nutrition Academy as early as 1981 to share professional nutrition information in a worldwide scale. What do you think of this transformation of food industry? How can food corporations make a good use of high-tech platform to promote product research and develpment?

Nathan Gray：I think Nestle is an interesting example because they had an early start. More and more corporations have had similar tries but only in the recent 5 to 10 years. I also believe that more corporations will join in the future, not only academies, perhaps research departments in universities will join, too; it may develop into an open innovation starting from leading figures in the field, and expanding to mini-size research teams. The whole industry will be more open, and contact new crowds in a brand new way. There is an unsurmountable gap among selling, marketing and researching, and another huge gap between them and academic research in universities. Now people come to realize the importance of communication and cooperation. It is a good thing for the whole industry because they set on new plans, just like Nestle which is a very interesting try. But we are not constrained to research on primal products. Of course food ingredient has the priority but in 5 to 10 years when they have experience and background, this trend may not be in its day anymore; or perhaps a more important part will come up during this session because new things happen every single minute. Many corporations, colleges and research institutions are trying now and perhaps, the commercial value of their tries are not apparent now, but I believe that the world is changing and their work will become very important one day!

FBIF Shirley Liu：Have you heard of a Chinese medicine corporation called Jiangzhong?

Nathan Gray：Sorry, no.

FBIF Shirley Liu：It’s alright, let me introduce it birefly. Jiangzhong is one of the most popular corporations in functional food market in China. It tried to add some traditional Chinese medicine ingredients to snacks like biscuits, and promote the concept of TCM Dietotherapy. It is proven to be a successful try according to the market result. I think Jiangzhong has relieved “medicine fatigue” effectively, which is also mentioned is your keynote speech. What do you think is the key factor that leads to Jiangzhong’s success? How about the abroad market of snacks containing TCM ingredient?

Nathan Gray：I think the idea of adding TCM or other functional ingredients to snacks will become more and more important. In every market in the world, like Europe and the US, more and more leaders in snacks are trying to become healthier. People’s feelings about food count, like the “consumers’ feelings” I mentioned several times just now. For example, people will think it is strange if a company which produces chocolates and biscuits begin to try something healthy. On the contrary, if a company which produces healthy food starts producing some snacks, people will still think it is healthy because they automatically filter the unhealthy information. What counts most is whether the right ingredient matches the right food; it suits your examples and tries of other corporations. For example in America, a local yogurt company adds fish in its ingredient list and their produce taste like fish, that’s awesome. So as long as the taste satisfies consumers’ feeling, it is the right thing, no matter what kind of ingredient, TCM, or other factors.

FBIF Shirley Liu：The increasing rate of obesity, diabetes and other chronic diseases provides a broader market for functional food, but at the same time offers the chance for some dishonest businessman. When interviewed, some scholars claimed that “health products corporations nowadays pay too much attention on selling, instead of producing products.” What do you think of this? How can we effectively manage the whole food industry in order to make it develop healthily and steadily?

Nathan Gray：I can’t agree more. Indeed, some corporations need to change their marketing strategy. Like the TCM corporation you mentioned before, they might apply almost half their fund or income to the research of products, but only one third to marketing. Compared with them, some corporations are just on the contrary. They may only keep 5% of investment for the innovation of products. So this is a big problem. For a long time, people hold the idea that as long as corporations don’t make big mistakes, they can sell anything. But the world is changing, and so are the ideas. The food industry should be well aware of this problem. I think people should pay more attention to producing products with high quality, which will last and will sell well!