With the rapid development of food science, with the help of biotechnology, artificial intelligence, big data, and advanced manufacturing technology, global functional food has ushered in a golden period of great development.
The People’s Health Project is a key state policy. Under the Healthy China 2030 policy, China advocates the development concept of shifting from “disease treatment” to “disease prevention” and from “traditional nutrition” to “precision nutrition”, which will undoubtedly drive the development of China’s domestic nutrition and health food industry and its related health industries.
According to the data released by the research institution, the size of China’s domestic functional food market in 2019 was 358.58 billion yuan, and the compound annual growth rate from 2015 to 2019 was 10.58%, which is currently in the growth stage, and the market growth rate and scale are expected to continue to increase in the future.
Functional food in China is mainly concentrated in the development of food based on dual-use raw materials, new food raw materials, all kinds of vitamins and minerals, and other raw materials. It is usually based on the research of some efficacy of raw materials so as to give food efficacy promotion. In essence, it belongs to the category of ordinary food, which is characterized by fast product category updates, many consumers, and relatively easy market transformation. So there are more participants.
Properties of functional foods
There is no legal definition of functional food in China, and the public often says that functional food is more of a marketing concept, often referring to ordinary food with some functional raw materials. “Functional foods” referred to in this report are ordinary foods that have certain functional properties but do not require registration or filing.
The three attributes of functional foods are as follows:
Food Properties
Safe, non-toxic, and harmless, can not bring any toxic side effects within the normal intake range.
Functional Attributes
The raw materials or products used have been scientifically verified and the efficacy is targeted, such as lutein eye care gummy, GABA sleep aid drink, probiotic food, and so on.
Special Properties
Usually refers to the development and production of specific people who need to adjust a certain aspect of body function, such as weight management low GI food, low sugar, low fat, high protein food, sports supplement food, mental food, bone health food for the elderly, children’s eye food, etc.
Features of functional food
Product differentiation
Based on the segmented health demands of consumers, the company further subdivides the product development for different consumer groups, focusing on meal replacement light meal, oral beauty, energy drinks, probiotics, sports nutrition, plant-based, and sleep health track.
Different groups of people such as white-collar anti-fatigue products, women’s anti-aging, calcium supplements for the elderly, children’s eye care, men’s delicate face, etc., each more than 10 billion blue ocean market.
| Help sleep and relieve stress | Lose weight, reduce fat, control body | Maintain beauty and keep young |
| GABA, Theanine, Spina date seed | Low sugar, Dietary fiber, Low carbohydrate water | Collagen, Vitamins, Grape seeds, Gelatin, Hyaluronic acid |
| Eye care and eye health | Anti-fatigue and refreshing | Improve brain and memory |
| Lutein, Vitamin A, Anthocyanin, Taurine, Salina | Caffeine, Taurine, Vitamin B12, Ginseng | PS, Protein-peptide, DHA lipid |
Channel Diversity
Traditional food giants in cross-border industries such as raw material suppliers, pharmaceutical companies, health food companies, and other industries, are expanding their business in the development of new functional foods.
The e-commerce boom has driven the rapid expansion of functional food. The channels of new brands that have not been established for a long time are very clear. Starting from online channels, the developed brands will slowly expand the market to offline high-end supermarkets finally reach traditional convenience stores and KA supermarkets, and finally achieve omni-channel operation.
Most new brands still choose online marketing positions, completely relying on e-commerce, media platforms such as TikTok, Kuaishou, small red book, and other publicity and sales. Through a large amount of content planting and video rendering in a short period of time, the new brands promote health knowledge, form sensory resonance with consumers, thus occupying the minds of consumers, and divert fans to online channels for commercial transformation.
The rise of domestic raw material enterprises
The concentration of upstream raw material enterprises is relatively high, such as hyaluronic acid, 82.0% of the global total sales come from China, and the national supply capacity of hyaluronic acid is far from the market demand, so in the future, the development space of hyaluronic acid raw material enterprises is still very large; With the deepening of people’s research on collagen and the continuous expansion of application fields, the demand for collagen raw materials in China is also increasing. The collagen market of enterprises producing collagen also has a good development prospect and a huge market demand. In addition, some special raw materials, such as vitamin K2MK-7, nattokinase, white kidney bean extract, fish collagen tripeptide, and yeast β-glucan are subdivided raw materials, there is also a certain market demand, the future with the increasing attention of consumers to health, and some national policy support, the demand for specific raw materials may be increasing.
In recent years, sugar and dietary fiber have also been relatively popular, and the scarcity of raw materials means that upstream enterprises have the right to negotiate special raw materials, which is a positive phenomenon for the continuous innovation of raw material enterprises.
New brands are growing strongly
Different people have different consumption habits. Generation Z is the most easily mobilized group for new brands in the new media environment, and it is the main consumer group that brings crowd dividends to new brands. The characteristics of new brands are fast communication, new channels, and rapid product iteration.
New brands usually choose to produce products on behalf of processing and entrust the production task to a professional processing enterprise to complete, multiple SKUs under the brand can come from different OEM production across the country, and the team focuses on operation, brand building, and marketing, publicity, and promotion.
For example, W Company listed a non-health food brewed meal replacement milkshake in 2019, the first brand spokesperson guided the Weibo topic reading more than 250 million, and the first oral hyaluronic acid fudge in China was listed in February 2021. In 2020, we will open more than 10,000 boutique chain retail channels in the country, and reach 60 million sales in the first year of establishment, becoming the NO.1 new consumer brand in meal replacement. In 2023, the company will launch a new probiotic capsule and expand the supplement route through cross-border e-commerce channels.
For example, the domestic B functional food company was founded in April 2020, and the Tmall store began to operate in October. Within 2 months of the product launch, the sales of sleep candies exceeded 20,000, and the average monthly sales of 4 SKUs exceeded 20,000 within 3 months, with young users aged 18-30 as the core consumer group.
Innovative application of high-quality raw materials
Diversification of raw materials to improve competitiveness
Global functional product raw materials are mainly vitamins, minerals, proteins, collagen, probiotics, prebiotics, and other traditional raw materials, plant herbal raw materials will become a new trend, and domestic functional food will focus on “new food raw materials and medicine and food homology” and other emerging raw materials.
| Functional direction | Principal representative material |
| immunoregulation | Ginseng, Ganoderma lucidum, Wolfberry, and other medicinal and edible homologues; Blueberry, European cranberry, and other colored berry extracts; Spirulina, astaxanthin, and other algae extracts; Mushroom extract; Bovine colostrum, Soybean protein, pea protein, etc |
| antioxidant | Grape seed, Green tea, Pine bark, and other extracts |
| weight management | Jerusalem artichoke, Konjac, Oat, and other dietary fiber; Coffee bean, White kidney bean extract, etc |
| sleep health | Valerian extract, Hop extract, Chamomile extract, etc |
Hyaluronic acid in 2021 ushered in the application boom in food and beverage, from snacks, drinks, chocolate, potato chips, soft candy, dairy products, etc., into the era of everything that can be hyaluronic acid. Mulberry leaf has been one of the hottest plant components in recent years. DNJ (1-deoxynojiri mycin), the active component of mulberry leaf extract, can inhibit the effect of α-glucosidase on sucrose and carbohydrates, inhibit absorption, and achieve the purpose of reducing postprandial blood sugar.
New technology – microbial fermentation synthesis
Synthetic biotechnology has become the source of upstream innovation in the functional food industry chain, and many functional raw materials are being developed and produced with synthetic biotechnology, such as artificial breast milk, alternative proteins, functional sugar substitutes (rabodin), synthetic salidroside, and so on.
Synthetic biology can achieve quantitative control of products, the core technology is to use genetic engineering means to achieve the transformation of bacteria to achieve an accurate synthesis path.
The future development of synthetic biology will further promote the improvement of functional food in the direction of flavor, nutrition, consumption mode, and resource scarcity, and play a strong role in promoting the functional food industry.
The core competitiveness of functional food is technology, and ultimately it is to return to healthy food itself
The current functional food, based on the form of ordinary food, adds active factors with health functions, has the taste of snacks, exquisite packaging design, both “useful” and “delicious” “appearance level” is also high, as well as the marketing of brand stories, the rendering of consumption scenes, in order to obtain the recognition of young consumers, in addition to functional attributes, social attributes are also the characteristics of functional foods that cannot be ignored.
Functional foods in snack form such as candy, solid drinks, new drinks, jelly, and meal replacements are favored by young people. They pay attention to ingredients and search products by functional ingredients, such as hyaluronic acid, melatonin, and other specific ingredients.
The space for the future development of functional food is huge, and functional food is so popular that it cannot be separated from the rapid development of science and technology. Scientific and technological innovation is the driving force for the development of the food industry, and the display of innovation results is an effective driving force for industry innovation. Today’s consumers are increasingly aware of the relationship between nutritious eating habits and health. This demand for healthier foods and beverages, coupled with the growing demand for convenience and naturalness within the industry, believes there will be more scenes and markets for customized, functional products.
