research enquiries - just-drinks · the yakult story 18 yakult today 19 ... scrutiny over claims by...

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

functional dairy drinks 2007functional dairy drinks 2007

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




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




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




Yakult Honsha Co. Ltd 85

Appendix – symbols and abbreviations (general) 86

Appendix – symbols and abbreviations (ingredients) 87




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’?




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,




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.




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




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




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

mailto:liz.hague%40just-drinks.com%0D?subject=Research%20Enquiry

research enquiries - just-drinks · the yakult story 18 yakult today 19 ... scrutiny over claims by...

Documents