Americans spend nearly $30 billion on functional foods, according to Leveraging growth in the emerging functional foods industry, from PricewaterhouseCoopers (PwC).

Functional foods are those that contain supplements beyond food that’s consumed for basic nutrition. They incorporate additional ingredients that target specific health benefits.

PwC believes that the U.S. represents the largest functional foods market in the world, up to one-half of global sales.

20 companies account for 70% of the U.S. market. Many of these names are very familiar, such as PepsiCo (with Gatorade and Quaker), Coca-Cola (Vitamin Water and Odwalla), General Mills (Cheerios and Yoplait), Kellogg (Kashi and Special K), Kraft (Balance Bar and Capri Sun), Nestle (Nestquik and PowerBar), Dannon/Danone (Activia), and Unilever (SlimFast).

As the chart illustrates, Energy is expected to have the fastest growth among all functional food categories in the U.S. Today, energy represents about 30% of the market, The other large areas in functional foods include gut health, bone health, and heart health.

Growing areas are expected to be cognitive health, including omega-3 fatty acides, along with weight management, mood enhancement, and skin beautification.

Health Populi’s Hot Points: Functional foods represent one of the most consumer-facing health segments in the U.S. American consumers spent somewhere around $30 billion in 2007 on functional foods. This represents out-of-pocket spending that people willingly make to benefit themselves — whether to increase energy, improve a health risk factor (e.g., blood pressure, cholesterol), or address an existing condition (e.g., chronic gastrointestinal issues).

As Americans face growing out-of-pocket costs for health care (such as copays for physician visits, and Rx copays at the point-of-purchase), many consumers look for substitutes and complements to traditional services and products. Health care morphs toward health as people take on more of this responsibility and get more engaged and activated on their own behalf.

The functional food companies understand this. They’ve begun to communicate health benefits in friendly, engaging ways. Jamie Lee Curtis, a friendly face and personality, talks about Activia and benefits of probiotics in TV ads. Kashi ads are bolstering both the natural features of the product along with an active, outdoor lifestyle. Over time, functional foods products will address more complicated health factors and move toward personalized health.

Traditional health stakeholders, from providers to pharma companies, should heed the trend of functional foods. Consumers are liking what they’re consuming here, and they’re spending a greater share of disposable income on these products. If people look to functional foods as part of health — which many have begun to do — they could be competing with traditional health products’ market shares.

At the same time, these products could also complement traditional products and services. In its discussion of opportunities, PwC asks an intriguing question? “What if medical practice requires the consumption of functional foods as a prerequisite for treatment of a certain medical condition?”

As the functional foods industry gathers data on effectiveness for specific conditions, these products could indeed become mainstream in medical practice.

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