Report 2

THE EUROPEAN MARKET FOR PROBIOTICS AND PREBIOTICS

Probiotics have been described as “live microbial supplements that beneficially affect the consumer by improving intestinal microbial balance.” Prebiotics, on the other hand, are said to feed the good bacteria that already live in the digestive system and provide “bulk”. They comprise non-digestible carbohydrates and include oligosaccharides, such as inulin, fructooligosaccharides (FOS), galartooligosaccharides (GOS), lactulose and lafinose.

Whatever their respective merits, the European consumer currently seems keen to consume products that promise to aid digestive health. Although these markets are relatively small both pre and probiotic foods have been showing substantial value growth rates of between 10% and 20% per year. This has to be compared to a total food market growth of only 1% to 2%.

FUNCTIONAL FOODS

Sales of functional food and drink in Europe have experienced considerable growth, with a doubling of sales between 2000 and 2005, at prevailing prices. RTS puts the value of European sales of functional foods at €8bn, currently, and destined to reach in excess of €10bn by 2010.

Consumers are becoming more ‘health aware’ and are interested in what they eat as well as food’s relationship to health. Many have gone beyond looking to food simply to maintain normal health and are seeking to optimise performance and wellness in addition to reducing the risk of some diseases such as cardiovascular disease, cancer and osteoporosis. In addition, populations across Europe are ageing, disposable income is increasing and there is a desire for convenience. This has set the scene for increased demand and development of functional foods.

Whilst functional drinks still occupy the largest market share (at around 50% of all sales) probiotics (mainly dairy products) and prebiotics (comprising mainly dairy products, cereals and baked goods) are the next largest sectors. Across Europe, the probiotic industry accounts for more than €1.4bn at consumer prices, whilst the prebiotics sector is valued at €0.9bn (RTS research).

Western Europe: Consumer market for probiotic and prebiotic products, 2000 to 2010 Market value (€m)

cagr cagr

2000 2005p 00-05 2010f 05-10

Probiotics 824.2 1,447.1 11.9% 2,100.4 7.7%

Prebiotics 365.3 878.6 19.2% 1,370.6 9.3%

Source RTS Resource Ltd

The market for prebiotics is growing rapidly from a small base. Prebiotics are mainly associated with breakfast cereals, baked goods, cereal bars and baby foods, as well as some dairy products. The probiotics market has become better established, based primarily on the launch of special yogurt and fermented milk drinks.

Synbiotics are a mixture of prebiotics and probiotics. The theory being that synbiotics load the colon with good bacteria whilst ensuring there is a plentiful supply of the right food on which to thrive. This also seems to be a rapidly growing market.

PROBIOTICS

Western Europe: Forecast consumer market for probiotic products by segment, 2005 to 2010 Market value (€m)

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600

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1,000

1,200

1,400

1,600

Yog & dess Milk Breakfast Biscuits

€m

2005p

2010f


Probiotics are “good bacteria” that help maintain a healthy balance of bacteria in the digestive system. There are two main types of probiotics, namely lactobacillus species and bifidobacteria, with up to seven different alternatives. They perform a natural function within the gut, which is to:

protect the body against harmful bacteria

prevent the growth of harmful bacteria

help with gut problems, for example, constipation and wind

help maintain cholesterol levels

produce some B vitamins, folic acid and some amino acids

help the body absorb vitamin B1.

Probiotics are most commonly suited to use in yogurts, yogurt drinks, cereals, capsules or tablets.

Probiotics, like most functional foods, are classed as foods or food supplements so are not affected by regulations controlling the advertising of medicines. However, this means that manufacturers are restricted to making non-specific “health” claims and that much marketing depends on the consumers’ own knowledge.

Most foods containing probiotic bacteria are found in the refrigerated sections of the supermarket as the bacteria are destroyed by heat and other processing conditions. This has given the dairy sector, already used to handling live bacteria for the manufacture of yoghurt, a major advantage in probiotic foods. Probiotic drinking yoghurts are currently the largest users of probiotics as well as the fastest growing dairy product in Europe.

KEY MANUFACTURERS & THEIR BRANDS

The main European probiotic brands are fermented dairy drinks from Danone, Yakult and Nestlé LC1. Yakult was the first probiotic drink to be launched in Europe in 1996, followed by Nestle’s LC1 “Go” and Danone’s Actimel in 1999. Whilst these are positioned as functional drinks, spoonable probiotic products tend to take a general health and taste positioning. This is demonstrated by the launch of Muller Vitality, for example, which is a low fat probiotic yogurt.

The development of new probiotic products has not always met with success and some notable brands have been withdrawn from the market in recent years.

Groupe Danone Danone markets Actimel, a probiotic yoghurt drink containing a unique culture called L.casei Imunitass, which is exclusive to Danone.

YakultYakult is a fermented milk drink containing lactobacillus casei Shirota. Developed by Dr Minoru Shirota, the drink has been around for about 70 years in some form. It was initially only produced in Japan but is now made in Holland for distribution throughout Europe.

NestléNestlé probiotic products are mainly based on its LC1 brand and include:

Ski BioVita: a probiotic yoghurt containing LC1 culture

Sveltesse Optimise 0%: a probiotic, fat free, dairy drink containing a probiotic and fibre, available in Strawberry and Pineapple flavours

Munch Bunch Drinky (UK): a yogurt drink designed for children, containing fruit puree and a gentle probiotic for children. It is claimed that the probiotic, lactobacillus fortis, is specially designed for children

Müller Dairy Müller Vitality drinks and yogurts contain two strains of good probiotic bacteria, La-5 and Bb-12. Müller also uses inulin as a prebiotic.

Orchard Maid (UK) Orchard Maid organic yogurt drinks (250ml) are marketed with an attached probiotic straw. The LifeTop straw, developed by Bio Gaia, contains the probiotic bacteria, lactobacillus reuteri (patented Reuteri), which is claimed to be one of the most effective probiotics available

Onken Dairy The Onken Biopot contains a combination of three biocultures: lactobacillus acidophilus, bifidobacterium longum, and streptococcus thermophilus.

Rowan Glen Dairy (UK) The company produces a range of yogurts, which include fat-free Probiotic Yogurt for Tesco, Sainsbury's, Safeway and the catering trade throughout the UK.

PROBIOTIC MARKET

The probiotic dairy market continues to develop after a particularly slow start. Bio yogurts have been eaten throughout Europe for their mild taste more than their health benefits. Only relatively recently, with the introduction of dose-delivery fermented milk drinks, have terms such as gut health, digestion and bacteria been used in promotion and advertising.

Whilst the European market for probiotics is showing healthy growth in demand it is not without controversy. Despite being beneficial to health, many products have been criticised for containing too few bacteria to have any practical effect.

Food is the largest sector of use, although probiotics supplements are also seeing good growth. However, in Europe, the sector of food supplements has been contentious due to the lack of specific legislation. Profitability of the supplements sector seems high with some probiotic materials commanding as much as €900 per kilo of capsules at consumer prices.

Key drivers driving the functional dairy products sector include consumer health concerns, the traditional healthy image of yogurt, and the good taste perceptions of the probiotic yogurts.

As the market has become more established this has enabled familiar brands to be developed into the broader “health” arena. For instance, Benecol started out with yellow fat and cheese spreads, then moved into yogurts in the UK and snack bars and dressings in the US. A further development has been the “mixing” of health ingredients into one product for example, probiotics with prebiotics (synbiotics) and probiotics with Omega-3 or vitamins.

There does appear to be an element of fashion attached to the market sector which could pose problems for sustaining growth in the future whilst probiotics in supplement form will continue to compete with probiotic foods.

Western Europe: Share of market for probiotics as industrial food ingredient by main country, 2005 % Share of market value (€m)

Germany29%

France21%

Finland9%

UK9%

Netherlands7%

Spain6%

Rest of WE19%


Western Europe: Forecast growth in market value of probiotics as industrial food ingredient by main segment, 2005 to 2010 Forecast additional market value (+/- €m)

+£4.44m

+£3.17m

+£0.20m

+£0.02m

Yogurt & desserts

Milk & milk drinks

B'fast cereals, bars

Biscuits/cookies


NEW TECHNOLOGY

Although the use of probiotics in food is largely restricted to refrigerated dairy products, technology is developing and there are now several ways in which probiotics can be added to these and other foods and yet remain stable.

Arla Foods Swedish probiotics producer, Medipharm, has revealed plans to launch a coated bacteria that can resist the damaging conditions in ambient foods like cereals, or even the low temperatures of ice cream. The Arla Foods subsidiary has worked with Sensient Flavors (the Nordic division of US-based Sensient Technologies) to create a probiotic that remains stable when stored in dry conditions at room temperature for six months.

The coating layer contains Medipharm's lactobacillus F19, already available in Arla's Culture brand, and shown in studies to boost the immune system. This creates the opportunity to add probiotics to other foods such as cereals and nutrition bars

Chr Hansen Probiotics supplier, Chr Hansen, claims to have developed a new, flexible formulation system for adding probiotics directly to finished products. The technology uses Tetra Pak's aseptic dosing machine, Flex Dos, which allows the bacteria to be added to liquids just before they are filled into cartons. The innovation is expected to significantly boost the market for probiotic beverages, which have so far been restricted by the delicate nature of the ingredient and concerns over contamination.

Chr Hansen is predicting strong growth in demand for probiotic beverages as the drinks sector has traditionally been one of the most innovative in adding healthy ingredients.

ValioMeanwhile, Finnish dairy processor Valio, claims to have succeeded in creating a probiotic juice (its Gefilus brand) by improving the stability of its probiotic bacteria. The product is said to enjoy the largest share of the chilled drinks segment in Finland.

Western Europe: Industrial market for probiotics and prebiotics, 2000 to 2010 Market value (€m)

cagr cagr

2000 2005p 00-05 2010f 05-10

Probiotics 12.0 19.6 10.2% 27.4 7.0%

Prebiotics 8.2 21.1 20.9% 32.1 8.8%


PREBIOTICS

Prebiotics are defined as: “non-digestible food ingredients that beneficially affect the host by selectively stimulating the growth and/or activity of one or a limited number of bacteria in the colon, which can improve host health.”

Materials include oligosaccharides, such as inulin, fructooligosaccharides (FOS), galartooligosaccharides (GOS), lactulose and lafinose.

According to LFI, there are many new prebiotic materials coming onto the market, including isomalto-oligosaccharide, soya-bean oligosaccharide, lactosucrose and xylo-oligosaccharides. Many others, such as tagatose, pectin, dextrins and larch arabinogalactan, are currently being assessed.

Prebiotics provide food for the growth of lactobacillus and bifidobacteria. These non-digestible carbohydrates occur naturally in foods such as wheat, oats, bananas, asparagus, leeks, onion, garlic, chicory, and artichokes. However, they are only present in small amounts. The commonest prebiotic in the diet is the fibre found in fruit and vegetables.

Although it is preferable to obtain prebiotics from natural sources, this may not always be practical. Prebiotics can be incorporated into the diet through foods such as cereals and dairy products, which are supplemented with them.

According to prebiotic producer, Orafti, infant formula manufacturers looking to replicate the qualities of breast milk are turning to prebiotics to boost gut

health. Children under the age of five are one of the groups most susceptible to gastrointestinal infections, particularly when starting attendance at nursery schools. Orafti says there is increasing interest in using prebiotic ingredients in infant and follow-on formulas on both sides of the Atlantic. Researchers have found that breast milk naturally contains oligosaccharides.

Western Europe: Forecast consumer market for prebiotic products by segment , 2005 to 2010 Market value (€m)

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PREBIOTICS RESEARCH

New research is being proposed to establish just how effective prebiotic ingredients substances are in different food applications.

Where probiotic products add more of the healthy bugs found naturally in the gut, prebiotic ingredients feed those that are already present. There has been a rapid increase in companies marketing such ingredients on the basis that a good balance of gut flora protects the digestive system and bowel against various cancers and other illnesses.

Leatherhead Food International (LFI) and The University of Reading have proposed a collaborative project with ingredient suppliers and healthy product manufacturers to research such products. The project will look at the performance of individual prebiotic ingredients and examine whether blending one or more ingredients gives increased activity. It will also investigate how well they work in different food applications.

It is hoped that the project will not only help suppliers of prebiotic ingredients to understand and establish the benefits, but will also help manufacturers of yoghurts, confectionery, snacks, spreads and beverages to look at potential applications and establish scientifically backed health claims.

KEY MANUFACTURERS OF PREBIOTIC PRODUCTS

As prebiotics are closely associated with products containing some form of fibre, product usage tends to be wide – bread and baked products, breakfast cereals (such as Kellogg’s Rice Krispies Multi-Grain), baby foods, dairy products and even soft drinks and pet food. However, these products are less well established than probiotic ones and tend to be confined to niche sectors of more established markets. It is surmised that this is mainly because prebiotics, as a group, have been less well supported by advertising and consumer awareness.

PREBIOTIC MARKET

As with probiotics the global market for prebiotics is showing a healthy growth in demand and there appears to be good scientific evidence to underpin health claims, which should further sustain growth in the future. Prebiotics can also be purchased in supplement form with some prebiotics commanding as much as €700 per kilo of supplement capsules. Food products command much less of a premium.

RTS calculates that the strict market for added prebiotic ingredients in functional foods, as defined, in the EU, USA and Asia, totals some 25,000 tonnes, which is forecast to rise in volume by more than 6% per year. However, the European market remains relatively small at €880m in terms of finished product sales values. Market potential though is considered high. Growth could occur at an even higher rate than our predictions if the industry develops more new products and markets them successfully, given legislative restrictions.

Western Europe: Share of market for prebiotics as industrial food ingredient by main country, 2005 % Share of market value (€m)

UK24%

Germany22%

France17%

Italy7%

Spain7%

Netherlands6%

Rest of WE17%


Western Europe: Forecast growth in market value of prebiotics as industrial food ingredient by main segment, 2005 to 2010 Forecast additional market value (+/- €m)

+€3.2m

+€2.9m

+€2.8m

+€1.3m

+€0.3m

+€0.2m

+€0.2m

+€0.1m

+€0.1m

Yogurt & desserts

B'fast cereals, bars

Juices, soft drinks & carbonated

Bread & morning goods

Pet foods

Confectionery

Milk & milk drinks

Ice creams & frozen desserts

Butter & yellow fats


CONCLUSIONS

Both pro and prebiotics represent different but potentially exciting parts of the market for healthy food and drink. All the signs are that consumers will continue to favour products with specific health benefits and this factor should ensure that these sectors continue to enjoy above average growth. However, as can be seen in the history of the development of probiotic dairy drinks, the consumer must feel both comfortable and somewhat knowledgeable about the products and their benefits before markets can develop. Perhaps the most significant barrier to future growth, therefore, is legislation. New EU legislation is likely to curb the use of specific health claims that lack the scientific evidence to back them up.

There is also a danger that health-giving foods such as these may suffer from changes in food fashion – what is “in” today may be “out” tomorrow.

At the same time, the market is starting to become more complex. What began as a relatively simple message with the addition of bacteria or soluble fibre to existing products is now becoming a battleground for more complex mixes. Not only are we being offered synbiotics, but also the addition of other health ingredients such as Omega-3 and plant sterols. Whilst some of these health “packages” are interesting the danger is that they will simply confuse the consumer who will then turn away from the sector as a whole.

Meanwhile, technology now seems to be available capable of expanding the use of both pro and prebiotics into new ranges of foods and drink and this, in turn, could provide the industry with a classic win-win for the future – better health for the consumer and an opportunity for growth and adding value for the manufacturer and retailer – providing the health benefit is effective and the message is kept simple.

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Report 2