Profits lie ahead in ‘lifestyle’ products

European food manufacturers have a head-start on increasingly competitive global markets. The sector’s decades-old reputation for quality and reliability is proving to be an excellent launch-pad for exporting innovative products to potentially lucrative markets such as China and Russia.

Future growth potential mainly resides in the expansion of the lifestyle products market. The ‘less and more’ products (reduced calorie drinks and vitamin enriched cereals, for example) may be losing some of the lustre they had a decade ago, but consumers still have plenty of frustrations ripe for exploitation by industry.

Growth will come from the types of innovation that promise to make consumers younger, fitter, brainier and more environm-entally friendly. European companies have quickly cottoned onto the trend. One example of recent lifestyle innovation is Nicoshot beer, the world’s first nicotine-infused beer designed by German manufacturer Nautilus, which was developed to help control the cravings that have landed scores of drinkers out in the rain in the era of blanket smoking bans.

Another example is French firm Danone’s range of ‘probiotic’ yoghurt drinks. The company offers a World Health Organization definition of ‘probiotics’ on its website, describing them as "live micro-organisms which when administered in adequate amounts confer a health benefit on the host". Not everyone is convinced. This month, US consumers launched a class-action lawsuit in California, accusing the company of making misleading claims. Complainants allege that claims of "clinically" and "scientifically" proven health benefits are unfounded.

Still, Nathalie Lecocq, economic affairs director at the Confederation of the Food and Drink Industries (CIAA), singles out probiotics and foods manufactured using processes that preserve nutrients as examples of the types of products that are doing well on global markets. In general, exports of lifestyle products to non-EU countries are growing, while exports of basic products are in decline.

But the EU has competition. With countries like Japan racing ahead on the hi-tech ‘superfoods’ market, European companies need to start stepping up investments into research and development. Lecocq thinks that industry-wide research expenditure is insufficient. "In terms of growth, the industry is probably not doing too badly, but there are signs from different sources that it could do better in terms of global competitiveness. The areas where it could do better are research. Growth will come from moving up the value chain," she says.

As demand for more functional foods grows, industry is also faced with the challenge of rising raw material costs. From 2006 to 2007 the price of wheat went up by approxi-mately 56%, maize by 38%, butter by 69% and rapeseed by 39% on EU markets. According to CIAA, the rise in raw material prices is unprecedented both in terms of the number of products concerned and the extent of the increases.

Günter Verheugen, European commissioner for enterprise and industry, announced in November the creation of a high-level group on the food and drinks industries. The group, the members of which have yet to be decided, will propose ways of boosting the competitiveness of the industry at a time of soaring costs.

European food manufacturers have a head-start on increasingly competitive global markets. The sector’s decades-old reputation for quality and reliability is proving to be an excellent launch-pad for exporting innovative products to potentially lucrative markets such as China and Russia.