Functional Ingredients: Spike in Demand for Nutrition, Immunity Set to Continue

Before the COVID-19 pandemic hit the U.S. in March, health and wellness products were already enjoying solid growth. But even now, as the public moves into a new phase of coping with the virus, those trends are set to continue, according to a presentation by SPINS analysts Kathryn Peters, Xochitl Javier and Jeff Crumpton at BevNET/NOSH Virtually Live 2020 in June.

Moreover, consumers are going deeper into the segment and seeking out key ingredients that emphasize strength and wellness; any expectations that they would turn more towards less-than-healthy comfort foods during the initial stage of the pandemic were proven incorrect. Instead, customers looked for natural products in greater numbers during the pantry stocking phase in March and April, a trend that has continued into the early part of the summer. Sales are still trending upwards: the category is averaging over 20% growth compared to last year. As rates of infection for COVID-19 are still rising in most states, consumers are expected to continue eating meals at home, meaning brands in the space have an opportunity to build lasting relationships with retailers and customers.

Natural products have already been outpacing growth for conventional items for some time, and the pandemic has seen an acceleration of that trend. Meanwhile, convenience categories, such as shelf-stable tea and snack bars, didn’t fare as well, with homebound consumers preparing meals more frequently. But those items have begun to rebound, which is of particular note because they offer significant opportunity as a first entry point for functional ingredients.

The combination of economic pressures and risk of infection means consumers are eating more meals at home, and therefore changing their expectations about what their food should deliver. Ingredient-based categories are poised to reap the benefits; plant-based milks and meats posted double-digit sales gains in June, as did fresh fruits and vegetables. It’s an opportunity for brands to showcase the holistic benefits of nutrient-dense foods by packing in more functional ingredients, Peters said.

Though consumers have shown broadening interest in emerging functional ingredients, familiar ones — such as turmeric and collagen — are still top of mind. Nutrients like Vitamin C and herbs like echinacea, both typically more popular during flu season, notably performed strongly during the spring. Oregano, a versatile herb with multiple medicinal applications and available in a range of formats, including in teas and essential oils, grew 10% over recent weeks.

Rising interest in functional ingredients has manifested specifically in certain categories. The first are immunity boosting products that offer benefits such as antioxidants and antimicrobial properties through natural ingredients like echinacea and elderberry. Refrigerated juices and functional beverages (105%), shelf-stable juice (41%) and shelf-stable tea (30%) have all enjoyed a boost in sales thanks to the uptick in demand for immunity defense products, according to Javier.

In response to dealing with the challenges of the pandemic, busy consumers are also turning to products that promise stress relief, relaxation and sleep support. CBD has been the most popular new ingredient in this space in recent years, but interest in ingredients like melatonin, L-theanine and valerian root has also picked up. Finally, adaptogens, which cover a wide range of functional benefits — including fighting fatigue, enhancing mood and sharpening mental acuity — are becoming more common in the form of medicinal mushrooms (chaga, reishi) and herbs like maca and holy basil. Adaptogens have helped drive sales in categories like tea, which is up 27%.

With consumers spending more time and more attention on their diets during the pandemic, new behaviors and preferences have begun to take hold. The pandemic, the analysts said, has bolstered the idea of “food as medicine,” with greater public awareness about the relationship between healthy eating habits and reducing risk for a variety of health issues, including COVID-19.

Several lifestyle diets have stood out in particular. First is plant-based, which has already been on the rise and which cuts across a wide range of health conditions and product categories. During and after the initial panic buying period, plant-based categories have shown healthy sales trends; frozen plant-based burgers (122%) and sausage links (516%) both enjoyed strong growth.

Sales growth across four key plant-based categories — frozen and refrigerated meat alternatives, plus refrigerated and shelf-stable milk alternatives — is much higher now than during the stock-up period, Crumpton explained. Other hot categories include plant-based ice cream, almond milk and coconut milk. Though the total amount of promotion is increasing, a majority of plant-based product volume is not sold on promotion, representing strong ‘quality volume’ and intentional purchasing, he noted.

Next is low glycemic and unsweetened products; as the drumbeat from doctors and nutritionists over the long-term dangers of sugar consumption, consumers are responding by favoring better-for-you alternative sweeteners such as monkfruit, stevia and sugar alcohols. This trend has penetrated into historically indulgent categories — baking and pancake mixes, for example — as well.

Consumers are also gravitating towards products that support microbiome and gut health, particularly as scientific evidence has emerged showing how it can influence all aspects of health, from immunity to anxiety. Traditionally, those products have been represented by yogurt, kefir and kombucha, which all contain living healthy bacteria. However, U.S. customers are now looking well beyond those ingredients to fermented items like refrigerated pickles and marinated vegetables (up 2,035%) and plant-based sour cream (up 1,453%). Lastly, pantry stocking has made nutrient-dense foods that pack high amounts of wholesome ingredients, like protein, fiber and whole grains, a more attractive prospect for shoppers seeking both nutrition and value.

Despite the economic downturn this year, products specifically aligned with lifestyle diets like keto, Whole30 and low-FODMAP experienced growth recently.

If past performance is an indicator of future success, natural foods are well positioned to face the economic challenges ahead, according to Crumpton. During the 2008 recession, natural products performed well and continued to do so after, and consumers’ motivation to pursue health and wellness should further boost category momentum this year.

Functionality, self-care and the concept of food-as-medicine is a trend that is set to last, and, until a vaccine arrives, so is COVID-19. As a result, SPINS urged brand leaders and entrepreneurs to consider how their own habits have changed and how their companies align, or don’t, with current market trends as they seek solutions to the complex web of problems they now face. These factors should influence decision making in order to help brands stay ahead of the competition in an era of accelerating product life cycles.