The functional food ingredients market size, currently valued at USD 119.2 billion in 2024 and poised to achieve a 6.8% CAGR, reaching USD 165.8 billion by 2029, is experiencing transformative shifts and innovations. Functional food ingredient demand is fueled by consumer demand for wholesome, sustainably sourced products that offer health benefits beyond basic nutrition. Functional food ingredients play a crucial role in addressing consumers’ increasing focus on health and wellness. These ingredients offer additional health benefits beyond basic nutrition, such as improved digestion, enhanced immunity, and better heart health.
With rising health consciousness and the prevalence of lifestyle-related diseases, consumers are actively seeking products that support their well-being. As a result, the demand for functional food ingredients continues to rise. For instance, according to the NCBI (National Center for Biotechnology Information) article “Consumer Acceptance Toward Functional Food” published in February 2022, individuals aged 65 years or older exhibited a heightened preference for various types of functional foods, such as yogurt containing lactic acid bacteria. It suggests that this inclination may stem from their increased focus on health-related concerns. As consumers increasingly prioritize their health and seek out products that offer added benefits, the appeal of functional food ingredients is expected to persist and drive further growth in the market.
Functional Food Ingredients Market Drivers: Increase in consumption of nutritive convenience and fortified food products
Busy schedules, rising health consciousness, and awareness about nutritional deficiencies drive consumers to seek out products that offer both convenience and health benefits. Nutritive convenience foods, such as pre-packaged salads, smoothies, and meal replacement bars, provide quick and easy solutions for individuals on the go, while fortified food products, including fortified cereals, milk, and beverages, address specific nutrient deficiencies and offer added health benefits.
In response to this growing demand, various manufacturers have capitalized on the trend by launching a plethora of functional food and beverage products. These products are formulated with specific ingredients, such as vitamins, minerals, probiotics, and omega-3 fatty acids, to provide additional health benefits beyond basic nutrition. From energy-boosting snacks to immunity-boosting drinks, the functional food and beverage market has witnessed a surge in innovative product offerings catering to diverse consumer needs. For instance, in May 2021, The US Food and Drug Administration (FDA) granted Cargill a letter of no objection for its GRAS notification regarding the incorporation of EpiCor postbiotic into certain food and beverage applications. This dried yeast fermentate, demonstrated in clinical trials for dietary supplements, effectively regulates gut microbiota and offers beneficial support to the immune system. This opens up new avenues for creating innovative products that cater to consumers’ growing interest in functional foods and beverages that support gut health and immune function.
This surge in functional food and beverage products, in turn, has fueled the demand for functional food ingredients. Manufacturers are increasingly seeking high-quality, scientifically-backed ingredients that not only enhance the nutritional profile of their products but also offer functional properties, such as improved digestion, enhanced immunity, and better cognitive function.
Functional Food Ingredients Market Opportunities: Use of encapsulation technology
Encapsulation technology involves the process of enclosing active ingredients within a carrier material, forming microscopic capsules. These capsules can protect the active ingredients from degradation, improve their stability, control release rates, and enable targeted delivery. In the functional food ingredients market, encapsulation technology presents significant opportunities. Firstly, encapsulation enhances the efficacy of functional food ingredients by shielding them from environmental factors such as light, heat, moisture, and oxidation. This ensures that the active components remain intact until consumed, maximizing their health benefits. Secondly, encapsulation allows for the controlled release of functional ingredients within the body, optimizing their absorption and utilization. This controlled release mechanism ensures a sustained delivery of nutrients, prolonging their effects and enhancing their bioavailability.
Furthermore, encapsulation enables the incorporation of sensitive or unstable bioactive compounds into various food matrices without affecting taste or texture. This expands the scope of functional food product development, leading to a broader range of fortified foods and beverages appealing to health-conscious consumers.
As a result, the demand for functional food ingredients is expected to surge with the adoption of encapsulation technology. Food manufacturers can create innovative products with enhanced nutritional profiles and targeted health benefits, catering to the growing consumer interest in functional foods. Encapsulation technology thus represents a lucrative opportunity for stakeholders in the functional food ingredients market, driving innovation, and fueling market growth.
Food, By Application, Accounted For The Highest Market Share Among Form Segment In 2023.
With the largest market share of all the segments, the food segment emerged as the dominant segment in the market for functional food ingredients. The market for functional food ingredients is experiencing growth fueled by a rising preference for convenient, nutritious food options and an increasing demand for fortified food and beverage products. This expansion is driven by a rapidly growing health-conscious population, especially evident in emerging markets, which seek out fortified food products incorporating functional food ingredients.
Functional foods are becoming increasingly popular among consumers who are looking for specific health benefits like better digestion, immune system support, or increased energy levels in addition to nutritional value.
To satisfy the many demands and inclinations of health-conscious consumers, food manufacturers are actively introducing functional ingredients into a broad variety of food products, from snacks and beverages to dairy products and baked goods by meeting sustainability demands. For instance, in March 2023, ADM introduced the Knwble Grwn brand of functional food ingredients, aimed at offering consumers sustainably sourced, plant-based food ingredients that prioritize wholesomeness. These products are cultivated by small or underrepresented farmers utilizing regenerative agricultural practices, contributing to environmental conservation efforts. This new brand aligns with ADM’s existing sustainability initiatives, further reinforcing the company’s commitment to environmental stewardship and responsible sourcing practices.
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Asia Pacific is The Fastest-Growing Market For Functional Food Ingredients Among The Regions.
Shifting dietary preferences and rising health consciousness among consumers drive the demand for functional foods fortified with specific ingredients targeting various health benefits in the Asia Pacific region. This trend is particularly pronounced in countries such as China, India, and Japan, where there is a growing awareness of the importance of preventive healthcare. Additionally, the rich and diverse food culture in Asia Pacific countries, coupled with the prevalence of traditional medicine systems such as Ayurveda and Traditional Chinese Medicine, creates opportunities for the incorporation of functional ingredients derived from natural sources. Moreover, the Asia Pacific region boasts a burgeoning population, rapid urbanization, and increasing disposable incomes, all of which contribute to increased consumer spending on health-enhancing products.
The Asia Pacific market benefits from a larger consumer base, a cultural inclination towards holistic health practices, untapped market potential, and a more receptive attitude towards incorporating functional foods into daily diets unlike other regions, such as North America and Europe. In addition, the relatively lower penetration of functional food products in the Asia Pacific region presents ample opportunities for market expansion and growth, making it a focal point for industry players seeking to capitalize on emerging trends and preferences.
Top Companies in the Functional Food Ingredients Market
The key players in this market include Cargill, Incorporated (US), BASF SE (Germany), ADM (US), International Flavors & Fragrances Inc. (US), Arla Foods amba (Denmark), Kerry Group plc (Ireland), Ajinomoto Co., Inc. (Japan), DSM (Netherlands), Ingredion (US), and Tate & Lyle (UK).
Cargill, Incorporated (US)
Cargill, Incorporated is engaged in the production of food ingredients and industrial products across four main business segments: animal nutrition & protein, food ingredients & applications, origination & processing, and industrial & financial services. Within its food ingredients & applications segment, the company offers functional food ingredients catering to food and beverage manufacturers, foodservice companies, and retailers. These ingredients, including probiotics and protein ingredients, are utilized in various sectors such as beverage, bakery, dairy, and meat, enhancing the appearance, taste, and stability of fresh and specialty meat products.
Operating in approximately 70 countries with additional sales presence in nearly 125 countries across North America, Latin America, Asia Pacific, Europe, the Middle East, and Africa, Cargill has subsidiaries like Cargill Meat Solutions (US), Cargill Enterprises Inc (Russia), Cargill Asia Pacific Holdings Pte Limited (Singapore), Cargill RSA (Pty) Limited (South Africa), Cargill España SA (Spain), Cargill Nordic A/S (Sweden), Provimi (Netherlands), and NatureWorks (US).
The company has been strategically focusing on expansion initiatives to further bolster its market presence and meet the growing demands of its customers. In September 2023, the company expanded its operations by opening the European Protein Innovation Hub in Saint-Cyr en Val, France. This facility represents a substantial EUR 50 million (USD 54.18 million) investment in Cargill’s European operations. The accelerated innovation hub is poised to empower Cargill, Incorporated to expedite the introduction of functional food ingredients to market, effectively catering to the escalating demand for innovative and distinctive products within the food industry.
BASF SE (Germany)
BASF SE, a prominent chemical company, is listed on stock exchanges in Frankfurt (Germany), London (UK), and Zurich (Switzerland). The company’s operations are organized into 11 divisions grouped under six segments: chemicals, materials, industrial solutions, surface technologies, nutrition & care, and agricultural solutions. For financial reporting purposes, BASF SE has structured its regional divisions into Europe, North America, Asia Pacific, and South America/Africa/Middle East.
Under the nutrition & care segment, BASF SE offers an extensive range of products for human nutrition, animal nutrition, pharmaceutical solutions, and aroma ingredients. It is a leading supplier of vitamins, antioxidants, and carotenoids for human nutrition, BASF SE serves major pharmaceutical companies across the pharmaceutical, nutraceutical, beverage, and dietary supplement industries. Its portfolio encompasses a wide array of functional ingredients including conjugated linoleic acid, peptides, plant-based sterols, colorants, omega-3, algae-based docosahexaenoic acid, and various food performance ingredients. BASF SE operates their business in North America, Europe, Asia Pacific, South America, and the Rest of the World.
In September 2023, BASF SE launched Product Carbon Footprints (PCFs) for several crucial products. These PCFs will cover vitamins, carotenoids, beverage processing polymers, feed enzymes, and feed performance ingredients, serving both human and animal nutrition sectors. This initiative underscores the company’s dedication to environmental stewardship, as it aims to furnish customers with vital information regarding the greenhouse gas emissions linked to its products across their entire life cycles.
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