Functional Foods and
Government’s Role in Information
Provision
Laurian Unnevehr
Dept of Ag & Cons Economics
What is a Functional Food?


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“Foods or dietary components that may
provide a health benefit beyond basic
nutrition.” (IFIC)
Biologically active components impart health
benefits or physiological effects.
Includes both functional attributes of
conventional foods and new food products
redesigned w/ new components.
Functional Components of
Food
Component
Food Source
Benefit
Lycopene
Inulin
Tomatoes and
products
Whole grains
Flavanols
Chocolate, tea
Prevent prostate
cancer
Improves GI
tract health
Circulatory
health
Boosts
antioxidant
Sulforaphane Broccoli, etc
Functional Components of
Food
Component
Food Source
Benefit
Omega 3
Salmon, tuna
fatty acids
Stanols/
Fortified
Sterol esters spreads
Reduce risk of
heart disease
Reduce risk of
heart disease
Isoflavones
Soy
Bone health;
menopausal health
Soy Protein
Soy
Reduce cholesterol
Italics indicates FDA approved health claim
Functional Food Products
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Conventional product marketed with new
information
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Conventional product with added or enhanced
ingredient
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Spread w/ added plant sterols
Chocolate with enhanced flavanols
“New” product to deliver functional ingredient
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Oats soluble fiber claim
Beverages– functional teas, water
Removing negative functionality
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Oils with heart-healthy profile
Industry Interest in FF
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Exploit niche market demand for particular
characteristics

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Add value or market share to existing product or
product ingredient

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Eg., soy protein branding for addition to cereals, beverages
Create new market for innovative products

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Eg., high markup for spreads w/ sterols
Eg., new beverages
Added value upstream in supply chain when
commodity becomes differentiated

Eg. Soybeans with low linoleic (less trans fats)
FF Brands
Cargill’s
6 ingredient
brands;
Only 2 have
FDA claims
Solae
makes Soy
Protein for
several
food
companies
ADM markets Soy7
foods as having 7gm
per serving to meet
FDA claim reqts
How does industry see the FF
Consumer?
Healthy active seniors, or
Good for all ages?
Consumer Interest in FF
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Demand for characteristics based on
household model suggests:
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Human capital
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Health status
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Potential benefits of FF higher when predisposed to
disease, health risks
Substitution possibilities
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Nutrition knowledge, ability to find and process new info
How well FF fits into current diet, food habits
Cost
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How much more costly than alternative; includes hidden
cost of lost utility if not as tasty
Past Studies of Consumers
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Education clearly important determinant of
adoption, WTP
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WTP related to health benefits which vary
among subpopulations

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very consistent across multiple studies
Eg., older women and soy products
Substitution ease and FF costs can be
important
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Eg., OJ w/ calcium popular among households
looking for dairy alternative
Market Impact of FF
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Estimates of FF mkt vary from $20 and $70
billion, depends on what is included
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Compare to about $6 bill organics and about $500
bill total food
Clear impact in some markets
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Calcium-enhanced OJ is 1/5 of OJ mkt
Soy beverages rapid growth
Functional breads and grains 10% of that mkt
Market Impact of FF
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Investments by firms in research
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Investments in new brands focus on reliability
of composition, taste
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Cranberry juice study by Harvard funded by Ocean
Spray
Mars funding research on flavanols in chocolate
Solae soy protein joint venture by Dupont, Bunge
Investments in new products tailor packages
of functional components
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Eg., Quaker Oats “Nutrition for Women” combines
vitamins, soy, calcium
Public Health Interest in FF
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Major U.S. diseases are diet related
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Many FF address these deficiences
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too many calories, too much saturated fat &
added sugar, not enuf fiber or fruits/veggies
Reduce risk of CHD or cancer
Increase fiber
FF that reduce other health risks can also
improve quality of life; reduce health costs at
margin
How is Information Regulated?
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NLEA in 1990 and regulations in 1993
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Nutrition label with basic nutrients
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7 allowable health claims relating diet to disease,
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eg. calcium and osteoporosis
Petitions reviewed for other claims based on
“Significant Scientific Agreement” (12)
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Amended for trans fats effective 2006
Eg., oat bran in 1997; soy protein in 1999
Criticized as too restrictive
How is Information Regulated?
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FDAMA in 1997 allows claims based on
“authoritative statement from scientific
body” (2)
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Eg. Potassium and high blood pressure
Qualified Health Claims estbl for food in
2003 based in “weight of scientific
evidence” (8)
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Eg., Omega 3 fatty acids and CHD
FF Health Claims
Using Significant Scientific Agreement
claim approved in ‘97
Using a
Qualified
Health
Claim
new in
2003
Using one of original 7 claims
from 1993
Using a FDAMA
Approved claim new in
1999
Information in the FF Market:
Supply Side
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FF research funded by industry with specific
products as focus
Approved health claims since initial 7 reflect
industry interest in pursuit of approval
Off-label information dissemination also wellsupported by industry
Public research and information dissemination
expenditures likely dwarfed by industry effort
Information in the FF Market:
Demand Side
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Consumers look for information from a variety
of sources (IFIC)
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Label claims may prompt specific product choice,
but need corroboration
Teisl et al found option value from label info,
even if behavior unchanged
FDA 1998 study of ability to use label; Hooker
experiments with different formats
Impact of Past Regulation
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NLEA labels and claims shown to:
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Improve diets among those who use them
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Spur product innovation and reformulation
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Eg., introduction of low fat products
Improve some kinds information disclosure
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Reduced sugar, fat, chol, sodium; more fiber
Diet quality improves MOST for those using health claims
in addition to label (Nayga et al)
Eg., fat content of salad dressing
Stifle some kinds of information disclosure
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Eg., regarding relative merits of different oils
What’s ahead?
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Trans fat nutrition label rule likely to have
happy ending:
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Spurs product reformulation and reduction in trans
fats in food supply
All consumers benefit whether use label or not
Clear health evidence combined with relatively
easy “re-engineering” leads to this likely happy
result
Shows power of regulation to achieve nutrition
goals in some cases
Issues for FF Regulation
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Nutritional paradigm?

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Are functional components like drugs, with
isolated action and dose/response function?
When do they need to be consumed within whole
food where found in nature or in moderation?
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Eg. Too much genistein may promote tumor growth
How do messages about functional components fit
with larger messages about a healthy diet and
calorie limitations?
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Eg Does message to obtain 25gms soy per day, lead to
more calories or undesirable diet?
Issues for FF Regulation
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Quality and quantity of information– is it
optimal?
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Information and research is often product and
supply-side driven; yet no proprietary reward for
claims
Claims approved do not seem to follow weight of
evidence, due to industry led process
Allowing claims before “significant agreement” not
welcomed by some consumer advocates
Lots of generic information available for
consumers who seek it, but it is not as accessible
as commercial information
What’s Ahead?
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Future for specific FF health claims less clear
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FF market likely to expand upstream through
greater customization of commodity inputs
FF market likely to expand consumer choice for
some components and for combined components
Continue to be product driven rather than public
health driven, but with strong overlap between
both interests
Will sometimes conflict w/ and sometimes support
macro messages about calories, fat, etc.
What would improve FF
information?
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FDA could move to a public health
driven approval system for new health
claims–
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Proactive rather than reactive
Weigh benefits of claim against risks if
wrong and costs of inaction
Weigh benefits of claim against progress
toward macro diet goals for public health
What would improve FF info?
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USDA could consider how FF impacts its
programs:
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What role for FF in nutrition education programs?
In food delivery programs (WIC or school lunch)?
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5-a-day partnership; F&V school lunch program
Are there supply chain policies that are
complementary?
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Voluntary certification through AMS?
Commodity driven claims (eg., soy, walnuts) to overcome
incentives problems?
What research is needed to
support new info policy?
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Supply side
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What are the incentives for pursuing claims/
research/ advertising and developing new FF
products?
Is there mkt failure in provision of information for
unbranded foods?
Demand side
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What kind of information results in product
choices that lead to improved diet/health result?
What kind of information do consumers value?
How do FF claims/adv/info impact diet quality
beyond specific product choice?