Manufacturers of fruit and vegetable extracts, increasingly used to flavour natural and functional foods, need to better standardise their products to help customers compare brands, finds a new report. Industry-wide standardisation would also promote development of the functional food industry, the biggest user of fruit and vegetable extracts.
The $960 million (€819.9m) US and European fruit and vegetables extracts and powders market is on course to grow at a CAGR of 4.5 per cent, reaching $1,321 million by 2009, claims a new report from Frost & Sullivan. But non-standardised testing procedures and variations in chemical profiles between brands are reducing competition between suppliers as customers have difficulties comparing similar products from different suppliers.
"Customers require harmonisation of testing methodology in order to obtain comparative information regarding an extract's chemical profile and to make informed purchasing decisions. At the same time, trade organisations and legislative bodies affecting this industry should work to raise standards regarding good manufacturing practice and to improve raw material supply," said Frost & Sullivan food research manager Anna Ibbotson.
However efforts to provide high-quality standardised products and detailed extract descriptions will be costly both in immediate financial terms as well as the length of time required for successful completion. But such initiatives would reinforce several positive market trends, including the rising preference for natural food products and the development of the functional food industry.
Growing consumer demand for natural food products has increased the use of naturally derived flavouring compounds, including fruit and vegetable extracts. These extracts are benefiting from wider use in new product formulations and as replacements for synthetic ingredients in existing formulations.
Fruit and vegetable extracts are also used in large quantities by the functional food industry for their nutraceutical properties. In 2002, the functional foods industry was the biggest user of fruits and vegetable extracts in Europe, generating demand worth $160 million. Functional drinks, in particular, are poised to become among the fastest growing markets in Europe, with Germany alone registering a 150 per cent jump in sales over 2001.
However, with the nutraceuticals sector undertaking cost reduction initiatives, the high prices of fruit and vegetable extracts are likely to restrain their uptake and in an increasingly competitive environment, functional food manufacturers could turn to inexpensive alternatives to add functionality to their products, suggests Frost & Sullivan.
Along with price, extracts manufacturers will also need to focus on product awareness campaigns to highlight the safety and efficacy of an extract used within a particular application or health area. Companies are also under pressure to invest in new product development as functional ingredients tend to have a short lifecycle.
Along with use in functional foods, new industrial food processes are set to encourage demand for fruit and vegetable extracts as natural flavouring and colouring ingredients. The flavouring industry is poised to be the second largest user of fruit and vegetable extracts behind the functional food industry.
In 2002, the European fruit and vegetables extracts and powders market was valued at $390 million and the US market at $570 million. Growth is likely to be driven by larger companies, consolidating in the sector, attacking new niche areas. Pricing pressures, high R&D costs and excess capacity are forecast to increase market consolidation, explains the report, with acquisition of smaller niche oriented participants by larger companies seeking to exploit newly emergent opportunities in the nutraceutical sector likely to drive further consolidation.
"Success in the fruit and vegetable market will lie in the ability to supply a large portfolio of extracts and to launch products fitting niche markets demand. The ability to offer expertise on the extract will be important. Successful fruit and vegetable extract suppliers will have to offer process sound integrated solution to their customers," concluded Ibbotson.
The report, 'European and US Fruit and Vegetable Extracts and Powders Markets' (B214), is available from Noel Anderson at Frost & Sullivan.