The ‘functional’ snack category is a booming segment thanks to health-conscious consumers, resulting in a structural shift in food preferences and purchase decisions towards healthy alternatives.
The segment has become an important brand portfolio for a slew of startups and even large F&B companies including Tata Soulfull, Dabur, ITC Foods, Nestle and Mother Dairy, along with startups like Chaayos, Sattviko, Lil Goodness, Nourish You and Alt Co, to name a few.
The category shows strong growth with an estimated market size of $30 billion in the next five years, where India is the fastest growing health food market expanding at 20% CAGR, which is 3x the global average and 1.5x India’s total packaged F&B market, states Avendus Capital, an investment banking arm of Avendus Group.
The last decade saw the emergence of many health food brands reaching adequate scale and demonstrating brand strength.
“We see increased transaction activity and consolidation over the next 10 years,” says Abha Agarwal, executive director and co-head, consumer, financial institutions group (FIG) and business services, Avendus Capital.
The functional attribute is one of the fast emerging categories in the FMCG space and includes products like roasted black chana with puffed rice, mixed nuts and seeds (trail mix), wheat/quinoa/bajra puffs, roasted makhanas (fox nuts), alternative dairy products like oat milk, prebiotic chocolates, etc.
“Dietary habits have changed as a result of evolving lifestyles, creating tremendous opportunities for healthy snack manufacturers. There is a paradigm shift in consumer preferences that has permeated the food and snacking industry. Thus, the growth is being fuelled by increased health consciousness among consumers, in addition to increasing demand for functional snacking,” says Prashant Parameswaran, MD & CEO, Tata Soulfull, a brand that has a ‘taste first, health forward’ approach with millets in products like muesli and oats.
Mother Dairy last year launched its probiotic drinks and probiotic curd under its Nutrifit portfolio and this category has been growing upwards of 25% YoY. “There is growing awareness and focus towards health, thus the demand for such products has also increased,” says Manish Bandlish, MD, Mother Dairy.
Dabur India in its Réal portfolio has ‘Real Health Chia Seeds’ and ‘Real Health Pumpkin Seeds’. ITC Foods is betting big on millets with various products, including flours, noodles, pasta, dosa and idli mix, vermicelli and cookies. Startups like Green Food brand Alt Co have plant-based soy and oat milk. Ready-to-eat snack brand Sattviko has products like gur chana. A yogic nutrition brand, Sattviko is focusing on the US markets, and has seen US sales grow on Amazon around 30% MoM since last year. The brand plans to launch about 100 retail stores in the next three months in India. “Functional snacks have a huge market in the US but are still nascent in India,” says Ayush Arora, co-founder, Sattviko.
According to Mintel’s 2023 Global Food & Drink report, consumers look for food and drink that are perceived to be healthier. “Brands can innovate with added micronutrients and ingredients to promote overall health,” says Anamika Banerji, food and drink research analyst, India, Mintel.
The plant-based food preference has been a major sales driver. “Post Covid, we have seen 4x growth in the past year, indicating that there is an active consumer base which is looking for functional benefits in snacking and a very good uptake from tier 2/3 markets,” says Harshavardhan, co-founder and CEO of Lil’Goodness, a Bengaluru-based children-focused food startup.
“Our philosophy is centred around superfoods, veganism and clean labels, which make such snacks apt for individuals with various dietary requirements,” says Krishna Reddy, co-founder, Nourish You, a brand that offers nut and meal mixes, besides millet snacks.
Another factor fuelling the demand is that consumers now read labels before buying a product. “Most check for trans-fat or amount of proteins, or if the product is true to the claim on the package. Consumers now make more conscious decisions on what they eat. Functional snacks provide nutrition and not empty calories while satisfying hunger cravings,” says Mona Mehta, brand manager, Fast&Up GoodEatz, a brand that has products containing seeds, curcumin and tulsi.
Taste for functional food drives F&B sales - The Financial Express
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