Background and Challenge
One of the world’s largest providers of food manufacturers was trying to define its strategic positioning within the growing functional foods space – everyday foods and beverages that are enhanced to provide targeted health benefits. The company selected L.E.K. Consulting to identify market opportunities and develop a go-to-market strategy for this sector.
Approach and Recommendations
First, we assessed the current functional foods landscape (e.g., market size, growth, channel and competitor dynamics, etc.). This process included conducting detailed primary research on more than 10 prioritized product categories through a combination of consumer feedback (on products as well as health conditions), store visits, retail buyer interviews and related market analysis. We also collaborated with senior company executives to review and prioritize functional foods market opportunities. This process assessed the company’s current internal capabilities to manufacture, distribute, sell and market functional foods in the defined prioritized categories.
Once the functional foods product strategy was defined, we then developed a channel and operational plan to outline how the company can implement this product strategy effectively, including implications for both existing and new channels. This process also included modeling the high-level financial case for functional foods.
Specifically, we recommended that the consumer packaged goods (CPG) company should target its functional food offerings to consumers whose lifestyles and behaviors suggest an affinity for food products that provide specific health benefits. The specific health needs identified represented those that maximized consumer appeal and credibility – the latter based on fit with the company’s existing brand and product equity. From a branding perspective, we also advised the client to initially extend its existing product portfolio to include formulations to address specific health conditions (e.g., heart health, brain health, etc.) rather than develop a separate product line.
Based on our recommendations, the company is developing an integrated functional food portfolio to demonstrate its commitment to the category and reinforce its credibility as a functional foods provider. The brand also prioritized initial functional food offerings based on clearly defined criteria identified in the report findings – including category growth opportunities and market dynamics. The company is also currently evaluating the introduction of specific functional food products based on our analysis, and is developing both internal growth and external acquisition strategies to build its brand across the targeted product categories.