Functional Ingredients Market - Forecast(2023 - 2028)

Functional Ingredients Market Overview

The Functional Ingredients Market size is estimated to reach $117.1 billion by 2027. Furthermore, it is poised to grow at a CAGR of 6.1% over the forecast period of 2022-2027. Functional ingredients are considered as ingredients that have the ability to positively influence health besides their basic nutritional value. They are preventative in nature rather than curative. The rise in demand for fortified food & beverage products and rising health awareness among consumers are the key drivers for the growth of the functional ingredients market. Consumers now expect processed food to be nutritional and sustainable, in addition to factors such as flavour, quality, safety, and convenience. The changing preferences, growing disposable income of consumers, and western-style eating habits boosted the sales for food and beverage industry which in turn augmented the growth of the functional ingredient market as end-users are aware of nutritional benefits, consider food safety important, and are looking for products that possess health-promoting and disease-preventing properties.

Technological advances have aided in identifying which ingredients would enhance fortification, creating further opportunities for stressing the health benefits of functional foods are some of the factors anticipated to drive the Functional Ingredients Industry forward in the projected period of 2022-2027. 

Report Coverage

The report: “Functional Ingredients Market Forecast (2022-2027)", by Industry ARC covers an in-depth analysis of the following segments of the Functional Ingredients Market.

By Product- Maltodextrin, Probiotics, Polydextrose, Modified Starch, Pectin, Omega-3 (EPA, DHA, ALA), Omega-6, Protein - Soy Protein, Whey Protein, Rice Protein, Mung Bean Protein and Others, Prebiotics, Vitamins & Minerals, Fibers & Specialty Carbohydrates, and Others. 
By Source- Natural and Synthetic.
By Application- Food & Beverages, Personal care, Pharmaceuticals, Animal feed, and Others.
By Geography- North America (U.S., Canada, Mexico), Europe (Germany, United Kingdom (U.K.), France, Italy, Spain, and Rest of Europe), Asia Pacific (China, Japan, India, South Korea, Australia, and New Zealand, and Rest of Asia Pacific), and Rest of the World (Middle East, Africa and South America).

Key Takeaways

• Geographically, North America held a dominant market share in the year 2021 owing to increasing health concerns and awareness among people and the presence of well-established players in the region. The growing demand for convenient food options resulted in the much-needed push for using such ingredients. Additionally, Asia-Pacific is expected to offer lucrative growth opportunities to the marketers owing to the growing preference to outsource the processing/manufacturing aspects to the region owing to cost advantages and trade benefits. Rapidly rising processed food consumption, combined with rising health and fitness awareness in developing nations, is a major element driving the region's functional food industry growth.
• Increasing health consciousness and consumption of nutrient-enriched foods to improve overall well-being will augment the market growth. Shifting consumers’ preference to plant-based foods coupled with key market players’ increasing innovative product launches are accelerating the Functional Ingredients Market over the forecast years 2022-2027. 
• A detailed analysis of strengths, weaknesses, opportunities, and threats will be provided in the Functional Ingredients Market Report.
  

Functional Ingredients Market- Geography (%) for 2021

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Functional Ingredients Segmentation Analysis- By Source

The Functional Ingredients market based on the source can be further segmented into Natural and Synthetic. Natural held a dominant market share in the year 2021 and is also estimated to be the fastest-growing, with a CAGR of 7.5% over the forecast period of 2022-2027. Natural sources are the most common source of functional ingredients. Studies have shown that food waste from fruits, vegetables, cereals, and other food processing businesses is used as a source of bioactive chemicals and nutraceuticals, which have important applications in treating a variety of diseases. Using various extraction methods, secondary metabolites, minerals, and vitamins have been recovered from food waste. Traditional personal care products are increasingly incorporating natural functional ingredients. According to SPINS' 2019 State of the Natural Industry study, retail sales of natural food and beverage products are growing at a considerably faster rate than the total food and beverage market this indicates that there is a growing need for natural functional ingredients, which is driving the Functional Ingredients market.

However, Synthetic is estimated to be the second-fastest-growing owing to the presence of major companies expanding their product on global platforms. Synthetic functional ingredients are nearly equivalent to those found in food in terms of chemical composition. Synthetic functional ingredients, on the other hand, are created in a very different way than they are created by plants and animals. The body may react differently to synthetic nutrition while having the same composition. Furthermore, how well synthetic functional ingredients are taken and utilised in the body is unknown. Some may be easier to absorb than others, thereby, driving the segment growth. 

Functional Ingredients Market Segmentation Analysis- By Application

The Functional Ingredients market based on the application can be further segmented into Food & Beverages, Personal care, Pharmaceuticals, Animal feed, and others. Food & Beverages held a dominant market share in the year 2021 owing to consumer preferences for nutritional and convenience foods, as well as an increase in demand for fortified food and beverage products. Also, with the constant expanding presence of start-ups focusing on innovative nutrient-enriched foods and beverages, the growth of the Functional Ingredients Market is expected to increase. Remedy Organics, for instance, is situated in New Jersey and creates beverages with strong super-ingredients, botanicals, herbs, proteins, and probiotics. Furthermore, YoFiit, a Toronto-based company, uses chickpeas' high nutritional value to develop non-dairy meal solutions. Moreover, few manufacturers are also aiming their products at people who suffer from chronic illnesses. For instance, Hapi Drinks makes sugar-free drinks for kids with the goal of preventing Type 2 diabetes and juvenile obesity. The growing application of functional ingredients and the availability of specialty functional foods and beverages in key economies allow the market to maintain a long-term development trajectory.

However, Pharmaceuticals are estimated to be the fastest-growing owing to their growing application scope in the treatment of Cardiovascular Disorders (CVDs) and malnutrition. Over the forecast period, the worldwide functional ingredients industry is expected to be driven by rising healthcare costs along with an expanding senior population around the world. Furthermore, the pandemic is a cornerstone for the beginning to the end of inferior nutrition, invalid claims, and clever marketing claims phrases that have misled customers. In India, for example, the Indian Council of Medical Research (ICMR) and the FSSAI have reached an impasse with the claims and are demanding clinical confirmation of the goods. In 2019, approximately 38 million children under the age of five were overweight or obese, according to a World Health Organization (WHO) factsheet. Owing to the obese population around the world, the market for functional ingredients is expected to rise at a rapid rate, thereby, creating growth opportunities for the segment growth.

Functional Ingredients Market Segmentation Analysis- By Geography

The Functional Ingredients market based on Geography can be further segmented into North America, Europe, Asia-Pacific, and the Rest of the World. North America held a dominant market share of 32% in the year 2021 as compared to the other counterparts on account of increasing health concerns and issues, such as obesity, digestive ailments, and diabetes, increasing ingredient transparency among well-informed consumers, and the presence of giant food companies actively creating products and exploring more opportunities in the functional food and beverage sector. Furthermore, the industry is being driven by increasing R&D and expenditures by key market players in this area. Cargill, Incorporated, for instance, made a strategic investment in Puris, a plant-based ingredients firm based in the United States, in August 2019. A total of $75 million was spent to address the expanding demand for pea protein ingredients in the U.S. market which in turn boosted the functional ingredients market growth in this region. 

Functional Ingredients Market Drivers

Growing Adoption of Plant-Based Products is Fuelling Functional Ingredients Demand.

Consumer preferences for health, ethics, and sustainability are driving a massive shift toward plant-based beverages. Manufacturers are now coming up with innovative ideas on quality and taste upgradation through product launches. For instance, following Yum China Holdings Inc.'s KFC's promising trial of plant-based nuggets in April 2020, REFILE-Cargill expanded its plant-based protein food for China. PlantEver, a consumer brand, will be introduced to both online and offline retailers in China at the end of June. According to research conducted by The Vegan Society, the vegan population in America increased by 600% from 2014 to 2019, generating new potential for plant-based products over the forecast period. Vegans make about 3-4% of the population in the United States, depending on their age group. The significance of vegan supplements in enhancing endurance is predicted to play a part in market expansion, with many well-known athletes adopting vegan dietary trends. As a result of the transition toward a plant-based diet, consumers are looking for plant-based protein supplements, which bodes well for plant-based beverage manufacturers in the long run, thereby, driving the Functional Ingredients Market.

The Use of Probiotics in Niche and Diverse Application is contributing to Functional Ingredients Industry Expansion

The growing use of probiotic ingredients in nutraceuticals, such as fortified food and beverage products and dietary supplements, is driving Functional Ingredients demand. Probiotics are quickly becoming one of the most popular substances that people want to include in their diets. These nutrients have been shown to help with digestion, mental wellness, and heart health. Supplement sales of probiotic components are increasing, as a rising number of customers regard supplements as a handy option. According to Packaged Facts, the age group of 18-34 years had the highest usage of probiotic dietary supplements in the year 2019, indicating a shift in their attitude toward staying fit and healthy. It might also be deduced that, unlike their elders, young Americans do not wish to suffer in the old life. As a result, they're taking precautions to avoid the health problems that plagued them in their younger years. Thus, increasing the growth of the Functional Ingredients Market.

Functional Ingredients Market Challenges

Stringent Regulatory Approval is impeding the market growth

The stringent regulatory approval is restricting the market expansion. Before being released on the market by the end product maker, all items must go through a rigorous approval process from multiple national agencies that examine the ingredients safety and efficacy. The process is complex and time-consuming, and it requires extensive testing with a minute to large-scale comprehensive observations. Also, advertising and product labelling are subject to stringent rules in many countries which prevents the expansion of the market. The Nutrition Labelling and Education Act (NLEA), which revised the FD&C Act, mandates that most foods be labelled with nutrition information and that food labels bearing nutrient content claims and some health messages meet specified criteria, thereby restraining the Functional Ingredients industry expansion globally.

Functional Ingredients Competitive Landscape

Product launches, mergers and acquisitions, joint ventures, and geographical expansions are key strategies adopted by players in the Functional Ingredients Market. The top 10- Functional Ingredients Market companies’ are-

1. ADM
2. BASF SE
3. DowDuPont
4. Cargill Incorporated
5. Arla Foods
6. Kerry Group
7. Omega Protein Corporation
8. Tate & Lyle plc
9. Amco Proteins
10. A&B Ingredients

Recent Developments

• In May 2021, Cargill launched EpiCor, is a dry yeast fermentate that has been clinically proved to regulate the gut microbiota and strengthen the immune system in dietary supplement trials. This launch is to meet the growing demand for sustainable proteins and to deliver novel value to the customers. 
  
• In June 2020, Kerry introduced 13 new plant-based, allergen-free protein options made from pea, rice, and sunflower protein sources. The ingredients are developed to meet the needs of both vegan and traditional product creation while also providing solubility, dispersibility, and neutral flavour.
• In May 2020, Kerry Group expanded its clean-label food protection capabilities through the acquisition of two companies, Georgia-based IsoAge Technologies, and Biosecur Lab, located in Quebec, Food Ingredients First reported. 

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