20 March 2006

International investors looking for opportunities in the growing market for high-tech foods should look to New Zealand, according to a new report by food industry consultancy New Nutrition Business.

New Zealand has a variety of unique plants and natural ingredients, and local companies with advanced technological expertise are using these to develop ‘functional’ foods that promote and support health and well-being.

Research commissioned by Investment New Zealand from New Nutrition, an international consultancy specialising in global nutrition, concludes that New Zealand offers “a wealth of untapped opportunities”. Companies in the business are seeing sales grow by 25 percent to 50 percent a year and Investment New Zealand believes that capital investment in this growing sector will stimulate expansion.

Functional foods aim to improve or maintain health, usually by targeting an aspect of the body with specially developed ingredients. Estimates for the worldwide value of the market vary but the United States and European markets are believed to be worth NZ$30 billion (US$19.8 billion) each per annum, Japan’s market NZ$11 billion (US$7.3 billion) and China’s at least NZ$5 billion (US$3.3 billion).

New Zealand has a tradition of developing sophisticated products from its dairy industry, and food companies are now drawing on plants, fish and shellfish to manufacture a new generation of foods and ingredients.

Callum Mallett, Investment Manager, Food and Beverage for Investment New Zealand says, “There is an opportunity to add value to our primary sector. The really exciting area is in the unique products we can adapt.”

These include manuka honey, known for its anti-bacterial and healing properties, the horopito plant, effective against yeast infections, and green-lipped mussel extract for its anti-inflammatory properties. Several fruits and vegetables that are native to New Zealand or thrive there, such as avocados, kiwifruit, boysenberries (a dark berry fruit), feijoas (a green fruit with an intense flavour) and tamarillos (a red tree-fruit), are also highlighted by the New Nutrition report as foods with “naturally functional” properties.

Paris-based food company Danone is now selling NZ$4 billion (US$2.6 billion) a year of its Actimel intestinal-support dairy drink. The company is marketing two drinks in China that were developed by New Zealand company Frucor.

The New Nutrition report says there are at least 128 New Zealand companies working in functional foods and health ingredients, generating an estimated NZ$323 million (US$213 million) in annual sales.

Apart from Frucor, others in the market include: Healtheries, which makes vitamin supplements; Func.nutrition, which makes a nutritional milk called Sun Latte; Functional Nutraceuticals, which manufactures products to promote intestinal health using bovine colostrum (the milk produced by cows in the few days after they give birth); BLIS Technologies, which makes oral health products; Vital Foods, which uses kiwifruit for dietary supplements; and Comvita, which markets manuka honey products.

The New Nutrition report says: “New Zealand health ingredients and functional foods companies are small yet they are highly competitive in international markets with a strong focus on new product development.”

New Zealand has several internationally recognised research organisations and universities which have formed collaborative relationships with multi-national companies. Health ingredients and functional foods companies in New Zealand will spend an average of 4 percent of sales this year on research, against the international food industry average of 1 percent or less.

New product development is a high priority in New Zealand’s burgeoning functional food and health ingredients industry and more than 80 companies plan to launch new products this year. “These companies are capable of working profitably, inventively and efficiently with small budgets,” says the report.

It concludes: “International investors are beginning to uncover the opportunities. Nestle has invested heavily in a venture fund that focussed on opportunities in the region and Danone has proven that products made successful in New Zealand can be turned into major success stories in Asian markets.

“New Zealand has the scientific and technical know-how; it’s got marketing skills, it’s got Asia on its doorstep, it’s got motivation. Everything is in place.”

*The New Zealand Health Ingredients and Functional Foods Sectors
by New Nutrition Business
* New Nutrition Business was founded by Julian Mellentin, a specialist in food, nutrition and health and co-author of Functional Foods Revolution, Healthy People, Healthy Profits?