Functional Foods and Government’s Role in Information Provision

1. Functional Foods and Government’s Role in Information Provision Laurian Unnevehr Dept of Ag & Cons Economics

2. What is a Functional Food? • “Foods or dietary components that may provide a health benefit beyond basic nutrition.” (IFIC) • Biologically active components impart health benefits or physiological effects. • Includes both functional attributes of conventional foods and new food products redesigned w/ new components.

3. Functional Components of Food

4. Functional Components of Food Italics indicates FDA approved health claim

5. Functional Food Products • Conventional product marketed with new information • Oats soluble fiber claim • Conventional product with added or enhanced ingredient • Spread w/ added plant sterols • Chocolate with enhanced flavanols • “New” product to deliver functional ingredient • Beverages– functional teas, water • Removing negative functionality • Oils with heart-healthy profile

6. Industry Interest in FF • Exploit niche market demand for particular characteristics • Eg., high markup for spreads w/ sterols • Add value or market share to existing product or product ingredient • Eg., soy protein branding for addition to cereals, beverages • Create new market for innovative products • Eg., new beverages • Added value upstream in supply chain when commodity becomes differentiated • Eg. Soybeans with low linoleic (less trans fats)

7. FF Brands Cargill’s 6 ingredient brands; Only 2 have FDA claims Solae makes Soy Protein for several food companies ADM markets Soy7 foods as having 7gm per serving to meet FDA claim reqts

8. How does industry see the FF Consumer? Healthy active seniors, or Good for all ages?

9. Consumer Interest in FF • Demand for characteristics based on household model suggests: • Human capital • Nutrition knowledge, ability to find and process new info • Health status • Potential benefits of FF higher when predisposed to disease, health risks • Substitution possibilities • How well FF fits into current diet, food habits • Cost • How much more costly than alternative; includes hidden cost of lost utility if not as tasty

10. Past Studies of Consumers • Education clearly important determinant of adoption, WTP • very consistent across multiple studies • WTP related to health benefits which vary among subpopulations • Eg., older women and soy products • Substitution ease and FF costs can be important • Eg., OJ w/ calcium popular among households looking for dairy alternative

11. Market Impact of FF • Estimates of FF mkt vary from $20 and $70 billion, depends on what is included • Compare to about $6 bill organics and about $500 bill total food • Clear impact in some markets • Calcium-enhanced OJ is 1/5 of OJ mkt • Soy beverages rapid growth • Functional breads and grains 10% of that mkt

12. Market Impact of FF • Investments by firms in research • Cranberry juice study by Harvard funded by Ocean Spray • Mars funding research on flavanols in chocolate • Investments in new brands focus on reliability of composition, taste • Solae soy protein joint venture by Dupont, Bunge • Investments in new products tailor packages of functional components • Eg., Quaker Oats “Nutrition for Women” combines vitamins, soy, calcium

13. Public Health Interest in FF • Major U.S. diseases are diet related • too many calories, too much saturated fat & added sugar, not enuf fiber or fruits/veggies • Many FF address these deficiences • Reduce risk of CHD or cancer • Increase fiber • FF that reduce other health risks can also improve quality of life; reduce health costs at margin

14. How is Information Regulated? • NLEA in 1990 and regulations in 1993 • Nutrition label with basic nutrients • Amended for trans fats effective 2006 • 7 allowable health claims relating diet to disease, • eg. calcium and osteoporosis • Petitions reviewed for other claims based on “Significant Scientific Agreement” (12) • Eg., oat bran in 1997; soy protein in 1999 • Criticized as too restrictive

15. How is Information Regulated? • FDAMA in 1997 allows claims based on “authoritative statement from scientific body” (2) • Eg. Potassium and high blood pressure • Qualified Health Claims estbl for food in 2003 based in “weight of scientific evidence” (8) • Eg., Omega 3 fatty acids and CHD

16. FF Health Claims Using one of original 7 claims from 1993 Using Significant Scientific Agreement claim approved in ‘97 Using a Qualified Health Claim new in 2003 Using a FDAMA Approved claim new in 1999

17. Information in the FF Market: Supply Side • FF research funded by industry with specific products as focus • Approved health claims since initial 7 reflect industry interest in pursuit of approval • Off-label information dissemination also well-supported by industry • Public research and information dissemination expenditures likely dwarfed by industry effort

18. Information in the FF Market: Demand Side • Consumers look for information from a variety of sources (IFIC) • Label claims may prompt specific product choice, but need corroboration • Teisl et al found option value from label info, even if behavior unchanged • FDA 1998 study of ability to use label; Hooker experiments with different formats

19. Impact of Past Regulation • NLEA labels and claims shown to: • Improve diets among those who use them • Reduced sugar, fat, chol, sodium; more fiber • Diet quality improves MOST for those using health claims in addition to label (Nayga et al) • Spur product innovation and reformulation • Eg., introduction of low fat products • Improve some kinds information disclosure • Eg., fat content of salad dressing • Stifle some kinds of information disclosure • Eg., regarding relative merits of different oils

20. What’s ahead? • Trans fat nutrition label rule likely to have happy ending: • Spurs product reformulation and reduction in trans fats in food supply • All consumers benefit whether use label or not • Clear health evidence combined with relatively easy “re-engineering” leads to this likely happy result • Shows power of regulation to achieve nutrition goals in some cases

21. Issues for FF Regulation • Nutritional paradigm? • Are functional components like drugs, with isolated action and dose/response function? • When do they need to be consumed within whole food where found in nature or in moderation? • Eg. Too much genistein may promote tumor growth • How do messages about functional components fit with larger messages about a healthy diet and calorie limitations? • Eg Does message to obtain 25gms soy per day, lead to more calories or undesirable diet?

22. Issues for FF Regulation • Quality and quantity of information– is it optimal? • Information and research is often product and supply-side driven; yet no proprietary reward for claims • Claims approved do not seem to follow weight of evidence, due to industry led process • Allowing claims before “significant agreement” not welcomed by some consumer advocates • Lots of generic information available for consumers who seek it, but it is not as accessible as commercial information

23. What’s Ahead? • Future for specific FF health claims less clear • FF market likely to expand upstream through greater customization of commodity inputs • FF market likely to expand consumer choice for some components and for combined components • Continue to be product driven rather than public health driven, but with strong overlap between both interests • Will sometimes conflict w/ and sometimes support macro messages about calories, fat, etc.

24. What would improve FF information? • FDA could move to a public health driven approval system for new health claims– • Proactive rather than reactive • Weigh benefits of claim against risks if wrong and costs of inaction • Weigh benefits of claim against progress toward macro diet goals for public health

25. What would improve FF info? • USDA could consider how FF impacts its programs: • What role for FF in nutrition education programs? In food delivery programs (WIC or school lunch)? • 5-a-day partnership; F&V school lunch program • Are there supply chain policies that are complementary? • Voluntary certification through AMS? • Commodity driven claims (eg., soy, walnuts) to overcome incentives problems?

26. What research is needed to support new info policy? • Supply side • What are the incentives for pursuing claims/ research/ advertising and developing new FF products? • Is there mkt failure in provision of information for unbranded foods? • Demand side • What kind of information results in product choices that lead to improved diet/health result? What kind of information do consumers value? • How do FF claims/adv/info impact diet quality beyond specific product choice?