Overview of the functional food industry

Over the past few years, the global functional food industry has experienced economic expansion and innovation owing to rising consumer awareness regarding their health and nutritional benefits. Typically, a functional food is a medicinal food that helps in enhancing health, preventing diseases, and reducing the healthcare costs. The rising prevalence of chronic diseases is prompting consumers to shift toward healthier food options. Moreover, the increasing consumer interest and growing understanding of how a proper diet can enhance immunity are some of the key factors driving the growth of the global functional food market. Furthermore, the rising disposable income and increasing demand for functional food and beverage products are leading to increased uptake of these foods, thereby, propelling the growth of the market.

However, our analysis of the global food and beverage industry shows that functional food manufacturers are facing issues in terms of:

• Understanding demand: The requirements of the market will define what regulations, actions, and science are needed in the producing and exporting country. This market information needs to permeate through the entire value chain of the product from producer to retailer.
• Understanding supply: Developing countries often have a wealth of biodiversity to develop their functional foods sector. However, a sustainable management plan for these resources is important to avoid dramatic reductions in plant populations and interference in the dynamics of local biodiversity.

To overcome several such issues, it is best recommended for functional food manufacturers to leverage the use of category management solutions. Category management solutions help firms in the global food and beverage industry space to increase market share, improve positioning, and gain sustainable customer loyalty, thereby, helping them enhance their competitive position.

The Business Challenge and Journey

Client background: The client who approached SpendEdge is a pioneer in the functional food manufacturing space. Their manufacturing units spread over 5 countries across the globe.

Client issue: Like several manufacturers, the client carried a wide range of product categories with different freshness issues, different rates of inventory turns, and different buying relationships with suppliers. The client had trouble in achieving growth and addressing margin problems. As a result, the management team believed a new approach was required but were unsure as to how to progress. SpendEdge was hired with three goals in mind: to change the basis for negotiations with suppliers, to demonstrate opportunities to improve sales and margins, and to transfer such competences to the internal organization.

SpendEdge’s category management experts followed a comprehensive research methodology and carried out discussions with prominent stakeholders in the global food and beverage industry to help the client improve sales and margins. The experts also compiled information from a wide array of proprietary sources such as paid industry databases, company presentations, and industry forums.

Client journey: With the help of SpendEdge’s category management engagement, the functional food manufacturing client established internal centers of excellence with formal tools, methodologies, and training for knowledge transfer to the other teams in the organization. They also conducted a  full value-chain analysis to understand the full breakdown of costs for a designated category and identify the effective pricing strategies.

Key questions answered in this category management engagement

The Results

The functional food manufacturer identified significant savings potential—$12 million in a quarter as a result of full value chain analysis with $20 million identified from improved category management.

To know more about our category management solutions