Nestle S.A. announced in late September plans to embark on a sweeping global initiative to “pioneer a new industry between food and pharma.” It is a bold effort by the world’s largest food and beverage company, and it is also one that may have future ramifications for food and beverage marketers as well as ingredient manufacturers focusing their efforts on the functional foods market.
Through its recently formed entities Nestle HealthScience S.A. and the Institute of HealthSciences, Nestle intends to develop areas within the marketplace where food may be used to prevent and treat health conditions. The outline presented by the company is a significant step beyond the traditional role food plays in providing sustenance.
With prevention in mind, Nestle is intending to enter the health care category by offering food and beverage products designed to prevent chronic conditions such as diabetes and cardiovascular disease. Chronic diseases account for 60% of all deaths, the company said.
“Taking everything into consideration, it becomes apparent that our actual health care system, which concentrates basically on treating sick people, is not sustainable and will have to be redesigned drastically,” said Peter Brabeck-Letmathe, chairman of the board for Nestle. “It is our strong conviction that disease prevention will have to play a much bigger role and, in this sense, personalized health care nutrition will become the first and most efficient step in an active prevention policy and for wellness and wellbeing.”
Anyone who has attended trade shows such as the Institute of Food Technologists Annual Meeting and Food Expo knows the food and beverage industry has been slowly edging its way beyond sustenance and into the gray area between health and wellness and the pharmaceutical sector. But with this expansion beyond traditional markets for food and beverage products will come additional regulatory scrutiny from agencies such as the Food and Drug Administration and the European Food Safety Authority. This will be a significant hurdle.
The FDA’s framework for evaluating the safety and effectiveness of an ingredient intended for use in food and beverages is significantly less burdensome than the agency’s drug approval process. It remains to be seen how agencies like the FDA and the EFSA respond, and it would be naïve to believe some sort of new regulatory framework will not be established for food products that cross the boundary between a food item with healthy attributes and one that has pharmaceutical attributes. Where the boundary is placed may have significant implications on the functional foods market, which may see its costs rise if the burden of proof is raised.
Food and beverage manufacturers, such as Groupe Danone, that have taken a lead position in developing functional foods to improve health already are facing regulatory challenges. In Europe, the EFSA has rejected the claims made by Danone and other manufacturers of products containing probiotics because they lack information to identify the substance on which the claim is based. The EFSA does not just want to know what the benefit in question is. Officials at the agency also want manufacturers to tell them how it works and in what amounts.
Beyond the regulatory challenges presented by this issue, food manufacturers will also face new competition. Researching and developing products with medicinal attributes is an area where pharmaceutical companies have much expertise. As the segment evolves there should be no doubt the food industry will face significant competition from pharmaceutical manufacturers.
The market segment Nestle has staked out offers unique opportunities, and what is now a gray area will become defined very quickly. What remains to be seen is how it will develop and who will lead.