26 Feb 11 Is probiotic fruit juice the next new beverage category
The juice drink market looks set to be transformed, worldwide, by the advent of probiotic products. One of the pioneers in the field is innovative Finnish dairy company Valio, which has spent the past decade turning its probiotic juice drink brand into a major success. Valio now ready to use the same model which has proven so successful for the company’s dairy probiotics, taking its technology to market through a network of global partnerships.
First published in New Nutrition Business, November 2010 Newsletter, by Julian Mellentin
Far-sighted juice drink producers are casting about to find whether they can get their own probiotic fruit juice to market ahead of French dairy giant Danone. The flurry in the world of juice drinks has come in the wake of Danone’s announcement that it plans to commercialise, worldwide, a probiotic juice using Swedish science company Probi’s L. plantarum 299v probiotic strain and the successful fruit juice ProViva, marketed in Sweden since 1994 (see New Nutrition Business September 2010).
A few senior juice industry executives are rightly fearful that the French dairy giant will redefine and dominate the chilled juice cabinet with the same ruthless efficiency with which it has redefined the health section of the dairy cabinet.
Looking for a rival probiotic juice technology, companies have found that for credible, proven products backed by clinical evidence the best – indeed only – place to go is to Valio Dairy, the Finnish dairy company whose successful technology innovations have helped make Finland the Silicon Valley of functional foods.
Valio is one of the pioneers in probiotics and has consistently proven itself to be farsighted – and successful – in creating and commercialising new technologies. The achievement is made all the more impressive by the fact that Valio is a farmer-owned co-operative operating in one of the remotest corners of Europe in a country with a population of just 5 million people. But on the other hand, perhaps it isn’t surprising. Finland is also the country that produced mobile phone giant Nokia, is a world leader in forestry and paper technology, and in health ingredients also produced such global successes as Xylitol and Benecol, to name just two. This small country’s excellent education system – internationally ranked alongside Japan’s as the best in the world – might help explain why one small country can be so innovative.
In the early 1980s farsighted people in Valio believed that probiotic bacteria offered considerable commercial potential – a radical idea at the time. So the company started asking around the dairy experts at Finland’s universities looking for opportunities for co-operation. This route drew a blank, but Valio did learn about a human probiotic strain that had been isolated in the US. The strain was Lactobacillus rhamnosus GG ATCC 53103, which had been isolated from a healthy human.
The scientific minds behind Lactobacillus GG are two Americans, Dr Sherwood Gorbach and Dr Barry Goldin (hence GG) both of Tufts University, who discovered the strain in the early 1980s. In 1987 Valio signed a worldwide licensing agreement for the rights of Lactobacillus GG with Gorbach and Goldin. LGG is the trade mark of Valio for Lactobacillus GG, which is also a patented strain. Valio holds world-wide commercial rights for LGG.
Thanks to heavy scientific investment by Valio in the years following, Lactobacillus GG today has the most extensive scientific background of all probiotics in the world, with over 500 clinical studies published. LGG’s credibility got a significant early boost when, in 1996, a yogurt brand based on LGG, called Onaka-He-GG!, produced by Takanashi Milk Products, became the first probiotic food ever to be granted the FOSHU seal of approval in Japan.
Valio launched the first LGG-based dairy product in its domestic market in 1990. Called Gefilus, it was the first clinicallybacked probiotic consumer product on the European market – four years ahead of the debut of Danone and Yakult.
Since then the Gefilus brand has grown and grown and has been extended to a wide range of products for almost every dairy consumption occasion, such that per capita consumption of Gefilus in Finland is over 6kg – arguably the highest per capita consumption of probiotic products in the world.
Gefilus products carry an immune health claim, which translates as a “strong dose of immunity”. LGG’s claim will be reviewed by the European health claim regulator in 2011, but with 518 clinical studies, it would be surprising if even European regulators – who thus far have rejected 90% of health claim petitions – can find fault.
Impressively, when Finnish consumers are asked which brands do most to help daily well-being, they rank Gefilus in fourth place – just behind Nivea face cream, ibuprofen and the Lumene cosmetic brand and ahead of L’Oreal (and far ahead of Danone Activia). Valio has not only commercialised LGG in products in its domestic market but has excelled at commercialising its technology globally – LGG can be found in dairy products in 35 countries, including some of the most successful probiotic brands, such as Emmi Aktifit in Switzerland and Campina’s Vifit in the Netherlands, the Unimilk brand in Russia, the Parmalat Vaalis brand in Australia (that country’s biggest probiotic brand), as well as in supplements in 33 countries.
In fact, Valio is something of a role-model for good technology commercialization: the company has also developed patented true lactose-free milk (in response to the needs of the Finnish market, where 15% of consumers are medically lactose intolerant) and rolled out this technology globally too.
PROBIOTIC JUICE INNOVATION
While many dairy companies have limited their innovation to dairy products, Valio has always been more open-minded and – along with Swedish company Skåne Dairy – was one of the first to spot the potential of probiotic fruit juice.
Valio launched its Gefilus probiotic juice in Finland in 1997. Well-supported with advertising and promotions – and delivering an effective benefit – by 2010 Gefilus juice had taken an impressive 32% share of Finland’s chilled juice market, becoming the country’s biggest chilled juice brand. “In value terms Gefilus juice has become the market leader,” explains Kalle Leporanta, export manager at Valio Dairy Innovative Concepts & Technologies. “In ten years Gefilus changed the structure of the market, becoming the leading brand despite being a premium juice in a premium market. The effect has been to increase the value of the chilled juice market in Finland.”
Gefilus’s ascent to market leadership was achieved despite selling at a premium. Regular juices, such as Valio Orange juice, typically retail for around €1.09 per litre ($1.51). Valio Gefilus sells at a hefty 100% premium, at €2.05 ($2.83) per litre, although this is still a much lower price than a super-premium brand such as Pepsi-owned Tropicana, whos regular orange juices retail for around €2.95 a litre ($4.07).
The Finnish chilled juice market has a volume of approximately 30 million litres and a retail sales value of around €45 million. The ambient market is much larger, with a volume of 80 million litres and a retail value of €120 million. Taking the two together Gefilus probiotic juice has a 10% value share of the entire Finnish juice market.
When you consider that Finland has a population of just 5 million, you realise that if Finnish per capita consumption of Gefi lus Juice was translated pro rata into a larger country, such as the US, it would be a $800 million (€600 million) annual-sales brand. Gefi lus comes in multiple fl avour variants, of which the best-selling are Five Fruits and Pineapple-Carrot (see picture on page 10).
The juice range was extended in September of this year with the launch of a 100ml fruit shot, sold in a 4-pack priced at €2.60 ($3.59) per pack, equivalent to €6.50 per litre. It is available in banana-applepassionfruit- orange-mango flavour.
The idea for the product was stimulated to an extent by the relative success in Finland of Danone’s Actimel 100ml dairy drink for immunity.
“As we have a lot of technology and knowhow in the company it made sense,” says Leporanta. “We are trying to make a point of difference from Actimel with probiotic fruit shot and there is also the logic of an alternative to dairy.”
The launch of the shot – sales of which are reportedly going to plan so far – gives another string to Valio’s bow when it comes to commercialising its probiotic fruit juice technology internationally.
“It’s clear that suddenly there’s a lot going on in this field,” observes Leporanta. “For ten years we have been proving the concept in the Finnish market and we have kept a low profile. But now we are activating ourselves. We have learnt many valuable lessons from building up the international network of licensing agreements for LGG in dairy and that puts us in a good position to work with the juice drink companies and bring them a related but different area of expertise.”
COMMENT: PROBIOTIC FRUIT JUICE THE NEXT NEW CATEGORY
It’s clear that Danone intends to make a major success of probiotic juice drinks. Juice companies face the real possibility that Danone, with its track-record of excellent execution, will redefine the juice market just as it has redefined the dairy market with brands like Activia and Actimel.
As we have also said before in New Nutrition Business, it’s our belief that probiotic fruit juice is one category that can provide consumers with a viable alternative to dairy. Fruit juice is consumed everywhere, appeals to all types of consumers, has little or no negatives associated with it – especially now that product developers are so focused on lowering the calorific value and have an increasing arsenal of ingredients to enable them to do so – and it can be delivered in highly convenient packages. Its convenience and taste appeal are advantages that few other categories can match. Moreover, in consumers’ minds fruit is a natural and credible vehicle for health messages.
It’s an opportunity that’s so-far underexploited but, like all good ideas, the idea of probiotic juice drinks for digestive health is a very simple one and it is well-proven and has already been around for a long time – and as Gefilus has shown in Finland and ProViva has shown in Sweden, well-executed it can be very successful.
For every beverage company there is now a narrow window of opportunity to get its own, scientifically credible, probiotic juice to market – and possibly the only place to find that technology is Valio. Happily, Valio’s 20 years of experience of partnering with companies worldwide to roll out its LGG technology in dairy means that the company is well set-up to guide partners in the new probiotic juice market. The next two-tothree years will reveal which juice companies are truly innovative and willing to create this new market – and which are going to be the also-rans in health. It will be a crucial test of managements’ commitment to innovation and their ability to take innovation to market.
About New Nutrition Business
New Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.
The strategies and success factors it has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the United States to Australia and from Sweden to South Africa.
New Nutrition Business is headed by executive director Julian Mellentin, one of the world’s very few global specialists in the business of food, nutrition and health.
He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace.
Julian Mellentin can be reached at email@example.com