Success in functional ingredients comes down to three things, says Jens Bleiel: "An understanding of consumer needs and market trends; partnerships with customers; and scientifically substantiated health claims."
Ultimately, says Bleiel, who set up DSM Food Specialties' functional food ingredients business unit two years ago, these are the things that make companies like DSM strategic partners to major food manufacturers instead of commodity ingredients suppliers.
"We've got some very exciting ingredients in the pipeline now and as a key part of the development process, we're talking to focus groups of consumers about their needs," says Bleiel. "I had to push hard to get buy-in from senior management when I first suggested that we needed to do this, but now it's a real point of difference."
He adds: "If you're presenting functional ingredients to customers, you have to come armed with real insight into what consumers want and what they're willing to pay."
Despite the technical nature of his role, Bleiel's background is in business economics rather than food science. However, his interest in food was stoked from an early age: "When I was doing my studies, I was diagnosed with diabetes, and I had to understand what I was putting into my body, to measure my carbs and proteins, so my interest in food probably started there."
His first experience of the food industry was in baby food, which was a "great place to start. I learned so much over the next 10 years". As global marketing director for infant formula milk at Royal Numico, he also formed the belief that ingredients branding was not critical for success in functional ingredients.
"You need brands for the business to business side, but you'll never get the payback on the consumer side for the amount you have to invest to familiarise consumers with your brand," he claims. "What we're selling is claims. Our customers already have great brands: their own."
The ?2.5bn nutrition cluster is divided into two groups: Food Specialties and Nutritional Products. Bleiel's business unit, functional food ingredients, sits within Food Specialties. "We share functions with other business units, such as legal functions, finance, personnel and the DSM general sales force. It's almost a virtual organisation. But it's also the focus of expectations in the company. DSM's Vision 2010 strategy is designed to generate ?1bn in extra sales, and functional food ingredients will be key to that."
Bleiel is aiming to grow turnover in his business unit 50% by 2010, an ambitious but achievable goal, he insists. Growth will come organically and via acquisitions or joint ventures/collaborations: "The focus [for acquisitions] would be on areas in which we already have a presence, but if there was a real market need, we would also explore other opportunities."
Weight management ingredient Fabuless - a novel emulsion of oat and palm oil that fools the body into believing it's full - is a great case in point, says Bleiel. "Fabuless was developed by a tiny Swedish company in 2000. It was a new area for us, but we could see enormous potential, so our venturing arm bought a share in the business in 2002. In 2005 the potential was clear, and we signed a sales and marketing agreement. In October 2006, we acquired the rest of the company."
Bleiel meets bosses at DSM Ventures every two to three months. "They look at hundreds of potential investment opportunities, and present maybe 30 or 50 to us a year. One of the most interesting areas is the relationship between diet and gene expression, and looking at how genetic differences determine response to diet. I can see big possibilities, but probably not for another 10 years."
product development
In the meantime, the focus is on broadening applications for key products in the portfolio such as Fabuless, dairy peptide PeptoPro and Lafti probiotics, and taking new concepts to launch, he says. "We have several exciting new products in the pipeline, including a product targeting diabetics likely to launch at the end of the year, plus a product aimed at consumers with metabolic syndrome likely to launch in 2007/2008" (see p12).
Meanwhile, Fabuless is going from strength to strength, he says. "We've just had a big launch in the Netherlands with Campina's Optimel Control one shot drink. Three weeks after they started advertising, they had to apologise for being out of stock. It's also been rolled out to Italy and Portugal in foods, while companies in France, Spain, Scandinavia and the US are selling it in individual cups that can be added to meals."
Expanding PeptoPro beyond sports nutrition into the mass market is also on his 'to do' list. "Gatorade started as a sports drink for a baseball club. Look at it now! We can position PeptoPro as a great way of adding protein to soft drinks and making them healthier without adding sugars and carbs."
As for probiotics, DSM was a latecomer to the market, admits Bleiel. "But this doesn't mean we're wasting our time. The European market is already pretty saturated, so we're looking for niche opportunities, particularly in the US, where probiotic supplements, chocolate bars and other products are just starting to catch on."
However, the US and the European markets are very different, he says. "In the US, they're very strong in supplements, many of them with pretty weak claims. In Europe, it's the other way round: the growth opportunity has been in functional foods. In Japan, functional food is completely mainstream. In China, it's only just starting, so you have to tailor your approach."
The European Nutrition and Health Claims Regulation will only benefit companies like DSM, which sell ingredients and claims properly substantiated by clinical data, he says. "We've got five positive clinical trials for Fabuless alone. We've done our homework and prepared dossiers to support all of our ingredients."
As for managing his time, Bleiel says: "I try and spend as much time as possible with customers, but I also have to reserve time for thinking strategically. It's so easy to spend half of your time just responding to emails."