101110_FD_Issue 197

functionaldrinks zenithinternational newsletter This issue at a glance...

Page five US sports drinks market evolves

Page four Germans get crystal clear sleep

Pages six and seven Functional Drinks conference focus

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10 November 2010

nutraceuticals

United States

Getting your 'beauty sleep' has never been easier! functionaldrinks spoke to Clark Wolfsberger President of Big Quark LLC, who told us about the recent launch of its innovative beauty and sleep drink.

resonating well with women aged 35 and younger who are taking control of their health and wellness.

According to Big Quark, BeautySleep addresses two concerns that are intrinsically linked to each other. Research has shown that sleep not only benefits the body in general, but can also help slow down ageing as this is when the body repairs itself and prepares the body for the coming day. In addition, research has suggested that a lack of sleep results in the body producing stress hormones that can actually cause the body to age faster. By targeting sleep and beauty concerns, the beverage offers an all-round solution for image-conscious women.

The dietary supplement called BeautySleep came into being over two years ago and was officially launched nationwide in August 2010 at Sally Beauty Stores; a chain that sells professional beauty products for salons and individual consumers.

functionaldrinks also asked Wolfsberger about BeautySleep's performance since it was launched, and he told us that, "Sales have increased each month and repeat business is spectacular. I think we identified a real desire and need of women today and have created a high quality/low cost solution." To support this growth,Wolfsberger said that the company has initiated an active PR campaign that will start in 2011 and will include extensive coverage in many national beauty, health and wellness women's magazines to ensure women know about the drink.

BeautySleep is described by the company as an advanced dietary supplement that combines antiaging compounds and cell protecting anti-oxidants with sleep enhancers. Unlike other beverages, Beauty Sleep contains clinically proven anti-aging ingredients to maintain skin tone and elasticity, reduce inflammation, slow the effects of aging, defend against sun damage and protect cellular and tissue health.

Moreover, the drink boasts zero calories or sugar.

Wolfsberger revealed that other future plans include the launch of a new flavour variant and a version targeted at men.

The launch of BeautySleep is timely as it is positioned in two promising categories: cosmeceuticals and relaxation drinks. In addition, it combines two of the fastest growing segments in the CPG (consumer packaged goods) category; beauty and sleep, and targets consumers with high levels of disposable income, principally women of the baby boomer generation. However,Wolfsberger added that the company quickly found that BeautySleep is

Page four Functional juice drink debuts

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BeautySleep can be found at 2,500 Sally Beauty Stores nationwide where it retails for US$3.49 per 2.0oz bottle. It is also sold at select Ritz Carlton Spas and Lobby shops and will be included in Soft Surroundings catalogue and possibly in ShopNBC shopping channel in addition to major drugstore chains.

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functionaldrinks zenithinternational newsletter Page 2 Issue 197 10 November 2010

editorial comment Welcome to the 197th issue of functionaldrinks. Across the Western world, exotic fruits have become increasingly popular mainly thanks to being antioxidant powerhouses. However, research recently conducted in Japan has suggested it is possible to increase the antioxidant content of certain more mundane fruits and vegetables such as potatoes, bananas, apples, peaches or grapes by simply inducing stress in the fruit in the form of an electric shock or high frequency sound waves. The potential implications if this technology can be broadened could be far-reaching on many levels. Watch this space!

In this issue, as promised, we present a round up of the themes covered at the Functional Drinks Conference in Geneva which focussed on the current situation in Europe (see Pages 6 and 7).

Nearby in the UK, Aimia Foods has recently expanded its portfolio of cold beverages with an energy drink supported by a well-known fashion brand and innovative packaging (see Page 3).

Meanwhile in Germany, we report on the long awaited launch of a night-time milk powder that promises to aid sleep (see Page 4).

In the Far East, we look at the expansion of Yakult's range of functional juice drinks in Japan with a bone and joint offering (see Page 4); we also see the launch of a sterol-enriched milk to help lower cholesterol - seemingly a first in the China (see Page 3).

In the US, functionaldrinks spoke to the President of Big Quark who spoke about the company's recent launch of a beauty drink with added relaxation benefits (see Page 1). Also with a relaxation positioning, is the newly introduced beverage by BYB Brands (see below).

Sports nutrition company VPX has reportedly revolutionised the market of sports drinks with a coconut water-based drink (see Page 5).

Finally, Abunda Functional Foods and Ganeden Biotech have partnered to produce a probiotic chocolate milk for children with immune and digestive health benefits (see Page 5).

Cecilia Martínez Núùez Deputy Editor cm@zenithinternational.com

nutraceuticals

United States

Nascent brand aims to help consumers relax Coca-Cola Bottling Company Consolidated (CCBCC) brand incubation subsidiary BYB Brands has launched a relaxation drink in the US.

chamomile flower, vitamins B3, B6, B12, Ltheanine, lemon balm, rose hips and valerian root.

Boasting a low calorie content, Simmer is currently available in Grape and Wild Cherry variants.The drinks are packaged in 16oz cans that differentiate themselves from energy drinks by using soothing colours and including a banner at the top underlining its purpose as a relaxation drink.

According to BYB Brands, Simmer is designed to help consumers relax, unwind and simmer down.The launch of Simmer comes at a time when the relaxation and alertness category is constantly seeing new entrants, all vying for the leading position.

The drink is called Simmer and aptly features the slogan "Go Low. Simmer Down." The drink features GRAS (generally recognised as safe) healthboosting ingredients enabling it to be safely consumed by the general public and making it a natural fit for the natural channel.Within its ingredients list are: passionflower, hops extract,

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Breaking away from the distribution reach of CCBCC, BYB Brands has already placed the relaxation drinks in a number of markets across the US. www.bybbrands.com X

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functionaldrinks zenithinternational newsletter Page 3 Issue 197 10 November 2010

energy drinks

United Kingdom

Energy drink targets fearless consumers Aimia Foods has introduced an innovative energy drink that is a first in the country.

Already present in the US, No Fear Extreme Energy drink is produced in the UK by Aimia Foods under license for the extreme lifestyle brand No Fear.

No Fear Extreme Energy was launched in the UK in Spring 2010 and is packaged in a 485ml re-sealable can, an industry first, that will provide added appeal to its active and on-the-go consumer audience. In addition, the can's 'twist and shut' feature allows the energy drink to stay carbonated for up to 24 hours after opening, so it can be enjoyed over a longer period of time. Hot on the heals of the original launch, Aimia Foods introduced No Fear in a 250ml slim cans in June 2010.

Targeted at typical energy drink consumers - males aged 16 to 24 - No Fear Extreme Energy will be supported by an extensive national marketing campaign that will include promotions and events as well as using online and offline media

throughout the rest of 2010.

Moreover, the energy drink's "attention grabbing branding" and competitive price are also designed to resonate with its customer base.

Neal Haworth, Category Marketing Manager at Aimia Foods, said, "A well-established brand, already synonymous with extreme sports and attention grabbing campaigns, No Fear is edgy and holds massive appeal with energy drinks' key audience.This, coupled with the innovative and quirky re-sealable can, gives it the potential to be a new 'must-have' drinks brand for a young male audience."

Haworth also revealed that the energy drink will appeal to retailers as they will be able to capitalise on good profit margins.To add to this, the drinks come in cases of 24, from which drinks can be sold individually or in packs of six, enabling retailers to choose the pack size best suited to their customers.

No Fear joins Aimia Foods' cold drinks portfolio consisting of Slazenger S1 sports drinks (covered in Issue 133 of functionaldrinks) and Outspan Drinks available in all-natural pure juice.

No Fear Extreme Energy retails for between ÂŁ1.09 and ÂŁ1.19 through Nisa, Costcutter, Bargain Booze and other independent retail stores. www.drinknofear.co.uk

functional dairy

China

Companies join forces to develop the Chinese dairy market

consists of a full-fat organic milk, a low-fat milk, and a naturally high-protein milk.The latest addition was developed in conjunction with Cognis to overcome the poor dissolvability associated with sterols.

Chinese dairy company Mengniu and Cognis Nutrition & Health, leading supplier of natural phytosterols scientifically proven to reduce cholesterol, have launched the country's first sterol-enriched milk in the country.

Cognis Greater China Business Manager Leon Chen, added, "Sterols do not dissolve easily in water or oil.We found an innovative way to make it work while maintaining the milk's superior taste and appearance."

Each carton of the sterol-enriched milk delivers enough phytosterols to help reduce cholesterol levels as well as help maintain healthy bowel function.

The new Milk Deluxe was launched in June and can already be purchased through major food stores throughout China. All Milk Deluxe variants are available in 250ml cartons that can be bought individually, or in boxes of twelve.

The new milk was launched under the Milk Deluxe umbrella brand which already

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functionaldrinks zenithinternational newsletter Page 4 Issue 197 10 November 2010

functional dairy/nutraceuticals

Patent awarded for 'nocturnal milk' solution After a five year-long research phase, Munich-based Milchkristalle has patented its milk powder product NachtMilchkristalle, based on the sleep-regulating hormone, melatonin.

First unveiled in Germany in April 2010, the company recently launched its sleep aid in Austria in September.

There has also been demand and interest from other countries, according to Tony Gnann, CEO of Milchkristalle, who indicated that the company had received requests from Israel, India and the US, amongst others.

The intriguing offering comes in the form of so-called night-time crystals, which are derived from defatted milk taken from cows at night, with studies showing that this contains far higher

Germany levels - up to a reported one hundred times - of melatonin than that produced during the day.

Gnann revealed that there are greater costs involved in collecting this 'nocturnal milk,' since additional light is required during the day and the cows need a special feed that comes at a higher expense. However, the general costs associated with the cows under night-time conditions are lower and the milk of better quality, according to the company.

Only pharmaceutical melatonin has been available in Europe to date due to the low bioavailability of the substance in natural sources, hence Milchkristalle's innovation is breaking new ground and offers a higher degree of bioavailability thanks to the higher concentration of the hormone in milk generated during the night.

According to the firm, melatonin is one of the most important factors in the fight against free radicals and is used for the treatment of sleeping problems and jet lag, as an anti-ageing substance and to reduce blood pressure. After the age of 25, the level of naturally produced melatonin drops significantly and the quality of sleep and ageing effects suffer as a result.

Pharmacies and retailers alike can order the product by fax, e-mail or online. www.nacht-milchkristalle.de

nutraceuticals

Japan

Drink offers concentrated health benefits Yakult has added a fourth variant to its range of functional drinks under the brand name Gyutto Kenkou.

simply wish to avoid fish-derived ingredients.The drink also contains 10mg of chondroitin, 20% apple juice and only 36 calories per 65ml carton.

Other variants in the range include a drink with 400mg of red perilla extract for skin health, one with 230mg of Co-Q10 for increased energy and antioxidant protection and one with blackcurrant extracts to support eye health and fatigue from continued use of computers.

The entire range is packaged in aseptic 65ml cartons produced by Nihon Kami Pak, retailing for Yen 143 apiece.

Gyutto Kenkou means 'concentrated health' and is designed to help maintain healthy bones and joints.The new drink, called Gyutto Kenkou Gurukosamin in full, contains the recommended daily dose of 1,500mg of glucosamine derived from maize for those consumers who are allergic to shellfish or

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functionaldrinks zenithinternational newsletter Page 5 Issue 197 10 November 2010

sports drinks/enriched beverages

Island dweller's drink hits the city Sports nutrition company VPX Sports has made a foray into the coconut water segment with an unusual proposition that has added active ingredients.

The latest drink to be launched by VPX is called Coco Fit+ and is designed to be 'the healthiest rehydration drink'. Coco Fit+ is currently available in Mangosteen Mania and Savory Açai, both containing 30% juice. Another flavour is reportedly under development.

Coco Fit+ is enriched with 33mg of omega 3 (ALA, EPA and DHA), has an ORAC (Oxygen Radical Absorbance Capacity) rating of 1,000 and provides 1,000 IU of vitamin D3 which represents 250% of the daily value (DV) of the vitamin. Coco Fit+ also contains 100% DV of vitamin C, 85mg of sodium and 260mg of potassium per 16oz bottle at just 35 calories.

United States As part of the company's motivation to introduce a coconut water-based drink,VPX cites research which has demonstrated that athletes who consumed pure coconut water instead of traditional sports drinks or plain water, showed higher tolerance levels of the drink without suffering nausea, fullness or stomach upset.

In comparison with other coconut water competitors,VPX claims that Coco Fit+ is very low in sugar as it contains 300% less sugar per ounce than the two leading coconut water brands.

According to VPX, the company sought to revolutionise the world's sports drinks by adapting the oldest and most natural rehydration fluid by adding essential nutrients such as vitamin D and omega 3 as well as combining this with fruit juices that are naturally high in antioxidants.

Coco Fit+ is targeted at health conscious consumers who are inclined towards natural products or who simply prefer to avoid artificially flavoured sports drinks that are high in calories.

Coco Fit+ is already sold through select distributors in California and Florida and retails for US$2.99 apiece. www.vpxsports.com

functional dairy

United States

Milk gets its mojo US food company Abunda Functional Foods has partnered with probiotic specialist Ganeden Biotech to launch MojoMilk, a probiotic chocolate milk mix aimed at children.

MojoMilk offers an alternative to current chocolate milk mixes, by providing the health benefits found in probiotic yogurt including immune system support and digestive health, with 60% less calories than its closest competitor, the Nesquik brand from NestlĂŠ.

It contains Ganeden Biotech's patented probiotic blend GanedenBC30, which

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laboratory studies have shown to deliver more than ten times the live cells than common probiotic yogurt cultures.

This strain of bacillus coagulans has been specially developed for high stability and survivability in the gastrointestinal tract, with each serving of MojoMilk providing at least 2 billion CFU (colony forming units) of probiotics.

"MojoMilk is the first functional chocolate milk mix on the market today, making it a healthy alternative to conventional chocolate milk or sugary juices and sodas," commented Andrew Lefkowitz, CEO and president of Ganeden Biotech. "This should resonate with today's consumers, particularly parents, who are always looking for healthy products that their kids will enjoy."

Each individual 4.5g stick pack is designed to be stirred into a 6-8 ounce glass of milk or milk substitute, making it ideal for lunch boxes or onthe-go consumption.The stick packs are currently available in a 10 count box for US$9.99, and can be purchased via the brand website.

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functionaldrinks zenithinternational newsletter Page 6 Issue 197 10 November 2010

functional drinks

West Europe

Functional Drinks Conference round up functionaldrinks' Cecilia Martínez Núñez attended the Functional Drinks Conference organised

by Agra Informa which kicked off on 11 October with the Pre-Conference Workshop.

The following day, the Functional Drinks Conference started with companies from a broad spectrum of fields in attendance, including the likes of Tetra Pak, German Impress, Tate & Lyle, Cargill, DSM, Tine Ingredients, Raisio, Valio and Volac.

The workshop was led by Food Law Consultants, a specialised law firm on all matters relating to food law in Europe.The workshop was intended to shed light into the latest regulatory developments regarding the EU health claims legislation, clarify novel foods regulation and identify the strategies of success amid tighter legislation.

Sebastián Romero, partner at Food Law Consultants, explained that in Europe, the soft drinks industry is in a transitional period with respect to the health claims regulation as much needs to be finalised and written into European and national law.

Highlighting the success of Provexis with its Fruitflow branded tomato extract, Romero explained that for the Commission to give a positive opinion on a health claim, the applicant needs to understand and explain the mechanism of action which produces the effect; it is not enough just to identify the relation between a certain ingredient and its effect.

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companies. He underlined that such companies understand that although consumers want to be healthy, they do not want to feel or seem to be too healthy.This is why such companies focus only on one aspect of the health benefit; for example Unilever's Flora lowers cholesterol and thus helps reduce the risk of developing cardiovascular disease, but the latter is not explicitly mentioned.

Some of the highlights of Day One included the presentation given by Neal Cavalier-Smith from The Healthy Marketing Company who explained that the functional drinks industry by definition is not about high volume but high margin. He gave the example of a milk by Whiskas cat food brand manufacturer Mars Inc which is seven times more expensive by pint than a regular pint of milk.This, he said, demonstrates that consumers are willing to pay more for products that are seen as providing added value.

Also, according to Cavalier-Smith, companies aiming to reach mass volume must invest between 15% to 20% of turnover in publicity.

Finally, Cavalier-Smith reminded us that when assessing whether there is demand for a certain product or health benefit, what most concerns consumers is not necessarily related to the diseases that most affect the population.

Finally, Romero concluded that once the issue of health claims legislation is settled, the Commission and manufacturers will turn their attention to the issue of novel foods regulation.

This is because under the new legislation certain foods that could previously be sold across Europe may now be banned whilst others that had previously not been able to enter the market may now be able to do so.

Patrick Mannion from Innova Market Insights presented on the key trends and areas of growth and decline in the European functional drinks market. In contrast with the general feeling of doom and gloom expressed by some companies, Mannion countered that the EU health claims legislation has helped breathe new life into products or brands that have received a positive opinion by the European body such as Fruitflow or Raisio's Benecol.

The workshop ended with a presentation by Javier Morán, nutritional researcher with extensive experience in Spain. Morán's presentation focused on a number of case studies and the strategies followed by successful

According to Mannion, areas of growth include using vegetables as flavours, as seen especially in juices and smoothies. Other growing areas

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functionaldrinks zenithinternational newsletter Page 7 Issue 197 10 November 2010

functional drinks

West Europe

(continued from Page 6) include those of organic or environmentally friendly products. Mannion explained that nowadays consumers see such products as 'good for the environment and thus good for me'.

On the second day, Beverage Marketing Company's Gary Hemphill spoke about the latest consumption trends in the US where the wellness trend is still a driving force, but due to the recession, both manufacturers and consumers have gone 'back to basics'.

Furthermore, although there has been a general increase in sales of soft drinks, this has been led primarily by a growing population rather than by organic growth. However, within this, tap water and functional drinks experienced rising sales in 2009 compared to regular soft drinks.

Another result of the recession was a slowdown in innovation as measured by new product launches. But Hemphill said that this is starting to pick up again and is expected to continue doing so.

Finally, on the hot topic of relaxation and alertness drinks, Hemphill said that Beverage Marketing Company does not yet recognise it as a category by itself, but rather they fall under nutraceuticals as these still represent very small volumes.

Continuing on the topic of relaxation drinks, Brent Sonnek-Schmelz, co-founder of RelaxZen, commented on the company's successes to date as well as his views on the category. He indicated that RelaxZen has been successfully placed in airport stores where the shots, priced at US$2 more apiece than through other retail

outlets, are selling well.This, obviously, not only benefits the company but retailers who are also able to obtain higher margins on the sale of RelaxZen compared to other beverages.

He also mentioned that the company's biggest challenge so far has been to explain the concept of daytime relaxation to consumers.

Sonnek-Schmelz explained that because of other wellknown brands that contain melatonin and can cause drowsiness, consumers typically think of relaxation drinks as alternatives to sleep aids.

As a result of this, the company developed daytime and night-time specific formulations so consumers can be stressfree and focused during the day and stress-free and fall asleep more easily at night.

Other presentations touched on a wide range of topics including novel applications of whey protein in sports drinks by Volac, the importance of protein in sports drinks by MaxiNutrition, assessing the future scope of omega-3 in functional products by Tine Ingredients, exploring the heart health benefits of plant stanol esters by Raisio and expanding probiotics from dairy to fruit drinks.

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functionaldrinks in brief

Europe

According to new research, Europe still leads the way for digestive health products. However, the US is said to be closing the gap, especially as new product launches have slowed down in Europe arguably due to the health claims legislation. Of the ingredients used in digestive health products, pre- and probiotics are the most commonly used in the continent.

France: Following Danone's decision not to launch its calcium and vitamin D-rich yogurt Densia, several industry observers questioned whether the tightening environment with regards to health claims was the culprit. However, Danone said that the market tests it had conducted in the country revealed that adults

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aged 45 and above do not feel the need to increase their intake of calcium, hence the decision not to go ahead with the launch.

Researchers from UniversitĂŠ Montpellier have found that grape and apple juice may help prevent the development of atherosclerosis in hamsters fed a high-fat, high-cholesterol diet.The phenol content of the juices has been suggested as the active ingredient.

UK: Mars has announced plans to discontinue production of Galaxy probiotic drinks less than a year after its launch due to lower sales than expected. Reportedly, the company had expected to see sales reach ÂŁ22 million in its first few years, whereas the drinks only sold ÂŁ445,000 in

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functionaldrinks zenithinternational newsletter Page 8 Issue 197 10 November 2010

functionaldrinks in brief

World

the year to date.

North America

US: It has been rumoured that Red Bull North America (RBNA) might drop one of its Los Angeles distributors in favour of distributing the energy drink itself. It is not known whether there is a cause for the termination of the agreement, or whether it is the company's decision to adopt such a route.

Dutch bio-tech company DNage has secured funding to commence a clinical trial on its antiageing ingredient, Prodarsan.The ingredient will be tested on a group of children suffering from progenia, an accelerated ageing condition.

Prodarsan could help not only slow the ageing process in children with progenia but also on the general population.

Australia: A study conducted at the University of South Australia has demonstrated that DSM's redVida resveratrol is effective in improving flow mediated dilation (FMD), a biomarker linked to the healthy functioning of the cardiovascular system. DSM Global Business Manager, Frank DeJianne, commented, "DSM is now involved in five ongoing human studies for resVida, and that list grows with each passing month."

In other company news, Red Bull's eponymous soccer team is finally beginning to turn towards profit after international stars Thierry Henry and Rafa Márquez were brought to the team. However, Red Bulls team Managing Director commented, "There's no timetable for when the team will be turning a profit."

PepsiCo has unveiled Mission Control for its Gatorade brand, its latest effort to inject life into the Gatorade brand.The initiative involves four full-time staff monitoring all posts made on social media websites on Gatorade 24 hours a day in the hope of learning how to market the brand more effectively.

Chief Marketing Officer Sarah Robb O'Hagan, stated, "It's like we're a person in their social circle now."

EQ Labs, producer of EQ Energy Drink, has announced it has reached a distribution agreement with Terrible Herbst chain of convenience stores in the states of Arizona, Utah, Nevada and California.Within the next 30 days, EQ Labs will supply the chain's 108 stores with EQ Energy Drink.

functionaldrinks zenithinternational newsletter

Editor: Anya Hembrough Deputy Editor: Cecilia Martínez Núñez Commercial Consultant: Matt Wilton functionaldrinks is issued 25 times a year and is only available by subscription: electronic PDF format only £495; hard copy and PDF £595* *VAT chargeable on electronic format to UK companies and EC companies not registered for VAT

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India: Yakult Danone India has recently introduced Yakult in Bangalore.Yakult was first introduced in the country in 2007 and is now available in the cities of Delhi, Mumbai, Pune, Chandigarh, Punjab and Jaipur.The company has revealed the probiotic drink will soon be present in other markets in South India.

The Food Safety and Standards Authority of India (FSSAI) is considering tightening the regulations governing energy drinks in an effort to curb caffeine levels in products.The FSSAI said it "believes it should develop an appropriate safety standard for energy drinks in the country."

7 Kingsmead Square Bath BA1 2AB United Kingdom t +44 (0)1225 327900 f +44 (0)1225 327901 e functionaldrinks@zenithinternational.com www.functionaldrinksnews.com No part of this periodical may be reproduced in any form, copied or stored electronically without prior permission in writing from the publisher. Every effort is made to verify all information published, but Zenith International cannot accept responsibility for any errors or omissions or for any losses that may arise as a result.

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