FUNCTIONAL MUSHROOMS ARE EVERYWHERE, BUT WHAT ARE THEY?

Four CPG brands give their perspective on this rapidly growing industry that shows no signs of slowing down

If you’ve perused the aisles of Whole Foods (or any health food store) over the last year, you’ve likely encountered the latest trend in wellness: functional mushrooms. But what actually *are* functional mushrooms? And how are they different from the shiitakes you cooked for dinner last night?

Functional mushrooms such as reishi, chaga, cordyceps, and lion’s mane, are neither the button mushrooms you buy at the grocery store nor the “magic mushrooms” (aka psilocybin) your once-hippie Dad still waxes poetically about. Functional mushrooms, though related to their more well-known cousins, are of the medicinal variety and bring with them a long list of purported health benefits such as reduced stress, more energy, greater focus, and stronger immunity.

Interest in the healing powers of mushrooms is nothing new — traditional Chinese medicine has used mushrooms medicinally for centuries — but it is relatively new to western consumers. As the Western world has become increasingly aware of mushrooms’ many benefits, there has been an explosion of mushroom products on the market. So much so that the functional mushroom market share is expected to reach(86 billion) USD by 2028.

To better understand this rapidly expanding industry, we spoke to four CPG brands in the mushroom market — offering products from supplements to gelato to sparkling teas — and asked what they think the future of functional mushrooms looks like.

CONSUMERS ARE GETTING SMARTER, BUT MORE EDUCATION IS STILL NEEDED

As more and more people become interested in functional mushrooms, both the opportunity and the challenge will be to ensure consumers are educated and supported as they explore how mushrooms might play a role in their wellness.

Kailey Donewald, the founder of Sacred Serve, a vegan gelato brand, explains that “most people have at least heard of these functional ingredients,” and consumers seem to be more educated than when she founded her business in 2016. However, education levels can vary between premium and conventional consumers — Kathy from Iowa may have heard of lion’s mane mushrooms once from her niece in Brooklyn, but she is still pretty sure it will send her off on a trip she did not pack for. More than one founder shared that they frequently need to assure customers their product is not a “magic” mushroom: no, it will *not* make you high and yes, it is legal to ship. Furthermore, not all mushrooms are created equal, which can lead to a good deal of customer confusion: reishi is different from chaga, which is different from turkey tail, which is differ- ent from cordyceps. So how are functional mushroom brands working to fill in some of these gaps in consumer education?

Umbo, founded by advocate Del Jolly and former pro-athletes Jake Plummer and Rashad Evans, uses the branding of each of their tinctures to demarcate its health benefits: the Lions Mane tincture has a picture of a brain, Turkey Tail has a gut, and so on. Immorel, a sparkling mushroom tea company founded by Hayley Kats and Charlotte Rogg, uses playful names for each drink to inform customers of its purpose: “Wake the Eff Up” is a coffee alternative, “Feed Your Focus” is for those mid-afternoon slumps, and “Slow Your Roll” helps customers relax.

There is only so much branding can do, however, and Nick Murray, the founder of Wake, likens the consumer learning curve to that of the CBD boom ten years ago. At first, many people wouldn't touch CBD because it was connected to marijuana, and it took around ten years for most people to understand it was not psychoactive and could be applied in a variety of ways. “People are getting smarter,” he says, but fully educating consumers on functional mushrooms is “probably going to take ten years, too.” In the meantime, brands should prepare to do a bit of hand-holding, which could be anything from in-person pop-ups and educational events to maintaining and updating a robust FAQ section, as consumers begin their journey into the world of mushrooms.

There are also barriers to education based on FDA regulations. Brands cannot explicitly say that chaga, for example, is a powerful antioxidant that will regulate your immune system, and instead can only vaguely imply its benefits. For the most part, however, brands can work around these regulations with careful wording. “We avoid declaratives,” explains Kats of Immorel, and instead rely on “can, could, and may” in their product descriptions to communicate efficacy without violating regulations. Brands hoping to break into the functional mushroom industry will need to work within these regulations as they educate consumers.

Functional Mushrooms Are Not An Overnight Fix

Each founder also emphasized the need for brands to communicate to consumers that functional mushrooms, as potent as they might be, are not an overnight fix. Jolly encourages consumers to “treat [functional mushrooms] like vegetables.” We don't eat one salad and expect to see immediate changes to our health — we start to feel the effects after we’ve eaten a salad every day for a month or two.

With functional ingredients, brands emphasize a slow and steady approach. Start with one product and check in to see how you feel after a week or two. Just like getting proper sleep and eating enough greens, functional mushrooms are merely another element to include in a healthy lifestyle, not a one-stop-shop cure-all. Donewald elaborates, saying, “Functional mushrooms are extremely powerful, but I think people don't recognize that because they're expecting something to happen really quickly. The industry’s challenge is communicating to consumers that no one pill or food is going to work like magic. Health is the culmination of a lot of different things.”

Maintaining Quality As The Industry Grows

Beyond educating consumers, many brands mentioned concerns around quality control as new products flood the market. As it stands now, there are very few regulations on functional mushrooms, and the quality of each product is reliant on the standards of the brands that make them and the retailers that stock them. There are some requirements when it comes to labeling — brands must distinguish whether the product is made of fruiting body or mycelium — but these requirements are not always enforced.

“There's a lot of junk in the industry,” explains Murray. There is no universally required testing for things such as heavy metals, and such a lack of regulation can make it challenging for consumers to trust the safety and efficacy of the brands on the market. To alleviate these concerns, Wake, which grows all of its mushrooms on a farm in Jamaica, is working to get to the point where each supplement they sell has a QR code displaying which batch the mushrooms came from, when they were picked, and when they were dried.

Over the last few years, there has been a growing call from consumers for brand transparency across industries, and this is especially true for products that purport to make us better. Consumers do not want to go on a wild goose chase just to figure out what they are putting into their bodies, and as more and more mushroom products come to market, they will only get more selective. To break ahead of the pack, it will be important for brands to take ownership of all aspects of their product — from sourcing to packaging, and any external partners they work with — no matter if the industry at large requires it or not.

Breaking Into Retail

Many retailers have taken it upon themselves to review functional ingredients and put standards in place regarding what they are willing to stock. As Sacred Serve expands into a new, larger retailer, Donewald has had to remove chaga from one of their ice cream flavors. Chaga does not yet have a Generally Recognized as Safe (GRAS) filing, and this retailer requires it. Applying for a GRAS filing can be a time-consuming and expensive endeavor — it can take up to six months to hear back from the FDA and brands must submit comprehensive research on the efficacy of the ingredient, research which can be costly to acquire. A small, up-and-coming brand like Sacred Serve cannot support such a consuming process and would rather focus its efforts on getting its products into as many hands as possible. Donewald hopes that a larger brand with more resources will eventually apply for a GRAS filing for chaga but, until then, they will have to do without the ingredient.

It’s important to note such requirements differ for food products as opposed to supplements or tinctures, but brands should consider the availability of GRAS filings for each ingredient they plan to incorporate if they are hoping to release a functional mushroom food product.

Furthermore, each retailer brands work with will likely have different standards and requirements. Umbo has found greater success with smaller, more forward-thinking retailers like MOM’s Organic Market, whereas some big-box stores have had more apprehension about bringing in new mushroom brands and products. That being said, Donewald encourages brands not to wait for the larger public to catch up and rather to focus on the mission of their brand and the product they’re creating.

As Sacred Serve has grown and worked alongside investors and larger retailers, she has found that those who have chosen to get involved did so because they “genuinely believed in the mission.” Donewald explains that their conversations with external partners “tend to be about performance and metrics, and proving our success, and less so the ingredients we're working with.”

Functional mushrooms may be a new ingredient to some, but as with any CPG product, retailers and investors are ultimately interested in the quality of your product and the cold hard metrics it can to produce once it hits the market.

ARE MUSHROOMS THE FUTURE OF WELLNESS?

Despite fears around quality control and educational gaps, the functional mushroom brands we spoke to are mostly just “excited people are excited about mushrooms.” The community of worldwide fungi fanatics is expanding rapidly: from athletes to doctors, to your crunchy aunt who forages each spring, people from all walks of life are beginning to get behind this ancient ingredient, and brands are thrilled to guide both new and old mushroom enthusiasts along the way.

So where will the industry go from here? Jolly and others hope to cultivate a spirit of “collaboration over competition.” Murray echoed this sentiment, encouraging functional mushroom companies to “leverage the community and iterate quickly. If new products fail, who cares? Just keep testing.” Rising tides raise all ships, and the more “crap we can get off the shelves and replace with healthier alternatives” the better.

Whether this trend urges more people to buy mushrooms from the farmer's market, experiment with psilocybin, or implement functional mushrooms into their wellness arsenal, there is a strong case to be made that mushrooms, in all of their iterations, are the future of wellness.

By Grace Kennedy