Specialty Nutrition consists of research-backed nutrition solutions designed for consumer groups with specific nutritional needs, including everything from childhood nutrition to sports and active nutrition to healthy aging.
According to Nielsen IQ, the 2024 consumer knows more than ever before what they want, need and what’s good for them, and they’re also more likely to spend their money on products that combine multiple health benefits.1.
For many years, dairy companies have made commercial sense by repurposing whey, a by-product of cheese production, into a nutrient-rich dairy ingredient that is a mainstay of sports nutrition and functional food and beverage innovation.
This is no easy task, especially as sports nutrition becomes the fastest-growing consumer health segment in the world according to Euromonitor International, with both lifestyle consumers and those interested in active nutrition driving the growth.
But the dairy giants are innovating well beyond whey.
The three largest dairy companies by revenue, Nestlé, Lactalis and Danone, all operate specialist nutrition divisions focused on research and product development for a range of solutions from early childhood nutrition to clinical care.
Meanwhile, New Zealand’s Fonterra operates two B2B ingredients brands: NZMP, which supplies dairy ingredients for everything from food manufacturing to speciality nutrition, and Nutiani, a cooperative B2B health and wellness brand that supplies premium ingredients such as lactoferrin.
In Europe, Dutch cooperative FrieslandCampina and Denmark’s Arla Foods both operate B2B ingredients divisions, while in Asia, Mengniu recently launched its own sports nutrition brand, M-Action, which includes a range of liquid protein supplements.
Danone’s approach to medical nutrition: a case in point
Specialty nutrition accounts for 30% of Danone’s total revenue and is expected to grow 10% year-on-year in 2022. The French dairy giant is the leader in medical nutrition in Europe and the second-largest infant nutrition company globally.
Danone has built expertise in medical nutrition for many years, but recent investments in the sector highlight just how important the sector is to the company as it seeks growth under its “Renew Danone” strategy.
In September 2023, the company announced it would invest €50 million (approximately $54 million) to expand its factory in Opole, Poland, and strengthen the group’s medical nutrition capabilities. Specifically, it plans to add an adult medical nutrition production line to serve patients who rely on feeding tubes.
In October 2023, the company announced it would invest 450 million Turkish lira (about 13 million euros/14 million dollars) in its Lüleburgaz production facility, which will produce both dairy and medical nutrition products.
Danone is targeting the adult medical nutrition market, which is expected to grow in future due to an ageing population and increasing chronic diseases.
In a similar announcement in May 2024, Danone told reporters it would pour 70 million euros ($76 million) into a medical nutrition production line at its Steenfold plant in northern France. The bulk of the investment, about 60 million euros, will be used to manufacture about 30 recipes for oral nutritional supplements for patients in Danone’s Nutricia line of specialty nutrition products (the rest will be used to install a biomass boiler).
According to Danone, the Steenvoorde plant will produce around 20 million litres per year of medical nutrition products, including solutions to improve the quality of life of patients suffering from malnutrition caused by illness.
Also in May, Danone announced it had completed the acquisition of U.S.-based whole-food tube-feeding business Functional Formularies, expanding the French dairy giant’s enteral tube-feeding product portfolio.
So what is the area of interest for Danone in medical nutrition?
A spokesman for the dairy giant said the increasing incidence of chronic diseases such as cancer and an ageing global population are expected to drive the need for medical nutrition products that can contribute to improving patient outcomes.
“At the same time, we know that some patients could benefit from medical nutrition but are unable to access it – only one in three patients who need it actually receives it,” the spokesperson explained.
“Current gaps and future needs highlight the need for investment and innovation in this sector. Through strengthening our industrial capabilities and investing in research and innovation, Danone is committed to accelerating the delivery of adult medical nutrition products and improving outcomes for millions of patients around the world.”
Danone researches and innovates across a range of product types, including oral nutritional supplements, thickeners for patients with swallowing difficulties, specialised tube feeding products and medical devices for patients unable to take food orally.
“Medical nutrition has been proven to help reduce medical complications, support recovery and independence, and reduce the consumption of medical resources,” the company said. “In cancer, for example, medical nutrition has proven benefits including fewer post-operative complications, better tolerance to treatment, shorter hospital stays, and improved quality of life for patients.”
There are several reasons why Danone claims that only a small proportion of patients who need medical nutrition products have access to them: “This could be due to low awareness of the role of nutrition in healthcare and the risks of malnutrition, as well as the strain on healthcare systems due to the prevalence of disease and increasing patient needs,” the spokesperson said.
“That’s why it’s important to us to invest in the medical nutrition space so we can serve as many patients as possible. We believe everyone who needs it should have access to it, so we will continue to innovate products to meet patient needs and raise awareness of the benefits of medical nutrition to support patient outcomes.”
Why are dairy companies attracted to specialty nutrition?
Dairy companies have access to some of the most profitable (e.g. lactoferrin) and most popular (whey, casein) nutritional ingredients on the market, and opportunities await in the specialty nutrition space.
According to Euromonitor International2Today’s consumers are looking for nutritional products that deliver a range of health and physical benefits, from weight loss and digestive health to immunity and sleep. Formulating that “magic pill,” ideally in a more appealing form, is a key challenge for developers.
Sports nutrition is also expected to see further growth in 2024, driven by demand from both lifestyle and active consumers.
In early childhood nutrition, the development of formula recipes that are as close as possible to breastmilk will also continue to drive innovation, as will pressure from new generations to align their brand choices with their own values.3
And the desire for improved health and well-being among consumers around the world is likely to drive the industry forward in the coming years.
According to McKinsey & Company’s 2020 Future of Wellness Survey of 7,500 global consumers, 79% of respondents believe wellness is important, with 42% of respondents ranking it as their top priority. The global management consultancy added that consumers across all markets have “significantly increased (from 27% to 65%)” in prioritizing wellness over the past two to three years.
