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Heavy demand drives market for fat substitutes to over $3 billion.

Americans have been made increasingly aware of the relationship between diet and health. Consequently, they have become eager to consume a wide range of products containing less fat. This trend should continue to have enormous impact on the expanding market for fat substitutes, according to a new report by leading consulting and research firm FIND/SVP.

"Fat substitutes have become essential to the food industry over the past decade, because of the unprecedented consumer demand for low-fat and low-cholesterol products," says Peter Allen, FIND/SVP's Vice President, Market Research Reports. "Fat substitutes replace the texture and flavor lost when real fat is taken out of a product," he adds. In 1991, retail sales of all products containing fat substitutes totaled close to $3.1 billion. At the same time, fat substitute ingredient sales were approximately $125 million.

Fat substitutes are classified as either natural or artificial. All of the substitutes currently on the market are made from all-natural ingredients and are categorized as protein-based, carbohydrate-based, or fat-based. In addition to Simplesse, introduced by the NutraSweet Company in 1990, natural fat substitutes include xanthan gum, guar gum, carrageenan, and Litesse. Artificial fat substitutes (lipid analogs) are synthetic compounds such as Olestra which have not yet been approved by the FDA but which have potential because they can be used in frying.

Over 300 new food product introductions in 1991 consisted of "light," "low-fat," or "low-cholesterol" products, and many of these incorporated fat substitutes. Dairy products, baked and frozen desserts, frozen dinners, and spreads are among the market segments that currently utilize fat substitutes.

Trends and Forecasts

When Simplesse originally became available in 1990, it was expected to revolutionize the food ingredient market. Other high-tech fat substitutes were developed quickly and and are now awaiting FDA approval if they are not yet on the market. However, the market for fat substitutes shifted in 1991 and 1992, and the present trend is toward the use of traditional ingredients such as gels, gums, and modified starch, which cost less than high-tech substitutes and do not require government approval.

While xanthan gum, guar gum, carrageenan, and cellulose gel are the most widely used fat substitutes, the market remains highly fragmented. An ingredient that replaces fat in one particular product, such as ice cream, may not be well suited for a different type of food, the report explains.

The market for fat substitutes as ingredients is projected to increase to $251 million by 1996, representing a compound annual growth rate of 15%. Total retail sales of all products using fat substitutes should grow at a similar rate and reach approximately $6.2 billion in 1996.

The Competitive Scene

The market for products containing fat substitutes is dominated by leading prepared foods processors. In 1991, major players included Kraft General Foods (a unit of Philip Morris), ConAgra, H.J. Heinz, Ralston Purina, and Campbell Soup.

Chemical companies, including FMC, NutraSweet (a unit of Monsanto), and National Starch and Chemical (a unit of Unilever), are top competitors in the fat substitute ingredient market.

There is currently an overabundance of fat substitutes available or under development, therefore, this is not a favorable time to develop new replacements. FIND/SVP believes that the market for products containing fat substitutes has greater potential. The best opportunities are for new product introductions incorporating the traditional, all-natural substitute ingredients such as guar gum and xanthan gum, which are on the FDA's GRAS ("generally recognized as safe") list.

Most marketers stress the taste factor or health factor in their advertisements for low-fat foods. By May 1993, new labeling regulations will be implemented and the terms "fat-free" and "low-fat" will be clearly defined. This will impact all manufacturers of foods containing fat substitutes.

"It is highly likely that the overall market for low-fat and low-cholesterol products will continue to expand as long as consumers continue to worry about what they should eat to keep healthy," notes Allen. "The potential market for fat substitutes is very large indeed."

The 154-page report, The Market for Fat Substitutes, is priced at $1,650 and is available from FIND/SVP, Dept. Q4A, 625 Avenue of the Americas, New York, NY 10011.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Publication:Frozen Food Digest
Date:Feb 1, 1993
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