The food industry is rapidly expanding its presence in the health functional food (HFF) sector, viewing it as a key driver for future growth. Companies are accelerating their market strategies, but face intense competition from established pharmaceutical companies and emerging platform businesses. Despite significant investment, the actual performance of these ventures is reportedly falling short of initial expectations.
Food Giants Enter the Health Functional Food Market
Several major food corporations have launched or bolstered their health functional food brands. Samyang Foods, for instance, entered the healthcare market in May with the launch of ‘SPINDLE’, a HFF brand based on its extensive research and development capabilities. Nongshim has been actively pursuing the inner beauty market with its proprietary HFF brand, ‘Lifill’. This brand features a unique, self-developed ultra-low molecular weight collagen ingredient that has received functional recognition from the Ministry of Food and Drug Safety.
CJ Wellcare is also making strides in the inner beauty segment with its brand ‘Innerby’, aiming to attract a younger demographic. Innerby, originally introduced by CJ CheilJedang in 2009 with the concept of ‘edible cosmetics’, has become a flagship inner beauty brand since the health business division was spun off as CJ Wellcare in 2022.
The Daesang Group operates brands like ‘Newcare’ and ‘My Meal’ through Daesang Wellife and is also introducing an artificial intelligence (AI)-based health management platform. Other prominent food companies, including Pulmuone and Maeil Dairies, are also actively managing their own HFF brands.
Drivers Behind the HFF Market Expansion
The primary motivation for food companies venturing into the HFF sector is its significant growth potential. Rapidly aging populations and heightened consumer interest in health management are consistently expanding the market. Furthermore, HFFs are generally perceived as a more profitable business compared to conventional food products. The existing research and development (R&D) expertise and raw material development know-how accumulated in traditional food manufacturing processes provide a strong foundation for these new ventures.
Industry insiders note that while the conventional food market is nearing saturation, demand for health functional foods, particularly among the elderly population, continues to rise. Food companies, possessing established technological prowess and operational knowledge, are therefore focusing on the HFF market as a new avenue for growth.
Challenges and Competitive Landscape
Despite the promising outlook, establishing a strong foothold in the HFF market is proving to be a formidable challenge. Pharmaceutical companies have long held a dominant position, and the rise of platform businesses has intensified competition. Consumers are increasingly prioritizing product functionality and ingredients over brand recognition, making it difficult for food companies to differentiate themselves solely on their existing brand equity.
The actual contribution of HFF businesses to the overall revenue of many food companies remains modest. For example, Pulmuone’s health living business segment reported sales of 10.7 billion won in the first quarter of the year, accounting for only 0.9% of its total sales. Similarly, Nongshim’s HFF business is considered to have a limited share, with ramen and snacks constituting approximately 98% of its total revenue in the first quarter.
An industry representative highlighted the difficulty for new brands to gain visibility when established pharmaceutical players already command significant consumer recognition. The competitive structure, involving both platform businesses and pharmaceutical companies, makes market entry less challenging than establishing a sustainable presence.
Investment and Long-Term Strategy
Sustained investment in R&D, securing functional ingredients, and robust marketing efforts are crucial for success in the HFF sector. While companies are investing consistently in new product launches and brand building, achieving tangible results in the short term is difficult. This often leads to a situation where return on investment does not meet initial expectations.
Nevertheless, the food industry remains committed to nurturing its HFF businesses from a long-term perspective. The structural growth factors, such as an aging population and increasing demand for health management solutions, remain valid. Moreover, the potential for higher profit margins compared to conventional food products is a significant draw.
Existing assets, including established production facilities, brands, and distribution networks, are also considered valuable advantages that are difficult to abandon. A food company official stated, “Conventional food products have low profit margins. In contrast, health functional foods are positioned between pharmaceuticals and general foods, offering comparatively higher profitability.”
Given the market’s growth potential driven by an aging demographic, companies are focusing on strengthening their competitiveness through differentiated ingredients and products, rather than solely pursuing short-term gains. This strategic approach aims to build a sustainable business for the future.
