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Functional foods and nutraceuticals

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As Canadians age and face rising health care costs, many are considering the link between health and diet. The functional food and nutraceutical industry is seizing the opportunity—389 firms in Canada generated $2.9 billion in revenues from these products in 2004/2005 and employed 13,000 people.

These firms develop products—which are taken as foods or supplements—directly from natural sources to benefit human health. Of those total revenues, $1.6 billion came from companies selling just nutraceuticals, $824 million was from firms specializing in functional foods and $443 million from companies selling both.

Today, 10,000 functional foods and nutra­ceutical products are available on store shelves, and R&D is expanding the product line. The industry spent $75 million in 2004 on R&D specifically for functional foods or nutraceuticals. This amounted to 46% of the total funds these firms spent on R&D.

The share of funds devoted to functional foods and nutraceuticals R&D was lowest, 39%, among firms that only sell nutraceuticals. Yet these firms also had the highest share of sales from functional foods and nutraceuticals, 57%. This indicates that most nutraceutical products are already on the market and generating revenues.

The number of Canadian firms producing functional foods or nutraceuticals grew from 294 in 2002 to 389 in 2004. These products pose not just a domestic opportunity but also a chance for international growth. The United States is a major market for the $545 million worth of functional foods and nutraceutical products these firms export.