The market for fat substitutes - Food Research and Policy

The Market for Fat Substitutes

Health officials are urging Americans to eat less fat. While it plays an important dietary role, too much fat has been linked with higher risk of coronary heart disease and certain cancers.

The 1988 Surgeon General's Report on Nutrition and Health urges Americans to reduce their consumption of fat, especially saturated fat, and cholesterol. The American Cancer Society and the American Heart Association recommend that fat compose no more than 30 percent of the total calories an individual consumes. Currently, dietary fat accounts for about 37 percent of Americans' total energy intake. Lowering fat consumption can also help reduce obesity because fat is the most concentrated source of calories in our food. Fat provides 9 calories of energy per gram versus 4 calories each for protein and carbohydrates.

Similar guidelines on fat consumption were issued recently by the National Research Council's Committee on Diet and Health. The Committee suggests people reduce their fat intake by:

* Eating lean meats, poultry with the skin removed, fish, and low-fat or nonfat dairy products. * Limiting consumption of fried foods, baked goods with large amounts of fat, and spreads and dressings high in fats and oils.

Many Americans, however, enjoy the taste of high-fat foods and may not want to give them up. Thus, food companies have been devoting considerable time and resources to developing products that taste like traditional high-fat foods but have less fat.

In existing reduced-fat foods, mixtures of water and starch or protein often replace some of the fat. However, these foods tend not to have the taste and creaminess of their traditional counterparts, nor can they be used in cooking because the mixtures break down when heated. Therefore, the thrust of current research is to develop fat substitutes that create the same taste and texture as fat and have the same functional properties.

Consumers and food processors are understandably excited over the prospects for improved fat substitutes. At the same time, food safety regulators, nutritionists, and others are concerned about the substitutes' safety and nutritional impacts, as well as the potential effects on dietary patterns, demand for traditional fats and oils, and ingredient manufacturers.

Sources of Fat in the Diet

Fat is a principal and essential component of our diets, along with protein and carbohydrates. Fat is a major source of energy, and it carries the fat-soluble vitamins A, D, E, and K throughout the body. Fatty acids, the chemical components of fat, help regulate many body functions, such as blood pressure, and are components of cell membranes and hormones. Fatty acids are classified as saturated, monounsaturated, or polyunsaturated, depending on their chemical composition.

Saturated fats are thought to increase the amount of cholesterol in the blood and may be partly responsible for coronary artery disease. The National Research Council's Committee on Diet and Health recommends limiting saturated fats to 10 percent of the calories we consume.

Fats that are solid at room temperature generally contain more saturated fat than those that are liquid. (Fats that are liquid at room temperature are called oils.) However, coconut and palm oil are more saturated than some solid fats, such as butter and beef fat.

Fat occurs in varying amounts in many foods (table 1). In 1985, fats and oils accounted for almost half of the fat in the U.S. food supply. Red meat, poultry, and fish were responsible for 31 percent of fat and 39 percent of the saturated fat in our diets. Overall, dairy products accounted for 14.5 percent of total fat consumed. However, the fat content of individual dairy products varied from 1 percent for nonfat dry milk to 10 to 15 percent for ice cream and 30 percent or more for certain cheeses.

The fat present in foods such as milk, meats, eggs, and nuts occurs naturally, but may be altered through breeding or feeding practices. Other fats and oils are added to foods, either directly, such as dressings on salads or butter on bread, or as ingredients, such as shortening or cooking oils, in bakery products and other processed items. Processed foods--like cheeses, shortenings, and salad dressings--are the candidates for fat substitutes because food processors control the fat content.

Types of Fat Substitutes

In addition to their nutritional roles, fats and oils add flavor and palatability to food. They also provide an essential lubricating action in baked goods that contributes to the products' characteristic form and texture. In frying foods, fats and oils transmit heat rapidly and uniformly to the food's surface. Thus, a successful fat substitute must mimic the taste, texture, and functions of the fat it is replacing. The desired function of the fat--flavor, lubrication, or heat transfer--determines what properties the developers of fat substitutes try to achieve.

Replacing fat with water or air is one method manufacturers use to reduce the fat content of processed foods. In low-calorie dressings that have less oil and more water, xanthan gum is used to increase viscosity and shelf life. Mixtures of starch and water and proteins and water are also used to lower fat in many food items, such as yogurt, salad dressing, and imitation margarine. Chocolate manufacturers have reduced fat in their products by using soybean and nut protein to replace some of the cocoa butter. Many of these replacements have limited applications or do not replicate the taste and creaminess of fat. Some imitation margarines, for example, separate at room temperature and when heated.

Below are examples of current fat substitutes, as well as substitutes made with enhanced technologies and new improved compounds.

* Starch-based substitutes. Mixtures of starch derivatives and water are used to produce a variety of reduced-fat foods. The mixtures do not have all the taste and functional properties of fat, so they can replace only part of the fats and oils without a loss in quality.

One such product, N-OIL, a tapioca dextrin marketed by National Starch and Chemical Corporation of Bridgewater, New Jersey, is used to reduce the fat content of salad dressings and ice cream. The company claims that N-OIL can replace 30 to 50 percent of the oil in salad dressings. National Starch and Chemical also sells a replacement for shortening in cake mixes. The substitute consists of emulsifiers, modified food starch, guar gum, and nonfat dry milk. A cake made with the shortening-free mix has 33 percent fewer calories than traditional cake, and the fat content drops from 10 to 3 grams per serving.

Maltodextrins made from corn starch can partially replace fat in salad dressings, margarines, and frozen desserts and cut calories in these products by a third. Maltrin M040, a maltodextrin made by Grain Processing Corporation of Muscatine, Iowa, is used in salad dressings, dips, diet margarines, and frozen desserts. However, it cannot be used by itself for frying or baking because it thins out and loses its creaminess when heated.

* Protein-based substitutes. Mixtures of protein and water are also used as partial fat substitutes.

Thomas J. Lipton, Inc., a subsidiary of Unilever located in Englewood Cliffs, New Jersey, has developed a technology that uses either gelatin or milk proteins to halve the number of calories in margarine. The company is already using this fat substitute in two of its European margarines. In the United States, Lipton has test-marketed a low-fat "butter" made with the fat substitute and is evaluating the results. The product can withstand some heat, so it can be used for baking and light frying and sauteing.

Another protein-based substitute, which has received a lot of publicity, is Simplesse, developed by the NutraSweet Company of Deerfield, Illinois. The company, a subsidiary of the Monsanto Company, also manufactures the low-calorie sweetener aspartame.

Simplesse is made from egg whites or milk proteins. Through a process called microparticulation, the egg and milk proteins are heated and blended into round protein particles so tiny that they create the taste and texture of a creamy, rich fat. Simplesse can be added to dairy products--like ice cream, yogurt, cheese, sour cream, and dips--and oil-based foods--like salad dressing and mayonnaise. However, the compound cannot be used to cook foods because heat causes the protein to gel and lose its creamy quality.

In September 1988, the NutraSweet Company filed a petition with the Food and Drug Administration (FDA) to have Simplesse affirmed as a GRAS (generally recognized as safe) substance and allow its use in frozen desserts. FDA approved the use of Simplesse in frozen desserts in February 1990.

Substituting Simplesse for most of the fat in leading premium (high fat) products reduces calories by 50 to 80 percent and fat content by 85 to 97 percent. The declines are so dramatic because one gram of fat has 9 calories, while Simplesse has only 1 to 2 calories per gram.

In May 1989, Kraft General Foods, based in Glenview, Illinois, petitioned FDA for GRAS affirmation of its new fat substitute in frozen dessert products. Kraft's "modified protein texturizer" is a mixture of dried egg whites and whey-protein concentrate or skim milk combined with 5 to 15 percent xanthan gum and 1 to 2 percent food grade acid.

According to the company's petition, a frozen dessert with this new fat substitute will have less than two-thirds the calories and 5 to 10 percent of the cholesterol of an average ice cream product. Because the vitamin A normally present in milkfat will be lost when the fat is removed, Kraft plans to enrich its new "ice cream" with vitamin A.

* Fatty acid-based substitutes. Other fat substitutes use fatty acids that have been chemically altered to provide fewer or no calories. Many of these are still under development.

Polyglycerol esters have 6 to 6.5 calories per gram, about one-third less than a gram of fat. They are used in low-calorie versions of ice cream, other frozen desserts, margarines, shortenings, peanut butter, whipped toppings, and bakery items.

Another type of fatty acid-based substitute functions and tastes like fat but passes through the body unabsorbed because the molecules are too large for the body's enzymes to break down. The most important of these undigestible fatty acid-sugars is olestra, a mixture composed of sucrose and six, seven, or eight fatty acid esters. The Procter & Gamble Company, headquartered in Cincinnati, Ohio, has been developing olestra since the 1960's.

In 1987, Procter & Gamble petitioned FDA for permission to use olestra in shortenings and oils for home and commercial use. Specifically, the company proposed including up to 35 percent olestra in shortenings and oils used at home and by foodservice personnel for grilling and seasoning vegetables, meats, and fish and for donuts, sauces, and salad oils.

Olestra would replace up to 75 percent of traditional shortenings and oils for deep fat frying in restaurants and other foodservice outlets and preparation of commercial snack foods, like potato chips. FDA is reviewing the petition. Although olestra can also be substituted for some fat in ice cream, margarine, salad dressing, and processed meats, Procter & Gamble has not petitioned FDA for these uses.

The ARCO Chemical Company of Newtown Square, Pennsylvania, is working on a fat substitute called esterified propoxylated glycerol (EPG). Like olestra, EPG is undigestible. The company is testing it in a wide variety of foods including frying oils, ice cream, baked goods, and dressings. ARCO Chemical estimates that EPG faces about 4 years of safety tests before the company will be ready to petition FDA, but ARCO Chemical has already applied for patents.

Other food companies are also developing their own fatty acid-based substitutes for a variety of foods. Unilever; Frito-Lay, Inc., of Plano, Texas; and CPC International, Inc., headquartered in Englewood Cliffs, New Jersey; are among those involved in the research.

Market Potential

The potential market for fat substitutes is determined by two factors:

* The size of the markets for products in which fat substitutes can be used. The largest of these markets is fats and oils. In 1988, the fats and oils market totaled about 14 billion pounds (table 2). Baking and frying fats, salad and cooking oils, and margarine accounted for about 13.8 billion pounds. Another 318 million pounds of fats and oils were used in specialty food applications, such as nondairy toppings, coffee whiteners, and confectionery coatings.

Food processing is the largest market segment for baking and frying fats and salad and cooking oils. About 54 percent of baking and frying fats produced annually are used by cookiemakers, snack food companies, and other food processors. The foodservice industry--restaurants, fast-food outlets, school cafeterias, and other facilities serving food--accounts for about 2 billion pounds, or 36 percent, of these fats. With a 71-percent market share, food processors are also big consumers of salad and cooking oils, which they use to make products like mayonnaise and dressings. In contrast, three-fourths of the margarine is sold in retail foodstores.

Some dairy products are also possible candidates for fat substitutes. Annual production of butter, ice cream, natural and processed cheeses, yogurt, and specialty creams equaled 12.1 billion pounds in 1987.

* The fat content of the products. The amount of fat a food contains determines how much of a fat substitute can be used in the product. For example, baking and frying fats and salad and cooking oils are 100 percent fat. Thus, a fat substitute that has all the properties of traditional fats could potentially replace the 11.9-billion-pound market for these items (table 3). Mayonnaise, on the other hand, is 80 percent fat so the potential market for a fat substitute is 1.4 billion pounds.

Dairy products that are candidates for fat substitutes also vary in their fat content, from 81 percent for butter down to only 3 percent for yogurt. The potential use of fat substitutes in these items totals 2.8 billion pounds. Natural cheeses and butter are the two largest markets.

The processing, retail, and foodservice sectors may differ in their interest in fat substitutes. Processors may be the most eager group to capitalize on the calorie- and fat-reducing properties of these substitutes to gain an edge over their competitors. The foodservice industry may be less interested in these attributes because most consumers do not seek out such alternatives as diligently when dining out. In a 1988 survey conducted by the Food Marketing Institute, 72 percent of respondents said that nutrition was a very important factor when they shop for food, while only 29 percent reported being very concerned about food ingredients when eating out.

However, the foodservice industry may be able to more readily absorb the higher price of a low-fat product because food costs are a smaller share of menu prices than of grocery prices. According to industry studies, food costs accounted for 74 cents of each dollar the consumer spent in the supermarket in 1987 but only 30 percent of the restaurant bill.

Factors Affecting Marketability

Existing low-fat and low-calorie items vary in their popularity with consumers. For example, according to scanner checkout data, diet soft drinks account for about 30 percent of foodstore soft drink sales, and reduced-calorie liquid salad dressings make up about 23 percent of their market. On the other hand, consumers do not view ice milk and sherbet as good substitutes for ice cream. These products have captured only about 11 percent of the ice cream/ice milk market.

Whether products containing new fat substitutes will replace existing low-fat items on supermarket shelves or even expand the popularity of low-fat foods depends on several factors--FDA approval, the substitutes' quality and versatility, strength of consumer demand and willingness to pay for reduced-fat products, and marketing strategies.

Before a novel substitute can be marketed, the manufacturer must obtain FDA's permission for each food use. At this time, FDA has granted the NutraSweet Company permission to use its new substitute only in frozen desserts. Expanded usage would require companies to file additional petitions. Because fat is an essential nutrient, FDA will carefully consider what foods to allow the substitutes in and at what levels, so that people do not risk eliminating fat from their diets.

For new fat substitutes to catch on with manufacturers and consumers and expand the low-fat market, they must be technically superior to existing substitutes and offer better taste or more versatility. Unlike today's fat replacements, true fat substitutes must mimic the taste, texture, and functions of fat. Substitutes may face the greatest difficulty competing with highly flavored fats, such as milk fat and olive oil.

The strength of demand for low-fat foods will strongly influence manufacturers' decisions to develop and market foods containing fat substitutes. Demand is expected to continue to increase as more health professionals extol the virtues of a low-fat diet. In an April 1989 survey for the Calorie Control Council, "staying in better overall health" was the number one reason respondents gave for using low-calorie foods and beverages. Among the low-calorie consumers in the survey, 52 percent said they would like to see more low-calorie alternatives available, especially cakes and pies, cookies, and ice cream. When asked about fat substitutes, 57 percent of the total sample and 69 percent of low-calorie consumers expressed a need for new fat substitutes.

But will people pay more for low-fat items? According to scanner checkout data, reduced-calorie liquid salad dressings sold in foodstores average about 10 cents more per pound than regular salad dressings. How manufacturers will price products containing new fat substitutes is unclear, in part because the costs of producing the substitutes will not be precisely known until they are made on a commercial scale.

Dr. Norman Sonntag, a fats and oils industry analyst, classified the cost of existing and proposed fat substitutes by assessing their raw material and processing costs (excluding expenses for research and development). He placed the existing starch-based substitutes, N-OIL and Maltrin M040, in the low-cost group at $1 per pound or less. The undigestible fats, olestra and ARCO Chemical's EPG, were in the average group projected to cost $1.01 to $2 per pound. He placed Simplesse in the third group with estimated production costs of $2.01 to $3. (The NutraSweet Company expects production costs to equal $1 to $2 per pound.) In comparison, refined soybean oil sells at between 20 and 35 cents per pound and milk fat costs about $1.35.

Whether companies developing the new substitutes and obtaining FDA approval will use them only in their own products or sell them as ingredients to other manufacturers is also a factor influencing marketability. A food company that develops a fat substitute may wish to restrict its use to its own brands. On the other hand, an ingredient manufacturer will likely make its substitute available to any food processor willing to purchase it. This approach expands the potential market for a fat substitute from one brand's share to the entire market for that low-fat food.

Issues and Concerns

The likelihood of a plethora of reduced-fat products raises several nutritional and food safety concerns. Many nutritionists are wary of fat substitutes. They have been trying for years to get Americans to substitute nutrient-rich fruits, vegetables, and grain products for high-fat foods. Their message has been to eat raw carrot sticks, not low-fat potato chips. Once the new low-fat products are on the market, people might eat more of these foods, instead of consuming healthful, nutrient-dense items.

Nutritionists also fear that fatty foods could follow the same consumption pattern shown by sweeteners during the last decade. Despite the growing array of foods and beverages containing artificial sweeteners, annual consumption of sugar and corn syrups rose from 125 to 131 pounds per capita between 1977 and 1987.

In addition to a fat substitute's nutritional implications, its toxicological safety is a major concern. Demonstrating the safety of a new food ingredient and securing FDA approval will have a significant impact on the length of the time required to commercially develop a new fat substitute. Consumers' perceptions of safety are also important. Negative consumer reaction could jeopardize sales of new reduced-fat products and other items made by the company.

Labeling issues will also emerge. Many of the target foods for fat substitutes, such as margarine, mayonnaise, and ice cream, are covered by FDA-enforced standards of identity. Standards of identity specify what ingredients and quantities these products must contain to be called by their traditional names. For example, a frozen dairy product containing less than 10 percent milk fat cannot be called ice cream. Margarine must have at least 80 percent fat to be labeled "margarine." Products containing less fat would need to be called by another name.

The National Renderers Association has raised objections to some of the undigestible fat substitutes. Renderers buy scrap bones and fat trimmings from slaughterhouses and supermarkets and collect the deep fat frying grease discarded by foodservice establishments. These byproducts are used in animal feeds and pet foods. According to a 1989 SRI International study, renderers collect 2.3 to 2.4 billion pounds of waste grease yearly from the U.S. foodservice industry.

The renderers believe that if the throwaway grease has fewer calories and less nutritional value, farmers and pet food manufacturers would pay a lower price or no longer buy the recycled grease. This could make it uneconomical for renderers to pick up the waste grease and could lead to a serious disposal problem.

Another set of issues would involve the intercommodity effects of fat substitutes. A growing market for fat substitutes would increase the demand for the ingredients used in their manufacture and displace demand for traditional fats and oils. Compounds, such as olestra, made from traditional vegetable oils would have a smaller economic impact on the oils industry than those made from other ingredients.

Vegetable oil-based substitutes would also raise demand for other ingredients used to make the substitutes. In the case of olestra, this would be sugar. If such a fat substitute caused demand for fat-containing foods to increase substantially, sales of vegetable oils would rise.

On the other hand, if a protein-based substitute, such as Simplesse, is used in oil-based products, demand for traditional vegetable oils would fall and demand for the ingredients used to make the substitute would grow. For example, if Simplesse were used in retail low-calorie salad dressings, it would displace about 9.5 million pounds of vegetable oil. If 10 percent of regular salad dressings, which contain more than five times as much oil, also switched to Simplesse, another 17.6 million pounds of vegetable oil would be displaced.

Simplesse uses either whey protein or egg whites as raw ingredients. In the above example, about 9 million pounds of milk or egg protein would be used in place of the 27.1 million pounds of oil. The source of the protein would depend on price and availability. In 1989, more than 200 million pounds of whey protein were an unused byproduct of cheese manufacturing, so the 9 million pounds of whey protein needed could come from this source and the dairy industry would not need to produce additional milk.

The egg market is a different situation. Demand for egg whites is very strong. The price of frozen liquid egg whites doubled during 1989. To produce 9 million additional pounds of egg whites, annual production would have to increase by 2.3 percent from the 1989 level of 390 million pounds.

Simplesse's use in ice cream would not affect the vegetable oil market but would displace milkfat. For example, if Simplesse were used in 25 percent of U.S. ice cream, about 123 million pounds of milkfat would be displaced by 40 million pounds of milk or egg protein, adding to the current surplus of milkfat.

The potential for fat substitutes is promising. Health professionals continue to advise consumers to reduce their fat consumption, and food manufacturers perceive a growing and lucrative market for fat substitutes. Consumers are likely to support research and development efforts because they want to follow the health guidelines without changing their eating habits. [Tabular Data 1 to 3 Omitted]

PHOTO : Milk and egg proteins are used in some fat substitutes.

PHOTO : The Food and Drug Administration recently approved the use of Simplesse in frozen dairy

PHOTO : desserts.

Rosanna Mentzer Morrison is an economist with the Food Marketing and Consumption Economics Branch, Commodity Economics Division.

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