As global markets shift toward science-led, high-margin nutrition, New Zealand risks missing a significant opportunity in functional foods, reflecting a sector that has been slow to move beyond its traditional commodity mindset, writes Mark Devlin, director of Impact PR and NZ Manufacturer business advisor.

New Zealand is sitting on a high-value food innovation opportunity that it continues to under develop, as global food markets move away from commodity nutrition and toward targeted, function-driven products.

Much of the sector still exports raw ingredients, while higher-value product development, branding and margin are captured offshore.

Reports out of the US suggest that up to one-third of people may have low levels of a specific dairy-derived fatty acid should be viewed in that context – as an example of a potential opportunity for New Zealand manufacturers looking to take advantage of a broader shift in how food is understood, valued and commercialised.

The compound in question, C15:0 or pentadecanoic acid, is naturally present in dairy fat and certain fish and was historically overlooked in favour of broad classifications of dietary fat.

Current research is examining how individual fatty acids behave in the body, with studies linking higher circulating levels of odd-chain fatty acids to improved metabolic outcomes and lower risk of conditions such as type 2 diabetes and cardiovascular disease.

At the centre of that shift is Dr Stephanie Venn-Watson, a veterinary epidemiologist who previously served with the World Health Organization and the US Navy and has spent much of her career advancing understanding of this nutrient.

Her research, including long-term analysis of ageing dolphin populations, identified C15:0 as one of the strongest markers associated with healthier metabolic profiles, lower inflammation and reduced metabolic dysfunction.

Those findings are directly relevant in New Zealand, where dairy consumption is shifting at the same time as rates of metabolic disease continue to rise.

Milk intake has declined to around 89 litres per person per year, while reduced-fat products and plant-based alternatives continue to gain share.

At the same time, rates of obesity remain high and diabetes continues to rise, creating a clear disconnect between evolving dietary habits and underlying health outcomes.

For decades, New Zealand’s manufacturing model has focused on producing at scale and exporting efficiently, particularly in dairy. That approach has built a globally competitive sector, but it has also meant that a significant share of downstream value, including formulation, intellectual property and branded health positioning, is captured offshore.

Recent moves to sell some of the country’s largest consumer dairy brands to offshore owners risk reinforcing this.

As those brands move further away from local control, the ability to vertically integrate, test and scale new value-added products based on emerging science becomes more limited, reducing the number of pathways through which innovation can move from research into market.

Food is now being assessed at a different level of precision, shifting attention away from broad categories such as protein, fat or carbohydrate and toward individual compounds with specific biological roles and measurable effects on metabolic function, inflammation and cellular health.

The whey story demonstrates how value is created when that shift is acted on early.

Once treated as a low-value by-product of cheese production, whey now underpins a global industry spanning sports nutrition, clinical supplementation and specialised food manufacturing.

What changed was the ability to isolate its functional components and build products around defined physiological benefits.

Almost 30 years ago, I was running a manufacturing and distribution business selling protein products as a health food. At the time, it was a niche dietary supplement.

Today, high-protein products are a standard feature across a large proportion of added-value food products on FMCG shelves. The shift from niche to mainstream took decades, but it created a category that now delivers substantial export value for New Zealand.

The same pattern is emerging again, with growing scientific understanding of specific compounds beginning to translate into early-stage commercial activity.

The science behind compounds such as C15:0 has advanced significantly, with research identifying roles in metabolic regulation, inflammation and cellular health, alongside early-stage commercialisation.

C15:0 is already being sold as a purified supplement. Whether it becomes part of broader food systems remains uncertain and will depend on testing, validation and commercial viability.

This is where New Zealand manufacturers have a clear opportunity to move earlier and capture value that is currently being realised offshore.

New Zealand food producers need to identify and assess nutritional breakthroughs far earlier, rather than waiting for them to mature offshore before deciding how they might be applied.

The issue is not simply whether compounds like C15:0 can be incorporated into functional foods, but whether local manufacturers are positioned early enough to explore, validate and commercialise those opportunities where they stack up.

The opportunity lies in understanding how specific components can be isolated, concentrated and applied in ways that align with emerging health needs and consumer demand.

This also requires recognising the limits of the current science. Increasing dairy fat intake may raise C15:0 levels and support aspects of vascular function, while also increasing other fatty acids linked to higher blood pressure.

The value sits in selectively applying what is beneficial, not in promoting broad consumption.

International investment in functional ingredients and nutraceutical pipelines is increasing, particularly across Europe, the United States and parts of Asia, where food, health and ageing are increasingly treated as part of the same system.

New Zealand has comparable raw material advantages, particularly in dairy, but has been slower to translate those into high-value, science-led products.

Functional food development sits at the intersection of food science, clinical research, regulatory compliance and advanced manufacturing, requiring coordination that extends well beyond traditional production models.

There has been a persistent tendency to treat innovation as incremental, focusing on product variation rather than repositioning within the value chain, an approach that is becoming increasingly difficult to sustain in a market where differentiation is driven by scientific validation and measurable outcomes.

Continuing to export bulk ingredients will remain viable, but it will not capture the full value available. Capturing that value requires engaging earlier, where science, validation and product development intersect.

As healthcare systems come under increasing pressure, interest in preventative approaches that improve population health outcomes and reduce long-term costs continues to grow, with functional foods sitting squarely within that shift.

New Zealand has built a reputation for producing high-quality, trusted food products. The next step is to apply that credibility to more advanced, science-led products that capture greater value from what is already being produced.

The remaining question is whether New Zealand manufacturing is prepared to engage earlier in that cycle, or continue operating within a model that delivers volume while leaving a significant portion of value on the table.