In the paper an overview is given about the market situation of Functional Food in Europe. The global market of Functional Food is estimated up to 33 billion US$, the respective market estimations for Europe exceed 2 billion US$, representing less than 1% of the European food market. Functional dairy products are the key product sector accounting for sales of around 1.35 billion US$ in 1999 in Europe. Mostly multinational food companies as well as international suppliers profit from the market growth of Functional Food. A limited number of small and medium-sized companies is active in market niches or offer "me-too" products. Specific efforts in nutritional research, product development and marketing are necessary to realise long-lasting market success of Functional Food products. Therefore the market is characterised by a high rate of product failures. General success factors for the marketing of food (like tasty products, convenience, variety) play a crucial role in Functional Food as well. (C) 2002 Elsevier Science Ltd. All rights reserved.