In what may be remembered as a defining moment in the development of functional foods in the U.S., Kraft Foods says products with high nutrition and functionality will play a key role in its turnabout strategy. Also, the dairy case appears to be ground zero for Kraft’s foray into functional foods.

Late last month, on the heels of reporting a 30% quarterly plunge in earnings, Chairman and Chief Executive Irene Rosenfeld said healthier foods will allow Kraft to differentiate its product lines, raise prices and boost profit-margins.

“We believe we can realize bigger margins by adding value,” Rosenfeld said, in the first report since Kraft’s March spinoff from Altria.

Some products are already testing the waters. A new version of Crystal Light contains antioxidants, and, as reported in our April Cultured Product Trends feature, the Breakstone’s and Knudsen cottage cheese lines are now labeled “for digestive health” and new formulas include inulin.

A probiotic Kraft cheese is also in the works.