10 Key Trends in Food, Nutrition & Health 2016 · 10 Key Trends in Food, Nutrition & Health 2016 2 ... Strategies 1+2= dairy from far away that’s also unashamedly indulgent 38

10 Key Trends in Food, Nutrition & Health 2016

by Julian Mellentin

Published by

NOVEMBER/DECEMBER 2015 ISSN 1464-3308

VOLUME 21 NUMBER 2/3

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Contents

l

10 Key Trends 2015 1

10 Key Trends in Food, Nutrition & Health 2016 2

Key Trend 1: Beverages redefi ned – new opportunities lie in the fl ourishing world of healthy niches 10

Key Trend 2: Snackifi cation – from cheese to bugs, there are no limits 19

Key Trend 3: Dairy 2.0 – reborn as a natural whole food and ripe for reinvention 33

Key Trend 4: Redefi ning sweetness 43

Key Trend 5: The fragmentation of the consumers’ mind 52

Key Trend 6: Naturally functional – three high-growth ingredients powered by the King of Trends 58

Key Trend 7: Plant-based foods and beverages 71

Key Trend 8: E-commerce powers the growing direct-to-consumer trend 82

Key Trend 9: Protein up and away in America as the rest of the world looks on 91

Key Trend 10: Free-from – spotlight shifting from gluten to dairy 100

Charts

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Chart 1: How the Key Trends infl uence each other 7Chart 2: The Trend Diamond – What does it mean? 8Chart 3: Where the trends sit in the life cycle 9Chart 4: Trend Diamond, Key Trend 1, Beverages redefi ned 18Chart 5: Product life-cycle, Key Trend 1, Beverages redefined 18Chart 6: Frequency of snacking has increased in the US 21Chart 7: Incidence of snacking in different demographic segments – snacks per day 22Chart 8: The meaning of snacking and meals is changing 22Chart 9: Snack frequency per day comparison in several countries 23Chart 10: Snacking in Spain is a group thing 24Chart 11: Premium-pricing no barrier to snack bar success 25Chart 12: Trend Diamond, Key Trend 2, Snackifi cation 32Chart 13: Product life-cycle, Key Trend 2, Snackifi cation 32Chart 14: Per capita cheese consumption (kg) 37Chart 15: Trend Diamond, Key Trend 3, Dairy 2.0 42Chart 16: Product life-cycle, Key Trend 3, Dairy 2.0 42Chart 17: Fat vs sugar content per 100g 45Chart 18: Trend Diamond, Key Trend 4, Redefi ning sweetness 51Chart 19: Seaweed overlaps with many trends 61Chart 20: Snack products launches with seaweed, Europe and US, 2005-2015(YTD) 62Chart 21: Seaweed products pricing vs other snacks - USA 63Chart 22: Coconut commands premium prices 64Chart 23: The number of snack products launched with coconut as an ingredient is growing 65Chart 24: An increasing number of new dairy products feature coconut as an ingredient 65Chart 25: Coconut benefi ts from overlapping with a number of trends 66Chart 26: Beanitos, a typical fast-growth start-up 67Chart 27: Beans benefi t from overlapping with a number of trends 68Chart 28: The number of new snack products featuring beans as an ingredient is on the increase 68Chart 29: Trend Diamond, Key Trend 6, Naturally functional, powering the rise of coconut 69Chart 30: Trend Diamond, Key Trend 6, Naturally functional, powering the rise of Seaweed 69Chart 31:Trend Diamond, Key Trend 6, Naturally functional, powering the rise of beans 70Chart 32: Product life-cycle, Key Trend 6, Naturally functional 70Chart 33: Non-dairy alternatives enjoying massive growth (2013-2014) 73Chart 34: Percentage of population who claim to be “vegetarian” & “vegan” 74Chart 35: Vegetarianism and veganism in the US 75Chart 36: Sales of meat alternatives in $M 78Chart 37: Plant-based foods are already a large part of our diets 79Chart 38:Trend Diamond, Key Trend 7, Plant-based foods & beverages 81Chart 39: Product life-cycle, Key Trend 7, Plant-based foods & beverages 81Chart 40: Product life-cycle, Key Trend 8, Direct-to-consumers 90Chart 41: Trend Diamond, Key Trend 9, Protein 99Chart 42: Product life-cycle, Key Trend 9, Protein 99Chart 43: Food products launched with “gluten-free” claims 102Chart 44: Food products launched with “dairy-free” claims 104Chart 45: Trend Diamond, Key Trend 10, Free-from 106Chart 46: Product life-cycle, Key Trend 10, Free-from 106

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Boxes

Box 1: Clean label is a “must do” but it is not a growth trend 3Box 2: Energy drinks still sharp 12Box 3: Coca-Cola’s Innocent goes coco 16Box 4: Social media drives evolution of beverage market 17Box 5: When economies improve, snack purchases go up 28Box 6: What’s next in snacking – beans 28Box 7: What’s next in snacking – seaweed 29Box 8: What’s next in snacking – insects 29Box 9: What’s next in snacking – dairy and grain/nut/seed combinations 30Box 10: What’s next in snacking – cheese 30Box 11: Strategies 1+2= dairy from far away that’s also unashamedly indulgent 38Box 12: Taking back milk’s taste advantage 39Box 13: As dairy fat concerns recede, the spotlight falls on sugar 40Box 14: Play in plant milks – they’re not going away 41Box 15: The re-birth of dairy fat 41Box 16: Will sugar taxes mean another nail in the coffi n of low fat yoghurts? 45Box 17: Mexico’s successful sugar taxes are straw in the wind for sugar 47Box 18: The science on sugar and infl ammation 49Box 19: Trop 50 stagnation a sign that stevia’s best days may be behind it? 50Box 20: World cuisine in the gastronomic heart of France 54Box 21: Fragmentation that started in 2003 has become a defi ning force 55Box 22: Consumers are full of contradictions! 57Box 23: “Healthy high caloric” foods – because naturally healthy beats calories 60Box 24: Beanitos: a bean snack with high growth at a premium price 67Box 25: Vegetarian “lifestyle” created awareness about plant-based foods 74Box 26: “Flexitarians” are a strong driver of the plant-based food trend 75Box 27: Marketing increasingly pushes plant protein for athletes 76Box 28: The slow-moving meat alternative market in the US 78Box 29: Plant-based foods are the oldest and biggest trend 79Box 30: Silicon Valley fi nanciers will drive “plant-tech” 80Box 31: Home delivery grows up 84Box 32: Responding to the distribution challenges of fresh dairy 85Box 33: Nestle investment in alternative channels 86Box 34: Home-delivery services in China 87Box 35: Home delivery is nothing new 88Box 36: Danone investment in home delivery – “Programa saber viver” in Brazil 88Box 37: Snacking and protein strategy from chocolate giant 93Box 38: Protein in Brazil 96Box 39: Protein in Indonesia 97Box 40: Plant focus a steadily building challenge to dairy 98Box 41: Lactose free is a growth opportunity 103

6 www.new-nutrition.com© New Nutrition Business 2015

Companies and brands in this Report

Regions in this Report

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ActiviaAlmond Board of CaliforniaAlmond BreezeAlproAmazonAnnie’s HomegrownAquafi naArla LactofreeAtkins NutritionalsAu Bon PainBatavoBeanitosBelvita BreakfastBenlaiBevmarkBeyond MeatBlue ApronBlue DiamondBlue HillBrooksideCadent ConsultingCampbell SoupChaat Co.ChapulCheeriosChia PodsChipotleChirpsChobaniChulaichuwangCoca-ColaCoke PepsiDanioDanoneDasaniDiet CokeDiet PepsiEmmiEmmi Caff e LatteEvianFairlife

FortiniGeneral MillsGlaceau FruitwaterGrazeHampton CreekHealthFocus InternationalHersheyHint WaterIlumiImpossible FoodsInnocentItsuJamba JuiceJD.comKindKraft FoodsKraveL-MenLove BeetsLunchables UploadedMarsMattsaMcDonaldsMelkuatMindful SnacksMinute MaidMondelezMunk PackMy MuesliN.A!Nairns Gluten FreeNakedNature BoxNature ValleyNestléNestlé LifeNoosaNudie SnacksNutridrinkOdwallaPeak Yoghurt

PeijnenburgPepsiCoPepsi NextPlentiPlum BabyPoland SpringPom WonderfulProtein O2PwCQuaker OatsQuornRed BullRingtons TeaSargento FoodsSevaSibberiSilkSobhaSouvenaidSparkling IceSpecial KStarbuck’sSuja JuiceTalking RainThe Collective Tmall.com.cnTrop 50TropicanaTwiningsVegaVita CocoVolvicWalmartWhite Moustache CoWhite WaveWhole FoodsYakult HonshaYoplait

NORTH AMERICA

SOUTH AMERICA

ASIA

EUROPE

AUSTRALIA AND NEW ZEALAND


10 Key Trends 2016

BEVERAGESREDEFINED

THE GREAT FRAGMENTATION



10 Key Trends 2016


Every year we aim to entertain and inform our customers with the New Nutrition Business annual analysis of the Key Trends in the business of food, nutrition and health. It’s what we have become best-known for.

Since 1995 we have identifi ed, ranked and forecast the most important trends, using a methodology that takes into account information of many types – from science to social media, from consumer surveys to supermarket data – and from a wide range of sources. We draw on not only research but our own experience, gained from advising a range of food, beverage and ingredient companies of all sizes.

We produce the 10 Key Trends as an antidote to the lightweight trend lists that companies are bombarded with. Most of these trend lists change signifi cantly from year to year, with new subjects appearing one year and disappearing the next. This is not the case with our list.

We focus only on those trends that will be long-term growth drivers for your business. Our long-term focus enables companies to formulate their plans, innovation and strategy around our trends analysis. And that’s why 10 Key Trends is used by companies all over the world, from Brazil to the USA, from Spain to Japan, and ranging in size from two-person start-ups to global giants.

Many people use the Powerpoint version of this report in presentations to colleagues, customers and suppliers. And companies often ask us to present in more depth (in person or online) on specifi c aspects of the Trends that are most relevant to them.

So what is a Key Trend?

A Key Trend is a genuine growth opportunity. It’s a set of changes in consumer beliefs and behaviours, leading to a change in a market. It’s something on which a company can base its strategy to increase sales of existing products or create new products, to boost market share and profi tability. There are many things that are trends – they are changes in consumer behaviour and beliefs that consumers expect you to follow. But for many trends consumers will not reward you with higher sales or increased prices. In other words, they are not growth trends.

One very good example of a trend that is important but will not generate business growth for most companies – and therefore has no place

on our trends list – is clean label. For about 15 years, companies have again and again considered removing artifi cial ingredients such as colours and fl avours from their products. But on the whole they held back – simply because natural versions add cost and they weren’t sure they could get that cost back.

Today companies have no choice but to respond to the consumer desire for natural ingredients and reformulate – but they need to be clear that there is no evidence that such a change will deliver higher prices or higher sales (despite what you might read on the internet). Most companies have found that going clean label has zero eff ect on their business and a few (as Box 1 explains) have found that their sales actually declined, because consumers prioritise price, convenience and many other factors over clean label.

Real Key Trends both create opportunities and challenge the basis of existing business, forcing signifi cant change. In many cases – as has happened in the beverage industry and among some dairy companies (see Key Trends 1, 3 and 7) – the senior management of existing companies are very reluctant to accept the changes that are happening and adapt their business models. This reluctance usually translates into opportunities for new entrants, who are more willing to do what the established players will not. It is unsurprising that small brands and premium brands are eating up a growing share of dairy, beverage and snack markets – as much as 25% in some cases, putting big brands into stagnation or retreat.

A Key Trend is also something that is going to stick around and have a strong infl uence for the next fi ve years (or longer) – because no one can aff ord to connect their new product development plans and strategy to something that might be gone two years from now.

There are three big evolutions in consumer behaviour that underly most of the trends:

1. Food explorers. Once upon a time, long ago, people found a brand or product they liked, made it their favourite and stuck with it loyally for many years. But today, not only the much sought-after Millenials but all age groups embrace variety and like to try new products. In most countries in most major cities people every day choose between eating Thai, Italian, Japanese or any one of about


BOX 1: CLEAN LABEL IS A “MUST DO” BUT IT IS NOT A GROWTH TREND

In 2013 Nestle was the fi rst chocolate confectionery brand in the UK to go 100% clean label.

Sales of Nestle’s leading brands fell. Sales of non-clean label Mars and Mondelez brands increased.

“75% of people look for products without artifi cial additives when buying confectionery.”

“Consumers are demanding, ‘Bring me more simplicity, simple ingredient lists.’”

“Consumers are telling all manufacturers that they want to recognize all of the ingredients in their food and that what they are consuming is made with the fewest ingredients possible.”

For consumers, “clean label” is an aspiration – but pleasure, taste, price and convenience all come fi rst.

Lunchables Uploaded, the most successful new US brand of 2014 with $143 million in sales, has 60 ingredients.


30 other cuisines. They are open to new tastes and textures and experiences and that makes them open to new healthier products of all kinds.

2. Technology. A host of websites, apps and social media platforms enable consumers to do their own research about food and health. With this steadily increasing knowledge people feel more confi dent to create personalised healthy eating patterns and dietary choices and conduct their own personal eating experiments to fi nd what works for them.

3. Loss of trust in expert health advice. Frequent changes in dietary advice have created consumer scepticism about the “expert opinions” of dietitians and nutrition researchers, just at the moment when technology has made it easier for people to fi nd the answers for themselves.

These three forces in turn power a consistent theme of our trends this year, which is summarised in: The Great Fragmentation (Key Trend 5).

According to consultants PwC, the fragmentation of markets has become the defi ning force of food and beverage strategy: “In both developed and emerging markets, there is a wider variety among consumers now than at any time in the recent past….individual consumer behaviour is more pluralistic.”

In parallel there has been a massive fragmentation of consumer beliefs about health, which in turn is producing a massive fragmentation of markets and a proliferation of new healthier niches (from plant waters to seaweed snacks) which small companies are perfectly placed to serve.

The proliferation of healthy brands is itself feeding consumers’ interest in new brands, tastes, textures and new types of foods and so giving birth to even more niches.

The divergence of consumers’ beliefs about health and the resulting proliferation of new niche brands fi nely targeted at this diversity of beliefs is driving the reinvention of categories.

In the beverage aisle, for example (see Key Trend 1), the upsurge in the number of small premium/healthy/challenger brands is eroding the market shares of the big brands. It wasn’t very long ago that it would have been unimaginable that Coca-Cola and Pepsi’s fl agship brands would have been losing market share to start-ups marketing products as diverse as fruit-fl avoured waters and coconut water, but that is exactly what is happening.

Again and again in our trends analysis it has become clear that the future lies with small brands, a few of whom will grow to become big brands. Companies have been fi nding it harder

to create high-volume mass brands for almost 15 years. They have become the exception. Big companies will have to learn to shepherd portfolios of small brands in the hope that some may become big successes. A very few companies have grasped this new reality – notably General Mills, which recently set up a business unit solely to do this.

The trend towards fragmentation can be seen in the dairy aisle (Key Trend 3), where new innovative dairy products are carving out niches – as are a growing number of non-dairy plant milks (Key Trend 7).

Even the direct-to-consumer trend (Key Trend 8) contributes to fragmentation by making it possible for small brands and new brands to by-pass supermarkets – the traditional stronghold of big brands, where shelf space is at a premium – and reach consumers. This is an early-stage but fast-evolving trend which more and more brands are connecting to.

For several years we have given the No 1 slot in our report to Naturally Functional – the King of Trends. Naturally Functional has long been the biggest trend because what consumers want more than anything else is beverages, foods and food ingredients that they perceive provide an all-natural and intrinsic health benefi t. And journalists love to write about such foods, thus reinforcing consumer interest. This has made Naturally Functional the trend that drives every other trend – it is the real locomotive of the food and health revolution. Anyone who doubts the power of Naturally Functional as a strategy – both for ingredient suppliers and for brand owners – should bear in mind that it delivered 220% sales growth for Blue Diamond almonds – from $266 million to $858 million – in just six years. And while Blue Diamond is the biggest success, it is not the only one.

This year, just to give our readers a change of scene, we deliberately moved Naturally Functional down the list and focused not on the over-arching trend but how it is powering the emergence of three high-growth ingredients – seaweed, coconut and beans.

Seaweed and beans are taking a small but growing role in snacking. Coconut, however, is more developed and arguably a more adaptable ingredient and it is showing up in:

Key Trend 1: Beverages redefi ned (through coconut water)

Key Trend 2: Snackifi cation (in new and emerging snack products)

Key Trend 3: Dairy 2.0 (as a good-tasting, health halo ingredient)


Key Trend 4: Redefi ning sweetness (with coconut water increasingly marketed by juice companies by itself, or in combination with juice as a way to market products with lower sugar content and calorifi c value).

Key Trend 7: Plant-based foods (in non-dairy milk category sales of coconut milk are growing fast).

Connecting to key trends is the recipe for success

As the above list (and Chart 3) shows, trends do not exist in isolation. They all overlap – some more than others. The most powerful trends are the ones with the most overlaps. As you can see, coconut has real power to become an important ingredient because it overlaps with so many trends.

The same is true for brands and ingredients – increasingly you fi nd that the biggest successes are among those that make connections to a number of trends.

Key Trends and ingredient suppliers

For ingredient suppliers the world is a tough place. Unless you have some unbeatable price or some indispensable advantage – such as a unique fl avour – ingredient companies live their lives at the mercy of their brand-owning customers, and in particular their customers’ marketing teams.

It is not ingredient suppliers who create markets and brands, but your customers, and this means that they drive your volume forecasts. No matter how much you invest in technical competence, clinical studies, new applications, development facilities or production know-how, whether your ingredient is successful depends entirely on whether brand marketers can get people in a supermarket to buy the products that include it.

Traditionally, ingredient companies left this entirely up to their customers’ marketing teams – often with frustrating results.

Today, if you work in an ingredient company you need to be as knowledgeable about the fi nal consumer as your customers are.

You need to know which Key Trends your ingredient connects to – or could connect to – because how well-connected your ingredient is to the Trends will dictate your strategy. Understanding the Key Trends will also help you to create the applications and marketing messages that will enable your customers’ brands to use your ingredient to connect their own brands to the trends.

If your ingredient does not connect to the Key Trends, don’t despair. There are many secondary trends. Among these smaller trends you will fi nd some niche you can connect to. Ingredients can achieve high prices in these niches – but you will need to be realistic about the sales volumes you will achieve.

If you’d like to discuss any of the trends in more depth or have us present to your colleagues the detail that we cannot show in a publication like this – to help you reduce your risk and create a more robust business plan – then get in touch. We can present in person, or by Skype or video.

We wish you every success

Julian Mellentin


HOW DO WE CHOOSE THE TRENDS?

It’s our job to constantly monitor a mass of qualitative and quantitative data. We then group the data under various broad headings. These headings summarise the elements that matter for food and health strategy. Under these headings we evaluate and rank what the information is telling us.

To understand this look at the Trend Diamond in Chart 1. The Trend Diamond covers the broad headings such as Consumer Need and Sales Trends. It also provides a fl avour of the questions that must be asked of the qualitative and quantitative data under each heading.

To help us evaluate a trend:

• We assign a score for each of the criteria, between 0 and 5, where zero tells us that “little is in place to support the trend” and 5 that “everything is in place to support the trend”.

. • In theory, the higher a trend scores on all the criteria, the stronger it should be.

• Zero scores are marked at the centre of the diamond, 5 at the outer edge. In other words, the lower the score assigned to a heading, the closer to the centre of the diamond it is marked – meaning that (in theory) the fullest diamond would indicate the strongest trend.

Looking at the key trends in this report you will see that they tend to score 3 or above on Consumer Needs, Sales Trends, Ingredients & Technology, Regulation and Marketing Strategies – even if they get a low score in other areas.

Interestingly, even where the regulatory framework is not supportive of the trend, that is often no barrier to success. Other factors can drive growth and create a durable trend, such as powerful consumer needs (as in the case of energy and energy drinks) and smart marketing strategies that can work with or get around, whatever restrictions are in place.

A NUANCED GLOBAL VIEW

We are uniquely fortunate that our presence in many countries (we are a small company, but we have a foot in many places) coupled with our global contacts within the industry enables us to look at the Key Trends from a global perspective.

There are also some trends beyond the top-10 that are region-specifi c and that we do not include in the PDF version of this Trend report. In Asia and in Brazil, for example, there is a strong trend for beauty beverages and supplements – products that help with skincare. This trend almost doesn’t exist in Europe and the US (at present) so we have addressed the Asian Beauty Trend in a special supplementary trend analysis that will appear only in the Powerpoint version of this report.

This supplementary material will be available in Powerpoint to Enhanced and Premium license-holders of New Nutrition Business, or by buying the Powerpoint version on our website.


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CHART 3: HOW THE KEY TRENDS INFLUENCE EACH OTHER

Trends don’t exist in isolation. The chart shows how each key trend overlaps with others – in some cases, with all the other trends. The most powerful trends are the ones with the most overlaps.

KEY TREND 1: BEVERAGES REDEFINED

KEY TREND 2: SNACKIFICATION

OVERLAPS WITH ALL TRENDS!

KEY TREND 3: DAIRY 2.0


KEY TREND 5: REDEFINING SWEETNESS

KEY TREND 5: FRAGMENTATION


KEY TREND 6: NATURALLY FUNCTIONAL

KEY TREND 7: PLANT-BASED FOODS

KEY TREND 8: DIRECT-TO-CONSUMER

KEY TREND 9: PROTEIN

KEY TREND 10: FREE-FROM




BEVERAGESREDEFINED

BEVERAGESREDEFINED



BEVERAGESREDEFINED


BEVERAGESREDEFINED

BEVERAGESREDEFINED


BEVERAGESREDEFINED

1


10 Key Trends 2016 Beverages Redefi ned

SUMMARY• Sea change in beverages: Soft drink brands like PepsiCo and Coca-Cola have long been the defining brands of

the beverage market but they have reached the high water mark and the tide is now going out on their businesses. They are being replaced with a host of brands with a variety of health benefits, from fruit waters to plant waters. A few of these thousands of start-ups will succeed, but 90% will fail, usually because of poor taste performance and/or inability to secure distribution (because partnership with a big company is still necessary in many countries to get access to distribution).

• The future is niche: As we’ve said for every trend, beverage companies will increasingly find themselves managing a portfolio of niche brands, catering for a range of tastes and preferences, some niche, some bigger.

• Sugar suspicions: Increasing consumer concerns about sugar, coupled with a turning away from non-calorific sweeteners of all kinds, mean that even diet versions of traditional brands are collapsing.

• Fruit beverages in decline: Fruit juice is also suffering from consumer concerns about sugar and despite the surfacing of new premium niches such as HPP, fruit juice is in long-term decline. Leading children’s brands such as Heinz have removed juice and replaced it with flavoured water and a whole generation is growing up without the fruit juice habit – their changed tastes will transform the beverage category in ways negative for carbonated soft drinks and fruit juice and positive for all other lower-sugar types such as plant waters.

• Weird now, but watch this space: Anything that industry perceives as too weird or too niche tends to succeed success (as with energy drinks such as Red Bull). The naturally-sweet, naturally low-calorie nature of plant waters means that even juice giants Pom and Innocent are launching coconut waters or coconut water-and-juice-blends.

Beverages redefi ned – new opportunities lie in the fl ourishing world of healthy niches

Key Trend 1:

Beverage aisles are undergoing a massive redefi nition around the world, leaving many companies unsure about the new rules of a game in which the biggest loser seems to be the long-time giants of the category, carbonated soft drinks and even fruit juices. Meanwhile smaller, healthier brands and start-ups are prospering, creating new categories, targeting niches and stealing ground from their bigger rivals.

“We’re going through a transitional period in the beverage category, and indecision is the key trend,” said Tom Pirko, president of Bevmark, and one of the beverage industry’s leading consultants worldwide. “We’re not in a fog, but we really don’t know with any certainty what the rules are.

“Back in the old days of [domination by] Coke and Pepsi, things were clear, right or wrong – they were black and white,” he added. “Now we’re in a transitional phase that is redefi ning and reshaping the industry, and companies themselves don’t know what’s going to happen. They’re placing bets, but they lack confi dence in terms of knowing how to read consumers, what products to launch, how to deal with sugar and so on.”

This redefi nition of beverages is being driven by:• the diff erent tastes of the Millennial generation• sugar’s shift to centre stage as the new dietary

demon (a role once performed by fat) and increasing consumer concerns about sugar in drinks

• continued attention from nutrition researchers to the potential harms of sweetened drinks

• the rise of “sugar taxes” on beverages, following their apparent success in Mexico (see Key Trend 4: Redefi ning sweetness)

• people having second thoughts about the healthfulness of juices (particularly noticeable in the case of parents choosing for their children)

• the rise of “simple” naturally healthy nutrition as exemplifi ed by everything from plant waters to spring waters to green teas

• the proliferation of new products and new brands, presenting people with ever more healthy choices (and not-so-healthy choices), contributing to the fragmentation of the market


Carbonated soft drinks in decline

The change that’s taking place in the beverage aisle is a global trend and the United States is a huge part of the transition. It is a market that refl ects how the beverage aisle tumult is playing out in most of the rest of the world. In many ways the US foreshadows the changes that are just gaining momentum in many countries that until now thought themselves immune. Despite the scale of the changes and their global nature, there are still many companies whose management has yet to accept the reality of what is happening.

In 2014, US total sales volume of “liquid refreshment beverages” was up only 1.7% over 2013, according to Beverage Digest. And that was an improvement from 2013, when overall “LRB” volume in the US was down by 1.6% compared with 2012.

What’s more, the magazine said, volume of traditional carbonated soft drinks (CSDs) – excluding energy drinks – fell by 1.2% in 2014, continuing a string of annual declines that went back several years.

To show the magnitude of the change – the maturing of the market, the sharp declines and the fragmentation that’s taking place – even if you include the successful, high-growth energy drinks category:

• sales volume was about 8.8 billion cases, comprising a loss of about 1.4 billion cases since the industry’s peak volume year, 2004

• per capita consumption of soft drinks by Americans in 2014 was the lowest since 1986

Such results translated into continuing disaster

for the beverage industry’s biggest megabrands:• sales volume for Coca-Cola was down by 2.4%

in the US in 2014, according to Beverage Digest • the Pepsi megabrand declined by an additional

2.9% in 2014 following a decline of 5.9% in 2013

Sugar is the demon but sweeteners are not the saviour

Consumer concerns about sugar and calories in CSDs date back to the 1980s, and industry’s response was the fi rst “diet” variants, based on non-calorifi c sweeteners like aspartame and acesulfame K.

Once an engine of growth, these diet brands have become a drag. The plunge in diet-soda consumption happened rather suddenly. In 2014 sales of Diet Coke fell by 6.6% compared with a year earlier, while Diet Pepsi sales fell by 5.2%, compared with just a 1.8% decline in sales of regular Pepsi.

At fi rst, industry executives did not comprehend the reasons for the decline, because it was aff ecting drinks they believed were “healthiest” – lacking sugar and calories. But American consumers weren’t crediting Diet Coke and Diet Pepsi for those attributes because they were fl avoured with aspartame, an artifi cial sweetener, not a “natural” one. This pressure came despite the fact that every credible medical source said there was no reason for health concerns about aspartame.

Finally, in 2015, PepsiCo CEO Indra Nooyi agreed to change the sweetening formula altogether for the fl agging Diet Pepsi franchise, ditching aspartame in favor of sucralose. By October, Nooyi told investors that it was “way too early” to get a handle on how well consumers were handling the formula change. “Our belief is you’ve got to wait a few cycles to see what the purchase-repeat-adoption cycle is,” Nooyi said.

Over the last few years, CSD executives have tried to counter the drop in diet-soda sales by introducing “mid-calorie” beverages such as Coke Zero and Pepsi Next that reduce calories only to some extent, by relying on sweeteners such as sucralose and stevia. But they haven’t caught on sales-wise.

“They’ve all experimented with a mid-calorie construct, and it hasn’t worked that well,” said


BOX 2: ENERGY DRINKS STILL SHARP

Energy drinks continue to boom, with US sales by the leading brand, Monster rising by 7% in 2014, and sales by Red Bull, now No. 2 in the category, increasing by 5.6%. In the UK also energy drinks continue to grow – the UK’s £1.1 billion market is up 3.1% in value terms.

In part it is because the young male core consumers are at a stage in life where they are less concerned about sugar. And it is also a reminder that if you deliver people a benefi t they can feel – with energy drinks that’s a shot of immediate, caffeine-fueled stimulation – they prioritise that benefi t over other aspects of the product, even negatives such as sugar.


David Stone, a managing partner in the beverage practice of New England Consulting Group and former chief marketing offi cer of PepsiCo.

Some experts believe the giants may yet come up with a non-sugar, natural sweetener, but the challenge is winning over skeptical consumers – many of whom have decided that they might be better off choosing products with “natural cane sugar” or water or coconut water.

PepsiCo’s Nooyi herself recently threw cold water on that prospect. “I don’t see a zero-calorie, naturally-sweetened CSD on the horizon in the next few years,” she told investors.

Juice sales to plateau or decline?

In some markets sales of juices and smoothies have been falling as the “sugar is evil” message gains ground in the media. Could it be that as alternatives multiply juice and smoothies are going to follow colas and other carbonates onto the path of a long slow decline?

In the US sales of fruit beverages have declined fi ve years in a row. In 2014 sales fell by 3%. Orange juice – once the mainstay of the market – experienced a 21% decline between 2010 and 2014. Coca-Cola’s once-mighty Minute Maid juice brand experienced a 27% fall in sales, to $980 million (€901 million).

In the UK market sales have also been hit hard: • In 2014 the value of the category fell by 3.5%

with volume down 6.5%• Market leader Pepsi-owned Tropicana

experienced a 6.8% drop in sales• Innocent, the second-biggest player and part

of Coca-Cola, experienced an 11.2% fall in sales

It isn’t diffi cult to fi nd what people – especially younger people – are drinking instead:

• Sales of bottled water rose by 11.2% by value and 8.9% by volume. Danone’s market-leading Volvic and Evian brands experienced 12% and

15% sales increases, respectively• Sales of coconut water – which is low-calorie

and mostly sold with no added sugar – jumped, with Vita Coco, the biggest brand, experiencing an 88% sales increase, to £50 million (€46 million)

Juice and smoothie brands have long depended on having a strong “naturally healthy” image. But their core consumers include the most health-conscious people and they are also the fi rst ones to have taken onboard the anti-sugar message. The vitamins, antioxidants and fi bre found in many (but not all) juices stopped being a source of competitive advantage some time ago – and today these benefi ts are increasingly overshadowed in the consumer’s mind.

Younger consumers – the Millennials – are driving the switch to healthier beverages. And the next generation after the Millennials – currently aged under 18 – will further accelerate the switch away from juice, since a larger proportion of them have grown up without any juice habit, a result of health-conscious parents (often concerned primarily about dental health) limiting their children’s juice consumption, starting about 2000. There is an astonishing number of children today who don’t consume juice even once a week. The evidence is that the kids who are now 15 year olds who began life with the no-juice habit are sticking with it. The outlook for juice is not bright.

The juice industry has also learnt that experimenting with added functionality almost always fails – partly because adding omega-3 fi sh oils, plant sterols to lower cholesterol or glucosamine for joint health adds cost, ruins taste and is wholly contrary to the natural image of juice.

Some companies are going down the road of fruit and vegetable juice combinations, but to get over the diffi cult vegetable tastes many products taste like fruit and often have a very high content of apple juice. Even those that taste good sell on a niche basis.



Some companies are pinning their hopes on high-pressure processing (HPP), which is believed to retain more nutrients and give better fl avour. However HPP has some disadvantages. “HPP is interesting, but the economics aren’t so great,” said leading beverage consultant Tom Pirko, who’s been working with at least one client on the possibility of launching a cold-pressed line. “For one thing, you need to use a huge amount of produce to get what you need. And the process doesn’t create as much shelf life as Naked or Odwalla has. Plus, some companies using HPP have been sued in a class action claiming that their juices aren’t any better than other juices.”

Pirko also argued that “most consumers don’t know what HPP is and frankly don’t care”.

Heather MacNeil, marketing director of the most successful HPP-made brand, Suja, appears to agree. Suja essentially founded the high-priced cold-pressed juice market in the US and grew into a $100-million (€89 million) company that already has attracted the purchase of a 16% equity stake by Coca-Cola. Suja was recognized earlier this year by Forbes magazine as the No. 2 “Most Promising Company” in America.

“I don’t think consumers have a deep understanding of the benefi ts of cold pressing,” she said. “They don’t understand the science. It has a halo, but people just think they know what it is.” In fact, MacNeil revealed, the No. 1 attribute of Suja that attracts consumers these days “is that it’s organic, more than that it’s cold-pressed”.

The strongest trend in the future direction of juice will be for it to become a lot more like water – and in particular fruit-fl avoured waters which have a very low juice content and are naturally low calorie seem to be gaining traction.

Water: an unstoppable fl ow

Bottled still waters and various forms of “sparkling” waters have come to rank as the brightest performers in the beverage industry. The strongest-performing beverage brand in the US last year was Nestle Life, whose sales volume of bottled waters rose by 8.9%. The No. 2 and No. 3 brands in percentage sales increases also were bottled water brands: Dasani with an 8.2% gain

and Poland Spring, up 7.9%.But, Stone noted, “the issue for the water guys is

still downward pressure on pricing, and it’s tougher and tougher to diff erentiate”. Instead, he said, “We think the greater opportunity today is sparkling waters, because there’s a better opportunity to diff erentiate there on a brand level, and you can get some premium pricing. Regular-water pricing continues to decline.”

Sparkling-water successes start with the industry pioneer and leader, Sparkling Ice, which includes a spray of fruit juice and is sweetened with sucralose along with the bubbles and water. Talking Rain, the company behind Sparkling Ice, was founded back in 1987 and built its business steadily and over several years. But then the consumer trends shifted in its favour and Talking Rain found that its pioneering, zero-calorie fl avoured sparkling-water brand, Sparkling Ice, was perfectly aligned with the new consumer preference and sales soared from just $25 million (€18.6 million) in 2010 to about $500 million (€372 million) by 2013.

The company, based in the state of Washington in the north-west US, has had the ultimate compliment of fl at-footed industry giants belatedly launching me-too fl avoured sparkling waters. Coca-Cola has launched Glaceau Fruitwater in bottles and Dasani Sparkling Water. And Nestle Pure Life has just introduced Exotics Sparkling Waters.



“Sparkling beverages play a role that ‘still’ beverages do not in refreshment,” said Gary Stibel, chairman of New England Consulting Group. “So we see sparkling water as a huge opportunity far bigger than Sparkling Ice alone.”

Another example, at the opposite end of the scale, is the Hint brand, which markets a fruit-fl avoured water, using e-commerce and B2C to bypass the giants’ domination of the beverage aisle (see Key Trend 8: Direct-to-consumer).

Will plant waters one day rival fruit juice?

You can guarantee that when someone in the food and beverage industry describes a new product type as “too weird” or “too niche” and unlikely to succeed then it is certain to become a massive hit. The best example by far is energy drinks, which in the 1990s most big retailers refused to stock, thereby missing out on the fi rst 10 years of one of the most successful beverage markets ever.

What’s burgeoning today are sales of coconut water, which keep growing at a strong-double-digit rate and long ago surpassed $1 billion; startup plant water brands in maple, birch and bamboo are adding to the category. Birch brands in particular seem to be enjoying fast growth – and are also getting the “too weird” treatment.

Coconut water brands such as Vita Coco have demonstrated how an all-natural plant water startup can rise from

practically nothing to a huge success. Bridging two positions – as a hydration alternative to traditional sports drinks, and as a refreshing, naturally low-sugar alternative – coconut-water sales continue to grow by double-digit volumes even as competition has eroded pricing in the category.

“It probably erodes the CSD market more than any other,” said George Young, chairman of Kalypso, a consumer goods consulting fi rm. “Somebody who’s drinking Aquafi na water may just be happy continuing to drink Aquafi na, or some other bottled water. But somebody who’s trying to manage their diet and wants to make some changes will say they’re going to try coconut water because it’s good for you and tastes better than water.”

Coconut water brands already have experimented with new ways to use their basic ingredient, combining it with fruit juices and with coff ee. Harris believes these brands have enough resources to develop more “improvisations” to extend consumption in other product forms.

“They’ve already sort of picked off the people who like the fl avour, so you’ll see them throwing it into the centrifuge to see what else they can make with coconut water,” he predicted. “Maybe something that has some of the properties of coconut water but isn’t as viscous, the next iteration – maybe making it lighter, like a true [gulpable] sports beverage made out of coconut water.”

There has also been a proliferation of new challengers to coconut water in what is broadly known as the plant-water category – including waters tapped from maple, birch and bamboo trees. Birch is possibly the biggest contender for the number two place after coconut, while maple water is number three. Maple and birch waters won’t erode the coconut water market, but they will expand the plant water market.

Plant waters have a lot going for them:


In its fi rst six months on the UK market the Sibberi birch water brand achieved sales of $400,000/€368,000 in just 300 stores, helping it secure national listings in supermarkets and e-tailers. The e-tailer Ocado sold out of the product within days and placed a second order with Sibberi that was 20 times bigger than the fi rst order.



• Taste: It may be polarizing but those who do like it, like it a lot and 80%-90% of coconut water consumed is plain and unfl avoured.

• Refreshment: The main reason anyone drinks anything.

• Variety: Plant waters enable people to widen their repertoire of what they drink and make their refreshment stops more interesting.

• Low in sugar: Plant waters off er the benefi t of 60% less sugar than juice. “Naturally sweet while also naturally low in sugar” is what consumers want most. It’s a benefi t they can understand and which they know they need. As plant waters become more common people concerned about the sugar content of juice will choose them more and more. It’s one of those rare moments when what’s on the horizon is very clear.

• Cool factor: The most health-conscious 30% of people like to discover things that are new and diff erent and affi rm their self-identity as people who like to experiment and be at the cutting edge of healthy consumption. There’s no kudos in juice.

Maple water and coconut water have been criticised because while both have some naturally functional advantages neither scores very highly as a “powerful nutritional cocktail” (a term used by one consultant). But plant waters do not need to be a “powerful nutritional cocktail” – any more

than any other type of water does. People choose drinks for refreshment.

Premium pricing will keep plant waters relatively niche – but it’s a big and profi table niche with good natural and sustainability credentials and often low sugar.

“There’s a lot of interest in and exploration of that category,” said Duane Stanford, editor of Beverage Digest. “And it’ll play out over a longer period of time, because more people want cleaner labels and simpler ingredients. So there’s no reason to think businesses won’t fl ourish, and there will be new entrants into the market.”

What does it all mean for strategy?

Risk in beverages is higher than ever and change is rapid. The days of billion dollar – or even $100 million – beverage brands may be over. As is happening in many other categories, beverage companies will fi nd themselves curating a large portfolio of brands – some their own creations, some acquired small brands, and some small

BOX 3: COCA-COLA’S INNOCENT GOES COCO

“The smartest thing a smoothie company could do might be to sell coconut water,” is what New Nutrition Business has been telling anyone willing to listen (see April 2015 NNB). To which we should add – “or maple water, birch water or any naturally low-sugar plant water”.

So it’s no surprise to us that in 2015 Coca-Cola-owned Innocent, Europe’s biggest smoothie brand, launched its fi rst line of coconut water (as well as a line of sparkling water blended with fruit juice).

Innocent coconut water has just 8.5g of sugars per 250 ml serve – compared to 27.3g per serve in its mango and passionfruit smoothie (one of the company’s three top-sellers).

Innocent could have chosen another type of plant water, such as birch or maple. Maple water is also naturally sweet and naturally low in sugar (maple water has just 4g of sugars per 250ml serve) and is even lower in sugar than coconut water (and maple water has by all accounts a better taste than coconut water despite its lower sugars).

Pom Wonderful, the brand that has had huge success with pomegranate juice, has also felt the need to launch a coconut juice (blended with pomegranate juice in three tropical fl avours).

Smoothie market leaders’ latest launch? A plant water.



BOX 4: SOCIAL MEDIA DRIVES EVOLUTION OF THE BEVERAGE MARKET

A continued steady decline in consumption is foreseen in the United States and elsewhere despite every effort by big companies to turn the trend line back upward. Their efforts have included increasingly creative marketing and promotions, experimenting with sweeteners at a furious pace, new package sizes that emphasize smaller servings, and even backhanded acknowledgement that their products may contribute to obesity and overall malnutrition.

The giants’ inability to check this trend clearly results from the increasing conviction of the average consumer that drinking what Tom Pirko at Bevmark called “sugar water” contributes greatly to overweight, obesity, caries and other negative health conditions and adds nothing positive beyond refreshment, taste and, to a limited degree, hydration.

Digital communication and social media are playing a big part in supporting the change. Far from being a great marketing channel, social media hasn’t benefi ted beverage makers, whose products are largely seen by Generation Y as harmful.

“Before,” Pirko said, “companies had the upper hand and ran ads and would guide consumers who were basically reactive. Now, that control has moved away from these companies who behaved relatively poorly in communicating with consumers. Now there is a worldwide system of communications that helps consumers make their own decisions based on all the information in that grid and on communicating with each other. If it weren’t for social media, do you think that Diet Pepsi and Diet Coke would have had such massive problems with aspartame?”

brands in which they have an investment stake but no control.

They will be competing in a fragmented market, with short product life-cycles, with some brands coming and going within three-to-fi ve years at most (as has already been common in Japan for 20 years).

The shorter life-cycles refl ect how beverages are increasingly about fashion – fl avours and ingredients come in and out of favour as much as clothes do. Pomegranate brands such as Pom Wonderful for example, came to market in 2001

on a surge of consumer enthusiasm – which died away, leaving Pom operating as a big niche brand whose sales growth stopped long ago.

This more fragmented world means, greater complexity, but also greater opportunity, as shown by plant waters like Vita Coco and premium juices like Suja. The sales of these beverage brands individually will often be too low to cross the threshold for the defi nition of “success” that’s been used for the last 50 years. But shareholders and senior management will just have to get used to that.



CHART 4: TREND DIAMOND, KEY TREND 1, BEVERAGES REDEFINED

CHART 5: PRODUCT LIFE-CYCLE, KEY TREND 1, BEVERAGES REDEFINED

TECHNOLOGY CONSUMERS

LIFESTYLECONSUMERS

MASS-MARKETCONSUMERS

Solid line = sales volumes

Broken line = unit selling price

10% of consumers 30% of consumers 60% of consumers

SALES

TIME



10 Key Trends 2016 Snackifi cation

Key Trend 2:

SUMMARYFive insights will help you to succeed in snacking:

1. Target the right consumers: Begun by targeting young adults (aged 18-30). In most countries they are the heaviest consumers of snacks.

2. Be open to the many new product opportunities: Fragmentation of markets and a variety of consumer preferences means opportunities abound. Consumers are very willing to buy new and innovative healthy snacks.

3. Reinvent “old” snacks: Snacking companies are shaking up old categories and markets – such as the reinvention of meat snacks as a premium, tasty and healthy product.

4. Give consumers permission to indulge: Giving people permission to enjoy an indulgent snack is one of the most effective marketing strategies. This is usually best achieved by:a) using ingredients with a positive “naturally healthy” halo (such as nuts, fruit, good grainsb) in addition, using chocolate

5. Make your snack premium: In healthy snacking premiumisation is normal – the degree of premium that convenient snacks can command is impressive, even in price-sensitive markets.

Snackifi cation – from cheese to bugs, there are no limitsKey Trend 2:

Snacking has become a way of life in many countries, the result of a major shift in consumer behavior.

The size and speed of this shift varies by country and culture, but the biggest change has been in the English-speaking countries – and nowhere more so than the US, which has experienced a 180-degree turnaround in consumer snacking behavior over the last 35 years.

For Americans, snacking was something done occasionally – now it’s part of everyday life. As Chart 1 shows, using data from the US Department of Agriculture:

• back in 1978 41% of Americans did not snack at all

• by 2010 (the most recent year for which reliable data is available) 56% of Americans were snacking three or more times each day

The UK is close behind the US, as Chart 4 shows. It also has the least-healthy snacking habits with 40% of people, according to Nielsen, snacking mostly on potato chips, cookies, cake or chocolate. Snacking on fruit or vegetables or yoghurt is much less common (compared to Spain, for example).

In France, on the other hand, the social

convention that it is unhealthy to eat between meals, that snacking might “ruin your appetite” (as grandmothers in many countries used to warn children back in the 1970s), still holds good. France has one of the lowest per capita consumption of snacks in Europe (and if a snack is taken, it’s most often towards the end of the afternoon). Vending machines in offi ces, common in the US, are rare in France (although starting to appear in more places). It is common to fi nd offi ce buildings where no snacks are on sale anywhere. However, even in France behavior is changing, with 8% of consumers admitting to secret snacking, according to Nielsen.

If you are launching a new snack product, your best chance of success is to start in a country with an established snacking habit. If you are selling in a country with less of a habit, set your targets low.

What’s driving snacking?

Although the amount of snacking varies between countries, the forces of change are the same. The drivers are the now-established consumer beliefs that:


CHART 6: FREQUENCY OF SNACKING HAS INCREASED IN THE US

Over the last decade here has been a 44% increase in people having at least 3 snacks per day.

It’s fairly normal to eat cake for breakfast in Holland, where on average, a household buys a Peijnenburg breakfast cake 11 times per year. Peijnenburg makes low- and zero-sugar varieties and on-the-go variants are popular.

Belvita biscuits have snackifi ed breakfast so successfully that sales of sweet cookies have displaced breakfast cereals, with Belvita’s US sales so far this year reaching $260 million.

0

5

10

15

20

25

30

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40

4541%

32%

16%

7%5%

10%

25% 26%

21%18%

8%

16%

20%

32%

24%

0 snacks 1 snacks 2 snacks 3 snacks 4 snacks

1978

2008

2010

continued on page 23

1. Any and every category is a potential source of snacks.

As a study by Nielsen pointed out in 2014, in the mind of the consumer, anything can be considered a snack – chocolate, chips, yoghurt, fruit, dairy desserts, cheese, cookies, nuts, instant noodles and many, many others. Jon Sebastiani, founder of the successful Krave meat snacking brand, explained:

“Our competition is not only other jerky manufacturers. Any snack item is competing for ‘share of stomach’.”

2. Any time of day can be a snack occasion and the boundaries between meals and snacks are disappearing.

Consumers consider any time of day a snack occasion. Snacking is no longer about consuming between meals, it is becoming meals – meals for

one, meals consumed on-the-go, meals that your grandmother would not recognize as a real meal but today’s consumer does.

Today anything can be consumed at a time that would traditionally have been regarded as a mealtime with a distinct identity – breakfast, lunch or dinner.

Nowhere is this more evident than at breakfast, where Mondelez Belvita breakfast biscuits brand transformed sweet cookies into an acceptable indulgent-but-healthy breakfast, even in countries that had no tradition of eating sweet cookies for breakfast, and in so doing dented sales of traditional breakfast cereals. And the Netherlands has a breakfast cake habit, consuming 100 million a year (on average, a Dutch household buys a Peijnenburg breakfast cake 11 times per year).



Kids Young Adults Young Families

Adults - no kids

Established Families

Seniors

Regular snacking habits are strongly dictated by school schedules.

Lives characterized by less structured routines and eating habits means higher incidence of ad hoc snacking.

Consistent daily habits and established eating patterns with lower incidence of snacking amongst older cohorts.

CHART 7: INCIDENCE OF SNACKING IN DIFFERENT DEMOGRAPHIC SEGMENTS – SNACKS PER DAY

CHART 8: THE MEANING OF SNACKING AND MEALS IS CHANGING

This daily diet will provide at least 500kcal from snack products alone!


Healthy plus indulgent is the standard for snacks

While it’s true that “health” is not the primary selling point of snacks – which are primarily about “energy”, “fi lling you up” and “pleasure” – people welcome indulgence that has enough of a health halo that they can feel no guilt. This very strong “permission to buy” factor is becoming more and more important in marketing snack brands. There’s no need for a snack to be overtly healthy – just healthy enough for people to feel able to buy your snack and enjoy it without guilt.

“Permission to indulge” can be delivered in a number of diff erent ways, using a combination of these tried and proven angles:

1. A product that’s free-from artifi cial preservatives or additives or other ingredients that the consumer considers “bad”.

2. Using an ingredient with a very strong “naturally functional” health halo, such as blueberries or almonds, oats or any one of a number of other ingredients whose popularity is on the increase, from seaweed to beans.

3. Controlled portion size, so that calories are 200, 150 or 100.

4. A “no added sugar” message, which appears to be the most resonant with the increasing number of consumers who want to better manage their sugar consumption.

Many niches means no limits on innovation

The future of snacking is a wealth of niches. This is a fast-emerging key characteristic of the snacking market, partly driven by fragmentation of consumer beliefs about food and health.

Consumers are not waiting for nutrigenomics to identify their personal nutrition needs. They are already using their mobile devices to access information that enables them to make very personal decisions about what is best for their health, as an individual.

The best example is the rise of gluten-free. Perhaps 25% of people follow diets that are “reduced-gluten” – and not fully gluten-free – and


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1.9

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1.6

1.4

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US

UK

Poland

Spain

Netherlands

Portugal

France

Number of snacks

5

CHART 9: SNACK FREQUENCY PER DAY COMPARISON IN SEVERAL COUNTRIES

Source: USDA, Bordbia, Fruyo

A 100g pack and mini-sized beets transforms this under-rated root vegetable into an interesting new snack idea.

continued from page 21



CHART 10: SNACKING IN SPAIN IS A GROUP THING

In Spain, snacking is strongly associated with social interactions and pleasure moments with others – only a minority (20-30%) of consumers admit to snacking alone. Snacking doesn’t happen everyday, but when it does, it’s with other people and often at home. Thirty-fi ve percent of all snacks are bought in big supermarkets and only 25% in convenience stores.

82% 70% 73%

54 44 43

29 26 2918 30 27

Eats it alone

Eats it with family

Eats it with friends, partners, co-workers...

Crisps Dried fruits Other snacks

this group has transformed lots of categories. Often they are self-diagnosed after googling “digestive health problems”.

The future of snacking looks like being one of many niche brands with a few making it to mass. But even these mass brands will rarely attain the level of sales that the big brands achieved back in the 1990s. Many senior managements will have to abandon their beliefs that they could or should create big brands and accept that their job is to create portfolios of small brands.

The more-educated, higher-income lifestyle consumers (and particularly young adults) are willing to try the new. Increasingly, consumers actively prefer to “discover”, new, interesting brands for themselves. This is particularly true of the most health-active consumers, who are also the most willing to pay a premium. They are the starting point for taking innovations to market.

Buying a new type of snack is a low-risk purchase. That’s because most snacks are sold at a low price per unit, as little as $1-$2 for single-serve packs. So if someone buys a product and its taste or texture disappoints, they don’t lose much from the experiment.

That low-risk and low-cost equation makes people more willing to be experimental with their snack choices – and that in turn drives their willingness to try new and exotic ingredients, new formats and new brands. This in turn makes it easier for new brands to come to market which further drives fragmentation.

A wealth of innovations in ingredients and processing are having a massive impact on new product development. Consumers are increasingly presented with snack

product formats and ingredients that would have been unimaginable fi ve years ago. There are no limits on formats and ingredients. Almost any material that can be dried, extruded, frozen, shaped, poured, pureed, or whatever, to deliver a good-tasting, healthy snack should be considered by product developers.

Just to make the challenge more complicated, consumer research is no longer able to tell companies in advance exactly what they should be delivering – the emphasis now is on creating innovative propositions beyond consumers’ imaginations and then building consumer demand for them.

The unexpected surge of meat snacking refl ects how much opportunity there is to innovate in unexpected ways, to reinvent categories, to use new ingredients and product types and create new brands.

Premiumisation is essential

There is a very good reason why you should focus on how to create a premium for a healthy snack, which is simply that healthy snacking is a series of niches. Most products sell on a low volume basis to the 20%-35% of the population who are the most health-active and who are willing and able to pay a premium for a healthier product.

Healthier products often have no choice but to sell at a premium in order to cover the cost of their ingredients – natural colours, fl avours and other ingredients often add signifi cant cost to a fi nished product.

You also have to earn a higher margin to fund the marketing eff ort that is needed to educate consumers about a new product and to convert consumers into loyal buyers of your brand.

A number of snack chip brands achieve


premiums of up to 100% and Chart 6 shows the signifi cant premiums earned by bar brands. Kind is a valuable case study. A more-than 100% price premium over “regular” products has been no barrier to the brand’s success and it has been able to sustain that price point even as it edges into the early mass market.

In healthy snacking premiumisation is normal and brands that connect to the important trends seem to have little diffi culty commanding a signifi cant price premium while also growing sales.

Begin in alternative channels

Trying to push into the overcrowded snack aisles of mass supermarkets too soon can be a recipe for failure, with new brands given just 8-12 weeks to create to create signifi cant sales.

In many countries there are all kinds of alternative distribution channels that are better adapted to low volume start-up products than traditional supermarkets. Health food stores, e-commerce-driven home delivery, convenience stores (vital for reaching younger consumers) and others.

Kind, possibly one of the world’s most successful snacking start-ups, spent its fi rst seven years selling only in natural product stores like Whole Foods,

before expanding to mass supermarkets and convenience stores. A very visible part of Kind’s strategy is looking for impulse sales by targeting locations where it may be the only bar on sale – from café-cars on trains, corporate canteens, sports stadia, juice bars like Jamba Juice and upscale cafes such as Au Bon Pain.

The number of units sold in each outlet will be small – and that is one reason why most mainstream marketers ignore such distribution opportunities, leaving the fi eld open to the


CHART 11: PREMIUM-PRICING NO BARRIER TO SNACK BAR SUCCESS

0

10

20

30

40

50

60

70

$ per kg

Epic Bison BaconCranberry Bar

($3.00/43g bar)

ThinkThin Lean Protein Bar($1.99/40g bar)

KIND Bars Fruit & Nuts

($1.49/40g bar)

KIND Bars Peanut Butter+Dark

Choc. +Protein($1.38/40g bar)

KIND Bars Oats Honey

($1.09/35g bar)

Special K (Kellogg) Protein

Meal Bars($0.99/45g bar)

Kashi (Kellogg) Fruit & Grain

($0.50/32g bar)

Fibre One (General Mills)

Oats & Chocolate($0.50/40g bar)

Nature Valley(General Mills) Oats & Honey

($0.25/21g bar)

€65.94 ($69.77)

€47.17 ($49.75)

€35.32 ($37.25) €32.92

($34.72) €29.53 ($31.41)

€19.80 ($22.22) €14.82

($15.63) €11.85 ($12.50)

€11.29 ($11.90)

Mindful Snacks’ offi ce snack delivery service gives young, tech-based professionals products with the exact nutritional and health profi le they request, with personal service and fi ne-tuning of orders to best meet clients’ needs.



With other more obviously healthful brands in its portfolio, such as Krave meat jerky and Brrokside fruit-and-chocolate snacks, Hershey can relax about communicating the health benefi ts of chocolate.

competition – but collectively those sales add up to something worth having. At the same time, omni-presence in distribution is as eff ective as advertising at creating consumer awareness of the brand.

Snacking and strategy

It wasn’t too long ago that snacking was treated by most companies as a category in itself. Some companies competed in the sweet snacking segment (such as cookies or confectionery) and others competed in the savoury part (such as chips or nuts).

Those days are over. Snacking has long been on the agenda of most food and beverage companies, whatever category they are in, but since the beginning of 2014 it has come to the top of the agenda. It drives and defi nes corporate strategy in companies large and small around the world.

More and more businesses realize that they need to think diff erently about snacking – and be willing to go outside the silo of their familiar category. A good example of “new and improved” strategic thinking about snacking is Hershey, America’s biggest chocolate confectionery maker. In January 2015 it announced the acquisition of Krave, possibly the fastest-growing meat snack brand in the western world. On the surface, the purchase of a marketer of premium meat snacks by a chocolate giant looks odd, but it shows that Hershey

understands that it is in the snack business, not just the confectionery business.

“Krave Jerky is a great fi t to our portfolio and overall snacks and adjacencies strategy,” said Michele G. Buck, President, North America, The Hershey Company, in a media statement. “The Krave brand delivers on portable and protein nutrition while also understanding consumers’ food preferences, including the desire for simple ingredients and transparency, something that is also a part of Hershey’s strategic vision.”

Hershey’s recent purchase of the Brookside fruit-nut-and-chocolate snack brand backs up this strategy: yes, it’s a chocolate snack, but it’s dark chocolate and real fruit, with no artifi cial fl avours – which leaves Hershey’s standard chocolate products free to be a “sweet treat”.

At General Mills, the snacks business has long been one of the most innovative and successful parts of the company, with the Nature Valley brand – to take just one example – growing 30% over the period 2010-2013 to become a $1.2 billion brand (€940 million) worldwide. And in 2015 General Mills followed its peers into the kids’ market, paying $820 million for the stand-out leader in healthier snacks for kids, Annie’s Homegrown (approximately 32 times the company’s 2014 profi ts). Despite the high purchase price, General Mills gets a leading position in the fast-growing, premium-priced organic kids’ snacks and meals market.



There are eight key consumer facts you need to understand if you want grow your business and make a success in snacking:

1. The consumer group that provides the biggest opportunity for new snack products is young adults (the age group approximately 18-30). They have the highest per capita consumption of snacks and in many countries they account for as much as 80% of snack purchases. The mostly urban and on-the-go lifestyle of this age group means that they have more opportunities to snack and their unstructured, time-rich lives (a sharp contrast to the time-poor lives of families with children) give them a greater need to fi ll up while on the move.

2. You will reach them through city centre stores and alternative channels. Don’t go to the big supermarket chains (at least not at fi rst), as your target consumer isn’t there. In major cities their on-the-go habits are already driving up sales of all types of products in convenience stores and city-centre supermarkets. For example in France city centre convenience store sales are up 9.6% and in the UK 13.4%.

3. Many of these consumers will pay a premium price. The age group 18-30 is less price-sensitive than is often claimed, as shown by the very high price premiums earned by snacks targeting this age group (see Chart 11).

4. They are open to innovation in ingredients and forms. Consumers aged 18-30 see themselves as adventurous food explorers. Give them something new and they will try it out.

5. Test your prototype only on your target age group, living in major urban centres. Do not make the mistake of testing on representative samples of the population at large. Such samples will include people who are not your target consumers. If 55-year-olds living in small towns don’t like the taste, that doesn’t matter just as long as your target consumer does.

6. A snack should be both healthy and indulgent. Snacking is about pleasure. Make sure that your product has ingredients that are “naturally healthy”. Consumers will see these ingredients as giving them “permission to indulge”.

7. Consumers respond best to brand messages that are simple and few in number.

8. It goes without saying that you should deliver excellent taste and texture.

CONSUMER INSIGHTS



BOX 6: WHAT’S NEXT IN SNACKING – BEANS

Beans have shed their back-to-the-earth hippy associations to become a very “now” ingredient that offers plant protein and fi bre benefi ts. Snack makers are serving up beans in convenient forms including hummus, chips (Beanitos) and exotically-fl avoured loose chickpeas (Chic-a-peas).

World of Peas peps up peas with world fl avours and fl attens fava beans (broad beans) to make crisps.

Can the bean be pushed further? In Egypt, chickpeas form the basis of a popular winter drink called hummus sham, while in Morocco they are used to make a thick soup.

Remember that weirdness and unfamiliarity is no barrier to success – hummus was pretty unknown in the US 10 years ago and now it’s a nearly $1 billion business.

REINVENTING THE CHICKPEA

Hummus Sham is a very popular drink/soup in Egypt during winter. It comes as a soup or as a drink that’s consumed with a straw or a spoon from a cup. It’s mostly bought from street stalls and eaten on-the-go.

Bissara (right) is a classic autumn soup that’s very popular in Morocco. It can be a starter or a meal in itself. Traditionally, Bissara is served with a generous drizzle of olive oil on top, and some red hot chili pepper, or with ground cumin or paprika.

BOX 5: WHEN ECONOMIES IMPROVE, SNACK PURCHASES GO UP

Never underestimate the infl uence of the health of the economy on how much money consumers spend on snacks – and what they spend it on.

In the US, as a result of the recent economic upturn, consumers are less price-conscious and more willing to spend money on new brands with new ingredients. As a result of the better economy, according to IRI:

• 10% of consumers admit they are paying less attention to price per serving

• 11% admit that they are snacking more frequently

• 8% said they are buying more indulgent snacks

In short, if you are selling snacks in a country, such as the US, where the economic outlook is looking brighter, you will fi nd a more receptive market for your products than in countries where the economic outlook is gloomy (such as France).


BOX 7: WHAT’S NEXT IN SNACKING – SEAWEED

Seaweed is a rare example of an opportunity to get in at Day One of a new growth market for snacks with sales of seaweed snacks already overtaking those of kale.

Long a favourite of health-conscious consumers on the food fringes, seaweed’s “naturally functional” advantages – it’s a low-calorie source of protein and fi bre, richer in trace minerals and vitamins than kale, and it ticks a number of free-from boxes – are winning it wider attention.

Launches of seaweed snack products are proliferating and sales outstrip those of kale, the trendy green vegetable that has benefi ted from a huge degree of hype since 2010 and has been embraced by young health-conscious urban consumers. In the US, retail sales of seaweed snacks were valued at over $250 million in 2014, a year when market growth was around 30%, and the last two years has seen a surge in launches of snack products with seaweed.

In response to this growing consumer interest, snack brands have started to include seaweed in existing products, such as seaweed-fl avoured rice chips, and there are also totally new brands that use a variety of seaweed types in inventive formats.

Seaweed is a naturally-healthy plant-based ingredient, with a range of natural nutritional advantages and impeccable sustainability credentials.

BOX 8: WHAT’S NEXT IN SNACKING – INSECTS

It’s easy to dismiss eating insects as a gimmick unlikely to take hold in western markets – although they are already an everyday food source for 2 billion people around the world. A sustainable source of protein, insects can easily be processed into a fl our for use in snacks.

Reactions from some people in industry have been “it will never happen” and “it’s too weird” or “too different”. These reactions are a sure guarantee that the idea will in fact become more accepted by consumers and become a successful, premium niche within the next 10 years.

In fact the commercialization of insects in snacks is already happening. Around 50-60 start-ups in the US and Europe are already making snacks and ingredients from bugs, presenting them in good-tasting, attractive and convenient ways, and targeting lifestyle consumers and in particular the prime target of young adults – the niche of people who kick off new trends and who aren’t particularly price-sensitive.

We thought there were about 10 western insect snack companies when we created a white paper on the subject (which can be downloaded free of charge at https://www.new-nutrition.com/ whitepaper/)Since its publication we have been contacted by 20 others (and 220 companies have downloaded the white paper).



BOX 9: WHAT’S NEXT IN SNACKING – DAIRY AND GRAIN/NUT/SEED COMBINATIONS

Long neglected by everyone but a few entrepreneurial companies, dairy-plus-grains are starting to take off as companies recognize that in terms of profi t margin, convenience and opportunity these blends are one of the better opportunities around.

Single-serve products that combine the “naturally healthy” virtues of dairy and grains are completely aligned with consumers’ needs for convenience, health (from “naturally healthy” ingredients) and indulgent tastes. They offer the possibility of a sustained energy marketing message, a more fi lling eating experience, and gluten-free options. The evidence is that though the combination may be completely unfamiliar to consumers, once they have experienced the tastes and textures and the satisfying nature of such snacks, they become committed buyers.

Last year Chobani, the world’s biggest Greek yoghurt maker and the company that gave birth to the Greek yoghurt revolution that has transformed the US, launched Chobani Oats, single-serve oats-plus-yoghurt cups. Chobani’s latest launch, Flips, combines yoghurt in a 150g container with a variety of ingredients, creating a range of 11 fl avours ranging from Coffee Break Bliss to Peachy Pistachio. Flips are billed as a crunchy snack “for when afternoon cravings hit”. Recognising a need for a more satisfying, heartier yogurt, General Mills launched Yoplait Plenti in 150g pots. Plenti mixes Greek yoghurt with natural ingredients such as oats, fl ax seeds, pumpkin seeds and fruit.

And taking convenience a step further are Munk Pack’s 120g squeezable pouches which can be consumed at room temperature or even cold – making them popular for outdoor activities such as hiking. Munk Packs blend oats with fruit purees and ancient or nutrient-dense grain and are free of artifi cial fl avours and added sugars. You don’t have to focus on oats – buckwheat, quinoa, chia and barley are already being used in some countries. And while the best dairy product to combine the grains with is one that’s higher in protein, this isn’t solely a dairy opportunity. Chia Pods focuses solely on single-serve on-the-go pots based on chia, but using dairy-free coconut milk (and also has a chia, coconut milk and oats combination).

Products like these are ideal for smaller city-centre stores, whose customers tend to be both more health-conscious and also in situations where they may have no choice but to fi nd a healthy on-the-go snack. They also work well in petrol stations, airport shops and lunch cafes.

Because the idea of a grain-plus-dairy snack is still relatively new, in-store sampling is key to creating success. It is a vital tool in reassuring people that something with which they are unfamiliar also tastes good.

Munk Packs contain 90 to 100 calories and 3 to 4 grams of fi bre per 120g serving, and sell at a suggested retail price of $2.49 (€2.23).

Whole grain oats, fl ax & pumpkin seeds promote a more satiating feeling



BOX 10: WHAT’S NEXT IN SNACKING – CHEESE

After 40 years of being demonized for its fat and salt content cheese stands at the threshold of a turnaround that will see it re-established as a natural and healthy wholefood. With new science reaching a tipping point, cheese could be the next naturally functional success story, with huge growth potential for cheese in general, and innovative new snack forms in particular.

Science has established that not only is cheese not harmful, with no link to cardiovascular disease or to elevated blood pressure, in fact it could be benefi cial thanks to its high protein and calcium content. New fi ndings show that:

• Sodium in cheese does not increase blood pressure• Cheese does not lead to weight gain and in fact may have the opposite effect

In addition, cheese has the following benefi ts:

Tooth friendly: As one of the least cavity-forming foods, and one that contains many benefi cial nutrients for teeth, cheese is recommended by both the British Dental Association and the Australian Dental Association.

Low in lactose: Cheese contains less than half the lactose of semi-skimmed milk and yoghurt.

Good nutritional profi le: Compared with semi-skimmed milk and yoghurt, Cheddar cheese has more than 3 times the protein, less than half the carbs, more than 3 times the calcium and the highest magnesium, zinc, vitamin A and vitamin B2 content. Cheese is also high in vitamin K2, which is known to have anti-infl ammatory effects and be protective against atherosclerosis and osteoporosis.

Offers taste and variety: Like dark chocolate or red wine, cheese is a better-for-you food that tastes good. Rising butter sales show that there are already consumers saying ‘I don’t need to worry about dairy fat’.

In addition there is huge potential for growth in cheese consumption in many countries. The US, for example, has half the per capita cheese consumption of France’s 26.3kg. Even a 5% per annum increase in cheese consumption in the US should be achievable – bearing in mind that almonds were achieving 30% growth (admittedly off a smaller base). Other countries with low cheese consumption are Australia, Canada, Brazil, Belgium, Denmark, Israel and Sweden.

With new snack formats and positive health messages, and the right marketing strategy, dairy companies can create a massive surge in demand for cheese.

SARGENTO TAKES CHEESE IN NEW SNACK DIRECTIONS

Sargento’s product range includes traditional cheeses, such as swiss, cheddar, havarti, parmesan, ricotta and others, in blocks, slides, shredded, strings and sticks. The company’s latest innovation is “Balanced Breaks”, which combines bites of natural cheese, nuts and sweet dried fruit. Each pack contains 7 grams of protein and between 170-190 calories. They are sold in convenient, individual-sized packages (42.5g).

“Today’s health-conscious consumers are looking for portable snacks that balance nutrition and great taste,” said Chris McCarthy, Director of Marketing for the Sargento Foods Consumer Products Division.



CHART 12: TREND DIAMOND, KEY TREND 2, SNACKIFICATION


CHART 13: PRODUCT LIFE-CYCLE, KEY TREND 2, SNACKIFICATION


LIFESTYLECONSUMERS





SALES



SUMMARY• The future for dairy is positive: There is enormous scope to reposition and reinvent traditional dairy foods. Just

don’t expect to have a huge mass-market success – so fragmented is the market becoming that a niche or “big niche” product is far more likely.

• Rethink on dairy fat opens up possibilities: As new science wipes away health concerns around dairy fat, many consumers – particularly younger people – are turning back to full fat and the better taste it offers. Products that offer good-tasting indulgence are more likely to succeed.

• Snackification: Savory yoghurt, dairy-plus-grains and in particular cheese have potential as any-time-of-day snack foods in single serve formats.

• Sugar suspicions could hasten move away from low-fat: The demonisation of sugar means that low-fat yoghurts, which are typically higher in sugar than full-fat yoghurts, will lose their health halo over the next 5 years and consumers will slowly switch to whole milk yoghurts with a lower sugar content.

Dairy 2.0 – reborn as a natural whole food and ripe for reinvention

Key Trend 3:

10 Key Trends 2016 Dairy 2.0

Despite competitive challenges from non-dairy products, the pressure of private label, and a small but growing segment of consumers who associate “free from dairy” with health, dairy – the original nutritional food category – has a positive future fi lled with opportunities.

From the mid-1990s dairy innovation focused on positioning dairy to compete with dietary supplements. Companies used science-based added ingredients such as omega-3s or glucosamine to off er medicalised benefi ts. Those days are over. Those products are either long gone or have settled into small niches.

Now and for the next fi ve years the opportunities for growth in dairy will primarily come from:

1. Dairy makeover: this is the strategy of reinventing traditional products with a new and modern twist, and/or taking traditional regional dairy products from one geography and launching them into new geographies where they are “new and exciting” but adapted to suit the tastes of the new markets. Huge scope exists to create new brands as well as to re-position and reinvent traditional dairy foods for new markets and new consumers.

2. Unashamed indulgence: this is all about taste and texture and pleasure

3. Snacking: legitimising spoonable dairy as an anytime healthy and pleasurable snack – not only as part of breakfast or as a healthy dessert.

These three elements of strategy are not mutually exclusive. Any dairy strategy can include all of them, and many new product opportunities combine two or even all three of them.

1. Reinventing traditional dairy and “bringing it to here from there”

Greek yoghurt is the most successful and high-profi le example of this strategy. A traditional and unexciting product in most of Europe, an entrepreneur took Greek yoghurt and presented it, back in 2007, as new and exciting to consumers in the US. Greek’s thick, satisfying texture was a revelation to Americans who had previously been accustomed to thin, overly-sweet yoghurts. It was this pleasurable eating experience coupled with the novelty factor – many people are food explorers now and look for new and interesting eating experiences – that helped make Greek into a market-transforming success.

Most dairy products will not become as big as Greek has in the US – its extreme success is due to some very specifi c circumstances and the fact that it was the fi rst product to transform the consumer’s eating experience. That type of transformation doesn’t come along very often.

But there are many opportunities to create new niches and even new categories, even in mature markets, by taking a traditional food and updating



it with a twist – what UK supermarket Waitrose calls “con-fusion foods”. These include lower profi le regional successes such as Icelandic skyr in Denmark and Germany, and Nordic quark in the UK.

One of the strongest long-term growth opportunities is in savoury yoghurt. Yoghurt has long been associated with savoury fl avours around the Mediterranean (a style of eating that has a uniformly positive and strongly healthy image with consumers) where you can fi nd it:

• served with meat (often with the addition of salt and crushed garlic)

• as an accompaniment to grilled aubergines• with cucumber (tzatziki in Greece)• as a side dish with pine seeds and olive oil

When savoury yoghurts fi rst appeared, back in the mid-1990s, most of industry rubbished the idea. But since then, Mediterranean food has taken off thanks to the attention of celebrity chefs, the media and scientifi c research.

Savoury yoghurt also off ers a neat way of getting around the sugar challenge. Although many yoghurt

products are only 10% sugar, that hasn’t stopped criticism from consumer groups and the media. In response many dairy companies have lowered sugar content by 30% – from 10g per 100g to 7g – while others have experimented with various non-caloric sweeteners.

The problems with these approaches are:• Sugar-reduced variants tend not to sell well

(some reduced sugar variants account or less than 5% of total brand sales)

• For most consumers artifi cial sweeteners are a no-go area – not to mention their higher cost and the taste problems they bring.

Savoury yogurt is a fresh approach to this conundrum. You can see the trend emerging fastest in New York City and the East Coast of the US – a global centre of “food explorers”.

• Blue Hill’s savoury yoghurt has 30% vegetable puree blended in so there are no pieces, in single pots as a snack or meal accompaniment, with fl avours ranging from parsnip to butternut squash

Chaat Co’s Indian-fl avoured snack yoghurts are topped with puffed lentils.

Who needs sugar? Sobha’s whole milk yoghurts are fl avoured with beets, spinach and chickpeas.


• Sohha yogurt, sold in NYC, uses whole milk in its plain savoury yogurt with toppings such as beets, chickpeas and spinach

• Chaat Co in NYC is launching Indian-infl uenced savoury yoghurt snacks topped with turmeric-spiced puff ed lentils in fl avours such as mango-chilli and tamarind-date

• The White Moustache company markets a range of dairy products, including savoury Persian yoghurt, and a Middle-Eastern yoghurt called labneh (a strained product somewhere between yoghurt and cheese, and fl avoured with Aleppo pepper and za’atar)

Reinventing yoghurt as a savoury snack is:1. A great way of keeping yoghurt fresh and

interesting2. A way of attracting people who, driven

by concerns about sugar and its eff ect on weight, are looking for savoury snack options (encouraging trial by sampling to reassure people about taste is key to growing this segment)

3. Enabling yoghurt to connect directly to the positive image of the Mediterranean diet (something that has already begun with Greek yoghurt) and Asian fl avours

For next fi ve years savoury yoghurt will be small niche but a growing one – it takes a while to familiarise consumers with a new type of consumption (although products such as labneh are already popular in cities like Paris, popularised from the 1970s onwards in the west following the fi rst wave of refugees from the Lebanon’s civil war, and there could be a fresh injection of interest as new refugees from Syria, Iraq and elsewhere bring a desire for products like these to major cities).

Savoury yoghurt has potential to be a big niche 10 years from now, and it would be wise to have a foot on the ground. If you are a dairy start-up savoury snack yoghurt is a growth opportunity. Even for bigger companies it’s a development they cannot

aff ord to ignore – an example of the huge scope that exists to create new brands as well as to re-position and reinvent traditional dairy foods for new markets and new consumers.

2. Making dairy unashamedly indulgent

The products that sell best are the ones that give consumers permission to indulge. Yoghurt has a naturally healthy image which makes it easy for consumers to choose a yoghurt product that is honestly about pleasure and taste and is making no eff ort to be low-sugar or low-fat.

A very good example of how successful honestly indulgent dairy can be is Collective Dairy, a brand marketed in New Zealand and the UK. Its label and its communications talk about its live cultures and present an image of yoghurt as healthy. Positioned as “gourmet yoghurt” – and with 16.6g of sugar and 4.4g of saturated fat per 100g (compared with 13.2g of sugar and 2.6g of fat for Danone’s Activia brand) – its “permission to indulge” enables it to get, despite a premium price 25% above leading brands like Activia, £20 million in sales within 3 years of launch.


As this image of Peak Yoghurt’s triple-fat product (18% fat) suggests, decades-long fears around dairy fat are fading away and consumers are seeking more indulgent dairy products.


Products made with full-fat milk have a signifi cant advantage because they deliver an indulgent and satisfying taste and mouthfeel. Americans are embracing full-fat yoghurts – or “yoghurt made with whole milk” as it’s usually described on labels – and companies are responding with more new product launches, such as Oh My Yog! from Danone-owned Stonyfi eld (the company says its full-fat yoghurt is “just getting back to what yoghurt truly is”).

3. Turning dairy into a snack option

Yoghurt for breakfast or for an after-dinner dessert is an established usage in many markets. But dairy is also a legitimate anytime snack for consumers or, in some countries, an accompaniment to a meal (savoury yoghurts, for example). The challenge is how to make yoghurt more successful as a snack, and a number of approaches are emerging:

• Teaming dairy with grains• Dairy and savoury fl avours (see above - this is

an embryonic area at the moment, possibly too embryonic for many companies, but to overlook it for that reason would be a mistake)

• Squeezie pouches• Snack cheese (this may be the biggest

opportunity of all of these)

Dairy plus grains. Combinations of dairy plus grains for a slow release energy breakfast/snacking product are an under-developed opportunity (see also Box 9).

Single-serve products that combine the “naturally healthy” virtues of dairy and grains are completely aligned with consumers’ needs for convenience, health (from “naturally healthy” ingredients) and indulgent tastes. They off er a more fi lling eating experience and gluten-free options and their taste and texture appeals to consumers, who often become committed buyers.

They also off er the possibility of a sustained energy marketing message. Worldwide, industry interest in claims focused on ‘slow-release’ or “sustained” energy have increased sharply driven by the global success of Mondelez’s Belvita Breakfast Biscuits brand. Oats, inulin and many other


2.2 3.7

12.2 13.7

14.2 15.1 15.3

16.2 16.7

17.4 19 19.4

21.8 21.8

22.5 23.4

24.2 24.2

26.3

0 5 10 15 20 25 30

Japan Brazil

Canada Australia

USA Belgium

Denmark Israel

Norway Sweden

Netherlands Switzerland

Italy Finland Greece Iceland

Luxembourg Germany

France

CHART 14: PER CAPITA CHEESE CONSUMPTION (KG)

The huge potential for cheese comes not only from the new science that’s revealing it to be a natural and healthy wholefood, but also from the relatively low cheese consumption in countries like the US, Australia,Canada and Sweden (compared with the 26.3kg per capita in France). Just a 5% increase in annual cheese consumption should be easily achievable in the US.

Source: International Dairy Federation, Canadian Dairy Information Center.


ingredients can be used to make a “slow energy claim”.

Selecting ingredients to deliver the slow energy eff ect leads product developers to slowly digestible carbohydrates, of which oats and barley are the best known.

Repositioning and reinventing cheese. Cheese is at Day 1 of a new era of opportunity. After 40 years of being demonized for its fat and salt content cheese today stands at the threshold of a turnaround that could see it re-established as a natural and healthy wholefood, like many other foods before it, from nuts to eggs.

Science has now established that not only is cheese not harmful – neither for its saturated fat content nor for its sodium, with no link to cardiovascular disease or to elevated blood pressure – in fact it could well be benefi cial to health thanks to its high protein and calcium content.

As Professor Arne Astrup, Head of Department, Department of Nutrition, Exercise and Sports at the University of Copenhagen – and who headed the infl uential Diogenes study published in the New

England Journal of Medicine in 2010, which found strongly in favour of high-protein, low-carb diets –told New Nutrition Business:

“Over the last years science has constantly made the same mistake. It’s time to change and start looking at the foods as a whole and not only to the eff ects of individual nutrients. The food matrix [the composite of naturally occurring food components in a food] is extremely important and determines the fi nal eff ects on the body – and cheese is the proof of this”.

Other barriers to cheese consumption that are crumbling are:

• its relatively high sodium content • its perceived link with weight gain

The evolution of science gives every reason to believe that cheese could be the next big food turnaround, just as nuts, once demonized for their fat content, turned out to contain benefi cial fats and have gone on to become a snacking success story.

But dairy companies mustn’t rely on sales of commodity block cheese to increase. Instead they should work to present it cheese in convenient snack


BOX 11: STRATEGIES 1+2 = DAIRY FROM FAR AWAY THAT’S ALSO UNASHAMEDLY INDULGENT

The Noosa brand of yoghurt, marketed in the US as “Australian yoghurt”, began in 2010 and by 2015 it had achieved $100 million in retail sales - selling only full-fat yoghurt. Noosa’s CEO told New Nutrition Business that the company has no intention at this point of coming up with a low-fat variety - the creamy, fat-based texture is too important - and added: “The cool thing now is that dairy fat no longer is considered [bad for you].” Noosa is a good example of Dairy 2.0 strategy in action.



BOX 12: TAKING BACK MILK’S TASTE ADVANTAGE

Consumption of white milk is in long-term decline in most developed markets. It has been reduced to a cheap commodity, increasingly dominated by private label (80% in UK, 60% in Australia) in which there’s little point competing unless you are a giant, least-cost producer. But there are some growth niches that offer hope.

People are willing to drink milk as long as it comes in a single serve and tastes nice. Flavoured milk doesn’t have to be for kids – products for adults, such as Emmi’s Caffe Latte, which comes in fi ve coffee fl avours, and Starbuck’s coffee-fl avoured Discoveries range have proven successful with adults. Asian fl avours such as turmeric milk, orange and cardamom have a naturally functional halo and appeal to “food explorer” consumers.

formats – on its own, or in combination with nuts or fruit, as Sargento Dairy has done, so that health-conscious consumers can incorporate it in their daily routine as an alternative to other less healthy snacks.

And industry has to engage in educating consumers and the media about the good things to be said about cheese, to counteract 30 years of misinformation from health professionals. Like the Almond Board of California did, go out and present the new science around cheese at dietician conferences. Debunk old science and present the newly-discovered benefi ts of cheese – its role in dental health for example.

With new science reaching a tipping point, cheese could be the next naturally functional success story. People in the dairy industry now have a once in a career opportunity to take a dairy food that’s been out of favour for decades and reposition it.

Embracing the new reality: a future of niches for dairy

The future for dairy companies is about successfully creating and curating portfolios of brands, most of which are niche, a few of which will become “big

niche” and – perhaps – one or two may eventually become mass.

Traditionally-minded management teams with their misplaced obsession with volume instead of value will struggle with this new reality, since individually they will see these brands as “too small”.

But they will learn the hard way – as many are now doing – that if you don’t accept the new reality all of these small – usually premium – brands will, like a shoal of piranhas, eat up your market, starting at the edges until they one day have taken 15%, 20% or 25% – as has happened in some markets.

So crowded is the retail environment, so strong consumers’ interest in small brands, and brands with a story and authenticity, that creating new mass brands will be – as we have said often before – close to impossible.

Coca-Cola is learning this the hard way – or rather re-learning it, as this company seems to fi nd the lesson hard to take on board. Coca-Cola’s Fairlife brand – a high protein, low sugar, low-lactose milk – was heralded over a year ago as a brand that would become mass and “take milk where it’s never gone before”. One year on and



Fairlife is showing every sign of settling down as a “big niche” product.

Dairy managements who want to take advantage of some of the opportunities we outline here will be smarter if they create and/or buy new small brands similar to the start-ups coming to market – such as the Collective, which has succeeded in authentic indulgence in both the UK and New Zealand.

Some companies will tell themselves that they

can still play in the mass market if they stick to growth markets like Asia. This is also a delusion. Danone last year sold off its business in Indonesia – once described as a “strategic market”, in which it had become the market leader with Activia and Melkuat (the no 1 kids milk). The reason? The margins are just not there in mass any more.

Embracing the new reality will be the biggest test of the next fi ve years.

BOX 13: AS DAIRY FAT CONCERNS RECEDE, THE SPOTLIGHT FALLS ON SUGAR

Sugar is falling out of favour, and dairy fat is losing its bad image – will this combination of forces fi nally spell the death of low-fat yoghurt? The chart below from Peak Yogurt, makers of triple-fat yogurt, shows how consumers are becoming more aware of the sugar content of low-fat.

Source: Peak Yoghurt



BOX 15: THE RE-BIRTH OF DAIRY FAT

The “the great low-fat disaster” was fed, for 30 years, by health professionals and academic researchers operating on a hypothesis – not established science – that saturated fat in dairy was connected to risk of cardiovascular disease. This produced a consumer obsession with low-fat dairy products in some countries, such as the US.

But the message that people should limit consumption of dairy foods and only consume low-fat dairy had its foundations in inadequate science, which is now being fi rmly debunked by a steady stream of good quality science. New studies suggest that dairy foods have a neutral or even benefi cial effect on the risk of heart disease and diabetes.

Low-fat milk may, in fact, have no health benefi ts whatsoever. In fact, the anti-dairy fat advice could have contributed to some of the growing health problems of the last two decades.

As the new fi ndings leak out into the media they are raising the positive profi le of dairy among health-conscious consumers – and causing some people to switch from thin-tasting low-fat dairy to the more satisfying taste of whole milk:

• In 2014, according to IRI, the $10.5 billion low-fat milk category in the US experienced a 5.2% decline in volume. But in parallel with that, the unthinkable happened – sales of whole, full-fat milk rose 1.3% by volume, 7.3% by value, to a total of $4.8 billion.

• The revival of full-fat milk appears to be gaining speed in 2015, with IRI reporting supermarket sales up by 5% in value and 2.3% by volume in the 52 weeks to May 2015. In the same period low-fat milk sales fell another 3%.

However, it will be some time – perhaps 10 years – before dairy companies can communicate that dairy fat has cardiovascular and other benefi ts because the “low fat paradigm” is so well-entrenched in consumers’ minds – particularly older consumers. Younger consumers will change faster, but change will nevertheless take time, because across the world there are health professionals and government bodies who cling fast to the advice to consume low-fat dairy. That means it’s up to dairy companies to do two things:

1. Start educating consumers and dietitians about the intrinsic health benefi ts of full fat dairy and overturn the low-fat myths

2. Aim for unashamed indulgence, launch full-fat products and market them for pleasure and taste

BOX 14: PLAY IN PLANT MILKS – THEY’RE NOT GOING AWAY

Some day in the not-too-distant future it will be understood that selling low-fat milk, and even low-fat yoghurt, was one of the greatest misfortunes ever to befall the dairy industry, and a bad development for public health. By taking away the satisfying mouthfeel of dairy fat – which is only 4% of whole milk – we took away pleasure and shifted milk from being a natural whole-food to something de-natured.

Unsurprisingly, consumers looked to other beverages to provide refreshment and pleasure. This development contributed to the now-irreversible decline of the milk-drinking habit. It boosted sales of fruit juices and smoothies and a host of other drinks – and drove the increasing preference of a small but fast-growing number of consumers for “non-dairy” milks, such as almond and coconut.

In America “non-dairy” milks have already seized a 10% market share. Some European countries are not far behind. The irony is that many of these “milks” have a very poor nutritional profi le and have to be heavily fortifi ed to reach the same level of nutrients naturally present in cows’ milk.

But it’s clear that plant milks are here to stay and dairy companies should embrace that fact, not fi ght it. The choice is to either create a plant milk yourself, or use the health halo of the ingredient (for example, almond/dairy blend) and use lactose-free dairy if that helps in your market. Use whole milk for the taste advantage.


CHART 15: TREND DIAMOND, KEY TREND 3, DAIRY 2.0


CHART 16: PRODUCT LIFE-CYCLE, KEY TREND 3, DAIRY 2.0


LIFESTYLECONSUMERS





SALES



Key Trend 2:

SUMMARY• Sugar is the new fat: Sugar has replaced fat as a key consumer concern – they associate it with obesity and

diabetes. Increasingly, sugar may be associated with inflammation.

• Tide has turned against sugar: Although in some cases consumers prefer the “honesty” of natural sugar, for the most part the tide has turned against sugar. But this is a challenge that can’t be solved with artificial sweeteners any more – people don’t want those either – and so far there are no realistic natural sugar alternatives.

• Losing our sweet tooth? Consumers appear to be turning away from sweetness altogether, as the rise of flavoured waters, plant waters and savoury snacks suggests.

• Embrace less-sweet: The decades-long search for non-caloric sweeteners – both natural and artificial – now looks like barking up the wrong tree. Industry investments in sweetener alternatives may never yield a good return. Companies should be looking for ways to market less-sweet products that still taste good. In the case of juice companies, for example, this means launching plant waters or plant waters blended with juice.

Redefi ning sweetnessKey Trend 4:

10 Key Trends 2016 Redefi ning sweetness

Sugar is the new dietary demon, fast replacing fat in the minds of consumers and the media as the single-greatest cause of society’s dietary ills.

In fact, the number of Americans who want to see added sugars spelled out on the front of packaging has grown steadily, while those who similarly want to see fat facts displayed has been dropping, according to consumer research agency HealthFocus International.

Sugar has become the most vilifi ed food and beverage ingredient on the globe, thanks to its suspected role in obesity and resulting diseases, and also in infl ammation.

The trend presents the food and beverage industry with a specifi c challenge. Consumers don’t want sugar almost as much as they don’t want calories.

“Calories remain No. 1 of the things that consumers want to see spelled out,” said Barbara Katz, president of HealthFocus International, a Chicago-based group that performs extensive market research on health and wellness perceptions of Americans. “But the diff erence between calories and sugar now is only about 10 percentage points versus 20 percentage points not too long ago.”

Both calories and sugar can of course be addressed by artifi cial sweeteners, but to compound the problem for industry, increasingly consumers don’t want those either.

Since the early 1980s companies have been delivering the benefi t of less sugar or no sugar using artifi cial sweeteners – aspartame, acesulfame K, then sucralose and others. But as consumers began to demand natural sweeteners, these have gradually fallen out of favour. However, the natural sweeteners, notably stevia, have failed to live up to their early promise.

Not only have non-calorifi c sweeteners failed to provide a solution, sugar is going to come under even more pressure. Sugar taxes are a very real threat and lobbying for their introduction – led by nutrition scientists and by celebrity chefs – can only increase thanks to the success of sugar taxes in Mexico (see Box 17), which resulted in a 12% reduction in purchases of sugar-added drinks in its fi rst year. Purchases went down across all socioeconomic levels, although the reduction was greatest among the lowest socioeconomic group, the group that also has the highest rates of obesity and diabetes, dropping 17% by the end of the year.

“I see the tide having turned on sugar, and it will start with developed markets that give strong indicators that sugar is the primary cause of obesity, and the epidemic of diabetes and cancer is because of obesity,” said Tom Pirko, president of Bevmark Consulting, a specialist beverage consulting fi rm. “And sugar is automatically identifi ed as the No. 1 target. Cultural values and the economics will be so strong against it.”


Sugar as an infl ammatory – the next consumer concern?

One new research study after another points to the solid connection between high consumption of “added sugars” and obesity, diabetes and other health problems. In October 2015, for instance, researchers from two California universities off ered new evidence from a study linking sugar consumption with conditions that can lead to heart disease and diabetes in children (Obesity, published online 26 October 2015).

The reputation of sugar as an infl ammatory agent within the body is rising in popular science and in online discussions. Concern about infl ammation is currently strongest among older consumers, but it will broaden.

“This will be a concern of Millennials as well, just not as much for now, because of their ability to get around some of the health eff ects of sugar because they’re young,” said Barbara Katz, president of HealthFocus International, a Chicago-based group that performs extensive market research on health and wellness perceptions of Americans.

Kara Nielsen, culinary director for Sterling-Rice Group, a brand-consulting fi rm, believes that rising concern about sugar as an infl ammatory “is coming. You hear about more anti-infl ammation diets, but they’re not widely prevalent yet. They’re not widely understood yet either and can be confusing. They are more for the very health-conscious consumer or those who are attached to a niche health outlook. It’s sort of the next layer of being allergy-free and intolerant.”

BOX 16: WILL SUGAR TAXES MEAN ANOTHER NAIL IN THE COFFIN OF LOW FAT YOGHURTS?

Low-fat yoghurts, marketed as a healthier choice during the “fat is bad” years that stretched from the late 1970s until about 2014, have commonly been higher in sugar than their full-fat counterparts.

However, a tax on added sugars could undermine their healthy image even further – and may send low-fat yoghurts into a long-term decline and accelerate the switch to yoghurt made from whole milk which is currently happening on an embryonic level (see Key Trend 3).

In the UK, for example, a proposed law currently under review by the country’s legislative assembly contains a clause which would ban any foods containing 20% (or more) of sugars from making any general health claim, on pack or in advertising, even if the product has already been allowed to make an authorized health claim.

Many low fat yoghurts exceed 20% sugar and even if they are low in fat, high in vitamin D and have less than 150kcals per serving, they would be forbidden from stating ‘low fat’ or ‘healthy’ or carrying any claim meaning the same.


0 1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16

Fage Greek Rachel's Greek

Tesco Greek

YEO Natural

Muller Light Skyr YEO Natural 0%

Activia 0% Rachel's Greek 0%

Liberte 0% YEO Vanilla 0%

Fat Sugar

Full-fat yoghurts Low-fat yoghurts

Rachel’s Organic in the UK present the perfect example of how brands need to increase their sugar content when reducing the fat content. Its full-fat Greek yoghurt has 5g of sugars, but, when the same product is 0% fat the sugar content increases to approx. 9g.

CHART 17: FAT VS SUGAR CONTENT PER 100G


Artifi cial sweeteners are dinosaurs

If the tide has turned on sugar, there is as yet no viable alternative to sugar among the many non-calorifi c sweeteners that have been developed. In fact, the global market for non-sugar sweeteners has reached an infl ection point – one that few in the beverage and food industries saw coming until very recently. And it is this: consumers just aren’t as interested in any artifi cial or even natural non-sugar sweeteners as many had hoped – the search for which drove investments by ingredient companies running into hundreds of millions of dollars.

Ingredient companies keep trying to come up with the holy grail of sweeteners – a natural one that will taste as good as sugar but with many fewer calories. Meanwhile food and beverage companies continue to work to fi t the available (and unsatisfactory) sweetener options, sometimes in combination with one another, to their product needs. These twin challenges mean two levels of huge frustration.

Several once-promising alternatives have failed to live up to their promise: stevia, monkfruit, agave, erythritol. But beverage companies are trying to make them work to varying degrees while they continue the search for the ingredient that really could fi ll sugar’s big shoes.

“The beverage industry has got to continue to look for the holy grail and search for some solution,” said Pirko. “They’re looking for the next sweetener again. Will they fi nd it? No. There are

no other real candidates. So the tide is going out, but it’s hard to convince the industry of that.”

If the ingredients industry hasn’t resigned itself to failure on this front, more and more brands have calculated these very unpleasant realities into their expectations. “We don’t see anything happening” with a “silver bullet” new natural sweetener, Kevin Klock, CEO of Sparkling Ice, told Beverage Daily. “Some of the major players are now starting to realize it’s a long way out.”

Beverage companies couldn’t persuade American consumers that diet soft drinks sweetened with aspartame were OK even with all of the scientifi c evidence on their side, so PepsiCo decided to stop fi ghting that battle and recently reformulated Diet Pepsi with a combination of acesulfame potassium and sucralose.

The company didn’t just make the change quietly; it trumpeted the switch with a line on the front of the new Diet Pepsi can that declares, “Now Aspartame Free.” But many in the industry suspected that the change won’t actually do much to halt the brand’s steady slide, which saw US sales of Diet Pepsi fall by 5% last year.

“They can’t continue with diet drinks with artifi cial sweeteners, and it’s not just aspartame,” Pirko said. “Women have come to believe that sugar substitutes are very bad.”

Added Gary Hemphill, of Beverage Marketing Corporation: “The resistance among consumers to the current crop of sweeteners primarily seems to be that they’re not natural.”

Stevia, the most-recent great hope for sweeteners, hasn’t proven as popular or as eff ective as backers had hoped. PepsiCo CEO Indra Nooyi stunned the beverage world with her remark about how problematic was the Peruvian-bush extract in cola formulations.

PepsiCo initially pinned its hopes on stevia, launching Trop50 – a half water and half orange juice and sweetened with stevia. But Trop50’s growth soon leveled off and US sales have even begun to decline (see box).

“Consumers have passed on stevia,” Pirko said. “You can’t turn back, but it didn’t turn out to be the solution.”

A major illustration of the problematic nature of stevia is Sparkling Ice. The startup sparkling water brand seems on its way to $1-billion status within the next couple of years and is getting there sweetened with sucralose. The company has tried to make stevia work, “But we can’t make a good-tasting beverage with stevia” because of stevia’s licorice-like aftertaste, said CEO Kevin Klock.

Ingredient companies are still betting millions of dollars that there is room for another sugar substitute. But with the competitive space for sweeteners already crowded and fragmented


Despite scientifi c evidence, Americans have not warmed to aspartame in diet soft drinks; PepsiCo has realised this and made Diet Pepsi “Aspartame-free”, reformulating the drink with a combination of acesulfame potassium and sucralose. Pepsi also sells a line called Pepsi with Real Sugar.


and the target shrinking as consumers switch to unsweetened beverages, from water to coconut water, those bets are looking riskier.

The day of reckoning for non-sugar sweeteners may be at hand.

The paradox of the (limited) natural sugar revival

Given the strength of consumers’ desire for ingredients that are “as natural as possible”, it perhaps isn’t surprising that sugar is becoming popular as a “natural” ingredient in more foods and beverage, and it compares well in the minds of many consumers with artifi cial sweeteners.

While consumers say they want less sugar in their food and beverages, when they do go for sweetness, many prefer it to be from an ingredient that’s natural and easy to understand. Research by HealthFocus International found that 38% of Americans surveyed say that sugar is a good sweetener and 42% say it’s neutral in terms of its health eff ects; 80%, for instance, say that honey is good.

“It’s just a return to authenticity,” said Ken Harris, managing director of consumer goods consulting fi rm Cadent Consulting. “No one will pretend that sugar is good for you, but as a preferred sweetener, people are understanding that if you’re going to sweeten with something, it might

BOX 17: MEXICO’S SUCCESSFUL SUGAR TAXES ARE STRAW IN THE WIND FOR SUGAR

On 1 January 2014, Mexico put into effect a new tax came intended to combat skyrocketing obesity and diabetes rates. Mexico’s tax was introduced in response to the country’s crisis of obesity and diabetes:

• 32.8% of the population is obese and it is now the country with the biggest weight problem in the world, according to the UN’s Food & Agricultural Organisation (FAO), taking the number one slot from the US

• a further 40% of the population is overweight• 8.7 million people of Mexico’s population of 120 million have diabetes

The IEPS tax (Impuesto Especial Sobre Producción y Servicios, trans: Special Tax over Production and Services) levies an 8% tax on all packaged food products considered high in calories and a MXN1 Peso per litre tax on sugar sweetened beverages without milk content. The amount of the tax was one peso ($.07 USD) per litre, which is roughly equivalent to a 10% increase in price

A study conducted jointly by the University of North Carolina and the Mexican National Institute of Public Health found that Mexicans purchased fewer sugary drinks in 2014 due to the effects of the tax, with an average reduction of 6%, achieving 12% by year’s end.

Sugary drink purchases diminished across all socioeconomic levels, although the reduction was greatest among the lowest socioeconomic group, reaching 17% by the end of the year. Results indicate that taxes imposed on sugar-sweetened beverages can help change behaviors in benefi t of public health.



as well be sugar. And it’s not carrying quite the stigma it used to carry, which is ironic; but so be it. I think it was probably vilifi ed more than it should have been, and now there’s a bit of retribution.”

“Sugar isn’t good for you, but it is real and it is quantifi able calories,” Harris said. “Up-front disclosure” of sugar content “seems to be working. Where sugar runs afoul is in products like ketchup where it is a stealth ingredient.”

Gary Hemphill of Beverage Marketing Corporation agreed. “There are growing consumer demands for simple, straightforward products with natural ingredients, and sugar would be among those ingredients,” he said. “People may not want to consume it all the time or in abundance, but as a treat in in certain products there’s an appeal to it.”

Brian Wansink, an authority on the psychology of eating and director of the Food & Brand Lab at Cornell University, believes that “what’s driven the pure-sugar craze is a lot of bandwagon thinking”. He added: “Right now sugar has made a bit of a comeback. But it’s not substantive, and it’s not long-term.”

And consumers’ belief in sugar as a healthier choice gets short shrift from scientifi c experts. “This is bogus health,” Walter Willett, chair of the department of nutrition at the Harvard School of Public Health, told New Nutrition Business. “There is really no important diff erence between sucrose and HFCS [high fructose corn syrup]. They should be considered equally harmful.”

Sweetness itself may become suspect

The trend against sugar does not present growth opportunities for companies by lowering sugar levels in existing products – dairy companies, for example, report that lowering sugar content from 10g per 100g to 7g per 100g does little or nothing for sales – but it is a growth opportunity for companies making:

• savoury snacks of all types• healthier beverages that are “naturally low in

sugar” such as plant waters• new types of dairy products (such as savoury

yoghurt and other naturally low/no sugar yoghurts)

There’s strong evidence that many consumers are changing their consumption habits in Europe and the US, with a small but growing number of people moving away from sweetness, as seen by:

• The growth in savoury snacking (it is savoury, not sweet, that is the hub of innovation and the driver of growth)

• The transformation of the beverage category

and the long slow slide in traditional categories such as fruits juices, carbonated soft drinks and diet sodas and the trend towards water, fruit-fl avoured water and even “naturally sweet”, but also naturally low sugar, plant waters (Key Trend 7)

Bottled water has just overtaken carbonated soft drinks as the most popular beverage type in America, and that may indicate still-deeper problems not only for soft drinks but for any sweetened liquid.

“Consumers are even moving away from the idea of sweetness,” Pirko said. “The long-term trend coming to fruition now with health and wellness is people are accepting the fact that their beverage may not have to be sweet. That gets us into interesting neurological and biological territory because of how humans crave sweetness. But we could be evolving to where ‘zest’ beverages with a hint of fl avour are the norm.”

There is also growth in authentic indulgence – consumers seem to be very forgiving of full-sugar products that make no pretence of health, that emphasise indulgence and pleasure. Brands like these have performed well.


Sparkling Ice couldn’t make a good tasting beverage withstevia because of the aftertaste, and instead has built itsnearly-billion-dollar brand on sucralose.


BOX 18: THE SCIENCE ON SUGAR AND INFLAMMATION

“”

“Chronic low-grade infl ammation is intimately involved in all stages of atherosclerosis, the process that leads to cholesterol-clogged arteries. This means that infl ammation sets the stage for heart attacks, most strokes, peripheral artery disease, and even vascular dementia, a common cause of memory loss.

Don’t be so refi ned. The bolus [dose] of blood sugar that accompanies a meal or snack of highly refi ned carbohydrates (white bread, white rice, French fries, sugar-laden soda, etc.) increases levels of infl ammatory messengers called cytokines. Eating whole-grain bread, brown rice, and other whole grains smooths out the after-meal rise in blood sugar and insulin, and dampens cytokine production.”

Source: Harvard Health Publications

• The consumption of soft drinks, sweetened-milk beverages and energy from total sweet beverages was associated with higher type 2 diabetes risk independently of adiposity.

Study: O’Connor et al., 2015

• It is recognized that a chronic low-grade infl ammation and an activation of the immune system are involved in the pathogenesis of obesity-related insulin resistance and type 2 diabetes.

Study: Esser et al., 2014

• Another proposed pathway of the relationship between excessive sugar intake and increased CVD risk is its association with infl ammation markers, which are key factors in the pathogenesis of CVD. Several recent studies have indicated an association between higher consumption of sugar-sweetened beverages and infl ammatory markers.

Study: Yang et al., 2014




BOX 19: TROP 50 STAGNATION A SIGN THAT STEVIA’S BEST DAYS MAY BE BEHIND IT?

The rapid success of Tropicana’s Trop50 juice brand made it the poster child for what suppliers of stevia believed it would be able to do for many more brands.

Trop50 was launched in 2009, sweetened with stevia and offering just 50 calories per 250ml serving. About half the drink is water, not juice, and so the product has half the sugar and calories of regular juice.

Trop50 ranked – at the time – as one of PepsiCo’s most successful product launches. It achieved sales of $154 million (€143 million) by the end of 2011 as measured by IRI. The brand produced 100% of the growth in the refrigerated juice drink segment between 2009 and 2011 and took an impressive 17% market share, putting it neck-and-neck with rival Coca-Cola’s Minute Maid. But at that point sales stopped increasing and in 2015 fell slightly.

Tom Pirko at Bevmark believes that Trop50’s fl attening is in large part a refl ection of consumers’ growing yawn about stevia. He accused the beverage industry of taking a “wish-hope-and-a-prayer attitude that stevia will save the day”.

“The ambition that stevia (with its taste and aftertaste profi le) was going to somehow ride to the rescue for a business debilitated by the artifi cial-sweetener backlash has proven illusory,” said Pirko, head of California-based Bevmark Consulting, an industry leader. “Stevia is not the silver bullet.”

Pirko said, “Trop50 gives the impression that it is unnaturally altered to make it ‘diet’, that it ends up not quite juice but instead a manipulated, contrived, manufactured, less-than-natural product. There is a strong psychological message here: the impression that Tropicana, with its vaunted juice image, is trying to deceive its loyal drinkers. That’s not good for the authentic image on which the Tropicana franchise rests – an image so essential and coveted by those who trade in real juice. Do you really want, as Tropicana, to bowdlerize your brand?”

It’s just possible that Trop50 might have been the last big brand of an artifi cial sweetener era that’s drawing to a close.



CHART 18: TREND DIAMOND, KEY TREND 4, REDEFINING SWEETNESS


5THE GREAT

FRAGMENTATION


Key Trend 5:

SUMMARY• Wider culture of fragmentation: Just as consumers have diverse musical tastes – they no longer feel they have

to commit to a certain style – there is also a culture of dipping in and out when it comes to food and drink.

• Fragmentation is now a defining force of food and beverage markets: Consumers create their own definition of what is a healthy diet – mixing health and indulgence, or vegan and meat-eating – and experimenting with new tastes at a pace that larger companies struggle to keep up with.

• Technology enables choice: Easy access to information has enabled consumers to become their own experts on matters of healthy eating – and pretty pictures on social media of interesting new dishes from other cultures have expanded their horizons and fostered a culture of experimentation. E-commerce means they can easily order and try what catches their eye.

• Making their own decisions about health: Having seen “set in stone” dietary advice about dairy fat and eggs overturned, consumers are sceptical about the “expert opinions” of dietitians and nutrition researchers, and that means they allow themselves more freedom to create their own health rules (while at the same time using the internet to decide for themselves what is healthy and what is not, and even to self-diagnose).

• Willingness to experiment: From the US to France, consumers are discovering that experimenting – mixing up

your diet from a variety of cultures and cuisines – can be fun. This is something the Millennials have learnt from their baby boomer parents, who were the first generation to do this back in the 1970s.

The fragmentation of the consumers’ mindKey Trend 5:

10 Key Trends 2016 Fragmentation

The idea that you do not have to be loyal to one musical genre or one style of eating, that you do not have to make and then stick with a single choice, that you can try many things, infuses our culture and drives people’s beliefs and choices.

The person who listens to Bach’s Goldberg Variations while working at home also listens to Aerosmith or Black Sabbath while driving to work, and sometimes jazz.

People’s ideas about food and health have also become a menu of choices from which they select – or completely change – as new information becomes available.

They might start the day with breakfast at McDonalds, followed by a vegetarian lunch of quinoa salad followed by a dinner of beef stir-fry. And they could put almond milk in their homemade breakfast smoothie instead of cow’s milk, then eat a Greek yoghurt at lunch. Or request a gluten-free main dish in a restaurant, then order a pastry with their coff ee.

New Nutrition Business fi rst pointed out this emerging trend back in 2003, observing “…increasing fragmentation of consumers’ perception of what is healthy in terms of food and beverages. Increasingly, individual consumers seem to regard health as an extensive menu of options from

which they select the dishes that make the most sense in the context of their individual beliefs, their individual health needs and their individual lifestyles. In eff ect they customize their nutritional choices to meet their own nutritional needs.”

Fragmentation culture driving food and beverages

The fragmented, individualised view of health that was emerging back in 2003 has in 2016 become the defi ning force of food and beverage markets. Consumer researchers agree. “Previously it was always about fat and sugar and if you took it out that would make it ‘better-for-you,’” explains Barbara Katz, president of Health Focus International. “But now there are so many diff erent ways that ‘healthy’ is defi ned, including ingredient sourcing and recognisability, and fair trade and sustainability.”

Consumer researchers interviewed by NNB confi rmed that the fragmentation trend is true across the age range – both Millennials and high-income, higher-education older consumers are driving the reorientation of the food and beverage industry.

At the same time health – with all its many, individualized meanings – is ubiquitous. Early


adopters of all ages are pushing for a better-for-you improvement across all food categories, even snack categories that used to be seen as simply empty calories (see Key Trend 2: Snackifi cation).

“There’s not really such a thing as a healthy category any more,” Katz added. “There used to be healthy foods and not-so-healthy foods. But nowadays we’re seeing two-thirds of people who believe that even an indulgent category should be as healthy as possible.”

Health and wellness has become an integral part of food culture rather than the alternative movement it used to be.

Americans have widely divergent defi nitions of what a “sustainable diet” means, with 39% saying it represents a balanced, nutritious meal; 25% saying it is foods that are aff ordable and readily available; and 23% citing foods that have a smaller impact on the environment.

We’re also all food explorers now, looking for novelty and variety. Coconut water and birch water, seaweed snacks and snacks based on beans and chickpeas, savoury yoghurt and indulgent desserts – people’s quests for new experiences leads them to experimenting with new and interesting brands, ingredients, tastes and textures, and to do so at a pace that larger companies struggle to keep up with.

This culture of experimentation is driving change even in very conservative food cultures, such as France, where the CEO of a food company was recently shocked by the statistics (see Box 20) which show that in Lyon, the gastronomic capital

of France, French restaurants account for less than a third of all restaurants in the city. The change has been driven by French people under the age of 40, travelling more, working abroad and coming home more open to experimentation and new foods. Within walking distance of NNB’s Lyon offi ce it is possible to eat at a diff erent Asian restaurant every day for 2 weeks – and they are all fi lled with people not only under 40, but in most cases under 30.

More complex eating patterns result from the great fragmentation of the consumers’ mind. It has become impossible to generalise about what consumers want, as many companies still do. Sometimes what they say in research is totally diff erent to what they do in the supermarket. The best example is clean label, which again and again consumer research reports say that consumers overwhelmingly want. And yet, America’s top-selling new food product of 2014 was a brand with 60 ingredients, many of them, such as palm oil, far from being “clean label”. In other markets brands that have been the fi rst to go clean label in their category have actually seen their sales fall.

Among the principal drivers of fragmentation are:

1. TechnologyA host of websites, apps and social media platforms enable consumers to do their own research about food and health – mostly on their phones – and with this steadily increasing knowledge people feel more confi dent to create personalised healthy eating patterns and dietary choices and conduct their own


BOX 20: WORLD CUISINE IN THE GASTRONOMIC HEART OF FRANCE

According to Tripadvisor.fr, less than a third of Lyon’s 2397 restaurants are French and there are 29 cuisines on offer.


personal eating experiments to fi nd what works for them. Consumers can fi nd information that 20 years ago would only have been found in a few magazines or TV programmes, or from health professionals. In eff ect, technology has overthrown dietitians and health professionals as the gatekeepers of knowledge about food and health. With their own research behind them, people now feel able to make their own well-informed decisions, to choose foods and diets that suit them – and when they get some new information, to change those choices. The biggest losers so far have been the big weight-loss brands like Jenny Craig and Weight Watchers, whose paid-for weight-loss programmes have to compete against free alternatives found online.

2. Loss of trust in expert health adviceAt the same moment that technology enabled people to access more information from more sources, the traditional health experts – academic researchers and dietitians – began to look as if they didn’t know wheat they were talking about.

Changes in dietary advice, which seem to have been accelerating in frequency over the past 15 years, have created consumer scepticism about the “expert opinions” of dietitians and nutrition researchers, just at the moment when technology

made it easier for people to fi nd the answers for themselves.

Consider that:• From being labeled as a source of cholesterol

that should be consumed no more than 2-3 times a week back in the 1990s, eggs have been re-born as one of nature’s superfoods – a good source of protein, of choline and many vitamins with a good body of research to show that eating them daily is in fact highly benefi cial for health and even that people who have an egg for breakfast every day are slimmer. Sale of eggs are surging.

• A similar shift has happened for nuts of all kinds, dark chocolate, wine and coff ee. Once demonised, we now know that they provide all-natural health benefi ts.

• For 30 years health professionals demonised dairy on the grounds of alleged harm from its saturated fat content – producing a consumer obsession with low-fat dairy products in some countries. But this advice has proven to have no foundation. Researchers are rolling back the negatives about dairy fat and the view that dairy fat is connected to risk of cardiovascular disease has been fi rmly debunked.


BOX 21: FRAGMENTATION THAT STARTED IN 2003 HAS BECOME A DEFINING FORCE

Back in 2003 New Nutrition Business observed that “…increasing fragmentation of consumers’ perception of what is healthy in terms of food and beverages. Increasingly, individual consumers seem to regard health as an extensive menu of options from which they select the dishes that make the most sense in the context of their individual beliefs, their individual health needs and their individual lifestyles. In effect they customize their nutritional choices to meet their own nutritional needs.” This is even more true in 2016.

2003 2016

DAIRY-FREE

LACTOSE-FREE

WHEAT-FREE

GLUTEN-FREE

REDUCED-SUGAR

REDUCED-FAT

DAIRY-FREELACTOSE-FREE

WHEAT-FREE GLUTEN-FREE

FREE-FROM ARTIFICIAL ADDITIVES

PLANT-BASED LOW-CARB

MEAT-REDUCER SOY-FREE

NUT-FREE

SUSTAINABLE

SOURCE OF PROTEIN

NO ARTIFICIALSWEETENERS

NO ADDEDSUGAR

EASY TO DIGEST

REDUCED-FAT

NATURAL


The discovery that these and many, many other natural foods – which had in some cases been demonised by health advisors for 30 years or more – not only do no harm but make a positive contribution to health has pushed many people to become their own experts.

Unsurprisingly, consumer research shows over and again, in most markets, that people are confused. A survey of US consumers conducted each year by IFIC showed in 2015 that, “Perhaps more than ever in the survey’s history, consumer confusion is emerging as a key concern. More than three-quarters (78%) say they would rather hear information about what to eat versus what not to eat. That’s the same result as in 2014, but the number who “strongly agreed” with that statement rose 7 percentage points, from 26% to 33%.”

The fragmentation of health beliefs is happening against the backdrop of fragmentation of food and beverage markets which, according to consultancy fi rm PwC, has become the defi ning force of food and beverage strategy:

“What we call the great fragmentation is manifested in consumer behavior and market response. In both developed and emerging markets, there is a wider variety among consumers now than at any time in the recent past. Growth is evident both at the top of the market (where more consumers are spending for higher-quality food and other packaged goods) and at the lower end (where an increasing number of consumers are concentrating on value). But the traditional middle of the market is shrinking.

“Further, individual consumer behaviour is more pluralistic. We’re used to seeing, for example, spirits buyers purchasing a premium brand in a bar, a less-costly label at home for personal consumption, and yet another when entertaining guests. But this type of variegated shopping has now spread to the grocery basket. Fewer consumers are making one big stocking-up trip each week. Instead, shoppers are visiting a premium store and a discounter as well as a supermarket, in multiple weekly stops — in addition to making frequent purchases online.”

Fragmentation of markets

The fragmentation of beliefs about health is producing a massive fragmentation of markets and a proliferation of niches which small companies are perfectly placed to serve.

The proliferation of healthy brands is itself feeding consumers’ interest in new brands, tastes, textures and new types of foods and so giving birth to even more niches.

The good news for would-be entrepreneurs – and even for executives inside big companies who long to create something new – is that in health and wellness

it is these small new brands and new businesses that are increasingly taking the lead in redefi ning markets.

The small new brands begin by targeting the “lifestyle” consumers – the 20%-30% of people (depending on which country you are in) who are willing to pay a premium for something that delivers health and wellness benefi ts. This is a smart move, because most brands that attempt to jump straight into the more price-driven mass market fail.

The lifestyle consumer can be reached by all kinds of alternative distribution channels which are better suited to low volume products than the traditional supermarket (see Key Trend 8: Direct to consumer).

Massive shift favours nimble innovators

How to cope with the pace of change in the consumer market is proving challenging for the largest food and beverage companies. Tony Vernon, chief executive offi cer of Kraft Foods Group, speaking in a conference call to discuss Kraft’s results, explained that the change included: “changing shopper patterns and channel shifting; the rise of digital media, breaking established marketing principles and best practices.

“In some ways, we have to unlearn what we believed to work in the past and re-learn what will make a diff erence today. In the short term, adjusting to such momentous shifts favours the smaller, more nimble players that are working from a small base. I think that’s what you’re seeing play out in the most recent set of fi nancial results across the food and beverage industry.”

The growing role in the market of “smaller, more nimble players” is a point which New Nutrition Business has made many times in the past. Back in 2010, for example, we said:

“And until the current generation of boards of directors grasps that the landscape of the food and beverage industry has changed, that creating a successful mass brand – as was a common and viable goal 20 years ago – is now the exception, and that a landscape that is fi lled with a plethora of niche brands is the “new normal”, many innovations will founder.”

The good news is that if you start small, you are making the right choice. The late Professor Peter Drucker of Harvard Business School was one of the best-known writers on innovation of the 20th century and his book, Principles of Innovation, is a standard textbook.

Drucker is very clear that innovations start small and aim at “only a small limited market”. Taking an innovation to market, he adds, requires patience because you will need time to make the adjustments




and changes to your product, because at fi rst “innovations rarely are more than almost right”. The necessary changes can be made only if the scale is small.

Portfolio approach the way forward

Smart companies will create a portfolio of brands, fi nely targeted at an ever-more fragmented consumer market. A few of these will become big brands, but most will be big niche at best. Changing the way they think about business to become a curator of smaller brands will be a big and diffi cult challenge for many companies to make.

But a few large companies are already embracing the change. Campbell Soup, for example, when it acquired organic kids’ food maker Plum Baby, wisely opted to keep it operating separately from the parent so it could maintain its small company competitive edge.

General Mills has gone a step further, setting up

a new business development and venturing unit – called 301Inc – to invest in entrepreneurs and early stage food companies.

“The rapidly evolving consumer landscape is dramatically changing the game in the food industry,” said John Haugen, vice president and general manager of 301 INC. “Tremendous opportunity exists outside of General Mills to partner with and foster emerging food brands…by providing them with a combination of capital and the capabilities that General Mills has built over the past 150 years in the food industry.”

“Under our previous model, we were primarily building our own businesses from the ground up,” said Haugen. “That experience was invaluable and has given us signifi cant insights into the challenges small, emerging businesses face in the marketplace.”

As the Great Fragmentation moves forward, General Mills’ new model will increasingly become the standard for large food and beverage businesses.

BOX 22: CONSUMERS ARE FULL OF CONTRADICTIONS!

As these comments show, we often hold fi ckle and changing beliefs and behavior.

Source: www.thekitchen.com


6


SUMMARY• King of trends: The trend with the broadest influence, naturally functional overlaps with – and strongly influences

– almost every other trend. Wherever you look, naturally functional is being used to create new brands and new categories.

• It is an innovation strategy: The biggest successes are coming from creating new brands and new product formats.

• Naturally functional needs no health claims: When consumers can draw their own conclusions (thanks to constant positive media attention to foods with natural and intrinsic health benefits) no health claim is needed.

• Proven to be the most powerful driver: Naturally Functional is behind the success of almonds, Greek yogurt and dairy products in general (Key Trend 3), coconut water, almonds and pistachios – although simply choosing ingredients with a health halo is not enough. Products must also perform in four other areas – marketing, processing technology, science and convenience.

Naturally functional – three high-growth ingredients powered by the King of Trends

Key Trend 6:

10 Key Trends 2016 Naturally functional

What people want, more than anything else, is for their foods and beverages to be naturally functional – to provide a benefi t that’s intrinsic to the food. Given the choice, they will always select a product they perceive as naturally functional over one with an added, science-based ingredient.

Consumers’ desire for naturally functional foods is in fact the biggest trend across all food and drink. Naturally Functional is behind the success of almonds, blueberries, Greek yogurt, coconut water, almonds and pistachios.

The trend with the widest infl uence, Naturally Functional overlaps with – and strongly infl uences – almost every other trend.

• Consumers’ desire for foods that are naturally functional is the real driver of the plant-foods trend (Key Trend 7), not vegetarianism or veganism

• It is one of the driving forces in snackifi cation (Key Trend 2)

• And Dairy 2.0 (Key Trend 3) is essentially a strategy of dairy as a naturally healthy whole-food

Wherever you look, Naturally Functional is being used to create new brands and new categories. It is an innovation strategy: The biggest successes are coming from creating new brands and new product formats.

Naturally functional needs no health claims: When consumers can draw their own conclusions no health claim is needed. The media and the blogosphere also like naturally functional foods and give them constant and positive attention, thus helping to educate consumers and build awareness of new and exciting foods and drinks.

Naturally Functional is one of the oldest trends. And whether you are a branded foods company or an ingredient supplier, it’s already infl uencing your strategy. Naturally Functional was already showing such strength and durability in so many categories back in 2005 that we wrote in New Nutrition Business:

“The advance of nutrition science is continuing to uncover a wealth of intrinsic health benefi ts from everyday foodstuff s and producers of such intrinsically healthy foods are beginning to communicate these benefi ts more and more.”

We then forecast that:“Over time the combined eff ect of such messages is likely to be to guide more and more consumers towards foods that carry the naturally healthy message. In the functional foods model of 10 years ago it was believed that health claims would be something that would be communicated only by specially-formulated products with added bioactive components.



“But health messages are appearing not only on specially designed premium-priced foods, but on a host of everyday foods. What’s more, such claims do not need to be communicated on the label – the media is always hungry for stories about naturally healthy foods and keen to tell stories about them: cranberries, blueberries and tomatoes being probably the three most conspicuous examples of foods whose sales have benefi ted from the trend to marketing intrinsic health benefi ts.”

Not only has nothing happened to change our point of view, but the events of the last 10 years have underscored that our forecast was correct.

There is a wealth of ingredients you can choose from that signal “health” to consumers – and for product developers there is a steady stream of exciting opportunities as ever-more ingredients become available.

Brand owners can select naturally functional ingredients as the core of the product or use them as a much smaller percentage of the fi nal product, solely to provide a health halo.

If you are a budding entrepreneur it’s also great news, because every new naturally functional ingredient is an opportunity to create a new brand and even a new category or market. You are also likely to move much faster than risk-averse established companies.

Success strategy for naturally functional

To get a picture of how well your natural ingredient or product will perform, use the criteria below to evaluate it and to formulate your strategy. These guidelines apply as much to creating an ingredients strategy as to a branded foods strategy.

1. Does the ingredient/product have some nutritional properties, some science?

2. Has it got marketing muscle and/or media appeal?

3. Off ers convenience and snackifi cation possibilities?

4. Allows creativity with food technology and /or packaging technology?

5. Price – can you get a premium price? 6. Is there a secure supply chain? 7. Which consumer trends does the

ingredient connect to?

Three emerging naturally functional “stars”

In this next section we outline three examples of emerging naturally-functional foods that have strong growth ahead of them. All of them could

820kcal/100ml

OLIVE OIL

550kcal/100g

“PURE AND NATURAL” DARK CHOCOLATE

530kcal/100g

FLAXSEEDS

BOX 23: “HEALTHY HIGH CALORIC” FOODS – BECAUSE NATURALLY HEALTHY BEATS CALORIES

So powerful is the idea of a food being naturally healthy that consumers will overlook a high calorifi c value

600kcal/100g

ALMONDS

354kcal/100g

COCONUT


also fi t neatly under Key Trend 7: Plant-based foods and beverages.

1. Seaweed

In parts of Asia seaweed makes up as much as 20% of the diet. Yet it is still seen by many product developers as “too strange” to take seriously. That’s a pity, because sales of snacks using seaweed as the hero ingredient are growing rapidly – in the US by 25% in 2015, to over $300 million (€279 million). The European market is smaller, but also growing fast. In both the US and Europe small companies are leading the way in launching new seaweed snack products (see Chart 19).

In short, the US seaweed snack market is already bigger than the kale snacks market. And there are parallels between the two vegetables.

One industry executive told NNB that seaweed is “something people are picking up who are green lovers, who are behind the green trend in smoothies and the emergence of kale. A few years ago we weren’t as dark leafy green as a society. The trend had gone as far as spinach and kale but hadn’t really emerged yet. Now consumers are favoring those deeper, darker greens, and seaweed is in the same family.”

One of the biggest drivers has been growing familiarity and acceptance of seaweed thanks to

the massive increase in consumption of sushi in the west. The US sushi market grew by 28% between 2010 and 2014 and is valued at $2.2 billion (€2 billion), while according to IRI data sales of sushi rolls sold as snacks were up 13% in 2014, a faster growth rate than any other snack category measured by IRI.

Some nutritional properties, some science. Seaweed has an excellent and very credible naturally-healthy story to tell. Among seaweed’s “naturally functional” advantages are that it is:

• High in minerals (such as iodine and calcium) and vitamins A and B12.

• Source of omega-3 • Source of protein • Source of fi bres (alginate) • One of the only natural, non-animal

sources of vitamin B12; a 1oz (28g) serving contains 140% of the daily requirement of B12

• Low in fat and sodium • High in antioxidants • Gluten-free • Lactose-free

Seaweeds are very low in calories. Ten sheets of nori contain just 22 calories – making


CHART 19: SEAWEED OVERLAPS WITH MANY TRENDS


them ideal for snacks, where consumers welcome the reassurance of a low calorifi c value, and seaweeds can be added to several products without signifi cantly increasing total calories.

Seaweed is high in protein, off ering protein levels ranging from 5% to 47% of dry weight (exact amount varies widely depending on species, with red seaweed having higher protein levels than brown). It provides all of the amino acids, and especially glycine, alanine, arginine and proline.

Fibre content of seaweed ranges from 30% to 50%, of which 20% to 65% is soluble – including alginate, which has been found to reduce the amount of fat absorbed by the body by around 75%.

Calcium is high in seaweed. It is seen as “the ultimate calcium source for vegans,” said Kimberly Grayson, chief revenue offi cer at Abe’s Market, a premier online retailer of natural and organic products. “They struggle with where to get their calcium from, and protein, and as a leafy dark green [product, seaweed] falls into that category. It has ten times the calcium of milk and eight times that of beef, pound for pound.”

Marketing muscle and/or media appeal. While seaweed’s fi bre content and related digestive benefi ts are often discussed in media articles, these potential benefi ts have not yet been fully explored in products.

Allows creativity with convenience and snackifi cation. Seaweed’s transition from food fringes to mainstream is being propelled by snack products. Companies have not allowed themselves to be constrained and are off ering entirely new and previously unknown product formats, ranging from nori sheets to chips to sticks.

Allows creativity with food technology and /or packaging technology. Intelligent use of food technology has made possible the use of seaweed as an ingredient in snacks and other foods, as well as making it available as an ingredient for food manufacturers to incorporate into other products.

Commands a premium price. Seaweed snacks are super premium-priced (see Chart 21) but their impressive health halo, coupled with a wealth of interesting tastes and textures means that they are catching the attention of health-conscious urban consumers who see themselves as food explorers and have no problem with the price premium.

Has a solid supply chain. Seaweed is mostly farmed, proving a very solid supply chain. This helps support seaweed’s sustainability credentials, which have been boosted by a not-for-profi t sustainability monitoring organization called Seafood Watch, which in 2014 gave ocean-farmed seaweed its highest sustainability ranking. This organisation’s rating system is now being adopted by retailers, such as Whole Foods.


9 8 9 11

8

15

19 21

39

57

40

2

6

2

6 4

6

16

10

16

27

17

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Europe

USA

CHART 20: SNACK PRODUCTS LAUNCHES WITH SEAWEED, EUROPE AND US, 2005-2015(YTD)

There has been a surge in launches of new snack products based on seaweed over the last two years. Although there are many more launches in Europe than in the US, it is the US which remains by far the largest retail market for seaweed snacks with the most successful brands.

*UP TO 30TH OF JULY OF 2015 SOURCE: MINTEL GNPD


Connects to the main consumer trends. Apart from being Naturally Functional seaweed connects clearly to:

Key Trend 2: Snackifi cationKey Trend 9: Free-fromKey Trend 10: Protein

2. Coconut Following the success of coconut water – which surged from zero in 2006 to an almost $3 billion (€2.4 billion) business in North America and Europe by 2014 – coconut is now entering new segments and showing how coconut water was just the beginning of this massive trend: healthy, natural, tasty and sustainable coconut are starting to be used in a variety of food products.

Some nutritional properties, some science. Coconut has not secured any approved health claims, because it doesn’t need to. Nutritional properties diff er somewhat between the various coconut products (coconut waters, coconut milk, coconut oil, coconut snacks) but overall consumers perceive coconut as healthy, specifi cally:

• Coconuts are high caloric foods (354kcal/100g) due to high fat content. However, coconuts’ saturated fats consist of medium chain fatty acids, like lauric acids and myristic acids – which are the “healthier” ones among the saturated fatty acids. Some studies have shown a relationship between these fatty acids and lower cholesterol levels as well as benefi cial

antiviral and antibacterial activities.• Coconuts are rich in fi bre, vitamins (C, E, B1,

B3, B5 & B6) as well as important minerals (including iron, magnesium, potassium).

• Coconut milk is lactose-free, which means lactose-intolerant consumers can consume it without digestive discomfort.

• Coconut water has the same electrolyte balance found in isotonic drinks, which off er hydration benefi ts. The UN Food & Agriculture Organisation states that it’s “a natural isotonic beverage with the same level of electrolyte balance as we have in our blood. It’s the fl uid of life”.

• Coconut fl our can decrease the Glycemic Index in baked foods, which can be important for diabetic consumers, for example.

• Coconut oil is the most polarising products, as there is disagreement about its “healthiness” and the British Heart Foundation does not recommend using this product.

Marketing muscle and/or media appeal. The naturally healthy properties of coconut make it a very interesting story for the media, and an increasing number of brands are using it as the main ingredient in their products. One of the leading coconut water brands, Vita Coco, has helped defi ne the coconut as fun, sexy and exotic by its signifi cant marketing eff orts in Europe, the US and now in China.

• Brands take advantage of the provenance story around coconut, which has already proven to


Price per 1 kg

CHART 21: SEAWEED PRODUCTS PRICING VS OTHER SNACKS - USA

$



be a successful message for consumers.• The idea of “healthy fats” or “special fats”

is being explored by many of the coconut yoghurts and milks brands.

• Coconut is evidently a fl avour that pleases consumers, so this is also a common message used by brands – the delicious taste and texture of the products.

Allows creativity with convenience and snackifi cation.

• Coconut water was initially sold almost exclusively in single-serve, on-the-go packs, making it easier for people to try the product as a snack.

• Coconut yoghurts are mostly sold in single-units, this makes it easier for consumers to see it as a single-serve snack and also makes premium prices more achievable.

• Coconut milks are mainly being sold in 1L packages, but there are already some brands off ering 250ml packs and several products mixing coconut milk with fruit juices, coff ee or chocolate in on-the-go bottles.

• Coconut snacks are increasing – commonly found in the format of coconut chips, dried fl akes and mixed with other nuts/dried fruits. Several supermarkets now off er single-serve

packs of coconut fl esh pieces that consumers can have on-the-go.

Allows creativity with food technology and /or packaging technology. The advantage of coconuts is that all of its parts can be used to develop innovative products – its fl esh, milk, water, sugars and oil.

• Reduced fat coconut products options are being developed for consumers who are still obsessed with its fat content.

• Coconut yoghurts are usually bigger than regular dairy single-serve yoghurts, and some brands have invested strongly in developing innovative and creative package designs.

Commands a premium price. Coconut water retails at a premium to other beverages but remains aff ordable enough to be used as a high percentage of fi nished products. Coconut milk is premium when compared to dairy milks, and more expensive than some of the other non-dairy alternatives (such as soy milk, oat milk, and almond milk). Many brands are investing in blending coconut milk with other non-dairy milks to improve taste and texture.

Coconut yoghurts are extremely premium in the markets where they currently exist. For example,

CHART 22: COCONUT COMMANDS PREMIUM PRICES

Coconut waters have seen steadily growing sales despite selling at a signifi cant premium to fruit juice and bottled water. Other coconut products from yoghurt to non-dairy milks also sell at a signifi cant premium.



0

50

100

150

200

250

300

2010 2011 2012 2013 2014 2015*

UK

Brazil

US

France

Vietnam

CHART 23: THE NUMBER OF SNACK PRODUCTS LAUNCHED WITH COCONUT AS AN INGREDIENT IS GROWING

Source: Mintel GNPD

0

10

20

30

40

50

60

70

2010 2011 2012 2013 2014 2015*

CHART 24: AN INCREASING NUMBER OF NEW DAIRY PRODUCTS FEATURE COCONUT AS AN INGREDIENT

Source: Mintel GNPD



in the UK, CoYo yoghurts and The Coconut Collaborative yoghurts cost up to 76% more than regular dairy yoghurts.

Supply chain. Palm trees produce coconuts up to 13 times a year, and even though it takes almost one year for a coconut to mature, in a single harvest a fully blossomed tree can produce between 60 to 180 coconuts. Currently, a supply chain for coconut is in place to deliver year-round supply and steadily increase available volumes.

Connects to the main consumer trends. Coconut also connects clearly to:

Key Trend 1: Beverages redefi nedKey Trend 2: Snackifi cationKey Trend 7: Plant-based foodsKey Trend 9: Free-from

3. Beans

Beans are part of many traditional dishes in several countries, but it’s their incorporation in more convenient snack forms that has made them an emerging trend within Naturally Functional.

Some nutritional properties, some science. Beans do not have any approved health claims, but they still have a range of nutritional benefi ts that are getting more and more positive media attention.

• High in soluble fi bres – at 13g per 100g – which are said to help lower cholesterol levels and keep you full for longer

• High in protein – 20g per 100g – which is why they are so often recommended for vegetarian and vegan diets.

• Low glycemic index due to the balance of complex carbs and proteins – important for diabetic consumers

• Low in fat and no cholesterol• Gluten-free• High in antioxidants, vitamins and minerals

(copper, folate, iron)

Marketing muscle and/or media appeal. The health properties of beans are an appealing message in brand communications, and attract positive attention from the media. The main messages used by brands relate to the fi bre and protein content of beans. However, associations with weight management and low GI are also common.

Brands like Beanitos or Way Better Snacks are leading the way, mainly with intense sampling, in showing consumers that bean-based snacks have great taste and texture.

Creativity with convenience and snackifi cation. Beans have been mostly used

CHART 25: COCONUT BENEFITS FROM OVERLAPPING WITH A NUMBER OF TRENDS


BEVERAGESREDEFINED



in snack products, such as chips, dips, tortillas and other crunchy snacks. For example, 50% of Beanitos sales are in mainstream supermarkets – the other 50% are in convenience, health food stores and independents. Some brands already off er these products in single-serve packs, and the opportunity is there to innovate and incorporate beans in convenient snacks or even beverages – chickpeas are already used in a traditional drink in some Middle Eastern countries, so why not beans?

Creativity with food technology and /or packaging technology.

Beans’ physical properties make them a very versatile ingredient.

• They can be dried and/or roasted for crunchy products, such as chips, tortillas or bars.

• They can be cooked and mashed to incorporate in diff erent types of products, like dips, cookies, and soups.

Premium price. Bean-based snacks are premium priced when compared to the “unhealthy” snacks they try to replace – crisps or other salty snacks. Within the new “healthy chips/crisps/crunchy” snacks, some brands are more premium, like Popchips for example.

Supply chain. Thanks to major suppliers all over the world beans have a secure and established supply chain – this is what allows beans to have a relatively low price when compared to other naturally functional ingredients (such as chia seeds, coconut, or almonds).

7. Connecting to the main consumer trends. Beans connect clearly to:

Key Trend 2: Snackifi cationKey Trend 7: Plant Based FoodsKey Trend 9: ProteinKey Trend 10: Free-from


BOX 24: BEANITOS: A BEAN SNACK WITH HIGH GROWTH AT A PREMIUM PRICE

CHART 26: BEANITOS, A TYPICAL FAST-GROWTH START-UP

0

5

10

15

20

25

30

2010 2011 2012 2013 2014 2015

$0.564 $1.486$4.068

$7.986

$12.133

$32.00

$ millions

Source: Infoscan Reviews, IRI

Beanitos is based on innovation in ingredients, creating a point of difference. It also connects to a number of trends including gluten-free. US sales in supermarkets, drugstores, C-stores and multi-channel outlets.


CHART 27: BEANS BENEFIT FROM OVERLAPPING WITH A NUMBER OF TRENDS

CHART 28: THE NUMBER OF NEW SNACK PRODUCTS FEATURING BEANS AS AN INGREDIENT IS ON THE INCREASE

0

20

40

60

80

100

120

140

160

2010 2011 2012 2013 2014 2015*

Europe

France

UK

Australia

US

Source: Mintel GNPD




CHART 29: TREND DIAMOND, KEY TREND 6, NATURALLY FUNCTIONAL, POWERING THE RISE OF COCONUT

CHART 30: TREND DIAMOND, KEY TREND 6, NATURALLY FUNCTIONAL, POWERING THE RISE OF SEAWEED


CHART 31:TREND DIAMOND, KEY TREND 6, NATURALLY FUNCTIONAL, POWERING THE RISE OF BEANS


CHART 32: PRODUCT LIFE-CYCLE, KEY TREND 6, NATURALLY FUNCTIONAL


LIFESTYLECONSUMERS





SALESSeaweed

Beans

Coconut



Key Trend 2:

SUMMARY• Taste transformation: The debut of ingredients like almond and coconut, with their superior taste to soy (which

was a turn-off to many people), has got consumers excited again about plant-based foods.

• Innovative formats: Interesting new snack and beverage formats have made plant-based foods far more visible to consumers and easier for them to incorporate into their lives.

• Aura of health and sustainability: Consumers feel good about choosing plant-based foods, believing they are better for the environment and for their health.

• Meat and dairy under attack: Plant-based foods and drinks benefit from the belief – held by a small-but-growing number of consumers, particularly Millennials – that meat and dairy are unhealthy.

• We’re all “flexitarians” now: Consumer beliefs about plant-based foods are not necessarily consistent – they may buy almond milk for putting on their cereal but also cows’ milk for their coffee. They may be vegetarian, vegan, meat-reducers – or dabble in all of these (“flexitarians”).

• The biggest opportunities: Two segments in particular offer the most opportunity – snacks, and non-dairy drinks.

• Stronger marketing of plant-based protein: The view that non-dairy protein is better than animal source protein is particularly promoted for sports and exercise.

Plant-based foods and beveragesKey Trend 7:

10 Key Trends 2016 Plant-based foods

At the same time that meat is enjoying a fresh image as a healthy food, plant-based foods and beverages are also having a moment. Consumers like the idea of “plant power”, with its connotations of health and sustainability. And if the plants come in a tasty form (unlike the drab nut and sprout creations of the 1980s) all the better. Innovations such as hummus, bean chips and almond milk are transforming plants into delicious and exciting fare.

The trend is driven by the most powerful trend of all, Naturally Functional. People everywhere like the idea that their foods and food ingredients are as natural as possible and have some natural and intrinsic health benefi t. It is one of the most compelling selling messages.

You can see this force at work most clearly in the case of almond milk. Almonds have created a very strong health halo since about 2000, conferring an image of healthfulness on any product that contains them. This made it an easy decision for consumers to choose almond milk, a product which has been responsible for propelling the phenomenal growth of the non-dairy milks market (see Chart 33) in the US and elsewhere.

Where are the opportunities in plant-based foods?

The trend presents a number of strong growth opportunities for makers of snacks and beverages and for dairy companies. Three segments in particular are getting the most attention (it’s worth noting that the fi rst two benefi t from consumer pull, but the third is looking like the child of investor push):

1. Non-dairy drinks and other “dairy-like” products: thanks to the debut of almond and other better-tasting ingredients than soy (which traditionally was the heart of this segment) sales have exploded in many countries, rising by 20% in the US to achieve a 10% value share of the milks market, 40% in the UK and 20% in Germany. There are a wealth of opportunities for new ingredients and product types.

2. Snacking: advances in food technology allow chickpeas (garbanzos), beans, sprouted grains, seaweed and a host of other plant-



source ingredients to be made into a wide array of snack types. And because people like to experiment with snacks, and are willing to try snacks which connect to Asian and Mediterranean cuisines (as most of these products do), there’s massive growth potential (see Key Trend 2, Snackifi cation).

3. Meat substitutes: dogged by poor taste and texture, this long-established segment is relatively small and low growth and suff ers from

an “overly processed” and not very natural image. It is likely to stay small for some time – unless the fi nancial investors who have recently poured hundreds of millions of dollars into the sector get their way.

Consumer beliefs driving demand for plant-based foods

Consumer researchers, consultants and the trade media are making big claims that the plant-based foods trend is a sign of:

• the growing power of the “vegetarian lifestyle” • or “the mainstreaming of veganism” (as one

source claims)• or the attention that consumers are paying to

sustainability and the health of the planet

While it’s true they do play a role, you should not base your strategy primarily on these. These three consumer motivations are just a small part of a large and complex landscape of consumer beliefs – many of which are contradictory and few of which are based on science and facts. These motivations are:

1. Taste2. Vegetarian and vegan3. Consumers’ quest for novelty and change (we’re

all fl exitarians now)4. Lactose and dairy-free5. Sustainability6. Protein7. The media and activists

1. It’s all about taste: No food or beverage sees sales go up unless people think it tastes good. For this trend, improvement in the taste of products that were once universally bad-tasting – non-dairy milks and meat substitutes – has been the biggest growth driver. This factor is more important than

37% growth rate

€233m

UK USA

CHART 33: NON-DAIRY ALTERNATIVES ENJOYING MASSIVE GROWTH (2013-2014)

0

€500m

€1bn

€1.5bn

€2bn

Dairy alternative market• non-dairy milks• non-dairy yoghurt• non-dairy desserts• non-dairy creams

53% growth rate

€1.8bn

SPAIN

20% growth rate

€174m


sustainability, nutrition or any other.When almond milk debuted it was a step-change

in taste that made it attractive to the many people who disliked the beany, vegetable taste of soymilk. This factor brought new consumers to the category and it can take the credit for propelling growth fi gures like these:

• 53% in the US• 37% in the UK

Similarly, the Quorn brand of meat substitutes has carved out a profi table and growing niche because the company has fi gured out – perhaps more than any of its industry peers – how to give its products a taste and texture that is very close to meat.

2. Vegetarian and vegan: Vegetarianism and its more extreme cousin veganism are more common in the old industrial countries of northern Europe

and the US and much less prevalent in southern Europe. In countries where people are still closer to the land – such as New Zealand and France, where most people still have a grandparent, an uncle or cousins who are connected to farming – vegetarianism barely exists, at just 2.5% of the population in France. In the UK and Germany on the other hand, where people moved off the land into industrial cities over 150 years ago, vegetarianism is more common, at 10% and 9.6% respectively. The lesson? When people know who produces their food, they are less suspicious of it.

Vegetarianism is self-defi ned – and defi ned in complex ways. In the UK, for example, 10% of people claim to be vegetarian (the highest rate in the industrialised world) but in fact around half of these people say they also eat fi sh. Another group eats fi sh and chicken.

They may be vegetarians or vegans for a limited period, a phenomenon the BBC noted in its


BOX 25: VEGETARIAN “LIFESTYLE” CREATES AWARENESS ABOUT PLANT-BASED FOODS

Among Millennials aged 18y-35y, vegetarianism is increasing:• UK, 20% of people aged 16-25 claim to be vegetarian.• US, 12% claim to be ”faithful” vegetarians.

But the numbers don’t tell the whole story. Half of UK vegetarians admit to still eating fi sh, while only 2% are vegan.

In the US, the growth of vegetarians (3.8%) and vegans (1.5%) is much less than the growth of vegetarian “inclined” consumers (26%) – people who consume some meat replacement products and plant based products as just a part of their diet.

In Spain particularly the vegetarian trend is still very niche: meat was the main food bought by consumers in 2013.

CHART 34: PERCENTAGE OF POPULATION WHO CLAIM TO BE “VEGETARIAN” & “VEGAN”

Source: FIAB, Observatorio del Consumo y Distribucion Alimentaria, Mintel, VeganSoc, NHS, Vegetarian Times, Gallup’s Consumption Habits Survey, Mintel

0%

2%

4%

6%

8%

10%

12%

8%

2%

9.60%10%

2%

0.5%1.4%

1%

USASPAIN GERMANY UK

Vegetarians

Vegans


3.20% 5%

7%

0.5% 2% 2%

10%

21%

36%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

2008 2012 2013

Vegetarian

Vegan

Vegentarian "inclined"

2014 article “The rise of the part time vegans”, and one encouraged by the “vegan for a month” Veganuary campaign. Or they may eat vegan foods occasionally as part of a normal eating repertoire that includes animal proteins. They may even be vegetarians who eat meat when they get drunk! http://www.sciencedaily.com/videos/97a27ed7ecde51f1fc49c919c8cce5f6.htm

3. Consumers’ quest for novelty and change (we’re all fl exitarians now): We are not vegetarians, but fl exitarians, picking and choosing from a wide range of cuisines and eating styles as it suits our mood and our lifestyle. We want novelty and new tastes and textures.

A vegetarian eating style can form part of that – even for people who are meat-eaters. The

Chipotle restaurant chain, for example, added a shredded tofu option to its burrito choices in some of its restaurants in 2013. Half the buyers, Chipotle found, were meat eaters. Chipotle is now rolling the product out nationally.

In some countries people add a vegetarian dish to their home cooking repertoire once a week. The Quorn brand successfully targets this consumer group, and for that reason it has avoided positioning itself as a vegetarian food for most of its 25 years.

Likewise, some people will use cows’ milk in their coff ee – but choose almond milk or coconut milk to make their smoothies. Some people will never use cows’ milk in drinks or cooking – but they will have Greek yoghurt or a piece of cheese.

People like to experiment. “One thing we know is that nothing is ever ‘permanent’ in the category”,

BOX 26: “FLEXITARIANS” ARE A STRONG DRIVER OF THE PLANT-BASED FOOD TREND

CHART 35: VEGETARIANISM AND VEGANISM IN THE US

Consumers like to experiment - Quorn targets consumers who like to eat a vegetarian meal once a week.

Chipotle’s shredded tofu option (called Sofrito) for its burritos has proved so popular – even with meat eaters – that the company is rolling the product out nationally.


“Flexitarians” are consumers who are not strictly vegetarians, but choose to alternate between animal-based products and plant-based products. For example, they might have regular milk three days a week, while the rest of the time they would try a plant-based milk.

According to Mintel, in the US, 36% of people admit to have a “vegetarian inclined” diet, which means they often consume vegetarian products but do not necessarily exclude animal products from their diet.


the director of marketing for Dream non-dairy beverages, a brand owned by Hain-Celestial, told NNB.

“Consumers strongly prefer variety” in the non-dairy-milk case, with more than 65% of consumers in the category purchasing more than one type of beverage.

“Almond milk allows you to combine anything you want in a smoothie, either a fruit base, or for protein, or an energy shake. It’s super-versatile. A lot of people are looking to start their day with an almond-milk smoothie rather than cooking eggs and eating cereal.”

The No.2 use for almond milk, after smoothies, is to pour almond milk on a bowl of cereal. No.3 is to drink a glass straight up. Cooking applications rank No.4.

4. Lactose free, dairy-free and the digestive connection: People who are medically lactose-intolerant were for a long time the core of the soymilk market. Today a much larger group of consumers – maybe four-to-fi ve times as many – are lactose intolerant (often they have self-diagnosed that they “feel better” if they reduce the amount of lactose in their diet).

One driver of this behaviour is people web-searching for reasons why they experience digestive

comfort. The most common explanation found in internet searches is gluten intolerance (this has been a driver of the gluten-free trend) with lactose-intolerance appearing as the second most-frequent explanation of digestive health problems. The explanation is sometimes widened to the much broader dairy intolerance, and naturopaths and personal trainers seem to use a recommendation to follow a dairy-free diet as their default setting for dealing with weight or digestive problems.

5. Better marketing for non-animal protein:Connected to lactose- and dairy-free is the emerging idea that non-dairy protein is somehow “better” than animal-source protein. This view is particularly promoted in relation to sports and exercise, with a host of company websites boasting of “vegetarian athlete” brand ambassadors. Most vegetable protein is defi cient in the amino-acids which are the building blocks of quality protein, and because plant proteins are less well-digested an athlete avoiding dairy will have to consume about 10% more protein to get the same eff ect. But in this market, as in so many others, belief is more powerful than science.

6. Sustainability worries: You don’t need to look very far to fi nd a wealth of media reports


BOX 27: MARKETING INCREASINGLY PUSHES PLANT PROTEIN FOR ATHLETES


Books by T. Colin Campbell, Michael Pollan and vegetable-loving chef Yotam Ottolenghi (widely known as the “man who sexed up vegetables”) have boosted consumers’ awareness of “plant-power”.


criticizing the environmental impact of the meat and dairy industries, from greenhouse gas emissions (the UN FAO attributes 18% of greenhouse gas emissions to livestock) to the impact on water courses. Add to this an unending stream of allegations about “factory farming” and it’s easy to see why a chunk of consumers – particularly younger Millennial consumers – don’t really like the idea of animal-origin foods.

However, it’s worth noting that sustainability worries have not been enough to make consumers think twice about buying almond milk, although 80% of the world’s almonds come from drought-stricken California and there are question marks over the sustainability of future production.

7. The media and activists: Consumers take their cues from what they read in the media, fi ltered down from academics or thinkers into mainstream health and lifestyle publications. That guides their dietary choices (until the next wave of thinking comes along to overturn the fi rst).

Two infl uences driving enthusiasm for plant-based foods are T Colin Campbell, a professor at Cornell University, whose book The China Study, billed as “the most comprehensive study of nutrition ever conducted”, was published in 2005 and by 2013 had sold 1 million copies. It advocates a whole food, plant-based vegan diet as a way of avoiding “Western diseases” and, although controversial, has been highly infl uential.

A year later, American author Michael Pollan published his book, The Omnivores Dilemma, named one of the 10 best books of 2006 by the New York Times. One of his key phrases from the book – “Eat food. Not too much. Mostly plants” – has become widely repeated as an easy-to-remember rule for eating.

A trend full of contradictions

1. Naturally healthy? Really? It seems hard to believe that the 25-year-old millenials who consumer researchers are always telling us want their foods to be natural – and who care about authenticity, provenance and transparency about ingredients – are the same people who get excited about a meatless burger produced by putting industrial food ingredients into a twin-screw extruder. For the fact is that most meat substitutes are the opposite of natural. No matter what their makers’ claims, they are highly processed and the end product is very far removed from the natural image of the plant.

While hummus is the role-model of a virtuous, plant-based snack food, made with a high percentage of chickpeas (garbanzo beans) and sesame seed paste, meatless burgers and almond milk are its polar opposite.

2. Questionable nutrition The statements that some products carry about “plant power” look questionable at best. Almond milk, for example, is just 2% almonds. The rest is water and the products are heavily fortifi ed to provide as much calcium, protein and vitamins as cows milk. It is, as one media source described it, more like “a glass of water and a multivitamin”.

Both non-dairy milks and meat substitutes often trumpet the absence of cholesterol or saturated fat. Yet there is no hazard to health from cholesterol in foods – the US even removed cholesterol from its list of “nutrients of concern” in 2015. As part of a balanced diet saturated fat poses no cardiovascular risks.



How will the trend evolve?

Simple consumer familiarity – just being able to see the products prominently in supermarkets – will cause people to try them. A very few will become committed buyers, most will buy them occasionally.

Familiarity is also making it easier for Millennials to choose plant-based milks – many of them, it turns out, grew up with parents who drank soy milk in the 1980s and 1990s (the last big plant milk boom).

Demand will increase. Vegetables – for the most health-conscious 20%-30% of the population – are shedding their image of being boring and diffi cult to live on thanks to:

• the eff orts of celebrity chefs creating easier, tasty-looking recipes

• the presence in every type of retail outlet of convenient, good-tasting vegetable snacks, from Innocent’s “Veg pots” to hummus to kale chips.

Meat and dairy will also come under ceaseless attacks. The announcement by the World Health Organisation in October 2015 that it was bracketing red meat and processed meat along with smoking as a cause of cancer attracted massive sensationalist media coverage – although there were many dietetics professionals pointing out the weak scientifi c basis for the WHO’s decision. Some people will be panicked into moving away from

animal foods, others will ignore it. We live in a sampling culture, where if something

is interesting (in any fi eld) people try it, share pictures of it on Pinterest or Instagram – and dip in and out as it pleases them. It’s no longer necessary in most western societies for anyone to be heavily committed to anything. It’s not vegetarians that will drive the trend, but people adding the products to their repertoire – as they already buy coconut milk and cows’ milk in the same shop, one for cooking, one for adding to coff ee.

Overall, plant-based milks and meat substitutes are part of the trend towards massive fragmentation of all markets. They will not become the majority, but they will become a ”big niche”.

What can companies do

Dairy companies should keep control of the chiller cabinet by selling their own non-dairy milks. Farmer-controlled dairies that refuse to participate are foolish and missing a high-value opportunity.

For snack companies the course ahead is clear (see Key Trend 2: Snackifi cation) and the opportunities many. And makers of meat snacks need not lose any sleep. Markets are fragmenting and there is space for everyone. Many people who eat hummus and seaweed snacks will also try a meat snack.

Source: SoyInfo Centre/Nielsen/SPINS

512 553

620

0

100

200

300

400

500

600

700

2010 2012 2014

CHART 36: SALES OF MEAT ALTERNATIVES IN $MThe retail value of the US meat alternatives market (both refrigerated and frozen) in both natural foods and mainstream supermarkets was $620 million in 2014, an 8.9% increase over 2013.

The small size and low growth of the meat substitutes sector stands in marked contrast to the larger and faster-growing non-dairy milks sector (see Chart 33).

This underscores that it’s not possible to generalise and say “plant foods are taking off”. Some categories are (based on taste) and some are not.

The leading 5 brands (by dollar value) in frozen and refrigerated meat alternatives are:Morningstar Farms (Kellogg) 52.0%Gardein (Pinnacle Foods) 7.5%Boca Foods (Kraft Foods) 7.4%Lightlife (Brynwood Foods via ConAgra) 6.9%Tofurky (independent) 5.3%

BOX 28: THE SLOW-MOVING MEAT ALTERNATIVE MARKET IN THE US



BOX 29: PLANT-BASED FOODS ARE THE OLDEST AND BIGGEST TREND

We’ve been eating plant-based foods for decades…

…and now we’re rediscovering them in forms that are more exotic, more colourful and more fresh

Source: adapted from UN FAO

CHART 37: PLANT-BASED FOODS ARE ALREADY A LARGE PART OF OUR DIETS

• According to Mintel 36% of Americans buy meat alternatives - these people are the once-a-week-or-less buyers.

• The large number of younger millennials represented among vegetarians in America includes a proportion who are vegetarian as part of their life-stage – just as their parents were at the same life-stage back in the 1970s and 1980s. For practical reasons and for greater variety and interest in their diet, most of them will give up 100% vegetarianism, although they may keep the habit of eating vegetarian food two or three days each week.

• Fragmented and contradictory beliefs that are constantly changing characterise much consumer thinking around meat reduction / vegetarianism / veganism (see Key Trend 5: Fragmentation of the consumer mind).

CONSUMER INSIGHTS


BOX 30: SILICON VALLEY FINANCIERS SCENTING THE NEXT BILLION-DOLLAR OPPORTUNITY WILL DRIVE “PLANT-TECH”

Achieving sustainability is the front-and-centre promise of the wealth of “plant food tech companies” which have sprung up in the US and particularly in California and around Silicon Valley. The investors of Silicon Valley are running out of good “tech” investment opportunities and they have turned their attention to food, arguing that they can “disrupt” the food supply, just as Amazon did for bookstores.

Hence the proliferation of start-ups which – just like Silicon Valley’s usual investments – have backing of hundreds of millions of dollars but have few or no sales. Examples include:

Beyond Meat: A company that is trying to make a meat substitute out of pea protein and has received around $100 million in investment.

Impossible Foods: Its core technology appears to be a bioengineered product from a molecule found in hemoglobin (what makes blood red). Impossible Foods is backed by $108 million in funding from Google Ventures, Hong Kong billionaire Li Ka-shing and Bill Gates’s Gates Ventures.

Hampton Creek: A business trying to replace eggs with pea protein. So far it has made an egg-free mayonnaise that is not much different from the egg-free mayonnaises that have been on the market since the 1970s. Backed by at least $120 million, its investors include Bill Gates.

Unsurprisingly, this plant-based foods investment trend is supported by an intense PR effort. Investors want to push the category to get a return on the massive investments they have made.

The Achilles heel of these companies seems to be that there’s no very strong point of difference compared to meat substitutes already on the market.



10 Key Trends 2016 Plant based

CHART 38:TREND DIAMOND, KEY TREND 7, PLANT-BASED FOODS & BEVERAGES

CHART 39: PRODUCT LIFE-CYCLE, KEY TREND 7, PLANT-BASED FOODS & BEVERAGES


LIFESTYLECONSUMERS





SALES


8


Key Trend 2:

SUMMARY• E-commerce from the start: An effective distribution strategy for a new brand or a small brand must consider,

from day one, online retailers’ web operations and e-tailers as well as a direct-to-consumer e-commerce option.

• More accessible than ever: E-commerce enables companies of any size – and particularly small ones – to create a direct-to-consumer business without the high labour costs traditionally associated with direct selling. Delivering packages – even globally – has never been cheaper and thanks to technology two people can create an e-commerce business that would have required 10 people.

• More power to small brands: Online shopping is becoming a way for smaller brands, new brands and experimental brands to reach consumers, avoiding the big retailers and associated costs, as well as offering several advantages. It adds to the steady trend for smaller brands to eat away the market from under the noses of established players.

• Urban change: E-commerce lends itself well to dense urban centres, and the revolution in consumer buying behavior in China may happen in major cities in other countries – potentially spelling the end of traditional giant supermarkets in big cities.

• Mix it up: A direct-to-consumer strategy can be combined with selling via e-tailers and supermarkets as well as bricks-and-mortar retail.

E-commerce powers the growing direct-to-consumer trend Key Trend 8:

10 Key Trends 2016 Direct-to-consumer

In a very short space of time, e-commerce has become an important channel to market in its own right. As yet, it’s a small part of the market – complimenting traditional retail, not replacing it – but it is growing fast.

What makes B2C e-commerce important is how it opens the door of opportunity for small companies:

• It gives a route to market for smaller brands and new brands that would struggle to get shelf space in traditional grocery – they can bypass the challenges of getting listings in traditional bricks-and-mortar retail, and the bigger challenge of staying on the shelf while sales are in the early-stage, low-unit-sales period (and also erode the advantage that bigger competitors have in controlling shelf-space in supermarkets)

• Companies keep more of the profi t margin that would previously have gone to retailers

• Brands can use data generated by their e-commerce to identify and better focus on consumers’ preferences (as NatureBox, Graze and Hint have all identifi ed)

An old business model evolves into a key trend – thanks to tech

Selling direct-to-consumers is not new. It’s a long-established business model, practiced by hundreds of small companies (such as Ringtons Tea in the UK, selling direct to consumers since l907) and global companies, such as Yakult Honsha of Japan (selling direct since 1955).

Yakult, the maker of the world’s second-biggest probiotic dairy brand, has attributed its success at taking fresh probiotic dairy to market (in countries as diverse as Indonesia, Brazil and Mexico) to its direct-to-consumer selling network. Direct sales account for almost 50% of total sales and the company describes its network in its annual report as “an unrivalled competitive advantage for global growth”.

In Brazil Danone is taking a leaf from Yakult’s book and also experimenting with direct-to-consumer selling of dairy products. Nestle, too, has a direct-selling operation.

But what is diff erent now is that e-commerce




BOX 31: HOME DELIVERY GROWS UP

The pioneers in home delivery were mostly small brands serving very specifi c consumer needs such as:

• Weight management foods and diet plans

• Sports nutrition• Allergen-free foods

The second wave consisted of companies creating entirely new brands and services specifi cally tailored and available online only. Home-delivered meal kits (such as Blue Apron in the US or Mattsa in Sweden), are a service idea that has shown huge growth but has yet to prove durable and profi table. Another example is snack subscription services, such as Graze and Nature Box.

The third wave, which is now just getting into its stride, is small food and beverage companies of all types creating direct relationships with consumers, selling “regular” foods which are also on sale in supermarkets The third wave has the advantage of simplicity. The service and the product are not new to the consumer and don’t need explaining, and nor is there necessarily the commitment of a subscription (a characteristic of the 2nd wave).

This year, Graze snacks became available in selected Sainsbury’s and other mainstream retail stores across the UK, as part of a “clicks to bricks” move that refl ects the fact that sales in the US and the UK have not met original expectations.

Home-delivered meal kits such as Blue Apron have shown huge growth but the concept has yet to prove itself.

Home delivery pioneer Illumi caters for a consumer niche with gluten- and dairy-free foods.

My Muesli began life as a purely e-commerce operation that allowed

consumers to personalise their muesli and have it delivered to their home – a

“mass customisation” intended to serve “thousands of tiny customer niches” – but after fi ve years the company also opened

branded bricks-and-mortar stores in several German cities.

Twinings tea is a staple in UK supermarkets, but consumers can also order direct from the website, which also allows them to personalise tea tins and send tea as a gift.


enables companies of any size – and particularly small ones – to create a direct-to-consumer business without the high labour costs traditionally associated with direct selling. Delivering packages – even globally – has never been cheaper. Thanks to technology two people can create an e-commerce business that would have required 10 people.

Millenials, “food explorers” of all ages and the health-conscious lifestyle consumers all like small brands and the idea of getting something “authentic” from a small company rather than a global giant. They are also totally accustomed to online shopping. The confl uence of these beliefs and that habit open the door to a wealth of opportunities for small brands and new brands.

Small brands also have the advantage of off ering the “human touch” that these consumer groups want from their brands. They are good at reinforcing their identity as “authentic” through their use of e-commerce and social media to engage their customers – or through real world activities such as sampling.

James Tjan, founder of Mindful Snacks, a company which delivers snacks of all kinds to offi ces in Canada’s biggest city, Toronto, explains that an element of his company’s success was choosing more of a low-tech route. “Our approach is more on the level of human contact, making a point of striking up a conversation and seeing how staff like the snacks.”

Tjan and others with experience of direct sales value the benefi ts of “getting feedback and trialing various combinations of products,” and add that once a brand’s credibility has grown it is helped

by word-of-mouth – either in the real world or on social media.

B2C e-commerce adds to the steady trend for smaller brands to eat away the market from under the noses of established players. For the entrepreneurial company – be it a start-up or a creatively-minded giant (they do exist) – it represents a massive opportunity.

It’s a key characteristic of the development of the internet over the last 20 years that distribution channels change and traditional intermediaries begin to lose their market power. Referred to as “disintermediation”, it’s what Amazon did to Barnes & Noble and what Apple and Spotify have done to big music companies. And now disintermediation – whether from giant e-tailers or from small direct-to-consumer brands – is emerging in food and beverage.

The trend is most advanced in the US and South America, large parts of Asia (notably China and South Korea) and the UK. It’s least advanced in European markets such as France.

The growth of e-tailers is fastest in China, where e-commerce is growing around 20% per year and 41% of consumers buy groceries online. The dominant B2C online shopping website players are Tmall.com.cn and JD.com.cn. The latter provides same-day delivery in major cities, not only for package grocery but fresh dairy.

What has happened in China may yet happen in major cities in many other countries. Already in those cities mainstream supermarkets are struggling to retain the loyalty of urban consumers and particularly the young, who are switching from


BOX 32: RESPONDING TO THE DISTRIBUTION CHALLENGES OF FRESH DAIRY

Yakult initially entered Indonesia in 1992, with distribution via stores only. Sales were low for many years. In 2007 introduced its proven home-delivery system, transforming its sales.

Home delivery now accounts for 48% of sales of 3.5 million bottles a day and helped Yakult generate $82 million in retail sales in Indonesia in 2014, despite premium pricing.



BOX 33: NESTLE INVESTMENT IN ALTERNATIVE CHANNELS

In Brazil Nestle has invested in alternative channels since 2010 is part of the bigger “Nestle to You!” campaign. New ways of reaching customers include Nestle sales people who go door-to-door in cities. One innovative element is the Nestle Boat - effectively a fl oating shop. It serves 18 municipalities located along the banks of the Amazon river.


a weekly shop to frequent visits to smaller stores. A combination of those shopping patterns plus consumers’ use of e-commerce could spell the end of traditional giant fl oor space supermarkets in big cities.

At this stage the volumes involved are still small enough that many senior managements will make the common error of believing that this channel is too small to bother with or they will argue that “it can’t happen in our country”. In time they will be proven wrong.

E-commerce helps Hint take off

E-commerce enables smaller brands to create growth that would be diffi cult to achieve from traditional retail alone. One of the best examples of how e-commerce can help small brands is the Hint Water brand. A no-added-sugar, fruit-fl avoured beverage, the Hint brand debuted in California in 2005.

Hint Water comes in a range of fl avours, yet remains unsweetened (through a process hinging on the oils, and not the sugars, from fruit). It retails at an accessible price of around $1.69 (€1.52) a bottle, depending on the location.

For a long time the brand struggled to secure

retail listings and sales were below investor expectations.

But this changed in 2013-2014 when – at the advice of one of its shareholders – the brand switched its focus to e-commerce and direct-to-consumer sales, in two phases:

• Initially the brand focused on selling through Amazon and similar e-tailers. As a result sales grew 30% in 2013.

• In 2014 Hint launched a direct-to-consumer e-commerce platform.

Hint’s revenues are around $40 million (€36 million), with 25% generated by direct-to-consumer, which remains the fastest-growing channel for the company.

Hint provides the role-model for anyone who wants to build sales without being wholly dependent on mainstream grocery channels.

First clicks, then bricks

As Hint demonstrates, a direct-to-consumer strategy can sit comfortably alongside selling via the e-tailers, such as Amazon, which provide the logistics and delivery system, and which are steadily taking market share from mainstream grocery.

And another thing that’s becoming clear is that



it’s a good thing to have a brand that people can fi nd in both supermarkets and online. Delivered snacks (such as Graze and Nature Box), often based on a subscription model, began by focusing 100% on online sales. But despite their best eff orts sales have yet to meet expectations (as Graze has admitted) and this has caused brands like Graze and Nature Box to launch their products into mainstream “real world” retail.

E-commerce, by helping smaller brands like these, will contribute to the fragmentation of markets which has become one of the defi ning

features of our time. Small brands are already nibbling at the market share of large companies. Free of the constraints and risks of relying only on traditional retail, e-commerce enables even more brands to do so. Each one is taking only a very small bite. But like a school of piranhas they can quickly eat up the market of the bigger brands. As one industry executive said: “First people say we don’t need to worry, these people are all too small, then you wake up one day and they’ve collectively taken 15% market share”.

CHULAICHUWANG

This website offers consumers a variety of home-delivery meal options: • Ready-to-eat meals, which consumers just need to heat and combine in their plate. • Portioned raw ingredients for consumers to cook the meals themselves.

BOX 34: HOME-DELIVERY SERVICES IN CHINA

BENLAI

Benlai offers a wide range of food, including vegetables, fruits, poultry, egg, milk, fi sh, seafood and more, from both Chinese and foreign high quality food suppliers. Users can chose between short-term (1 month) and long-term (1 year) food orders (depending on the type of products) which are kept in cold-storage and delivered directly to their home. The brand focuses on large urban areas like Beijing (where it started), Shanghai and Guangzhou.



BOX 35: HOME DELIVERY IS NOTHING NEW

Ringtons has been home-delivering tea and coffee for more than 100 years. Are we now simply reinstating an old idea, briefl y swept away by the rise of supermarkets?

BOX 36: DANONE INVESTMENT IN HOME-DELIVERY – “PROGRAMA SABER VIVER” IN BRAZIL

In Brazil, Danone invested in a home-delivery program for some of the brands’ specialized nutrition products, including its senior product Souvenaid which “protects brain cells against memory loss”, baby formula, baby food and supplements. These products are usually available in drugstores and pharmacies, sometimes bigger retailers too, but Danone’s initiative makes it easier for consumers like mothers and seniors to access the products. The program also includes phone support for consumers who have questions about the products, and tips and advice for different health topics and conditions.


CASE STUDY: NATUREBOX - A SNACK BOX DELIVERED TO YOUR DOOR

Many subscription services for better-for-you snacks have popped up lately, but the three-pronged approach being taken by NatureBox may be unique:

• Relies on “big data” to hone in on consumers’ preferences• Disdains existing brands in favour of selling only its own private-label goods• For product development, trusts itself to outguess the entire global food and beverage business about

trends that would appeal to its customers

The NatureBox approach seems to be working. The Calif.-based startup is doubling its business this year after tripling it last year and, in 2013, achieving 20-times growth over the year earlier. It is on track to ship three million boxes this year after shipping one million last year and 50,000 boxes in its inaugural year, 2012.

Consumers sign up to receive monthly deliveries of fi ve full-size, resealable snacks from a catalogue of 120 items that are all sold under the NatureBox brand – a number that has remained constant for several months now. Subscriptions start at $19.95 (€17.90) a month, or about $0.75 (€0.67) a serving.

Once they register, users can either select the snacks they want or opt for the “discovery” experience in which the service chooses products for them. “Fan faves,” for example, include chocolate quinoa granola, asiago and cheddar cheese crisps; praline pumpkin seeds; sweet blueberry almonds; lemon tea biscuits; pistachio “power clusters,” and honey Dijon pretzels.



• “There is some evidence that millennials over-index for grocery e-commerce, but to say that millennials are driving the trend is an oversimplifi cation. Consumers across generations and life stages are adopting grocery e-commerce as the service becomes available to them.” Source: John Stichweh, e-commerce director for ConAgra Foods

• Many consumers older than millennials will remember – or will have heard about from their parents or grandparents – a time before the dominance of supermarkets, when home-delivery of groceries, milk and bread was completely normal.

• Urban consumers, and particularly the young, are switching from a weekly shop to frequent visits to smaller stores. There’s evidence that more consumers prefer not to spend and hour or two each week visiting a large supermarket. Others are reducing their number of visits because they believe that many supermarkets offer a dismal and dispiriting environment in which to spend their precious spare time. And there are practical reasons as well. Often choosing to live without cars, they’re unable to carry a large load – and nor are they interested in spending large amounts of time at the weekend in a supermarket. A combination of those shopping patterns plus consumers’ use of e-commerce could spell the end of traditional giant fl oor space supermarkets in big cities.

• These factors are all contributing to a slow erosion of the grip of mainstream supermarkets and an increasing fragmentation of the retail landscape. Supermarkets won’t disappear, but their share of the market will be slowly eroded by e-commerce and convenience stores.

CONSUMER INSIGHTS


CHART 40: PRODUCT LIFE-CYCLE, KEY TREND 8, DIRECT-TO-CONSUMER


LIFESTYLECONSUMERS





SALES



SUMMARY• Embraced in America: US sales of a wide variety of protein-based foods and beverages in general have been

rising steadily, echoing the low-fat zeal of past decades, but protein’s growth is slower in Europe and Asia.

• A trend with staying power: Protein seems sure to be the focus of conscientious American dieters for some time to come, thanks to its image as a satisfying part of a healthy diet (and to the rise of low-carb ways of eating).

• The source of protein may change: Consumers may turn away from added-protein products to “naturally-functional” protein sources – products that have a natural reason to have protein in them, such as meat.

Protein up and away in America as the rest of the world looks on

Key Trend 9:

10 Key Trends 2016 Protein

Many trends in food and health emerge fi rst in the US and then migrate to the rest of the world. Americans have turned their protein craze into an era-defi ning dietary trend, close in importance to the low-fat fi xation of a generation ago. American consumers exhibit a signifi cantly greater interest in boosting protein than their counterparts in other western markets, thanks to historic and cultural infl uences.

“Protein is a long-term trend because more and more people are in gyms and more and more people understand which diets work and which don’t,” Gary Stibel, chairman of New England Consulting Group, told New Nutrition Business. “It only has one redeeming value: It works.”

“Bacon consumption – they can’t make enough of it,” Stibel continued. “Chicken consumption would be up with the exception of the avian fl u. Jerky – it used to be disgusting. Now sales are through the roof.”

But for now the geographic reach of the protein trend is restricted:

• In Asia, protein’s growth is restrained because protein is also often an expensive ingredient – and despite the region’s economic dynamism many people, even the middle class, have to be careful with their disposable income. The focus for protein brands in Asia is fi rmly on higher earners in major cities, such as the successful L-Men brand in Indonesia.

• In the UK and Scandinavia protein is making progress. But outside these countries, take-up of added-protein foods is restrained by European food culture, which looks to nature before it looks to a fortifi ed dairy beverage – protein-conscious people choose to eat more of their traditional and natural types of proteins

(in Spain and Portugal for example this means seafood).

Still a lot of opportunity in protein

Protein has the benefi t of being a nutrient that’s easily recognized and whose benefi ts are readily understood – and even better, are underpinned by a growing body of good science.

Dietitians, nutritionists and the collective opinion of American consumers are rallying around proteins as the soundest pillar of a balanced, long-term better-for-you diet:

• for weight control• to help build muscle mass in older adults• because they are satiating• and because they appeal to activity-minded

consumers both as a slow-burning fuel for workouts as well as an antidote for exercise “recovery”

Barbara Katz, president of HealthFocus International, concurred. Rising protein consumption “is not a fad”, said the head of the Chicago-based group that conducts exhaustive research on the always-evolving health and wellness views of consumers. “Protein is the ‘it’ nutrient these days; it can do no wrong. And there remains a lot of opportunity in protein. Some people still don’t understand what some of the best protein sources are, for example.”

Brian Wansink, an American expert on the psychology of eating, told New Nutrition Business that the psychology as well as the physiology of protein consumption will help it persist.

“It’s one of the few things in nutrition where you



feel the diff erence as soon as you eat some forms of protein,” he said. “If you have a bowl of a hot protein breakfast, versus a bowl of cold cereal, for breakfast, you feel it right away and you feel better throughout the day. You’re not reaching for a doughnut by 10am.”

The head of the Food & Brand Lab at Cornell University and author of the book, Slim By Design: Mindless Eating Solutions for Everyday Life, said that his school’s research recently documented the fact that “people tend to overeat if they don’t have easily edible protein in the house.” Cornell research showed that “people who tend to be the most naturally slim had at least six single servings of quickly available protein in their house to eat,” Wansink said.

“This could be things ranging from string cheese to yogurt to nuts to tofu, and including eggs. And it points to the power of protein in its various forms as being able to off er something fulfi lling and satisfying that doesn’t necessarily strike you as a snack.”

Not surprisingly, long-time promoters of protein-based diets not only are enjoying more sales but also are indulging in a bit of I-told-you-so.

“The research is teaching us that the low-fat propaganda of the last 30 years may not be the best approach for the majority of individuals, and that protein may be the best viable option for the masses out there not only to lose weight but as a wiser way to eat,” Colette Heimowitz, chief marketing offi cer for Atkins Nutritionals, which has been pushing a low-carb, high-protein diet for decades, told New Nutrition Business.

“It’s wiser to curtail consumption of sugars and starches and focus on high-fi ber carbs and proteins, and that’s not just a marketing ploy: That’s what the research and clinical trials have been telling us all along.”

Thus, sales of a wide variety of protein-based foods and beverages – meats, bars, cheese, yogurts, eggs, beef jerky, nuts, legumes, peanut butter, whey-based sports drinks and others – in general have been rising steadily.

BOX 37: SNACKING AND PROTEIN STRATEGY FROM CHOCOLATE GIANT

Hershey, America’s biggest chocolate confectionery maker and one of the biggest in the world, in January 2015 announced the acquisition of Krave, possibly the fastest-growing meat snack brand in the western world.

On the surface, the purchase of a marketer of premium meat snacks by a chocolate giant looks odd, but in fact it illustrates that Hershey understands the most important growth trends.

Krave is thought to have had sales of around $60 million in 2014 – from zero in 2010.

Three key health benefi ts have taken a strong place in health-conscious consumer’s minds over the last 4-5 years and are driving sales growth in multiple categories. It is these that the new meat snacking brands are connecting to. These are:

• Protein• Gluten-free• Natural

Protein: ‘Healthy protein’ is the Krave brand’s main message; others use “great protein” or “high protein”. The essence is connecting to health-conscious consumers’ growing understanding that protein has benefi ts for anyone looking to maintain a healthy fi gure. Reporting by bloggers and mainstream media about the emerging positive science connecting protein to healthy weight is helping to drive consumer interest.



Brand owners have responded with an explosion of products using whey, soy and pea proteins to enhance the protein content of other unexpected carriers of the nutrient, ranging from ready-to-eat cold cereals to enhanced waters.

As a result the number of new-product launches claiming “high” or “source of ” protein grew 29% in North America in 2014 compared with 2013, according to Mintel GNPD. Meanwhile, 12.8% of snacks launched in the US in the fi rst half of 2015 made protein claims, up from 5.8% in 2010.

Signifi cantly, more and more of the protein launches and claims are occurring in non-traditional protein categories including cereals, snacks and bakery products – breakfast cereals passed sports nutrition by almost double as the top market category for product launches making protein claims in 2014.

“The many applications for protein lend themselves well to consumers who are looking for diff erent ways to consume their protein, and this versatility in product off erings enables consumers to have options,” said Jean Heggie, strategic-marketing lead at DuPont Nutrition & Health, which supplies soy proteins.

Typical of the many attempts at harnessing protein in new products is Protein On-the-Go, a single-serve pouch fi lled with three diff erent whey proteins, totaling 25g, to which consumers add water, then shake and drink. A new alternative to the many protein-based workout-recovery products, Protein On-the-Go already is mainstream enough that it is being carried in Target stores within a year of launch. It retails for a suggested $3.99 for a pouch that creates an 8oz beverage.

“The ability to literally take it with you is so much better than carrying around a tub or shaker of powder and having to blend it at your house,” said Peter Evans, chief marketing offi cer of E-Hydrate, the company that introduced Protein On-the-Go.

Further back in the pipeline are potentially important new sources of protein ingredients such

as tempeh. It’s a vegetable-based, cultured, highly-fl exible protein derived from various legumes and grains that is a staple of diets in Malaysia and Indonesia and is fi nding its way into some western applications, such as at foodie restaurants.

“It’s a great delivery vehicle for protein that is vegetable-based and a lot more versatile than other options,” said Ken Harris, managing director of Cadent Consulting, and former chairman of a free-from-food startup called Enjoy Life that was bought by Mondelez International in early 2015. “It’s not commercialized yet, but it’s driven by the high level of interest in vegan protein, and it can be turned into a lot of diff erent kinds of food without limitations.”

Established companies and entrepreneurs now are trying to decide what kind of legs the protein focus has with US consumers: Does today’s picture indicate a long-term determination to consume more proteins in more ways that disadvantage other nutrients? And will it grow? Or has the protein focus shown signs of leveling off and maybe even losing momentum?

The consensus of players and experts indicates that, while there certainly have been some excesses in companies’ eff orts to intersect consumers’ protein cravings with their products, and while some concerning trends loom on the horizon, protein seems sure to be the focus of conscientious American dieters for some time to come.

“We anticipate that there will be more protein-enhanced soy-product off erings that are tailored

The future of protein? Warung Tempeh sells the nutty-tasting fermented soy-bean product at Leather Lane market in London.

Cheerios is America’s biggest breakfast cereal brand. Its new recently-introduced protein variant is thought to have contributed $100 million (€88 million) in sales in its fi rst year.


for specifi c consumer targets with distinct health-focused needs,” DuPont’s Heggie told New Nutrition Business.

Strongest in the US – but other markets waking up

Americans more frequently seek convenience foods or “quick fi xes” than, say, Europeans, which is one reason they’re snapping up protein-based products, said Silvia Veri, nutrition supervisor for Beaumont Health Weight Control Centers, which are affi liated with a major hospital chain in Michigan.

Kara Nielsen is culinary director for Sterling-Rice Group, a brand-marketing fi rm with clients including General Mills, PepsiCo, Quaker Oats and Starbucks. Americans have fl ocked to the promise of proteins, she told New Nutrition Business, in part because they “love the idea of a silver bullet that’s going to save them from everything.”

“They have apps that track news headlines but they don’t necessarily understand the information behind them, and there’s a very powerful media machine that puts out those headlines” about developments in diets and nutrition.

Americans also are more inclined to chase new possibilities in eating compared with traditional societies in western Europe “that have gone for centuries longer with certain culturally-based diets that are connected to a land or a place. It’s harder to break out of those cultural eating approaches in Italy or Spain or France, compared with the US, where we reinvent the way we eat every generation – or every few years.”

Not surprisingly, Wansink agreed with the psychological explanation that Americans “tend to want to get rich quick and do everything else quick, and we can while people in most countries can’t – so we want to lose weight quickly and feel healthy quickly.” But Wansink said that the US focus on

protein also stemmed from “the reaction against the high-carb diet of the past, which was also really big in the United States but less so elsewhere.”

But there are signs that other markets are waking up to protein. Global awareness of protein is 88%, according to HealthFocus International research, and nearly 30% of Asia-Pacifi c shoppers have increased their use of protein over the last two years and 11% of European shoppers have, according to DuPont.

This “indicates that while protein is already highly used,” Heggie said, “consumers across the world are making a conscious attempt to add more of it into their diets.”

Restraints on protein

But back in the US, experts believe some factors could tend to slow up the rush to protein. One factor could be rising general objections to meat consumption because of activists’ contentions that some red meats are carcinogenic and that animal husbandry leads to excessive methane emissions which contribute signifi cantly to climate change.

The United Nations’ World Health Organization recently boosted this perception by declaring certain processed red meats, such as bacon and sausage, as “carcinogenic”. WHO also has been militating against meat consumption because of methane emissions, so now the United Nations has at least two reasons to oppose this particular form of protein consumption.

Americans’ favorite means of obtaining protein is eating meat, but their freedom to do so may become increasingly imperiled by the growth of such sentiments. It’s easy to imagine, for instance, the millennial-heavy constituency of a transparency-based chain such as Chipotle rather abruptly turning on the brand because of all the meat it sells.



“People who still say that animal-based protein loading has some kind of health benefi t need to rethink their position,” said Dana Simpler, an internal medicine specialist at Mercy Medical Center in Baltimore.

“Where is the evidence that protein loading with animal products provides health benefi ts? I’m not aware of it. However, the reverse is absolutely true: Countries with the highest consumption of animal products have the highest rates of heart disease and cancer, while the countries with the lowest consumption of animal products and the highest consumption of plant-based foods have the lowest rates of cancer and heart disease.”

It may be no accident that bacon is one of the most celebrated forms of protein in the current craze. And it may not matter that scientists long ago exhibited concerns about a connection between red meat and cancer that hasn’t been proven.

George Young, chairman of Kalypso, a Houston-based food and beverage consulting fi rm, said of the WHO report that “because so many of these kinds of announcements come out, the impact probably isn’t as great on the public as it used to be. And people are becoming more educated to the fact that too much of almost anything could be bad for you.”

A second factor that diminishes the aura of protein is the proliferation of gimmick products in which protein not only isn’t central to the proposition but seemingly superfl uous.

“The challenge,” Wansink of Cornell said, “is for companies to fi gure out how to get protein to people in an acceptable way and not just put globs of protein dust on potato chips.”

For example, Protein2o, a new line of fl avoured waters infused with electrolytes and 15g of protein, was rolled out to 750 US Walmart stores in the fall, targeting protein seekers who want a refreshing, protein-backed beverage without many calories. Launched in 2013 at a variety of retailers, it’s on course to be in more than 10,000 US stores by the second quarter of 2016.

To Nielsen, such applications are a sign that “it may be spinning out of control and [protein positioning] may be getting a little faddish and getting less relevant, with more hype.” It’s one indicator to her that “this trend will level off eventually”.

Heimowitz of Atkins Nutritionals defends all comers who want to tout protein. “If protein is replacing carbs and sugars in these products, it’s a good thing regardless,” she said. “And food scientists now are very good at getting protein into food without aff ecting taste. So it’s a step in the right direction.”

Another restraint on the rise of protein could be potential overconsumption of proteins overall. “Over the course of the day, Americans seeking protein may tend to consume way more protein than they actually need, and protein comes along with calories,” Nielsen said. “That’s another reason I feel this will level off eventually, maybe beginning

BOX 38: PROTEIN IN BRAZIL

In Brazil, Batavo markets a Greek yoghurt which is said to be:• thick, satisfying, high in calcium• high in protein• without any artifi cial fl avours • only with natural sugars from the fruits

Batavo Grego compares its protein content with other products which consumers know to be high in protein and strongly connects with the Redefi ning Sweetness key trend with messages like “only natural sugars from the fruits”.

“It has the same protein as a big egg!”

“Healthier and tastier, with more protein and less fat”

“The exclusive liquid greek yoghurt. 2x more protein. Only with natural sugars from the fruits. No artificial flavours added.”



next year. People are starting to realize that calories are creeping in and they don’t need as much protein all day long as they think.”

In any event, Nielsen believes, American consumers may at least “return more to whole foods and natural proteins and anything less processed, or jury-rigged to have proteins,” will fade.

Katz of HealthFocus said that Americans still don’t think in terms of protein ingredients such as whey, soy or pea but, rather, “in terms of milk, meat, fi sh, rice, beans” as protein sources – “foods, not ingredients. And it’s going to continue to be easier to appeal to them with naturally occurring proteins rather than the benefi ts of those ingredients.”

Harris of Cadent Consulting agreed. He anticipates that “the popular piece of the protein craze will probably run its course over the next two to three years” as more consumers “start to gravitate to products that have a natural reason to

have protein in them, such as meat”. Wansink off ered some advice on how brands

might best tap into the swirl of protein trends and truths.

“I would provide a high-protein, single-serving product that could be heated and served hot, because one thing [the Food & Brand Lab fi nds] is that people who say they eat a hot breakfast claim to be satisfi ed longer throughout the day if it has protein in it. It could be an omelet or a piece of bacon – something that’s high-protein and hot.

“The diff erence is that if you eat just a yogurt or a cheese stick, you will say it was pretty good – but it wasn’t a meal. It’s more satisfying than breakfast cereal, but it’s not really a meal. But if it’s hot and it has protein you check it off as a meal, and it also has the power to really fi ll you up.”

BOX 39: PROTEIN IN INDONESIA

L-Men is an Indonesian brand which focuses exclusively on the younger men, offering them a range protein benefi ts: energy, muscle building, weight management.

Key claims made are:• High in protein: 10-50% more protein than regular milk• Gain weight OR Lose weight (depending on product)• Muscle building• Extra energy• Burn fat faster• Healthy snack• Help to maintain the daily levels of protein intake




BOX 40: PLANT FOCUS A STEADILY BUILDING CHALLENGE TO DAIRY

The acquisition of Vega by the owner of the Alpro and Silk brands is a sign of how vegetable proteins are becoming more established in the strategies of many ambitious companies as a high-growth, high-margin business that they believe has the potential to grow much further and faster. The trend is at its most developed in North America, but there are clear signs of it developing elsewhere.

Vega, based in Vancouver in Canada, markets protein powders designed for people to mix in with water or non-dairy milk, as well as some protein bars. The company, founded in 2001, entered the US market in 2011.

In protein-obsessed America the total protein powders category was estimated at over $3.2 billion (€2.8 billion) in retail sales in 2014 – a 12% increase over 2013, which in turn was a 12% increase over 2012.

The category is dominated by whey protein, but the growth-driver of the category is vegetable proteins, which account for a less-than-30% share of sales but which have produced 50% of category growth.

Sales of plant-based protein in 2014 are thought to have come close to the $1 billion (€880 million) mark, representing a 20% increase over 2013, itself a year that saw 25% growth.

Vega’s sales have soared, from $25 million (€22 million) in 2011 to:• $72 million (€64 million) in 2013• $95 million (€84 million) in 2014• $135 million (€119 million) in the 12 months to May 2015

Vega is one of the companies that is growing by being free from soy. The company’s products have a core blend of pea protein, SaviSeed (sacha inchi seed) protein, hemp seed protein and sprouted whole grain brown rice protein, with some variants also including chlorella (also known as algal protein).

VEGA PROTEIN COMMUNICATIONS

VEGA has a blog where it posts about general health and wellbeing topics, as well as several brand ambassadors. Some of these are athletes and sports-related professionals, while others are artists and TV personalities.

VEGA Facebook page is active and has regular posts about healthy recipes, exercise routine tips, promotional events…

A STRATEGY FOCUSED ON PLANTS

In 2015 WhiteWave Foods – owner of the Silk and Alpro non-dairy milk brands – paid $550 million (€486 million) to acquire Vega with the aim of strengthening its increasingly strong position in plant-based foods and beverages (Key Trend 7).

Gregg Engles, chairman and chief executive offi cer of WhiteWave, speaking at a conference in Paris, said that Vega’s core market is relatively small compared with all other proteins and that, “We believe this provides a signifi cant opportunity to source future growth”.


CHART 41: TREND DIAMOND, KEY TREND 9, PROTEIN


CHART 42: PRODUCT LIFE-CYCLE, KEY TREND 9, PROTEIN


LIFESTYLECONSUMERS





SALES



Key Trend 10:

SUMMARY

• Gluten-free has had all the attention in recent years and has been a growth trend. But now it’s rapidly evolving into a reassurance message, carried not only by specially-formulated products, but hundreds of products of all kinds that are naturally gluten-free. Brands have learnt that adding gluten-free to the messages on the label gets the attention of the 30% of people who see it as a positive health message.

• Growth opportunities of the next five years: These are likely to be in dairy-free and lactose-free, which are next in the hierarchy of consumers’ desired free-from messages.

• Non-dairy the winner: The biggest, fastest-growing beneficiary of the dairy-free message at the moment – and likely to stay fast-growing for the next three-to-five years – is non-dairy milks and similar non-dairy products.

• Reducers not avoiders: People who look for dairy-free and lactose-free, just like those who look for gluten free, are often not eliminating dairy from their diet, just reducing the amount they consume, when they can, because it makes them “feel better”.

• Both gluten-free and dairy-free/lactose-free connect strongly to digestive health. When people have digestive disorders and turn to Google to make their diagnosis, what they are most likely to find in their search results are sources linking gluten and dairy to digestive health problems. Interestingly, when many people reduce dairy or lactose, they report feeling the benefit – and feel the benefit is one of the most important reasons for anyone to buy a healthier product.

Free-from – spotlight shifting from gluten to dairyKey Trend 10:

10 Key Trends 2016 Free-from

If you are looking at trends and trying to work out the diff erence between a trend and a fad, the free-from market – and specifi cally the gluten-free market – shows how diffi cult that can be. From about 2001 up to 2010, the slowly-emerging gluten-free market was regarded by many in the industry as a fad, likely to fall away when consumers wised-up to the “fact” that gluten-free wasn’t doing anything for their health. As recently as 2010, it was still possible to fi nd people willing to say that gluten-free had had its day and would soon be fi nished.

Such doubts about gluten-free are perhaps not surprising, since it looked as if several things counted against it:

• in most countries only a small percentage of people suff er from coeliac disease (1%-5% of people)

• there were no discernible health benefi ts from gluten-free products other than for diagnosed coeliacs (in fact many products are much higher in sugar than their regular counterparts)

• the products mostly tasted poor

But a rational analysis based on these points – which is what many people did – left out of the

equation all the soft data, such as:• how much conversation there is on social

media• how much attention the subject is getting on

mainstream media• how many celebrity chefs are paying the

subject attention• how frequently the products were showing up

in foodservice, not only in major cities but in out-of-the-way places

• and much else besides

It also left out an analysis of how gluten-free connects to other trends:

Digestive health: Not in our Key Trend list this year, but still an important trend, it is a major “wellness” issue for many consumers. Much of the interest in gluten- free came from people googling any symptoms of digestive discomfort they had and fi nding, on page 1 of the search results, plenty of sources describing the digestive health discomforts that are typical of gluten intolerance. Armed with this information, people self-diagnose. As one food executive of a maker of gluten-free foods told NNB: “There’s a lot of consumer pull, and the more



they’re seeking out information, the easier our job becomes.” Put very simply, although there are a number of allergens – such as soy, nuts, egg, celery and so on – that could fi t under the free-from trend, the biggest driver of whether an allergen will matter to consumers appears to be whether people experience digestive discomfort after eating it.

Cutting down on carbs: Another important trend (although not a Top-10); even in Italy, the

birthplace of pasta, sales of dried pasta have fallen by more than 25% since 2010. A small but growing percentage of people associate carbs with processed grains, specifi cally wheat and gluten. These “gluten reducers” (they may not be eliminating gluten, just lowering the amount in their diet) are a key group in the shift towards “ancient grains” and “good grains” – and particularly gluten-free grains, such as chia and quinoa. Much of this thinking is fed

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

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Spain

*Up to 18th November Source: GNPD Mintel

CHART 43: FOOD PRODUCTS LAUNCHED WITH “GLUTEN-FREE” CLAIMS

In many categories gluten free is becoming a hygiene factor, a reassuring message for consumers but not one that will necessarily increase sales.



BOX 41: LACTOSE FREE IS A GROWTH OPPORTUNITY

Alpro’s Tummy Talk test is an example of using “feel the benefi t” as a powerful marketing tool and underscores that digestive health is a key driver of dairy free/lactose free. It’s consumers seeking a solution to stomach upset that will drive the growth of lactose-free for the next few years.

by media and popular literature, such as the books Wheatbelly and Grain Brain, that attack refi ned wheat as the source of most of the ills in the traditional American diet. “We had thought that gluten free was its own phenomenon, now we view this as part of the “carbs are bad” movement,” a senior executive at one of Europe’s biggest bakery groups told NNB.

Cutting down on “bad” ingredients: It links to the interest in “clean” eating of a small but growing number of the most health-conscious lifestyle consumers in some countries – notably the coasts of the US and major cities like London.

Gluten free is now normalising as brands move from being in a special aisle to the mainstream aisle. Increasingly companies are choosing to fl ag up gluten-free even on products where you would not expect to fi nd gluten – motivated simply by the frequency with which consumers ask “Is it gluten-free?”. Blue Diamond nuts, for example, one of the world’s biggest almond snack brands, has cited “demand…for gluten-free products” as one of the factors behind growth in its sales.

Many companies are making gluten-free a standard part of any new product development. Brands in the fast-growing and profi table niche of meat snacks, for example, make “gluten-free” one of their core messages – because that’s what their target health-conscious consumers are interested in.

As Chart 43 shows, hundreds of products fl ag up ‘gluten-free” – but overwhelmingly these are

existing products that are simply repositioning and communicating it for the fi rst time, or “regular” products that are naturally gluten free and have added it as a marketing message.

In eff ect, in many categories “gluten free” is rapidly becoming a hygiene factor – a standard message that reassures consumers that “this product contains nothing bad”, similar to the longer-established messages such as “natural” and “free from artifi cial additives”.

The “gluten-free” message is evolving to become a reassurance message that every product carries if it can – and which no longer enables you to diff erentiate yourself and grow sales. So if you want to take advantage of gluten-free, you need to do so now.

Lactose-free, dairy-free

It’s beginning to look as if (as gluten-free becomes an everyday part of product development) lactose-free and even dairy-free might off er the biggest growth opportunities for the next three-to-fi ve years.

Lactose-free, which is the number two “free-from” market (measured in terms of retail sales), is also a digestive health issue. In the words of the respected American government’s National Institute of Health (NIH):

“Lactose intolerance is a condition in which people have digestive symptoms—such as bloating,


diarrhea, and gas—after eating or drinking milk or milk products.”

The explanation is sometimes widened to the much broader dairy intolerance. Naturopaths and personal trainers seem to use a recommendation to follow a dairy-free diet as their default setting for dealing with weight or digestive problems.

As with going gluten-free, many consumers turn to lactose-free products as a result of self-diagnosis – and if they fi nd their symptoms go away, then they stay with the new eating pattern.

Some go a step further. Amateur athletes using sports nutrition products based on plant proteins rather than dairy proteins, for example, often report that they do so because they “feel better” – they have fewer incidences of an upset stomach.

As with gluten-free, the factor that is powering lactose-free is that it delivers a benefi t that the consumer can quickly see or feel. This is one of the biggest marketing advantages a product can have. It tells consumers that they are getting value-for-money and they immediately understand why they should buy the product again – and it underpins the success of energy drinks, for example, which deliver an energy boost that’s immediately detectable.

Marketers of probiotics products with a digestive health platform have the same advantage. With digestive health you quickly know if a product works or not and if it gives you the benefi t of better digestive health – and, therefore, an improvement in your quality of life. It’s for this reason that Danone Activia, the world’s most successful probiotic brand, continues to be marketed with the message: “Feel the diff erence or your money back”.

From a scientifi c point of view some industry executives might struggle with the idea that consumers of gluten-free or dairy-free products are feeling a benefi t – which is specifi cally the relief of digestive health symptoms – but clearly they are.

The picture is confused by the fact that in consumer research people are often not very specifi c about the underlying problem they are trying to solve – which has long been the case with digestive health markets, thus causing the size of the consumer motivation to be consistently understated. They tend to use terminology such as “I feel better”. Consumer researchers have long had a poor record in capturing digestive health and bloating as an issue – even though it has powered some of the worlds most successful brands.

The most obvious benefi ciary of the dairy-free/lactose-free trend at the moment is the plant milks markets (see Key Trend 7). Once dominated by soy milk, the advent of better-tasting products – notably almond milk – has made it much easier for people to try plant milks instead of cows milk. Going dairy-free is one of many drivers of this market. Interestingly, many almond milks now also list “soy free” in their list of benefi ts on the label – underscoring that there are many, many niches of free-from.

As Chart 44 shows, hundreds of products fl ag up ‘dairy-free”. But looking at numbers of launches that say “dairy” or “lactose-free” can be misleading. Overwhelmingly these are existing products that are simply repositioning and communicating it for the fi rst time, or “regular” products that are naturally dairy free and have added it as a marketing message. As with gluten-

*Up to 18th November Source: GNPD Mintel

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

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Spain

CHART 44: FOOD PRODUCTS LAUNCHED WITH “DAIRY-FREE” CLAIMS



free, most companies that can communicate “dairy free” or ‘lactose free” on their label do so. They may not have designed the products this way deliberately, but they do recognize that if you are creating a message hierarchy for your brand it’s worth mentioning dairy- or lactose-free if you can. According to one snack company that sells products that mention dairy free, only around 20% of products labeled “dairy free” are bought by people who are looking for that message.

The biggest opportunity for lactose-free is in the dairy category and specifi cally in those countries in South America, Africa and Asia where there is a high incidence of lactose intolerance. As per capita consumption of dairy rises, people are more likely to encounter the symptoms and off er lactose-free products as a way of countering them. Even more importantly, off ering lactose-free products can be

a way to increase dairy consumption because it reassures them that they can try dairy without fear of digestive upset.

The rise and rise of niches

The rise of free-from is one part of the Great Fragmentation (Key Trend 5). It illustrates that when it comes to particular eating styles there is a niche for everything – and especially if that eating style can be served by a wealth of regular products, as well as by specially-designed foods.

These foods are a powerful reminder that when you are thinking about the future of your business you must keep an eye on niche markets and niche brands. One day they may infl uence – even dictate – your entire strategy.




CHART 45: TREND DIAMOND, KEY TREND 10, FREE-FROM

CHART 46: PRODUCT LIFE-CYCLE, KEY TREND 10, FREE-FROM


LIFESTYLECONSUMERS





SALES

Gluten-free is ceasing to be a point of differ-ence. Every brand that can communicate gluten-free on its label messages, does. Gluten-free has become an everyday message signifying ‘healthy’.

Dairy-free and Lactose-free are growing, powered by plant-based foods.


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