...trendwatchkeeping an eye on the food industry

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RISE OF THE ARTISANSWhy big brands are now playing it small

ALL CHANGE!Why seasonal food could

be the next big thing

NOVEMBER 2009

Healthy Naturals:How can manufacturers identify rising stars in healthy ingredients?

Practical, valuable and original insight

EXOTICTASTESThe spice revolution taking supermarket shelves by storm

BRAND SHARES

What they don’t tell you

...trendwatchNovember ’09

All features ©RTS 2009

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Inside this month...

3! THE RISE OF THE ARTISAN

! Why small is the new big for

! brands - can you spot the

! difference?

5! HEALTHY NATURALS

! Navigating the fast-changing

! flow of healthy ingredients

7! THE trendwatch DEBATE:

! How useful are brand shares

! for identifying key suppliers?

8! ALL CHANGE!

! Why seasonality could be a

! big trend of the future

9! A TASTE OF THE EXOTIC

! The rise of ethnic flavours and

! which tastes are set to be the

! next big thing

10! NEWS

! What"s new in the food industry

...trendwatch

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Maintaining customer loyalty used to be about being a big, established brand. But now, consumers appear to be looking for something di!erent - and big brands are facing increased challenges from small, artisan labels. It’s impossible to look at recent success stories in the food industry without considering artisan brands. Rags-to-riches tales and friendly, homemade-style products have become the stu! of marketeers’ dreams, capturing the imagination of consumers across the US, UK and Europe.

BIGGER = BETTER?In the past, a brand’s desirability was judged by the size and provenance of a manufacturer; brands like Kellogg’s, Pepsi, Philadelphia, Walkers and Birds Eye traded on their long company history, multinational prominence and extensive product ranges. It was widely accepted that customers needed to be reassured in order to develop long-lasting relationships - and the bigger your company was, the better.

CHANGING VIEWSReassurance is still a key issue, but customer perceptions of what provides it have dramatically changed in recent years. Widely publicised stories of cheapening products, poor working conditions in developing nations and a general distrust of globalised businesses have led to a rise in smaller, domestic companies. In the UK, food retailers such as Waitrose actively seek to stock new, innovative products. Traceability is the new buzz-word and companies that are transparent about their suppliers, use seasonal ingredients, support ethical values and encourage interaction with their customers are seeing their sales increase. Innocent Drinks founder, Richard Reed, describes his company as, “informal, ethical and open, becoming more ethical the larger we grow.”

SUCCESS STORIESArtisan snacks are performing well. In the UK, the artisan sector is now worth in excess of £100m, boosted by successful companies

such as Burt’s, Tyrell’s, Innocent and Whole Earth, growing by 7% per year. Meanwhile in the US, Cape Cod was one of the first artisan potato chip brands, but many others have since followed, including Dirty Potato Chips, Herr’s, Glick’s, Grandma Utz and Glenny’s. These and other artisan brands, such as Bob’s Red Mill, David Rio and Udi’s, now account for sales of almost $1bn, growing at 5% - double the growth of the overall market. The successes of Spain’s BioCentury, Zonnatura in the Netherlands and Gardenia Foods in Singapore show that artisan or independent brands are a truly global phenomenon.

BUYING POWERBut now, the big brands are fighting back. Well-known artisan brands, such as Ben & Jerry’s, Rachel’s Organic and Green & Blacks have been acquired by large multinational corporations such as Unilever, Dean Foods and Cadbury’s. Oregon Chai Latte was recently acquired by Kerry, Inc and even Innocent recently sold a minority share to Coca-Cola.

‘DOWNSIZING’ BRANDSOne of the most intriguing developments from this is a range of ‘artisan-like’ products being developed by several well-established multi-nationals often with little or no mention of the parent brand on the packaging. Red Sky potato chips, for example, have been carefully marketed by Walkers in the UK as a stand-alone label, whilst Kellogg’s Nature’s Pleasure cereal has packaging and an accompanying website specifically designed to look ‘small and friendly’ in order to attract consumers. Supermarket own-brands are also getting in on the act as big companies aim to capture consumer attention by appearing more local and approachable.

A FUTURE TREND?As independent and artisan brands continue to succeed, the trend for brand ‘down-sizing’ looks set to continue. Look opposite to see

some of the most notable examples. tw

The rise of the artisansand why small is the new big for leading brands

...trendwatch

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Spot the Di!erence?1.Jordans Country Crisp (UK)

Jordans is the largest privately-owned cereal maker in the UK

2.Kellogg’s Nature’s Pleasure (UK)Launched in 2008, the branding was designed to look ‘home-made’

3.Innocent Smoothies (UK)Started by three university friends, the brand has grown into a £115m business (2008)

4.Tropicana Smoothies (UK & US)Launched this year, the company made no attempt to hide the fact that it had Innocent’s market share in its sights

5.Grandma Utz’s Potato Chips (US)Utz Quality Foods is the largest independent privately-held snack brand in the US

6.Frito-Lay Miss Vickies Potato Chips (US)Started as an artisan company in 1985, Miss Vickie’s is now part of Frito Lay, PepsiCo’s $11bn convenience foods division

7.David Rio Chai (US)Independent producer of chai and tea products, steadily building a market presence

8.Oregon Chai (US)Started as a small US business, growing to become the leading supplier of Chai Tea Latte mixes, concentrates, and ready-to-drink products, now owned by Kerry Inc

1. 2.

3. 4.

6.

7. 8.

5.

$150 million

USA market for artisan cereals growing at 5% per year against long-term decline in consumption. Source: RTS Resource

The recent surge in consumer interest for foods containing healthy, natural ingredients has created new opportunities for food manufacturers. But with the fast-changing, fashion-led nature of the market - coupled with new legislation regarding health claims - how can manufacturers take advantage of this potentially lucrative trend?There can be little doubt that today’s consumers are concerned not only with healthier lifestyles and diet, but also with incorporating more natural ingredients, specifically from the point of view of ensuring better health.

GROWING DEMANDDemand for foods containing natural ingredients which are perceived to possess health-beneficial attributes is on the increase, fuelled by growing media interest and celebrity endorsements. Currently worth !1.4bn in Europe, the market for healthy naturals is forecast to see sales increasing by 15%-20% per year.

HEALTH CLAIMSManufacturers face tighter regulation on health-related food claims, so it is now no longer possible to label foods with terms such as ‘cholesterol-reducing’, ‘superfood’, or ‘anti-oxdising’. However, with no such regulation for the media, these terms

still abound and consumer interest continues to grow.

BETTER INFORMEDConsumers are much more savvy when it comes to healthy naturals, thanks in part to the vast array of websites and magazines providing information on these ingredients. Consequently, they will actively seek out products that contain healthy naturals and are prepared to pay often higher prices - leading to increased sales.

SUCCESS STORIESWith media and consumer interest in healthy naturals still increasing, manufacturers face the dilemma of how to market their products to appeal to consumers who are looking for specific healthy ingredients, without making claims about the perceived health benefits.

“It is a minefield for manufacturers,” says Steve Rice from RTS. “This is a fast-growing market with good opportunities for the right products to thrive. But finding a balance between marketing to catch

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Healthy Naturals:what’s next for the healthy ingredients market?

...trendwatch

Healthy Naturals: ingredients derived from

natural sources,

such as plants and fish,

which are perceived to have

beneficial attributes

the consumer’s attention and ensuring that no health claims are made is a tough call.”

SUCCESS STORIES

Despite the di"culties, companies are reaping the rewards from the growing market.

In the UK, the success of Dorset Cereals has significantly a!ected the market for added-value, healthy cereals and muesli. Growing from a small artisan company in 1989 to its sale in 2007 to Wellness Foods for a reported £50m, the company attributes its success to its o!ering of ‘honest, tasty and real unadulterated breakfasts’. Even though the price point of the cereals, muesli and porridge is significantly higher than that of its competitors, sales remain strong.

In the US, Bob’s Red Mill Natural Foods has been manufacturing organic and gluten-free cereal mixes, porridge, muesli, baking mixes and flours since 1978. One of the most prominent organic and milled whole-grain producers in North America, the company won the title of World Champion Porridge Maker in Scotland this year. The company was established with the goal of ‘moving people back to the basics with healthy whole grains, high fibre and complex carbohydrates.”

LATEST INGREDIENTSIn the fashion-led market for healthy naturals, popular ingredients change quickly. Recent stars have included acai and goji berries, cranberries, oats, spelt and ginger, with a plethora of products appearing containing one or more of the above ingredients.

FUTURE VIEWSo how can manufacturers take advantage of the increased interest in healthy naturals without falling foul of the new regulations? One key point is to focus on the ingredients, not the alleged health benefits. With consumers much more informed about the perceived advantages of certain foods, products can be marketed simply as containing these ingredients, without the need to explain why the foods are healthy. “Consumers are already looking out for products containing healthy naturals, based on what they have read and seen in the media. Therefore, the important consideration for manufacturers is to identify the ingredients that are likely to be in demand,” says Steve Rice. Recent success stories are a good place to look for ingredients that can cross over to other food markets - so an ingredient which has successfully been utilised in a cereal bar could conceivably be used in cakes, biscuits or soft drinks.

Another possible solution is for manufacturers to partner with non-regulated media. Health and women’s magazines, websites such as www.bootswebmd.com and celebrity chefs are all being increasingly relied upon by consumers to inform their food-buying

choices and habits - so working more closely with these media would not only work to inform consumers of new products, but could also help manufacturers to keep abreast of the latest trends in healthy eating.

With the European market for healthy naturals forecast to be worth !2.5bn by 2014, this growing sector o!ers a wealth of possibilities to manufacturers. The message is simple: carefully research the ingredients consumers are looking for, look for cross-over markets where previous successes can be utilised and carefully market products to focus on the healthy naturals themselves. tw

...trendwatch

‘Consumers will actively seek out

information: manufacturers

should simply focus on promoting the

ingredients, not the perceived benefits’

THE FUTURE FOR HEALTHY NATURALSWestern Europe: Forecast expenditure on healthy naturals to 2014!bn

Source: RTS Resource

Note: f = forecast.

2009

2014f !2.5bn

!1.4bn

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...trendwatch

The trendwatch debate:

BRAND SHARES

30%

9.2%4.9% ? 16%

With the rise of own-labels, increasing importance of foodservice and the outsourcing of production by major brands, are brand shares becoming meaningless to suppliers in the food and drink industry? trendwatch investigates.The food industry is used to moving with the times – and, in today’s fast-paced world, the pressure to continually develop has never been greater. With rising shares of retailer own brands - in some cases now taking over 50% of market share - own brand manufacturers may be larger than some of the major brands in terms of output. This poses a considerable dilemma for suppliers of ingredients and packaging, looking to target the largest manufacturers: is brand share still the most reliable measure of manufacturing size and sales opportunities?

THE WAY WE WERETraditionally, a brand’s share of its market was a reliable indicator of a company’s prominence. With production processes largely contained in-house, every stage of manufacture could be traced because it generally happened in one place. Even raw material suppliers tended to be linked to specific companies. Therefore, companies with the largest brand shares could be safely assumed to also be the largest users of ingredients.

CHANGING TIMESBut now, with companies facing intense pressure to cut costs and be more competitive on prices, the shape of the market is changing. One key factor in this has been the rising power of supermarkets. Their practice of finding the cheapest supplier has led many established companies and brands to follow suit – leading to a new phenomenon in the food industry – the specialist supplier. Now, instead of a company making several

ranges of products all in-house, they will instead turn to a supplier who can manufacture specific products to their own specifications. Instead of these suppliers working for one single brand, the new breed of manufacturers are able to work for several at once, all using tailored recipes for each company. The net result is that the largest manufacturers in the food industry are no longer the brands themselves. In the UK, notable examples include: Premier, Potato and Allied Services (McCain), Northern Foods, Pinguin Foods (sic), Bakkavor, Greencore, Kitchen Range Foods (Moy Park), R&R (ice cream), Goldenfry Foods and Thornton’s.

TARGETING THE MARKETIf ingredient and packaging suppliers are relying on targeting the major brand based on brand shares, they may well be missing out on significant opportunities. So if brand shares are no longer reliable measures of a company’s size, how can companies looking to enter the market get hold of accurate information to identify who is making products and where they are being made? Jamie Rice, Marketing Director of RTS, recognises the problem. “We’re finding increasingly that brand shares are no longer reliable indicators in the global food market. Brands are often now little more than marketing umbrellas under which outsourced production is co-ordinated. The only way to determine the true picture is to research behind the leading brands to see the companies that are manufacturing products on their behalf.”

As the food industry continues to move ahead at pace, it seems likely that brand shares will be left behind, leaving companies urgently seeking new ways to identify their major competitors. tw

RTS can identify manufacturers in your sector. For more, visit:www.rts-resource.com or email: research@rts-resource.com

...trendwatch

8All Change!Why a return to seasonal food could be good news for food manufacturers

Supermarket dominance, improved transportation and year-round demand for fruit and vegetables have led to a ‘season-less’ year-round supply. But with the current economic crisis and growing concerns about the environmental impact of what we eat, could a return to seasonal foods benefit global food manufacturers?A new trend is emerging across the world for locally sourced, seasonal food. Championed by chefs, food writers and activists, the global push for a return to seasonal food is growing in influence and already some food manufacturers are adopting seasonality as a valuable marketing tool.

‘FEEL-GOOD’ FOOD

One of the major benefits of seasonal food is the feel-good factor. Consumers associate fresh, local food with a bygone era. Nostalgia is already proving to be a powerful trend for connecting consumers with products and seasonality could follow suit, especially when combined with sustainability and reducing food miles or carbon footprints – two areas where consumer interest is growing.

“It’s an experience that enriches one’s life. It smells good. It tastes good. It has a good feeling about it,” says Alice Waters, US chef, writer and long-term campaigner for seasonal food, also Vice President of Slow Food

International, a non-profit group established in 1989 to promote local food traditions, which now has 100,000 members in over 130 countries.

Many chefs across the world agree that fruit and vegetables taste better in season than forced for year-round consumption. “I want to utilise as much as possible from the local market,” says Thomas Rappl, German-born Executive Chef at The Westin Bund Center, Shanghai. “When you import, you don’t have the freshness.”

GLOBAL SEASONALITY

In some countries, seasonal food and beverages are the norm. In Japan, even convenience food is expected to be fresh, seasonal and regional (source: www.kyotofoodie.com), with food manufacturers regularly changing their o!ering to adhere to the seasons. Elizabeth Andoh, writer and recently-appointed Food Ambassador for Japan, observes: “The

Japanese take great pleasure in celebrating seasonality… the choice of what to serve is intimately linked to nature.”

In Australia, seasonality is becoming a powerful trend. “People are looking for the best quality products in their own backyard to help support the economy during tough times,” says Australian food writer, Jared Ingersoll.

Anya Fernald, Executive Director of Slow Food Nation, agrees. “Globally, people are looking for authenticity and goods that have a connection to people, a place and culture.”

FARMERS’ MARKETS

Nowhere has the increase in consumer interest for seasonal food been seen more dramatically than in the recent rise in farmers’ markets in the US and UK. Between 2002 and 2006, the number of US farmers’ markets increased by 40% - with 4,385 markets in 2006. In the UK, the National Farmers’ Retail and Markets Association (FARMA) estimates the value of farmers markets – currently operating in around 550 locations – to be £220m per year.

CHALLENGES

British chef and food writer Hugh Fearnley-Whittingstall believes that consumers have been given an unrealistic view of food availability by the trend for year-round fruit and vegetables. “It makes us aspire to someone else’s seasonality.” Challenging consumer attitudes on this issue is key, reassuring consumers of continued quality whilst exciting them with a changing o!ering.

A FUTURE TREND?

So, how can food manufacturers benefit from this trend? There is already a seasonal market across Europe and the US for certain times of year, such as Easter, Christmas, Halloween and Oktoberfest, so extending ranges further is possible here, perhaps with Winter or Summer varieties being introduced. In the UK, potato chip manufacturer Tyrrell’s o!ers four ‘seasonal’ flavours that rotate every six months as part of its range (above); in Japan, Pepsi has a range of seasonal versions of its popular drinks, such as ‘Pepsi Ice Cucumber’ (left). If manufacturers can tie in seasonal ingredients with their e!orts to improve their eco-credentials,

this could be one trend set to increase over the next few years. tw

“What is local and seasonal should be

at the forefront of each shopper’s consciousness”

Hugh Fearnley-Whittingstall UK chef and food writer

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...trendwatch

A Taste of the Exoticwhy the recession is boosting ethnic flavours

Flavour companies have been predicting a rise in ethnic-inspired blends for some time. Now, with interest in new world cuisines growing, a boost in ethnic flavours may come from an unexpected source - the

current economic crisis.For several years, ethnic cuisines such as Chinese, Indian, Italian and Mexican have influenced products across the food industry. This trend looks set to develop further, as consumers continue to search for new taste experiences.

NEW FLAVOURS

Far Eastern influences, such as Thai, Japanese and Indonesian are forecast to be rising stars, along with Vietnamese, Malaysian and Korean-inspired blends. Floral flavours, such as jasmine, juniper, hibiscus, honeysuckle, rose, lavender and geranium are also growing in popularity.

MEDIA INFLUENCES

As ever, the influence of television and print media remains strong in this area. Recent UK television programmes have included guides to Caribbean cookery (with Reggae Reggae Sauce founder, Levi Roots) and authentic latino cuisine (Jamie Oliver’s American Road Trip), whilst Latin-American dishes are the focus for US cook Ingrid Ho!mann - so demand for products with these flavours is likely to increase.

TRAVELLING AT HOME

One reason for the rise in popularity of ethnic-inspired flavours may come as a surprise to many. At the beginning of the recession currently playing out across the world, few would have predicted it could lead to a rise in exotic flavours, yet many in the industry are now citing the

economic situation as a key factor influencing consumer demand in the UK and US. “With a lag in pleasure travel, consumers can use food to recreate the travel experience at home,” says Kim Holman from US seasoning and flavours company, Wixon Inc.

FUTURE VIEW

With consumers travelling vicariously through their food, increased media coverage of new cuisines and flavours and continued demand for new taste

experiences, ethnic flavours are set to be a major industry story during the next five years. tw

For a FREE guide to Global Herbs and Spices, visit: www.rts-resource.com

SEASONINGS, HERBS & SPICESUsage of industrial seasonings, herbs & spices in food & drinkby key country, 2009tonnes

Source: RTS Resource

USA

China

UK

Japan

Germany

Brazil

France 39,587

44,765

56,579

97,430

98,227

147,346

447,608

...trendwatchExclusive subscriber offer

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...NPDwatchwhat!s new this month

Where now for Organic?Organic food producers in the UK and the US have responded strongly to a recent report which stated that organic food has no significant health benefits compared with non-organic produce.

The research by Dr Alan Dangour, with the London

School for Hygiene and Tropical Health, was the

largest ever study of scientific papers and was

published in the American Journal of Clinical

Nutrition.

Tom Levitt from The Ecologist said the report “left

consumers short-changed on real benefits of

organic food,” by focusing on a narrow study field,

whilst The Organic Farmers and Growers

Association warned that, “the headlines alone will

damage the livelihoods of hard working organic

farmers and food producers.”

The organic industry has suffered a slow-down in

sales growth during the recession and this report

will do little to help. It remains to be seen what, if

any, longer-term implications these pressures will

have on the organic industry.

RTSnews - new report launch

RTS is launching a new report on the industrial use of Seasonings, Herbs and Spices to 2014.

Available in EAME, Asia Pacific, Americas and Global

Editions, the report features a dashboard #at-a-glance"

reference of key facts, extensive country-by-country

market analysis and a comprehensive data pack.

For more information, click here

or email us at: research@rts-resource.com

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SPICY STUFF FROM BART

Following the trend for the increased interest in ethnic flavours, Bart Spices has launched a range of new spices and blends, including:

BERBERE - a spice mix hailing from North Africa, containing chilli, ginger, cloves and allspice

SUMAC - the dried, ground berries of plants from the Rhus genus, widely used in Middle Eastern cuisine to add a sweet-sour lemony taste

ZATAR - a blend of thyme, sesame seeds and sumac originating from Turkish and Jordanian cuisines.

The range also includes Lavender, Poppy Seeds, Chervil, Savoury, Ras-El-Hanout spice blend, Celery Seeds and Yellow Mustard Seeds.