CLEAN: THE OPPORTUNITY REPORT

© FONA International

CLEAN: THE OPPORTUNITY REPORT


CLEANTHE OPPORTUNITY REPORT

Copyright © 2016 FONA International Inc. All rights reserved.

4 Clean: The Opportunity Report | fona.com


5 Introduction

8 Our Current Environment

10 Driving Needs

28 Two Important Considerations

34 Resulting Behaviors

48 Industry Response

56 Opportunities

60 Connect with Us!

At that time, in 2003, we discovered:

• 76% of consumers agreed with the statement: “In the next five years, it’s very likely that experts will have a completely different idea about which foods are healthy and which are not.”

• Package labels were identified by 75% of the general population as influential in purchase decision.

• That there was a growing reduction in insurance benefits and a distrust of the healthcare system overall.

• The fastest growing product tag for beverages was “natural” — more than 10 years ago!

• The top concern for consumers was to “stay healthy” longer.

If any of that sounds familiar, it should. The clean label movement of today has its roots in the health and wellness movement of the early 2000s. At FONA, we’ve been thinking about and examining consumers and their perception of health and wellness for a long time as well. This year, we’re diving in deep again. From commissioning a national survey to exploring mainstream and industry reports, we want to continue examining the environment, driving needs, resulting behaviors, industry response and most importantly, the opportunities as they relate to the food industry and health and wellness.

More than 12 years ago, FONA International undertook a project, to understand what “health and wellness” meant to consumers. We studied the environment that consumers were living in each day, which led us to their driving needs and resulting behaviors. We examined the industry response to the growing health and wellness movement, and discovered the opportunities available for product development.

Contents



© FONA International © FONA International

ENVIRONMENT DRIVING NEEDS RESULTINGBEHAVIORS

INDUSTRYRESPONSE

OPPORTUNITIES

Health & Wellness UNDERSTANDING

Some important takeaways from our new research:• The clean label movement is not a fad. It is the new normal that spans multiple generations and walks of life. • As far as the consumer is concerned, clean means healthy. Consumers’ perception of what healthy is no longer involves calories and fat as a main consideration, but recognizable ingredients.

• Clean means health, and health means longevity. Just as in 2003, consumers today are concerned about health because they want to be as healthy as possible for as long as possible. They do not want to bear the burden of expensive hospital bills. They do not want to be a burden on their friends and family.

• From the fact that the clean label consumer still values taste as a top priority, is quite adventurous when it comes to flavors, brand loyal when values align and still interested in indulgence and functional ingredients — opportunities abound.

Whether or not it’s agreed that clean label is healthier than artificial, consumers believe it to be true. And their reasons for wanting to eat healthier are understandable. No one can be judged for wanting remain independent and illness-free for as long as possible. Of course, the fact is that the methods for this goal are sometimes inconsistent and the driving needs are rarely linear. Consumer choices may appear contradictory — but often, therein lies opportunity. If each consumer thought exactly the same and enjoyed exactly the same food, it’d be a boring grocery store indeed. We have a challenge and an opportunity to deliver products that span the spectrum of flavors and interests. We as an industry must meet the consumer where they need us, and deliver what they want most — clean products — and we must do so with confidence. Join us as we explore where the consumer has been, where they will be and where our opportunity lies.



The environment of the food industry today perhaps needs little examination. There are some facts that by now are well established:

LARGE FOOD AND BEVERAGE COMPANIES ARE STRUGGLING TO GROW. According to a 2015 Food Value Equation Survey by Deloitte (in partnership with the Food Marketing Institute and the Grocery Manufacturers Association) large food and beverage companies were flat 2009-2014, showing just 1% growth. This compares with 4.9% growth for smaller brands and 4% growth for private brand manufacturers. The industry as a whole is barely keeping pace with inflation and population increases, growing at only 2.6% annually between 2012 and 2014.

TRUST IS PLAYING A HUGE ROLE. The same Deloitte report claims that consumers are 3.4 times more likely to harbor negative sentiment about food companies than a cross-industry average. According to the Center for Food Integrity (CFI), food companies are held most responsible for transparency in all aspects of food production, from the impact of food on health to food safety to business ethics.

MEDIA USAGE AND MARKETING OUTLETS HAVE COMPLETELY CHANGED.With the popularity and improvements in streaming video, it’s no surprise that the avenues where consumers get information — and can be marketed to — have profoundly changed. According to Nielsen’s Q2 2015 report “Comparable Metrics,” any decreases in traditional television watching have been more than offset by increases in smart phone, tablet and other formats. The Natural Marketing Institute’s (NMI) 2015 Healthy Living Report indicates that 43% would rather find out new information about food and beverage products from friends or family than from ads. We can assume that friends and family would be making a recommendation after firsthand experience.

INCOME SHRINKING WHILE HEALTH COSTS STAY HIGHAccording to the Peterson-Kaiser Health System Tracker, Americans paid more out of pocket for medical services than ever before in 2014: $329.8 billion. Some reports say that the growth in spending has slowed, but regardless, the high cost of healthcare is on the minds of consumers. Adding to that, the U.S. Census Bureau reports that median household income was 6.5% lower in 2014 than in 2007 and 7.2% lower than in 1999.

Adding to all of this — or perhaps because of this — consumer activism and social media campaigns regarding food and beverage choices are at fever pitch. Although the communication pathways have changed, the consumer is engaged, reachable and interested in what the food industry does.

FONA LISTENS: About our National SurveyFONA completed a national survey of consumers in 2016. The 524 respondents were split evenly, half women and half men. Other metrics are outlined as follows.

Geographic Region of U.S.Northeast: 18% Midwest: 22% South: 37% West: 23%

Age: 18-24 : 5% 25-34: 18% 35-44: 13% 45-54: 21% 55-64: 20% 65+: 23%

Our Current Environment Although the communication

pathways have changed, the

consumer is engaged, reachable

and interested in what the food

industry does.



This motivation towards longevity feeds directly into eating habits. Approximately two-thirds of consumers have integrated healthy eating into their lifestyle, a huge increase in the last decade. In fact, 70% of consumers say that eating healthy is a vital part of their lives — a 27% increase since 2006. About 66% of consumers say that eating healthy helps them feel in control of their lives, and 76% say that they believe they can manage health conditions through proper nutrition.

Driving Needs

Health and Wellness: A Top PriorityTo understand clean label and the consumer movement behind it, it’s essential to look at the population’s thoughts on health. According to the 2015 NMI Healthy Living Report, 75% of consumers are taking more responsibility for their health today than they did 10 years ago. The reason that health is at the forefront of their thoughts and actions? About 95% say that they want to remain independent as they age; 92% want to live a long life and 91% don’t want to have to rely on others.

Primary reasons for interest in health and wellness:

92%95%

91%

I want to live a long life

I want to remain independent as I age

I don’t want to rely on others

IMPORTANT TO MAINTAINING A HEALTHY LIFESTYLE

Consumption of healthy, nutritious food: 75%Maintaining a balanced diet: 73%Taking vitamins and minerals: 59%Consumption of natural foods/beverages: 49%Consumption of fortified/functional foods/ beverages: 41%Consumption of organic foods/beverages: 33%

Source: NMI 2015 Trends in Healthy Living


Driving Needs


HEALTH AND WELLNESS LEADS EVOLVING DRIVERSAlthough the traditional drivers (taste, cost and convenience) are still crucial for consumers, the Deloitte survey reports that what it calls “evolving drivers” are quickly increasing in importance. First among those evolving drivers is health and wellness. Second is safety, which is a concept that we will explore in-depth. For now, the key thing to know is consumer perception of safety is undergoing fundamental change. In the public’s mind, safety is actually equated with clean label in many ways. Transparency as well is an important evolving driver and is “overarching” — impacting consumer motivations overall. We’ll examine both safety and transparency later in the report.

According to the Deloitte report, more and more consumers are making purchase decisions based on evolving value drivers, and it’s this shift which is causing some disruption for food companies. The evolving drivers have always been present in the minds of consumers but with 51% of consumers now saying they value things like health and wellness and transparency alongside taste, price and convenience, food companies have a mandate to take notice. It’s also important to note that this shift in motivations holds true across all food and beverage categories.

CHALLENGES TO HEALTHY EATINGKnowing that a majority of consumers want to eat healthy isn’t nearly enough. What challenges do consumers face in this quest, and are there any opportunities to meet their needs? According to NMI, 72% of the general population says it can be a challenge to eat right, with 42% saying that they often have to sacrifice convenience for healthy eating.

The primary reasons consumers don’t eat healthy is expense, and later we will explore how price plays into consumer drivers. But other reasons consumers give for not eating healthy include: their child won’t eat it, it’s not filling, it requires too much effort or it doesn’t taste good. On the third level of reasons given, consumers in general are uncertain and confused about what is healthy.


REASONS CONSUMERS DO NOT EAT HEALTHY FOODS MORE OFTEN

PRIMARY SECONDARY TERTIARY

EXPENSEDOESN’T FIT

LIFESTYLELACK OF

INFORMATION

Child won’t eat Uncertainty

Not filling Confusion

No time Lack of Knowlege

Inconvenient

Too much effort

Source: Deloitte Food Value Equation Survey 2015, Deloitte Analysis

TRANSPARENCY

TRADITIONALDRIVERS

EVOLVINGDRIVERS

51%49%TastePrice

Convenience

Health & WellnessSafety

Social ImpactExperience


Driving Needs


No arti�cial preservatives

No arti�cial sweeteners

No arti�cial colors

Non-GMO

Trans-fat free

Organic

Uses natural �avors

Sugar-free

Fat-free

Gluten-free

Vegan

Dairy-free

82%

76%

72%

No arti�cial �avors 69%

52%

48%

48%

44%

35%

29%

21%

13%

8%

Select the items you perceive as healthy. Choose all that apply.

= traditional “nutrition” drivers

FONA Listens: Health PerceptionsWhen it comes to health perceptions, being able to say “No artificial ingredients” is an opportunity to appeal to consumers. We asked respondents to select any of the characteristics that they perceived as healthy, and the four “no artificial” options were by far the most popular. “Uses natural flavors” is well within the top ten as well, which leaves many options open for tasty product development. Also of note, traditional “nutrition” drivers involving fat and sugar were chosen by less than half of respondents.

OPPORTUNITIES & STRATEGIES: When formulating a product, think about a challenge that consumers face in their day-to-day lives. Consumers want to eat healthy but acknowledge there are challenges. Helping address one of the top concerns — like a picky child or saving time — may mean winning in the marketplace. Consider also that consumers are open to natural flavors in your products, leaving a door wide open to explore great-tasting options.

Being able to say “No artificial ingredients”

is an opportunity to appeal to health-conscious

consumers.

Source: ©FONA International National Consumer Survey, 2016


Driving Needs


SAFETY GETS A NEW MEANING...…as it relates to consumer perception, anyway. No longer does food safety refer only to immediate risks. Consumers have expanded that focus to include long-term effects. At play are attributes like the absence of allergens and the removal of artificial ingredients. It’s clear that safety has become closely tied with the same health/wellness and trust motivations behind the clean label movement.

Consumers put “Commitment to Food Safety” as the top value they want to see from food companies. According to Deloitte’s 2015 consumer Food Value Equation survey, 62% of consumers consider safety as being “free of harmful elements,” which is the

traditional definition. Criteria not traditionally considered, like labeling, sourcing, nutritional content and “no artificial,” are close behind.

Food safety and the impact of food on health are top concerns for consumers, according to the CFI. In fact, 62% of consumers polled said they were concerned about food safety — and they hold food companies most responsible in this and all categories. Food companies are held responsible more than farmers, grocery stores and restaurants. When engaging with consumers, it is key for food companies to consider the new perception of safety. Operating under an outdated definition may mean seeming out of touch.

Trust IssuesIt’s not news that the food and beverage industry is facing some trust issues with consumers. Food companies have to examine how to gain — or regain—consumer trust and keep it. We must take a step back and consider what is going on in consumers’ own lives and any history that is feeding this distrust. One piece of good news: Reports show that when a consumer feels like a brand shares their values and understands them, they will make that purchase and they will stay loyal.

According to Mintel’s 2016 Ingredients and Additives Global Annual Review, 71% of consumers say they believe there are probably more harmful or excess ingredients in food than manufacturers admit, and 53% of consumers worry about potentially harmful ingredients in their food. This distrust is rooted in more than just ingredient concerns, however. Research from CFI shows that in every category, food manufacturers are held more

responsible than farmers or restaurants. Food companies are held responsible in every single segment: from Food Safety and the Impact of Food on Health to Animal Welfare, Business Ethics and Labor Rights.

With a vast majority of consumers making health a top priority, it’s unfortunate that they don’t believe food companies formulate products with health in mind. According to NMI, 64% believe that companies create food in the cheapest way possible with only 36% saying food/beverage manufacturers are interested in promoting healthy food choices. This response skews even higher for Millennials (age 18-37) and households with children, with about 70% saying companies formulate on the cheap whenever possible.

WHO HAS THEIR TRUST? Consumers view the following as trustworthy sources, according to NMI. Doctors are considered the most trustworthy, with 80% of the population trusting them. Interestingly, package labels are quite important to consumer decisions, with 62% of the population viewing them as trustworthy. 1. Physicians : 80%2. Nutritionists: 72%3. Pharmacists: 73%4. Health-related websites: 69%5. Friends and family: 58%6. Package labels: 62%7. Government agencies: 48%8. Membership organizations: 43%9. Alternative practitioner: 42%10. TV talk shows: 39%


62%

47%51%42% 41%

Free of harmful elements

Clear and accurate labeling

Clear information (ingredients/

sourcing)

Fewer ingredients/processing,

nothing arti�cial

Nutritional content

PERCENTAGE OF CONSUMERS RANKING THESE ATTRIBUTES AS AN IMPORTANT MEASURE OF SAFETY

Criteria not traditionally consideredas part of “safety” de�nition



Driving Needs


NMI reports that 45% of the general population will buy products from companies whose values are most like their own, and 36% will buy products from companies who donate to worthwhile causes. Values and charity appeal to Millennials most of all, with 54% of Millennials saying that they buy from certain brands if values align and 49% saying that donations to charity play a role.

The CFI lists seven elements of trust-building transparency:

Motivation: Act in a way that consumers trust.Disclosure: Share both positive and negative informationStakeholder participation: Communicate with those who are interested in what you do.Relevance: Share relevant informationClarity: The info you share should be easily understoodCredibility: Have proven integrity and share both positive and negative informationAccuracy: Information should be honest, reliable and complete

Source: Center for Food Integrity/CMA Consulting, LLC.

Some companies are addressing these consumer needs through telling their story, from brand origin stories to showcasing those who make up their company. But regardless of the path, if and when you gain consumer trust, chances are they will stick with you. About 52% of consumers say they are brand loyal, according to NMI.

IT’S PERSONAL: TRANSPARENCY AND SHARED VALUESThe food we eat and the food people buy for their children is deeply personal. It’s no wonder that consumers feel, and feel strongly about what they pick up in the grocery store. There are opportunities to gain consumer trust. Often, it comes down to two words: transparency and values. Consumers want to feel like companies are being up-front about what is in their food, and about the supply chain as a whole. They want to have important information about the companies they support — not only about ingredients but about the things that align with their own core values.

What are these values? Most important, according to the Deloitte report, is an issue we just covered: commitment to food safety. Of consumers who say that reputation and/or values was important to their food and beverage purchase, 69% give commitment to food safety as a first or second reason they shop at a store. This is followed by worker treatment, local sourcing, overall mission/values, environmental responsibility and the company’s role in the community.

According to the Natural Products Insider booklet, “Transparency, It’s What’s for Dinner,” 82% global consumers said “ingredient transparency is important” when grocery shopping. The key here, as NPI notes, is that it’s no longer enough for consumers to know where their products come from, they have to trust where it all comes from. They have to trust the brands themselves, tying this all directly with engagement and shared principles.

PRIORITIZING VALUES1. Commitment to food safety2. Fair treatment of workers3. Local sourcing4. Overall mission and values5. Environmental responsibility6. Role in the community7. Aligns politically


The number-one value for consumers is

commitment to food safety, followed by

worker treatment, sourcing and overall

mission and values.

It’s no longer enough for

consumers to know where

their products come from,

they have to TRUST where it

all comes from. They have

to trust the brands

themselves, tying this all

directly with engagement and

shared principles.


Driving Needs


FONA Listens: Trust in CompaniesWhen it comes to trust, our national survey results show that 47% of consumers said that they were at least somewhat likely to trust food companies to do what is right. What’s more, most of the consumers polled said there are ways to gain or maintain their trust.

OPPORTUNITIES & STRATEGIES: Good news! The research shows that consumers can and will trust again, if they get a reason to. Take a look at what consumers said in our national survey. Sharing more supply chain details and working with suppliers that are safety-verified may be clear ways that you can get some consumers to put their trust in your products. Also crucial: Consider the new definition of safety when using the word — and make sure you’re speaking to both immediate risks as well as the new trust and health connotations.

HOW LIKELY ARE YOU TO TRUST FOOD COMPANIES TO DO WHAT IS RIGHT?

WHAT CAN FOOD COMPANIES DO TO GAIN OR MAINTAIN YOUR TRUST?

23%

25% 7%

5%

Neither likely or unlikely

Slightly likely15%

Moderately likely

15%Slightlyunlikely

10%Moderately

unlikely

Extremely unlikely

Extremely likely

10%

43%

Provide information about company’s engagement with

community

Provide details about supply chain

36%Earn recognition from third party groups for

food safety

8%Other

3%Provide

information about

company’s charitable

works



Driving Needs


CLEAN LABEL CONFUSIONIf only fulfilling consumers’ driving need for clean label products were as easy as a simple switch. Although consumers want to see “all-natural” claims on their products, many don’t realize that it’s not a verified claim. About half of consumers believe that natural means the same as organic, according to NMI. They’re also quite often confused about GMOs and gluten, as well, which we’ll explore in a later section.

In 2016, the FDA closed the comment period on the use of “natural” on food labeling. They had requested public feedback after three citizen petitions requesting a definition and one request to ban the term on labels. Awaiting a decision from the FDA and because of some class-action lawsuits, many food companies are abandoning “natural” in favor of “nothing artificial.” A section of Mintel’s 2016 Ingredient and Additive Review is even titled, “Nothing Artificial is the New Natural.”

In Mintel’s trend presentation held at FONA in March 2016, Director of Innovation and Insight Lynn Dornblaser said there is an “essential disconnect consumers have between what’s in a product and why it’s there.” She goes a step further to say that if food companies know why certain ingredients is in a product, why not help explain that to consumers? She points to some products that explain what ingredients do in parentheses. For example, “lecithin (made from soy and helps hold ingredients together)”

The Case for CleanWe’ve already taken a look at some considerations as they relate to consumers’ driving needs: health/wellness and trust. The third directly relates to both: the ever more prevalent consumer belief that “nothing artificial” and/or clean label equals healthy and trustworthy.

Clean is tied direct to safety — which we’ve shown is the number one component of trust. And health and wellness has moved from being fat/sugar (nutrition) to being ingredient driven (nothing artificial). And we believe that the result of this movement is not just clean label, but clean products. Our meaning: rather than taking an existing product and removing artificial ingredients, it’s also important to mindfully start new product developments with clean ingredients.

According to Nielsen’s 2015 report, “We Are What We Eat,” 57% of global respondents are expanding their diets with more natural, fresh foods — a 2% increase in three years. The percentage of people eating fewer processed foods is highest in North America, at 46%. Mintel’s Ingredient and Additive Review shows similar data, with 59% of consumers believing that the fewer ingredients, the healthier.

Consumers are significantly more likely to be monitoring food and beverage labels today compared to eight years ago, according to NMI. In fact, the number of people who said they

“select foods based on the ingredient list” is 53%, up nine percent from 2007. Those eyeing the nutritional facts panel are at 54%, up six percent in the same timeframe. Global research from Nielsen supports these findings, with more than 40% of people attracted to claims like “natural” and “no artificial colors/flavors.”

FONA Listens: Do Consumers Know What “Clean Label” Means? Consumers in general are unfamiliar with the term “clean label.” We asked consumers an open-ended question, “If a food or beverage product has a “clean label,” what does that mean to you? More than 62% said they didn’t know, or gave incorrect answers such as, “see-through packaging.” That puts “clean label” firmly as an industry term, at least for now.

However, when asked about “clean and/or natural” consumers gave no room for doubt; they want those kinds of ingredients in their food.

ATTRIBUTES RATED AS IMPORTANT FOR PURCHASE

GLOBAL AVERAGE NORTH AMERICA

All Natural 43% 29%

GMO Free 43% 32%No Artificial Colors 42% 29%No Artificial Flavors 41% 30%Made from Vegetables/Fruits 40% 32%

Natural Flavors 36% 31%Source: Nielsen “We Are What We Eat,” 2015

ARE CLEAN AND/OR NATURAL INGREDIENTS IMPORTANT TO YOU?

82%YES

18%NO



Driving Needs


SIDE NOTE ON ALCOHOLWe mentioned that alcoholic beverage is the last category consumers demand to be clean. However, we predict that patience is only temporary. With huge growth in not only craft breweries but Millennial interest in craft spirits and wine, it’s only a matter of time before even the average consumer wants their alcoholic beverages to have the “healthy halo” of clean.

ALL CATEGORIES IMPACTED?According to the Deloitte report, all food categories are at least partially impacted by consumers’ move to what they call evolving drivers (Remember, evolving drivers as defined by that report are: health/wellness, safety, social impact, experience and transparency.) They looked at consumers who factored any of those into purchase decisions whatsoever. Of those consumers, 66% said they considered evolving drivers when purchasing fresh prepared meals and 49% said the same of deli items. It was 45% for dry goods and nonalcoholic drinks, 44% for bakery items and 42% for condiments/dressings and snacks/sweets. The only category that was below 40% was alcoholic beverages at 33%.

However, when taking a wide view at all consumers, it seems that label monitoring may be category-dependent, at least for now. Eliminating ingredients without knowing your consumer base could be a mistake according to NMI. For example, while 47% of the general population is looking at sugar when they read a label, we don’t know if they seek lower sugar content in bread so that they can fit in a sweet treat or a soda later in their day.

When taking a wide

view at all consumers,

it seems that label

monitoring may be

category-dependent,

at least for now.

Eliminating ingredients

without knowing your

consumer base could

be a mistake.


Driving Needs


We Will Break It DownSimply understanding that clean itself is a major driver for consumer purchases, and why it has arisen is key. But in the sections ahead, we’ll move a step further, moving past driving needs like health/wellness, trust/transparency and the need for clean. We’ll look at the resulting behaviors and what’s happening in the industry — and always with an focusing on where opportunity can be found.

FONA Listens: Consumer Views on Natural Flavors We asked consumers an open-ended question to discover their views on “natural flavors” and found that most consumers view the presence of natural flavors favorably. (Note that the answers were in the consumers’ own words, so we compiled similar answers together to calculate percentages.)

OPPORTUNITIES & STRATEGIES: Consumers have spoken. Survey after survey shows that the move to clean label is clearly embraced by shoppers. And the great news is that “natural flavors” fit nicely within those clean product needs, according to our national survey. Keep great taste in your formulations while serving those clean label needs. Also, Mintel’s advice to explain certain ingredients’ presence might help increase consumer understanding and transparency.

WHEN I SEE “NATURAL FLAVOR” ON A PRODUCT, MY EXPECTATION IS…

Nothing arti�cial or additives

Contains all natural ingredients

Good tasting; tastes like it came from the source

Comes from nature

Better for you/healthy

39%

16%

8%

7%

6%

6% Don’t know


OPPORTUNITIES & STRATEGIES:



Two Important Considerations

One: Taste Is Not NegotiableRegardless of what is driving consumers towards their food and beverage purchase, one thing is clear: Food must taste good. Consumers do not believe that taste and nutrition are mutually exclusive. More than 75% of shoppers choose food because of taste, according to Mintel’s Food Packaging Trends report. And 58% of consumers told NMI that they are not willing to give up taste for health. Food Technology reports similar responses, with 83% of consumers saying taste has a large impact on food choices, followed by price at 68% — something we’ll touch on next.

What’s more, consumers want new flavors in their food. Mintel’s “Innovation on the Menu” reports that 82% of Americans say they’re interested in new flavors. Related to all of this is premium or “high quality” positioning. About 65% of consumers look for high-quality ingredients according to Mintel. The Global New Product Database shows that globally, food and beverage launches with “premium” positioning increased 56% between 2012 and 2015. Food Quality and Safety’s article “How Companies Can Meet Specialty Food Demand” claims that consumers are willing to pay more for specialty products and those consumers are here to stay.

The fact that consumers want food that tastes good and have an interest in new flavors and high-quality ingredients is good news. Get and maintain the flavor they love and they’ll come back for more. If you can meet their clean label and nutrition needs while you do it, you might just have fans for life.

WHAT CONSUMERS SAY IS IMPORTANT WHEN BUYING FOOD AND BEVERAGES

Great taste: 83%Price: 68%Healthfulness: 60%Convenience: 52% Sustainability: 35%

Source: Food Technology, “What, When and

Where America Eats

FONA Listens: Taste is Number One

WHEN MAKING A PURCHASING DECISION ON A PRODUCT, WHAT IS THE MOST IMPORTANT?

27%

25%

7%

TASTE

INGREDIENTS24%PRICE

13%NUTRITIONAL

PANEL

MADE IN THE USA

4%OTHER





Two: Consumers Might Pay More for Clean — But They Won’t Like ItAfter taste, the priority for food/beverage purchase cited is cost. Shoppers worry about spending too much at the grocery store, and want to get value from what they buy. Yet surveys show that most consumers say they will pay more for clean label products. Why the apparent contradiction?

According to the Deloitte study, 81% of consumers said they would be willing to pay more for products that were healthier or contained “natural or organic” ingredients. The same report showed that 55% were willing to pay up to 10% more and 23% were willing to pay up to 20% more.

Certain segments of the population seem to be driving these numbers more than others. Millennials were 75% more likely than older consumers to express willingness to pay more for health and wellness attributes. Consumers starting a nutrition program, parents and higher income consumers were also more willing to pay more than other groups. Nielsen’s “We Are What We Eat” report mirrors these findings, with 80% of North American consumers willing to pay more for food with health attributes.

At the same time, CFI reports that more than half of consumers agree that food prices are a greater concern for them than they were a year ago, and 57% of Americans are highly concerned about the affordability of healthy food.

One figure might help explain why consumers say they will pay more for nutritious food, but at the same time are concerned about prices. Mintel’s Free-from Food Trends (Canada) report shows that more than 60% of Canadians think that “free-from” positioning labels are just a way for companies to charge more, yet 80% say they still buy food with these “free-from” labels.

This all seems to go back to the trust issue — it seems that consumers will pay more for clean label food because they feel they don’t have a choice. Not knowing what goes into clean formulations, they perhaps believe that food companies will hike up the prices for clean claims, not because they have to, but because they can. And they’re resigned to it. They’re concerned, yes, but yet willing to fit that cost into their budgets — and that’s how important clean products are to consumers. The mixed message also illustrates that consumers may only tolerate higher prices for the time being. As Mintel’s Free-From Report (US) puts it, “There is a threshold where consumer won’t pay a higher price for clean label.”

Consumers may only tolerate higher prices for the time being. As Mintel’s

Free-From Report puts it,

“There is a threshold where consumer won’t pay a higher price for clean label.”




FONA Listens: Purchasing PrioritiesOur national survey shows that consumers are split when it comes to package claims and what is worth paying more for. About 54% of consumers will pay more for a “no artificial ingredients” claim and about half will pay extra for “all-natural” and recognizable ingredients. However, non-GMO and organic do not fare as well. In fact, organic performed the worst with our consumers — 41% said they would not pay more, and 39% said they would.

OPPORTUNITIES & STRATEGIES: Consumers still value taste and that is fantastic news for anyone who loves delicious food. Build it and they will come; Deliver an incredible signature flavor in your food and consumers just might follow. But while taste is non-negotiable, paying higher prices is debatable to consumers. They might pay more for some claims, but not for others. And they do not want to feel like prices are needlessly high. So if you can deliver great flavor, clean label and fit within consumers’ budgets, all the better.

Strongly Agree

Strongly Disagree Disagree

SomewhatDisagree Neither Somewhat

Agree Agree

7% 9% 10.5% 19% 27% 16% 11%

Strongly Agree



Agree Agree

9% 8% 10.5% 23% 25% 15% 9.5%

Strongly Agree



Agree Agree

7% 8% 8% 20% 24% 19% 13%

When purchasing food and beverages items, I am willing to pay more for products with "no arti�cial ingredients."• Total percentage that agree: 54%• Total percentage that disagree: 26.5%

When purchasing food and beverages items, I am willing to pay more for products that are "all natural."• Total percentage that agree: 49.5%• Total percentage that disagree: 27.5%

When purchasing food and beverages items, I am willing to pay more for products with "recognizable ingredients lists."• Total percentage that agree: 56%• Total percentage that disagree: 23%

Strongly Agree



Agree Agree

10% 13% 12% 21% 20% 13% 10.5%

Strongly Agree



Agree Agree

13% 14% 14% 20% 18% 12% 9%

When purchasing food and beverages items, I am willing to pay more for items that are "non-GMO."• Total percentage that agree: 43.5%• Total percentage that disagree: 35%

When purchasing food and beverages items, I am willing to pay more for products that are "organic".• Total percentage that agree: 39%• Total percentage that disagree: 41%




Resulting Behaviors

Consumers are not a single bloc thinking with one like mind. Each shopper has a different need driving them at any particular moment. Their goals, dreams, challenges and preferences are deeply personal, and as we all know, food and meals with family are also deeply personal. But whereas shoppers’ driving forces are diverse, it is the resulting behaviors that we can truly measure and track. And quite often, it’s in the resulting behaviors where consumers seem to align more. It’s the resulting behaviors that we see in sales figures. But when (not if ) actions don’t align, if we see unexplained variations or anomalies, we have to take another angle, and think about what we just covered: the various driving needs.

In this section, we’ll move on from those drivers and examine the resulting behaviors — those actions that bring the driving needs to life.


Resulting Behaviors


OLDER GENERATIONS ON BOARDThe mainstreaming of clean label is reflected when looking at different generations. Consumers in the 50-plus age group are very interested in clean label, said Elizabeth Sloan, PhD., of Sloan Trends as quoted by Food Business News. She cites a 2013 Gallup study where, of those age 65 and older avoiding artificial ingredients in their food, 76% say it is because of health concerns. Food Technology’s article “Clean Label Rules, But Confusion Reigns” cites the same study, claiming that heavy clean label purchasers are likely to be aged 50-plus. Also, 66% of Generation X (38-49) and 64% of Baby Boomers (50-68) say that reducing toxins in their body is critical to staying healthy, according to NMI. The same survey shows 67% of Generation X is interested in non-GMO products, and 56% of Baby Boomers say the same. What’s more, perceived health isn’t the only consideration, with nearly half of Generation X and more than a third of older generations saying that they will usually buy from a company whose values match their own.

It’s Not Just Millennials When we examine consumer behavior, it’s essential to know that the push for clean is not just favored by Millennials or high-income consumers. The attraction to clean ingredients is a cross-generational, cross-income paradigm shift.

MILLENNIALS AS EARLY ADOPTERSThe move to clean is often attributed largely to Millennials (age 18-37) but that could be because they are the early adopters in their families. According to NMI’s Healthy Living Report, 74% of them say that if they like something, it will influence others to try it. About 65% say that they are usually one of the first in their family or circle of friends to try a new product.

GOING MAINSTREAMRegardless of where it started, it’s clear that clean label (fueled by health and wellness purchasing behavior) has gone mainstream. NMI’s report shows that 76% of the population believe it is very important to lead a healthy, balanced lifestyle. Even the consumer segment that has always been the least health-oriented is feeling the tide change. These consumers, which the report describes as “Eat Drink and Be Merrys,” has seen an eight percent drop in membership, while the very next more health-conscious group “Fence Sitters”

has seen a seven percent increase. As NMI puts it, “these shifts in segment membership are a strong indication of the mainstreaming of health and of a population which is getting on a path to living a healthier lifestyle.”

EVOLVING DRIVERS LIKE SAFETY, HEALTH/WELLNESS ANDTRANSPARENCY ARE:Equally important across all regions of the U.S.

Equally important across all age groups

Highly relevant across all income groups


The move to clean is

often attributed largely

to Millennials but that

could be because they

are the early adopters

in their families. About

65% say that they are

usually one of the first

in their family or circle

of friends to try a new

product.

PERCENTAGE OF CONSUMERS WHO SAY THEY WILL USUALLY BUY PRODUCTS FROM COMPANIES WHOSE VALUES ARE MOST LIKE THEIR OWN

Generation X (age 38-49):

46%Baby Boomers (age 50-68): 38%Mature Generation (age 69+):

38%Source: NMI 2015 Trends in Healthy Living


Resulting Behaviors


IT’S ALL ABOUT THE KIDSParents are an important consumer group when it comes to clean label. Regardless of their generation or income, when people become parents, their purchasing behavior changes. Research shows that new parents move away from artificial ingredients and towards food they consider natural.

More than 60% of households with children under 18 say that they became more concerned about pesticides and toxins in food when they had their first child, according to NMI. The percentage is 57% regarding allergens in food and 55% concerned about GMOs. The addition of a child in the household creates a brand new set of challenges for a family, with 64% saying that providing healthful snacks is a nutritional challenge. Interesting to note is that fathers are quite involved in food choices, perhaps more than ever before.

OPPORTUNITIES & STRATEGIES: Are you thinking about older generations when you market your products? Or fathers? With 74% of Dads saying they teach their children the value of nutrition — they might be just as much of an impact on food choices as Moms. What efforts are you putting towards capturing these important audiences?


PERCENTAGE OF HOUSEHOLDS WITH CHILDREN UNDER 18 INDICATING:

“I actively teach my children the value

of nutrition.”

“Snacking is a nutritional challenge.”

Household with child 72% 64%

Male Parent 74% 63%

Female Parent 70% 65%


Resulting Behaviors


Regulatory and Nutrition Matters The consumer behaviors of the clean label movement can’t be examined without parsing through the various label claims and certifications appearing on food and beverages.

What does this all lead to, with consumers and their purchasing behaviors? Is there anything that appeals to them more than others, and what may be falling by the wayside?

Remember safety’s new definition as you consider the regulatory and nutrition issues to follow. No longer is safety just about immediate risks to consumers. Rather, consumers now consider health and wellness and ingredient transparency as directly related to safety.

ORGANICSOrganic food purchases have rebounded significantly since a dip in 2011. Fortune estimates the organic market has tripled in the last decade and is now worth $36 billion. Organic brands have gone completely mainstream, with more and more shelf space allocated each year. Organic food prices are lower than in the past, bringing in a much greater range of customers than ever before. Yet at the same time, many consumers seem confused or doubtful about the benefits and regulations behind organic certification.

According to NMI’s 2015 Healthy Living Report, 71% of consumers say they had purchased organic food or beverage in the previous year — an18% increase since 2007. Despite these remarkable sales increases, consumers are not unanimously confident about organics. According to NMI, 57% of the general population say they aren’t sure that products labeled organic truly are organic. And 68% of the general population think that organic food is too expensive. Only 32% of those polled believe it’s worth it to pay more for organic food.

Interestingly, a growing consumer attitude is that products labeled natural (which is an unverified claim currently undergoing FDA scrutiny) are basically the same as organic (which is a verified claim and regulated by the USDA.) The 2015 NMI Healthy Living Report shows that more than 30% of consumers agreed that natural and organic were synonymous — a 12% increase since 2006. Putting aside what might be consumers’ confusion about regulations, and looking at opinion — they also think quality is the same. Survey results show that consumers do not distinguish from “natural” and organic when it comes to quality attributes like nutrition and taste.

But regardless of apparent confusion about various claims, organic continues to grow. According to the Organic Trade Association, organic sales were up 11.3% in 2014. They predict it’s unlikely to fall out of favor in the near future.

FONA Listens: Consumers Non-Exclusive in OrganicsMost consumers are not diehard organic purchasers, but more than half do purchase at least occasionally. We asked consumers if they purchase organic products, and about 53% said yes. Of those, very few (6%) purchase always.

HOW OFTEN DO YOU PURCHASE ORGANIC PRODUCTS?

PERCENTAGE OF GENERAL POPULATION INDICATING WHAT NATURAL AND ORGANIC MEAN TO THEM

Better nutrition

Better taste

Better for environment

Better for family/children

NA

TU

RA

LO

RG

AN

IC

48%

39%

57%

55%

48%

34%

58%

53%

51%

6%

SOMETIMES

27%ABOUT HALF

THE TIME

MOST OF THE TIME

15%ALWAYS

0%NEVER




Resulting Behaviors


MIXED BEHAVIOR ON GMOS When it comes to consumers and their views on GMOs, it is a mixed bag. NMI reports that 58% of the general population say “it’s important for stores to carry products that do not include genetically modified ingredients.” And more than 80% of those polled tell Consumer Reports that for something to be “natural,” it cannot include GMOs. Yet 35% of consumers tell NMI that GMOS are important to growing more food per acre to feed the world’s population and 32% say Non-GMO certified foods and beverage are “just a marketing ploy.” NMI also reports that 55% of consumers say they would avoid products labelled to have GMOS — but that’s down from 63% in 2013.

The contradictions and confusion are perhaps not surprising, given what is going on in the food industry itself. While companies like Campbell’s are voluntarily labeling the presence of GMOs in their food, the United States Congress is debating the issue of mandatory labeling. In February 2016 a California federal court judge threw out a GMO lawsuit against Chipotle, saying that the plaintiff did not prove the presence of GMOs caused economic injury and also speculated than the plaintiff’s definition of GMOs was inconsistent. Some outlets, like environmental website Grist, question if GMOs can even be defined in a way that suits everyone.

The good news is that, even with the confusion, consumers feel more knowledgeable each year. NMI reports that in 2014, 17% of consumers said they were very knowledgeable regarding

GMOS — a 7% increase in just two years. Mintel research backs up the increase. Lynn Dornblaser of Mintel said that consumers are becoming more aware that there are positive aspects to GMOs, like drought and insect resistance. “The conversation isn’t just ‘GMOs are bad,’” she said. “The consumers are beginning to understand there’s a flip side.”

While “natural” claims were down 30% between 2011 and 2015 according Mintel, products with non-GMO claims were up 17%. According to the Wall Street Journal article “Organic vs. non-GMO labels. Who’s winning?” non-GMO sales have increased 70% annually from 2013 through 2015, reaching $13 billion in 2015.

In the eyes of the consumer, organic and GMO appear to be on equal ground — 32% say that they would pay more for organic labeling and 28% say the same of non-GMO. Perhaps the best advice when it comes to considering GMO formulations is to prioritize and engage whenever possible. Who is the customer for your product, and are GMOs a main concern for them? Would going organic or “artificial-free” be just as attractive? To help consumers understand the difference, California Certified Organic Farmers has created a label, “Organic is non-GMO & more.” The group hopes that it will help distinguish organic as more valid than just non-GMO claims. As Vernon Petersen of Abundant Harvest Organics — whose products bear the new label — told the Wall Street Journal, “When you have a confused public, it’s never good.”

FONA Listens: About the NGP Logo We showed consumers the Non-GMO Project logo and asked them, open ended, what it meant. More than 50% of consumers correctly that it meant “no GMOs.” The rest did not know what the logo was or gave vague answers like “natural” or “healthy.”

“When you have a confused public,

it’s never good.

—Vernon Petersen, Abundant Harvest Organics

PERCENTAGE OF CONSUMERS WHO SAY THEY ARE VERY KNOWLEDGEABLE ABOUT GMOS

10%

2012 2013 2014

14%17%



Resulting Behaviors


GLUTEN DEMAND LESSENING? While GMOs and organic claims seem ever on the rise, more traditionally “nutrition-related” concerns like gluten appear to be lessening somewhat for consumers. Mintel’s Food Packaging report shows that the second leading claim for products is “low/no/reduced allergen.” But while 11% of U.S. consumers say they look at this information, only 2% claim to purchase based on allergies. Unless dealing with

an allergy themselves, consumers as a whole are less interested in allergen-free products than in clean label products, according to Mintel.

Gluten-free, which is related to allergen positioning, has seen explosive growth in recent years. However as Food Technology mentions in “Clean Label Rules,” gluten-free interest seem to be waning in favor of other claims. This slowing of interest may have something

to do with consumer confusion. As with non-GMO claims, consumers aren’t completely sure what gluten-free means. According to NSF International, a global public health and safety organization: while 90% of consumers have heard of gluten, only 35% can correctly define gluten as a protein found in wheat and related grains.

Even though consumers are confused about the term, we don’t expect gluten-free formulation and positioning to disappear any time soon. According to Euromonitor’s 2015 Health and Wellness report, “Gluten-free food may have been less dynamic in 2015 compared to previous years within the review period, but it nevertheless managed to garner a 9.6% constant value rise.” Indulgence and convenience will bring the category growth in the future, Euromonitor predicts. So, if gluten-free or allergen-free is the direction you’re consumer is going, you might want to think about ready-made meals, easy snacks or fulfilling their guilty pleasures.

PERCENTAGE OF CONSUMERS WHO INDICATE THEY WOULD BE MORE LIKELY TO PURCHASE A PRODUCT WITH THESE SEALS/CERTIFICATIONS

54% 35% 26%

of consumers de�ne gluten incorrectly or are not sure what it is

think wheat-free also means gluten-free

of consumers correctly identify gluten as a protein found in wheat and related grains

Source: NSF.org

34%

20%

USDA Certi�ed Organic

Non-GMO Project

Gluten-free

40%



Resulting Behaviors


ADDED SUGAR IN THE SPOTLIGHTA nutritional and labeling issue garnering a lot of attention lately is added sugar. The U.S. government recommended in January 2016 that Americans cut their intake of added sugar to no more than 10% of daily calories. The FDA is also proposing changes to the nutrition panel to

require the declaration of added sugar in food. According to the FDA, Americans typically get 16% of their total calories from added sugars. Other changes include revising the overall design and the way serving sizes are calculated. The FDA has gathered input from the public and is revising their standards. After the new standards go in effect, food manufacturers will have two years to comply.

These government changes reflect an attitude that’s apparent when talking to consumers. More than half of consumers tell NMI they prefer foods with no sugars added — a 12% increase since 2006. The growth in this opinion is cross-generational. In 2006, 26% of Millennials preferred foods without added sugar and today it is 53%. In 2006, 51% of mature Americans (older than Baby Boomers) said the same, and now it’s 63%.

We know that despite the interest in health and wellness, consumers are still interested in taste — so what are they

using to sweeten their own foods, if not sugar? NMI’s healthy living research shows that while 42% of consumers are using table sugar, that percentage is down 13% since 2007. Stevia-based sweeteners and honey have seen the most gains, with increases of 12% and 6% respectively. Sweeteners sucralose, aspartame and saccharin are all seeing decreases due to consumers’ move away from artificial ingredients. According to NMI, natural sweeteners like agave (which is now used by 10% of consumers) are becoming popular with Millennials and “health-focused” consumers.

Added sugar is certainly in the consumer and regulation spotlight, but opportunities exist to get consumers the sweet taste they crave while meeting their nutrition and clean label needs. Whether it’s developing the perfect flavor, using taste modification or adding natural sweeteners with a “healthy halo” — like beet sugar or agave — there are options when tackling added sugar concerns.

OPPORTUNITIES & STRATEGIES: We’ve covered the confusion — and the clear growth — in claims like non-GMO and organic. Of note is that organic is usually the verified claim that lets a company prove that something is clean label. But if the average consumer doesn’t understand this and doesn’t want to pay for it, is it time to very strategically help them understand? Conversely, if organic and/or non-GMO claims aren’t possible in your product development, consider that there is one area where consumers feel most strongly: food safety. Keep in mind the changing face of food safety. But when in doubt about where to direct your efforts, make sure you are working with quality verified facilities, and let your customers know what that means to you. The spotlight on added sugar also gives food companies the opportunity to use unique new natural sweeteners or to approach their flavor supplier for other innovative solutions.

SIDE NOTE ON FATWhile sugar remains a top concern for the public, fat has a rehabilitated reputation. Lynn Dornblaser of Mintel spoke at FONA in March 2016 and discussed what she called the trend of “Fat Sheds Stigma.” No longer are fat-free and low-fat the most appealing claims to consumers. Sales of butter are at a 40-year high, and “consumers are beginning to understand there are good fats and bad fats,” she said. Some companies are promoting that they are sources of “good fat” on the package, and she pointed directly to Food For Health Organic Coconut Oil with on-package messaging: “One of nature’s richest sources of good fats.”

PERCENTAGE OF CONSUMERS WHO PREFER FOODS WITH NO SUGARS ADDED

SWEETENERS CONSUMERS ADD OR USE ON A REGULAR BASIS

Table SugarHoneyRaw SugarStevia-basedSucraloseAspartameSaccharin

55%36%18%

4%24%21%13%

42%42%21%16%14%12%

9%

TYPE 20142007



40%

2006 2014

52%



Industry Response

We’ve examined our current clean label environment, consumers’ driving needs and the resulting behaviors. Now we take a look at the industry response. What is being done to meet consumer demand and to recapture trust? What’s on the horizon? Knowing this will help you answer some key questions: Are you, as a food developer on-track with the industry, and where is white space further innovation?

All About LanguageThe industry response to clean is much more than ingredient changes. If you consider that consumer attraction to clean label involves trust and perceptions, then the words used in marketing take on a greater importance than ever before.

Retailer Aldi is making a push toward clean. As Mintel’s Lynn Dornblaser mentioned in her March 2016 trend presentation at FONA, Aldi is one particular company that is providing elevated product claims without an elevated price. She said that they’re changing the dynamic that clean is just of interest for high-income families. Aldi’s push isn’t just about products alone, however. A free booklet passed out in American stores shows that language is a key part. Phrases in the booklet include:

“Feel Good Food”“With honest ingredients, anything is possible”“Fresh. Simple. Honest. ““Honest Food You Can Trust”“A Simpler Approach to Better Food”“Bring out the best in you”“We have a responsibility to you and the world around us.”

Other companies are making changes in the way they talk about their food. Fortune’s article, “The War on Big Food” points out that Campbell’s employees use words like cook, preserve and recipe instead of manufacture, process and formulation.

Larabar’s first television commercial featured the tag, “Food Made from Food.” Advertising for Oscar Mayer’s natural line features the tag, “Great taste is in our nature.” And as Advertising Age reported, Coca-Cola’s 2016 marketing is “Taste the Feeling,” a strategic shift to capture “emotional storytelling” and the nearly universal experience of drinking Coca-Cola.

Of course, language is only part of the strategy for most companies. According to Mintel’s “Cleaner Labels Meet Private Labels” report, Blount Fine Foods launched a “Clean & Simple” language campaign. But the company also eliminated what they called “outdated” additives, preservatives and flavors and gained certifications and updated sourcing, procurement, logistics and production processes.

FONA Listens: On Marketing LanguageWe ran some packaging phrases past our consumers, to see what they thought. Here are the top choices, with the percentage of consumers who said it most appealed to them:

1. Nothing Artificial: 63%2. Made in the USA: 59%3. Honest Ingredients: 38%

The least popular claim was “Clean Ingredients,” which appealed to only 23% of those polled.© FONA International National Consumer Survey, 2016

The industry response to clean is much more than ingredient changes.

If you consider that consumer attraction to clean label involves trust

and perceptions, then the words used in marketing take on a greater

importance than ever before.


Industry Response


At Your DoorstepStartups like Thrive Market are opening the world of clean label food and beverages to an even wider audience. Even if you live in an area where healthy groceries are hard to come by, you can have clean label packaged foods delivered at a reasonable price. The company says its mission is “to make healthy living easy and affordable for everyone.” Think Whole Foods products delivered to your door with Amazon-like convenience at Costco prices. The company charges $60 per year and users get healthy and wholesome products delivered to their door for 50% less than retail. Thrive only sells non-perishables and ships through services like FedEx and UPS. According to Business Insider, the company has raised $58 million and has more than 180,000 paying users.

Not only is the company garnering a huge audience, it also is launching its own products. It has two private label offerings already: coconut oil and tomato sauce. Co-founder Nick Green told Fortune the company had plans to release 100 private labels in the first six months of 2016. Beyond private label, the company is also selective about which brands get represented in the catalog. According to Fortune, Thrive only carries three to four brands in a product category.

Another subscription service gaining attention and playing directly into the clean label movement is NatureBox, which sells snacks directly to consumers online via subscription. The Wall Street Journal reported that the company received a $30 million

investment in May 2015. According to the company website, they guarantee simple ingredients, “no artificial junk,” no high-fructose corn syrup, no MSG and less than 200 calories per serving.

Meal kits are also bringing food conveniently to doorsteps nationwide. Companies like Blue Apron and Hello Fresh sell subscriptions to meal-making services. Customers get fresh ingredients and instructions mailed directly to them, to make a meal from scratch at home.

Clean VendingLike Thrive Market, convenience is key for startup LeanBox, which places healthy and high-tech vending machines in workplaces. Companies receive “fresh food kiosks,” which are stocked with the popular items that employees vote on via app. Items include things like organic entrees and pressed juices. Each kiosk has a stock-tracking system and products are kept fresh.

“We created LeanBox to empower companies and become a partner in creating an upgraded in-office food culture,” co-founder Shea Coakley said to FoodBev.com. By early 2016, there were 200 LeanBox machines in New England and plans to advance to more major markets. The company also has fruit and snack delivery services available, as well as cold-brew coffee on tap. Coakley told FoodBev.com that the company was constantly scouting to bring new products and brands into the fold.

Meal kits are bringing food conveniently to doorsteps nationwide. Customers

get fresh ingredients and instructions mailed directly to them, to make

a meal from scratch at home.


Industry Response


Smart Labels & QR CodesAnother initiative within the food industry is the printing of scannable quick-response (QR) codes, bringing consumers to a landing page with more information than found on the package. The idea is to offer greater transparency and access to nutrition, supply chain or environmental information.

One such program that the Grocery Manufacturers Association and food companies (such as Hershey’s) are uniting behind is SmartLabel. According to a GMA press release, 30 major food companies signed up to take part in the SmartLabel program and more were taking interest. The SmartLabel website positions the program, saying it “empowers shoppers to learn even more about the products they buy and consume.” Information on the SmartLabel product landing pages include 350 product attributes — from nutrition to allergens to certifications. The Hershey’s website backs SmartLabel, calling it an industry-wide solution to help consumers make informed decisions.

It seems that shoppers are on-board with these initiatives, with more than half telling Mintel they are interested in these types of scannable codes.

Kraft’s Sneaky But Successful Move Kraft Foods made what many consider to be a bold move in response to the clean movement. In December 2015, Kraft quietly removed artificial ingredients (namely, yellow 5 and 6 and artificial preservatives) from its iconic macaroni & cheese without telling anyone. Then they waited. In March 2016, Kraft announced that they had made the change, calling it the “world’s largest blind taste test.”

“They made the switch and literally nobody noticed,” Mintel’s Lynn Dornblaser said in her March 2016 presentation at FONA. “This illustrates that for the most part, consumers don’t look at the ingredient statement.” Dornblaser added that it was “absolutely brilliant” because consumers can now trust that the taste and color has not changed. She added that though that a company probably has only one chance to try that approach without consumers getting suspicious.

PERCENTAGE OF CONSUMERS WITH ANY INTEREST IN SCANNABLE CODES OR LINKS TO…

PLEASE RATE YOUR LEVEL OF INTEREST IN SMART LABELS/QR CODES ON PRODUCT PACKAGING THAT DIRECT YOU TO A COMPANY’S WEBSITE FOR MORE INFORMATION.

Additional nutritional information

51%

Additional information about the product source

51%

Additional information about product recycling and environmental responsibility

49%

Additional information about the company history

45%

Entertainment content (like songs and videos):

38%

Source: Mintel Food Packaging Trends, 2015

ExtremelyInterested

VeryInterested

SlightlyInterested

NotInterested

ModeratelyInterestedInterested

77%

28%24% 23% 19%

7%


FONA Listens: Our national survey also shows that shoppers are open to accessing smart labels or QR codes for more information. In fact, 77% of respondents said that they were at least somewhat interested.


Industry Response


Do-Not-Use ListsSome companies are publicizing the absence of artificial ingredients in their food. Stores and restaurants like Whole Foods, Kroger, Trader Joe’s and Panera are publishing “do not use” ingredient lists. Panera’s company website says they are committed to removing artificial preservatives, sweeteners, colors and flavors. “The no-no list is the latest step on our journey to clean food and a transparent menu,” said Panera CEO Ron Shaich in a press release.

Trader Joe’s private label products don’t contain artificial ingredients or GMOs, according to the company website. Whole Foods’ unacceptable ingredient list includes 79 ingredients such as aspartame, MSG and high fructose corn syrup. Kroger published a list of 101 ingredients banned from its Simple Truth and Simple Truth Organic private label brands. The company website says these are the “101 artificial preservatives and ingredients that our customers told us they didn’t want in their foods.” As IFT.org reported, that list of 101 banned ingredients mirrors many of the ingredients on the Whole Foods and Panera lists.

FONA Listens: The question is, do consumers even know about these do-not-use lists? According to our national survey, the answer is no with 85% of respondents saying they were not aware of banned-ingredient lists.

OPPORTUNITIES & STRATEGIES: Earlier in the report, we mentioned that Mintel called “Nothing Artificial” the new “Natural” when it comes to marketing language, and that language was popular with shoppers we polled. Second to this was, “Made in the USA.” Consider these issues when you start your product development efforts. Is it possible to have artificial ingredients absent? If you make your products in the USA — are you clearly sharing that information with consumers? Also, startups like LeanBox and Thrive Market are addressing needs in the market and gaining an audience. Examining what is working for them can help inspire your own entrepreneurial efforts.

ARE YOU AWARE THAT COMPANIES HAVE DO-NOT-USE INGREDIENTS LIST?

85%NO

15%YES




EXPAND YOUR OWN PERCEPTION OF CLEANIn our opinion, the clean movement isn’t just an exercise of going to your product and removing the “bad” ingredient of the moment. It can also be comprehensive reformulations or developing new products or lines, with clean in mind. Think of clean as bigger than clean label. Go beyond clean label and think about clean products made with kitchen friendly, consumer understood ingredients.

TASTE REIGNS SUPREMEWe’ve said it a few times in this report, but taste is still the top priority for consumers and that is wonderful news. It gives us in the food industry a mandate: Make it taste good. With 75% of consumers choosing food based on taste (Mintel) and 58% saying that they won’t give up taste, even for health (NMI) we know what we need to do.

INSPIRED INDULGENCEDespite the huge interest in health and wellness, consumers are willing to indulge with delicious, high-quality foods. Americans are not giving up chocolate and candy, which have avoided declines plaguing other packaged foods, according to Fortune’s article “The War on Big Food.” Related, 65% of consumers look for high-quality ingredients (Mintel). As the Fortune article says, “If we’re going to eat something bad for us, we want to know it’s the best kind of bad we can get.”

FOSTER AN ADVENTUROUS SIDEAs we mentioned earlier, 82% of Americans tell Mintel that they are interested in new flavors. Most consumers (58% according to NMI) will try a new product regardless of brand, so just think what would happen if at that first taste, you blow their minds with the perfect taste. Clean label consumers are especially adventurous. A consumer willing to explore new tastes offers so many new opportunities. Let’s explore with them!

BOOM(ERS)Baby Boomers are also clean label consumers. They account for about half of all consumer spending, but get only 10% of marketing dollars directed their way, according to NPR. They control 70% of expendable income. Americans are living longer, fuller lives. Seniors are physically and mentally active, technologically savvy and engaged. AARP has an online dating site. What was age 65 in the 1990s is not what age 65 looks like today, so make sure some efforts are directed towards these consumers.

Opportunities

When thinking about opportunities as it relates to the new normal, it’s not enough to think that consumers aren’t satisfied. It’s important to take a step back, consider all the information presented and think, “This is my consumer and they’re doing this because...”

There are huge opportunities in the clean product space. It’s an exciting area of growth and a chance to do something tremendous for your consumers. It’s not an overstatement to say that food is a key part of an enjoyable life. Consumers want enjoyable lives, and we can be an essential part of making that happen. Finding some way to help people feel better about what they eat is truly an opportunity we can’t let pass.


Opportunities


FUNCTIONAL AND FORTIFIEDIt should come as no surprise that functional and fortified products have an audience with our newly health-conscious population. As NMI reports, 77% of consumers used a functional or fortified food or beverage in the previous year. Many consumers want to boost nutrition with products that are convenient and tasty, and they want easy ways to add ingredients like fiber and protein into their diet.

NEW PARENTS AND DADSAnother consumer group we touched on is parents. Consumers grow more interested in clean label when they become parents, with 63% of households with children under 18 say that they first became more concerned about pesticides and toxins in food when they had their first child, according to NMI. Another key takeaway is that 74% of dads are involved in the nutritional education of their children. Mom is quite often at the receiving end of food marketing efforts. Are you targeting new parents and dads?

KNOW YOUR AUDIENCEEven though most consumers are interested in learning about the behind-the-scenes in the foods they eat, our survey showed that they don’t necessarily want to be bombarded with this info. While 89% of respondents said that they were interested in learning about the companies and processes behind the food they eat, in a different question, 17% said they did not want food companies to proactively inform them — they want information posted on a website if at all.

THINK VALUES & BRAG ABOUT EMPLOYING LOCALIf you make products locally, or in the United States, it’s a good idea to proactively share that with consumers. More than 70% of consumers we polled said that they’d be more likely to purchase a product if they knew it was made in their state. Our survey also showed that “Made in the USA” was language that appealed to 59% of consumers. Earlier we noted that 45% of consumers said they’d purchase from a company that shared their values (NMI). The top-rated values for consumers are food safety and fair treatment of workers.

KNOW THE PRODUCT PERCEPTIONSA key piece of advice if considering any strategy change is to know how your product is perceived in the market. According to the Nielsen report “We Are What We Eat,” clean label claims are strongest when a product is already considered healthy. Healthy products with packaging call-outs tend to outperform other products. Before you reformulate an already popular product, think about the existing perceptions behind its success.

CONSUMERS WANT MORE OF THESE INGREDIENTS IN THEIR DIET, RANKED:

1. Vitamins/Minerals2. Protein3. Fiber4. Calcium5. Vitamin D6. Antioxidants7. Omega-3x8. Probiotics9. Potassium10. SuperfruitsSource: NMI 2015 Trends in Healthy Living



Let us do the heavy lifting. FONA’s market insight and research experts will translate our clean research into product category ideas for your brand. We can help you with: concept and flavor pipeline development and ideation. Our consumer studies and white space analysis will pinpoint opportunities in your market.

Our flavor and product development experts are at your service. You want to meet the labeling and flavor profile needs for your products while capitalizing on the clean movement. We get it. At FONA, we understand how to mesh the complexities of flavor and the challenges of clean with your brand development. We will consider your technical requirements and regulatory needs to deliver a complete taste solution. From concept to manufacturing, we’re at your side every step of the way. Your priorities are our priorities. Let’s talk.

At FONA, we’re more than just great flavors — we provide complete market solutions. Your priorities are our priorities. Your challenges are our challenges. Let’s talk.

Contact our Sales Service Department at 630.578.8600 to request a flavor sample or visit www.fona.com.

Clean is a Continuum At FONA, we believe that clean is not a checkbox, but a continuum. Where does your product fit in? What ingredients or claims are on your always, sometimes and never lists? • Perhaps you’re like Brand A: You have a wider range of “clean”

that suits your product.

• Maybe you’re Brand B: You have much narrower constraints, need very simple ingredients, which might limit availability on flavor profile.

When it comes to flavor, there are technical tradeoffs and transition processes to consider no matter where you fit. Count on FONA to guide you every step of the way. After all, taste is a must, with 82% of consumers saying it’s the #1 consideration for purchase.

We can do the heaving lifting as you tackle the switch to natural flavors or other clean challenges. Are changes in your base, functional ingredients or natural colors affecting taste? We’ll work with you to deliver incredible flavor, no matter what you’re facing.

FONA AND YOU: CONFIDENT IN CLEAN. We’d love to be the flavor company that helps you answer what’s next? We know the clean movement isn’t a trend but a new standard. And in our opinion, clean is about both clean labels AND clean products.

Artificial Natural Flavor

Organic

Simple Extractives

Non-GMO Claims, like NGP

Certified

Suitable

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Clean Continuum Brand A Brand B

Where does your brand fit?



SOURCES1) Capitalizing on the Shifting Food Value Equation 2015, Deloitte Consulting (with Grocery Manufacturers Association and Food Marketing Institute)2) 2015 Consumer Trust Research, The Center for Food Integrity3) Peterson-Kaiser Health System Tracker, www.healthsystemtracker.org/interactive/health-spending-explorer 4) Income and Poverty in the United States: 2014, www.census.gov 5) Comparable Metrics Q2 2015, Nielsen6) 2015 Trends in Healthy Living, Natural Marketing Institute (NMI) 7) 2016 Ingredients and Additives Global Annual Review, Mintel8) The FDA requests comments on use of the term “natural” on food labeling, www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/LabelingNutrition/ucm456090.htm 9) Transparency, It’s What’s for Dinner, Natural Products Insider10) We Are What We Eat, 2015, Nielsen11) Mintel Presents 2016 Food & Drink Trends presentation at FONA International, March 201612) Food Packaging Trends: Spotlight on Food Labeling, Aug. 2015, Mintel 13) What, When and Where America Eats, Food Technology14) Mintel GNPD15) How Companies Can Meet Specialty Food Demand, www.foodqualityandsafety.com/article/how-companies-can-meet-specialty-food-demand/ 16) Free-From Food Trends Report (Canada) May 2015, Mintel17) Free-From Food Trends Report (US) May 2015, Mintel18) A boomer market for clean label, www.foodbusinessnews.net/ 19) Clean Label Rules, But Confusion Reigns, Food Technology20) The war on big food, Fortune, www.fortune.com/2015/05/21/the-war-on-big-food/ 21) Market Analysis, Organic Trade Association, https://ota.com/resources/market-analysis 22) Peeling Back the Natural Food Label, www.consumerreports.org/food-safety/peeling-back-the-natural-food-label 23) Chipotle GMO Class Action Dismissed, www.Classaction.org/blog/chipotle-gmo-class-action-dismissed 24) It’s practically impossible to define GMOs, www.grist.org/food/mind-bomb-its-practically-impossible-to-define-gmos/25) Real, Clean and Fresh are the Attributes Consumers Will Look for in the Foods They Eat in 2016, www.npd.com/wps/portal/npd/us/news/press-releases/2015/real-clean-and-fresh-are-the-attributes-consumers-will-look-for-in-the-foods-they-eat-in-2016/26) Organic Vs. Non-GMO, Who’s Winning? www.wsj.com/articles/organic-vs-non-gmo-labels-whos-winning-1449619118?cb=logged0.65517471125349427) NSF Survey Finds U.S. Consumers Struggle to Define Gluten, www.nsf.org/newsroom/nsf-survey-finds-us-consumers-struggle-to-define-identify-gluten 28) Health and Wellness Market Performance, 2015, www.blog.euromonitor.com/2015/11/health-and-wellness-market-performance-2015-whats-new.html29) Federal Dietary Guidelines www.health.gov/dietaryguidelines/2015/guidelines/executive-summary/ 30) Federal government urges Americans to limit sugar to 10% of daily calories, www.usatoday.com/story/news/2016/01/07/federal-dietary-guidelines/77151060/

31) Proposed Changes to the Nutrition Facts Label, www.fda.gov/Food/GuidanceRegulation/GuidanceDocumentsRegulatoryInformation/LabelingNutrition/ucm385663.htm 32) Feel Good Food, Aldi (booklet distributed at stores) 33) Coke Replaces “Open Happiness” with “Taste the Feeling in Strategic Shift, www.adage.com/article/cmo-strategy/coke-debuts-taste-feeling-campaign-strategic-shift/302184/ 34) Clean Labels Meet Private Labels, July 2015, Mintel35) Two Years Ago these Founders were rejected by more than 20 Investors, www.businessinsider.com/healthy-marketplace-thrive-market-launches-an-iphone-app-and-has-a-100-million-run-rate-2016-2 36) www.thrivemarket.com 37) This Startup Wants to Kill Off the Center of the Supermarket, www.fortune.com/2016/01/04/costco-whole-foods-startup-thrive-market/ 38) NatureBox Raises $30 Million to Sell Snack Subscriptions Internationally, www.blogs.wsj.com/venturecapital/2015/05/05/naturebox-raises-30-million-to-sell-snack-subscriptions-internationally/ 39) www.naturebox.com/homev2/ 40) Leanbox offering on-demand purchases in the workplace, www.foodbev.com/news/interview-leanbox-offering-on-demand-purchases-in-the-workplace/ 41) www.leanbox.com/ 42) New SmartLabel Initiative Gives Consumers Easy Access to Detailed Ingredients, www.gmaonline.org/news-events/newsroom/new-smartlabel-initiative-gives-consumers-easy-access-to-detailed-ingredien/ 43) www.smartlabel.org/assets/SmartLabelFactSheet61381.pdf 44) Hershey shares what’s inside SmartLabel, www.thehersheycompany.com/social-responsibility/shared-goodness/our-ingredient-conversation/story/hershey-shares-whats-inside-smartlabel 45) Kraft Mac & Cheese Conducted World’s Largest “Blind Taste Test,” newscenter.kraftfoodsgroup.com/phoenix.zhtml?c=253200&p=irol-newsArticle&ID=2146435 46) www.panerabread.com/panerabread/documents/press/2015/no-no-list-release%205-5-15.pdf 47) www.traderjoes.com/faqs/product-information 48) www.wholefoodsmarket.com/about-our-products/quality-standards/food-ingredient 49) www.simpletruth.com/about-simple-truth/101-free/ 50) Companies phase out “no no” ingredients, www.ift.org/food-technology/daily-news/2015/may/06/companies-phase-out-no-no-ingredients.aspx 51) For Advertisers, Baby Boomers Are a Market Hiding in Plain Sight, www.npr.org/2015/05/02/403766871/for-advertisers-baby-boomers-are-a-market-hiding-in-plain-sight 52) Innovation on the Menu: Flavor Trends, June 2014, Mintel 53) Baby Boomers are the sexiest consumers in retail, www.businessinsider.com/baby-boomers-spend-the-most-money-2015-6



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