Expo West exclusive: Six forces shaping the food industry

3/9/2015 - by Monica Watrous

About 70,000 people attended Natural Products Expo West held March 5-8 in Anaheim.

ANAHEIM, CALIF. — By 2020, sales of natural and organic food are expected to represent nearly 14% of total food sales.

“For a long time, natural and organic was 1%, 2%, 3%, so we’re finally making some critical mass in terms of total food sales, and that’s expected to accelerate as more food companies and big retailers start to get more into natural, organic and healthy foods,” said Carlotta Mast, executive director of content and insights at New Hope Natural Media. She and Jenna Blumenfeld, senior food editor at New Hope Natural Media, discussed industry trends during a presentation at Natural Products Expo West held March 5-8 in Anaheim.

Sales of natural, organic and better-for-you products are expected to grow 8.1% annually to $226 billion by 2018. Driving the steady growth are robust product innovation and an accelerated shift in consumer behaviors. Additionally, more consumer packaged goods companies are entering the segment.

“We’ve got a lot more people from some of the large companies and C.P.G.s because they’re all trying to learn how to be more successful with natural, organic and healthy products,” Ms. Mast said. “And a big part of that is our industry as a whole is growing more than two and a half times faster than mainstream packaged foods. This is where the growth is, this is where the innovation is, this is where the excitement is.”

Early estimates track just over 12% growth of natural and organic food and beverage sales in the United States last year.

While conventional frozen food sales have been stagnant in recent years, sales of organic frozen foods increased nearly 16% in 2014, up from 8.6% in 2013, according to research from New Hope Natural Media, which produces Expo West. Organic oils grew 30% last year, led not only by olive oil but coconut oil and avocado oil, too. Non-dairy, non-soy products grew 17% last year.

What’s driving this dynamic growth? Ms. Mast and Ms. Blumenfeld pointed to six key forces shaping the industry.

“One of the reasons it’s important to pay attention to the trends is that, as we’ve seen, it’s really accelerating in terms of the timeline that a trend will move from the organic and natural channel into mainstream,” Ms. Mast said. “Things are moving much, much more quickly these days. It is important to be on top of what’s new and what’s happening and really be able to identify those trends that have a lot of staying power.

“We believe the trends related to our macro forces have a lot of staying power and are very quickly moving from niche and natural all the way into mainstream.”

What's old is new again.

Ancient wisdom

From chia to baobab, the market for whole, nutrient-dense ingredients has exploded, Ms. Blumenfield said.

“It’s about going back to basics with simple, clean ingredients,” she said. “What smart manufacturers are doing is making these products very accessible.”

Nature’s Path, for example, introduced Q’ia Superfood Superseeds & Grains oatmeal, made with gluten-free rolled oats, chia, hemp and buckwheat.

“Maybe a shopper isn’t going to make a full bowl of buckwheat for breakfast, but they most certainly will eat hot cereal,” Ms. Blumenfield said.

Product developers are finding ways to deliver sustainable protein.

Feed me

Forward-thinking companies are addressing the challenge and opportunity of feeding a growing population. From Blu Dot Protein Tea with whey protein to Chapul energy bars made with cricket flour, a growing number of products are developed to deliver sustainable protein. 

“What’s exciting about cricket flour is not only is it a very sustainable source of protein compared to beef or chicken — it takes a very small amount of water to produce the crickets needed to produce cricket flour — but it’s also a highly nutritious protein,” Ms. Mast said.

“Of course,” she added, “there’s the ick factor.”

Cluck 'n Moo Burgers combine grass-fed beef and chicken meat for consumers seeking to reduce red meat consumption.

Food tribes

Increasingly more consumers are gaining identity not by what they wear or where they live, but by what they eat or don’t eat, Ms. Blumenfield said.

“Brands can market to specific food tribes, but the really smart brands are combining and blurring these quite different tribes,” she said. “One of my favorite buzzwords of late is ‘peganism,’ which is a blend of paleo and veganism. The products there are very clean and also contain no dairy or meat or grains.”

Then there are “lessitarians” and “flexitarians” who may reduce intake of animal protein, grains, gluten or dairy. For these consumers, there’s Beyond Meat’s Beast Burger, a meat-free, dairy-free patty that is marketed not as vegan but as 100% plant protein-based. Another example is Cluck ‘n Moo Burgers, which combines grass-fed beef and chicken meat to contain less saturated fat and calories than a traditional ground beef patty.

Fishpeople's pouches include codes that enable consumers to track the ingredients.

Transcendent transparency

More companies are providing transparency through certifications and product claims. Thirty-eight per cent of products exhibited at Expo West included an organic claim, and 35% had a gluten-free claim, according to New Hope Natural Media. And despite recent scrutiny of natural claims, 25% of products were labeled as such. A growing claim, Ms. Mast noted, is “made in the U.S.A.”

Other aspects of transparency include clear packaging and front-of-package ingredient labeling, as well as technology-enabled transparency. Codes on packaging for such products as popcorn, nutrition bars and, recently, seafood permit customers to track individual ingredients within the product. The seafood entrees and soups from Fishpeople, for example, include codes on the pouch that trace each product back to the fisherman.

Storytelling is another creative approach to transparency. Fat Toad Farm, a maker of goat’s milk caramel, uses social media to share stories of the goats that provide the milk for the products.

“A lot of us like to go to the farmers market and talk to the farmer who grew produce we’re buying and hear the story,” Ms. Mast said.

Savory snacks are on the rise.

Snackifcation

Snacking is in, but traditional snack staples are out, Ms. Blumenfeld said.

“Research shows that about 70% of consumers decide what they’re going to eat within an hour of sitting down and eating it,” she said. “That’s a stat that’s indicative of this rising trend of snackification, but what we’re seeing is that the plain old potato chips won’t cut it anymore. Snacks must be fast, easy to make, and also nutritious.”

Consumer concern over sugar has given rise to savory snack products. As an alternative to sweet yogurts, a company called Good Culture offers organic cottage cheese in sundried tomato and olive flavors. Such brands as Kind and Mediterra recently introduced savory nutrition bars.

But with any trend, there is a countertrend.

“As snackification rises, there is also a trend of preserving the home-cooked meal, but just because we have this desire to eat full meals, that doesn’t mean we have more time,” Ms. Blumenfeld said.

New frozen food offerings and meal helpers like Cooksimple meal starters offer easy dinner solutions for consumers seeking natural, organic and healthy options.

Consumers are willing to pay more for products that offer functional nutrition.

The value(s) shopper

There are the value seekers, and then there are the values seekers — consumers who will pay more for products that deliver on demand for convenience and nutrition or support a good cause.

“A key to this are mission-driven consumers who gravitate toward brands that stand for more than selling a great product,” Ms. Mast said. “They are actually trying to solve a problem or create positive change in the world through their products and the purchase of their products.”

Shoppers may also pay a premium for products that tout health benefits.

“The idea of nutrition and functionality is very much a key value for a growing number of consumers who believe food is medicine and are willing to pay more for nutrient-dense, functional foods and beverages and other products they really believe will heal their bodies,” Ms. Mast said.

For these consumers, Sweet Earth Natural Foods has launched a new line of functional burritos, offering benefits from probiotics, plant-based protein, fiber, magnesium and omega-3s.