by Carmel G. Hearn/Shelby Report contributing writer
Trends drive innovation. While consumers define the trends, food manufacturers are continually innovating the products to meet their demands. Far from the “super-size-me” days of yesteryear, today’s consumers are opting for quality over quantity. They want to know what’s in their food, to be able to read the label without a dictionary and prefer terms like “premium,” “non-GMO” and “healthy” associated with their food choices. But how does this consumer demand translate to the confectionery market? What innovations are candy manufacturers developing to meet that demand?
“The confectionery market is unique since consumers expect a certain flavor and experience with many brands,” said Jenn Ellek, senior director of trade marketing and communications for the National Confectioners Association (NCA). “There is a trend toward clean labels within segments of the consumer population. The companies who are trying to simplify their ingredient lists while remaining true to the flavor and presentation of their well-loved product lines will be applauded both by the segment of the public looking for simpler ingredients as well as by those who have loved those brands their entire lives.”
Both Nestlé and Hershey recently announced changes to their product lines in accordance with the move toward transparency.
Nestlé said it will remove all artificial colors and flavorings from its sugar confectionery in the U.S., pledging to remove those ingredients from more than 250 of its products by the end of 2015.
Nestlé, which claims the changes will not affect taste, said that it will use annatto, a natural yellow coloring made from the seeds of the achiote tree instead of the artificial colors Red 40 and Yellow 5.
Doreen Ida, president of Nestlé’s American confectionery and snacks division, said that the decision was due to growing demand from customers for foods with natural ingredients. In a press release issued by Nestlé, Ida said, “We know that candy consumers are interested in broader food trends around fewer artificial ingredients. As we thought about what this means for our candy brands, our first step has been to remove artificial flavors and colors without affecting taste or increasing price.”
The Hershey Co. is beginning a transition to simple and easy-to-understand ingredients, which it says is part of its ongoing commitment to responsibly sourcing the ingredients it uses in its product portfolio.
“As consumers, our relationship with food is changing. We spend more time talking and sharing with others about what we eat and why we like certain foods, than we spend actually eating. Food matters and at Hershey, we care deeply about it,” said John P. Bilbrey, president and CEO. “We all want and deserve to know what’s in our food. Hershey takes pride in listening to our consumers and customers and understanding what they need. We will continue to make our great tasting, high-quality iconic brands that people know and love. We also will share more information about what goes into our products in ways that are easy to understand and access.”
Hershey is focusing on three key principles:
• Simple ingredients like fresh milk from local farms, roasted California almonds, cocoa beans and sugar.
• Sharing what’s inside, from ingredients to sourcing, manufacturing and labeling; and making it easy to find information on packaging, on the website or through new technologies.
• Thoughtful and responsible sourcing of ingredients, including working with suppliers to responsibly source sustainable ingredients, building on progress against commitments to source 100 percent certified and sustainable cocoa and certified sustainable and traceable palm oil.
“We will strive for simplicity with all of our ingredients, but we may not achieve it with every product,” said Bilbrey. “This is a journey and it will take time. We are equally committed to sharing what we achieve and what we don’t. For ingredients that may not be as simple, we will explain what they are and why we need them to provide the great flavors, aromas, textures and appearances that our consumers know and love.”
Hershey will continue updating its website to serve as a resource for information.
Consumers look for new taste experiences
While NCA data shows that the most important features of candy for consumers are taste and price, new flavors and natural ingredients also are trending.
“With chocolate in particular, we’re seeing many new infusions and flavor combinations with natural ingredients like wide varieties of nuts and berries,” Ellek explained. “For example, fruit infusions grew more than 50 percent last year. Nuts have also seen growth over the past several years. In addition to growth of dark chocolate, milk chocolate confections grew 2 percent last year, accounting for nearly $200 million in growth for the category.”
In lines with those trends Ellek mentioned, Dove Brand recently launched Dove Fruit, combining Dove Dark Chocolate with cranberry, cherry and blueberry. These are available in 2.83-oz. (SRP $1.99-$2.59) and 6.0-oz. (SRP $3.59-$4.79) packages; a special 26-oz. bag also is available at select warehouse stores ($10.89).
“We’re excited to add this real-fruit snacking option to the Dove Chocolate family,” said Kerry Cavanaugh, brand director. “We know snackers and chocolate lovers have been clamoring for something like this. In fact, dark chocolate is the fastest growing category in confections and fruit is the fastest growing snacking category, so it’s the perfect combination and the perfect time.”
Hershey also is launching on-trend chocolate products, planning to introduce in the U.S. its Brookside Dark Chocolate Fruit & Nut Bars.
Consumers show concern for sourcing, too
Ethical sourcing, sustainability and fair trade issues also have been gaining ground in consumer awareness and concerns. Oxfam, a global organization working in more than 90 countries to create lasting solutions to poverty, hunger and injustice, recently released its Behind the Brands Scorecard, elevating food producer Unilever to the top spot, overtaking Nestlé. Unilever brands include Ben & Jerry’s, Klondike, Magnum, Good Humor, Breyers and Popsicle.
Oxfam’s Scorecard ranks the 10 biggest food and beverage companies on their policies and commitments to improve food security and sustainability. The scorecard covers seven themes impacting the lives of people living in poverty around the world: transparency, farmers, women, agricultural workers, access to land, water and climate change.
“After two years of sustained pressure from the hundreds of thousands of Oxfam supporters, the ‘Big 10’ are definitely moving in the right direction,” said Monique van Zijl, international campaign manager for Oxfam’s Behind the Brands campaign. “However, the real challenge has just begun. Companies now need to start putting new policy commitments into practice. Only then will real change happen for the millions of small farmers and agricultural workers. It is high time for companies to walk the talk.”
‘Premiumization’ trend is multifaceted
NCA research recognizes global responsibility as a subset of “premiumization,” which is one of the top trends driving confectionery growth.
“Premium chocolate items, defined as having a price per pound upwards of $11, have been on fire in the past year and all indicators point to continued strength,” noted Ellek. “Premium chocolate items represent 15 percent of the global market and during 2014, grew a whopping 10.9 percent. This is compared with 1.9 percent for candy and gum as a whole and 2.9 percent for total chocolate during the same time period.”
According to the NCA, premium includes these subtrends:
• Provenance of ingredients—For example, chocolate from Ecuador, Peru or Madagascar.
• Fine flavors—New and daring options such as chili, sea salt, dried fruits and nuts appeal to Millennials, who are looking for something different.
• Ethical sourcing—Reflected by a number of programs such as Fair Trade or the Rainforest Alliance.
• Organic—As seen in other areas of the store, demand for organic confectionery is rising rapidly.
The NCA further identifies these as the other top trends in confectionery growth:
• Healthier for you options such as chocolate infused with dried fruit (up 56 percent or nearly $80 million), dark chocolate (up 8 percent) and chocolate with nuts. For instance, dollar sales featuring almonds grew four percent during 2014.
• Shareable packaging featuring minis and bites, which are well positioned to address the ability for easy portion control. Mini sharing bags also command a higher unit price for the retailer. Globally, China leads the resealable market at 10 percent of units sold, followed by Japan and the U.S. The growth forecast is strong in the U.S. with a compound annual growth rate of 10 percent over the next five years.
• Hybrid products, cross-branding and line extensions, such as chocolate covered pretzels or popcorn. These line extensions are well liked by consumers loyal to their brands to try new products in other indulgent snack categories.
“In non-chocolate candy, fun and sweet treats are hot,” added Ellek. “We expect the three prevailing themes of 2014 to drive continued growth in 2015.”
These trends are:
• Fun, fruity and spicy: Gummies, including fruit flavored gummies, are a consistent winner with growth well above the category average.
• Value: Despite the economic recovery, value remains front and center for many. Assorted candy provides shoppers a way to try a little bit of everything without having to buy a number of different bags.
• Traditional favorites: Nostalgic treats are making a comeback, with favorites such as caramels and marshmallow peanuts growing.
Separate from these trends, NCA research shows that adding new items, both in everyday and in seasonal candy, drives category growth. Shoppers have their proven favorites, but also like hunting for something new and different. This is especially true with Millennials.
New Flavors, New Trends, New Habits In Snack Foods
Is that a meal or a snack? Take a look at what Americans are eating at any given time, and that question may not be so easy to answer. Half of U.S. consumers now consider snack foods as less of an in-between-meal indulgence and more of a go-to staple in their time-strapped lifestyles. This mini-meal trend, according to the Hartman Group, doesn’t appear to be slowing down any time soon, and the researcher further anticipates that the lines will continue to blur between meals and snacks. This poses both a challenge and an opportunity for food manufacturers and retailers to offer more flavorful, nutritious products in grab-and-go packaging.
The core snack food market in 2014 totaled $130 billion, and dollar sales grew by 3.3 percent compared to 2013, with 2020 sales projected to be $155 billion. This is why, according to Sally Lyons Wyatt, executive and practice leader with market researcher IRI, gaining a better understanding and applying these insights to tap into current and emerging shopper trends, such as the move to healthier eating, can translate to enormous revenue and market share gain opportunities.
Lyons Wyatt presented “The State of Snacking: Insights into Behaviors, Trends and Opportunities” at the Experimental Biology Conference in March. She revealed the top trends driving dollar sales: “macrosnacks,” “healthier” and “indulgent.” Her research also showed that:
• 50 percent of consumers select snacks that have additional benefits beyond nutrition;
• 52 percent actively seek items that are “good for me”; and
• 41 percent state snacks are an important part of a healthy eating plan.
Lyons Wyatt also said that while 38 percent of people eat three square meals and several snacks a day, 28 percent opt for four to five mini meals and 21 percent say they eat on the run and grab food when they have a chance. Only 14 percent of people say they eat three square meals and no snacks.
“According to IRI, 51 percent of Americans consume three or more snacks of one kind or another per day, up from 21 percent just four years ago,” said David Walsh, director of marketing and member services for the Snack Food Association (SFA). “The average number of snacks consumed daily jumped from 1.9 percent in 2010 to 2.8 last year. This trend is so prevalent due to increasingly busy lifestyles and less time to eat three square meals per day. It’s also leading to a rise in protein-packed and healthier snacks; consumers are looking for more nutritious foods they can consume on the go. Overall, it’s leading to continued and consistent growth in the industry.”
Although nutrition still ranks toward the top of the list for consumer preference in snack foods, new flavors also are leading the way in snack trends. In its 2015 Flavor Forecast, McCormick identified top trends, insights and ingredients driving the future of flavor that include:
• Combining coarse salt with sours like pickled ginger, sour cherry, dried mango and lemon zest
• Smoked spices and herbs for deeper flavor and aroma
• Global influences of Middle Eastern and Japanese spices and herbs
• Umami-rich vegetables like mushrooms, tomatoes, sweet potatoes and nori
• Classic spiced cookie flavors taking new form in decadent, imaginative desserts that redefine “milk and cookies”
Walsh agreed that bold and spicy flavors like sriracha, along with protein-rich ingredients like bacon, are becoming more prevalent, but also said clean labels continue to rank high with snack-seeking consumers.
“Generally speaking, the top emerging trends are better-for-you products, non-GMO products, natural and organic products, a big rise in meat snacks, a big rise in ready-to-eat popcorn and caramel corn,” he added. “The SFA would like to see a federal standard for GMO labeling, both to set a uniform standard for providing consumers the information they require, and to ease the burden on food manufacturers, big and small, of the prospect of having to comply with multiple state-by-state regulations.”
To that end, the SFA is supporting the Safe and Accurate Food Labeling Act of 2015, introduced in the U.S. House of Representatives on March 25. If passed, it would preempt state GMO laws, establish a voluntary federal labeling standard for GMO foods and seek to eliminate confusion, advance food safety and provide consistency in the marketplace.
“SFA members continue to innovate by providing non-GMO and organic options that an increasing number of consumers are desiring,” Walsh said. “Additionally, more and more companies are offering products with a multiple of grains and with no artificial flavors or colorings added.”
The SFA also encourages member support of a “Facts Up Front” labeling program, in which manufacturers call out the main nutrition facts including calorie disclosures of their product directly on the front of their package, and reports many snack companies further label their products as Non GMO-Verified or with the USDA Organic seal to keep their consumers informed.
Beverages: Sodas Continue To Lose Fizz While Other Sectors Pop
America’s thirst for carbonated soft drinks (CSDs) is continuing a steady downward turn in 2015. While some experts predict the ultimate demise of CSDs, with diet sodas leading the way towards extinction, others are saying what is happening is a natural evolutionary process that could eventually strengthen the category.
“The category has lost volume for the last 10 years,” said John Sicher, editor and publisher of Beverage Digest, a publication covering the non-alcoholic beverages industry. “That’s mainly due to two reasons: There is a subset of consumers who appear to be concerned about obesity and health and wellness issues in terms of soft drink consumption. Perhaps even more though, U.S. consumers have been diversifying their beverage choices and drinking a lot more bottled water, sports drinks, ready-to-drink teas and energy drinks.”
Sicher said energy drinks have resonated with consumers because there is a functional benefit—meaning energy—that is felt almost immediately. Bottled water is perceived as healthy, tea is thought to have health and wellness benefits and sports drinks are perceived as having a health benefit for active consumers of all ages.
While Sicher predicted some of the current industry trends will continue for the next several years, he said CSDs are far from going the way of the dinosaur.
“Carbonated soft drinks, in terms of volume, will continue to decline modestly,” Sicher explained. “But, there are a lot of people who like them for good reason and they’ll continue to be a large category. Over time, the category will benefit from innovation.”
One of the steepest declines in CSDs is in the sales of diet sodas. In a recent Washington Post Wonkblog, Roberto A. Ferdman reported that diet soda sales, which grew more than 30 percent between 1999 and 2009 with sales topping $8.5 billion, have gone flat again, and he predicted this time it could be for good.
Calling two trends into focus, Ferdman said low calorie sodas have been fighting an uphill battle because soft drinks, in general, are something Americans are proving less and less interested in drinking. The second, and perhaps more significant trend, he pointed out, is a growing mistrust of artificial sweeteners.
“Some of the biggest brands are also some of the biggest losers in America,” reported Ferdman. “Diet Coke, which is the third bestselling soda in the United States, has seen its sales fall off by 15 percent in the past two years, and almost a third since 2005. Sales of Diet Pepsi, the second largest low calorie brand, meanwhile, have plummeted by roughly 35 percent.”
While artificial sweeteners may be at the center of the downturn in diet CSDs, Sicher cautioned not to count them out yet.
“Aspartame is a complicated issue,” he explained. “It is a very good tasting and a very safe sweetener, but it has been dinged by social media. I also think that there is a growing interest in natural sweeteners. The big beverage companies need to do the work they’re doing on sweetener research.”
While Stevia shows promise, and companies are learning better how to use it, Sicher envisions that there may be other natural sweeteners and sweetener enhancers soon emerging on the horizon.
“I think that in five to 10 years from now we’ll see a very large carbonated soft drink category,” he stated. “But it will be populated with new drinks and new ingredients to supplement what we have today.”
While there’s no indication the downward slide in CSDs will be reversing anytime soon, carbonated beverages still occupy a strong corner of the U.S. liquid refreshment beverage market. According to a special U.S. Beverage Business report, issued in March 2015 by Beverage Digest, 2014 was better than 2013 for the U.S. beverage business. Liquid Refreshment Beverages (LRBs) were up +1.7 percent VS down in 2013. Nestle out-performed while Coke and Pepsi tied in LRB performance. The publication further reported that CSDs were down for 10th year, but less than in 2013. Coke continued to dominate the top 10 CSD brands with a 17.6 percent share of the market but the Pepsi brand retook the number two spot at 8.8 percent, after having lost it to Diet Coke in 2010. The Beverage Digest report attributes this repositioning to the fact that diet CSDs in general have been hobbled by poor performance in the last few years, as some consumers seem to be having a withdrawal of enthusiasm for aspartame and other legacy diet sweeteners.
*Editor’s note: Read more of The Shelby Report’s Sweets, Snacks & Beverages feature in the May print editions.