Health and wellness concerns were the overriding theme for 2008, and most consumers made a sincere effort to improve the eating habits of their families, albeit not always successfully.
As we head into 2009, the uncertainty of the global economic crisis is of great concern to all. At home in the U.S., now officially in recession mode, insecure consumers are worrying about their jobs, cutting back on their spending and assembling and eating more meals at home.
Fortunately for them, the cost of food is declining. U.S. food prices recently benefited from the plunge in corn, soybean and wheat prices (down about 50 percent) and the falling cost of energy – used to process, package and transport foods (down about 66 percent from record levels). But consumers could still wind up seeing a 4 percent increase in their grocery bills next year, according to the USDA.
Hope and optimism about the economy are seemingly in the air following the election of Barack Obama. So the question on all our minds is whether the economy will temper healthier consumer behavior and new product development from food companies as they grapple with prices and profits, or will American optimism and new-found confidence help to turn the tide. According to Chicago-based Mintel (www.mintel.com), there are five major ways consumers will adapt and businesses can thrive.
• You are in control: Consumers are more confident and demanding about how they live their lives and spend their money. Even in recession mode, they’ll want to stay in control of their choices wherever they can. They will seek out products and services that give them exactly what they want, when they want it, especially as their budgets tighten. And the Internet will be key, showing people every option available, giving them the power to demand more, while also allowing them to influence others through user reviews and feedback.
“Those companies that give consumers precisely what they want or give them the freedom to customize their purchases will do well,” says Joan Holleran, Mintel’s director of research. “Companies that fail to do this will see consumers walk away.” Baby Boomers will be of particular interest to businesses. Companies will move beyond traditional “old age” products and services to ones that embrace the active, healthy lifestyles of many older consumers.
• Simplify and purify: Faced with fast-paced modern life, consumers will continue to seek convenience and simplicity. As people take control of their everyday lives, they will also demand that companies communicate with them honestly and openly. From understandable ingredients to clear company practices, consumers want complete transparency when it comes to the products they buy.
Datamonitor identifies floral flavors as trends for the new year, and McCormick already has a product out. Lavender was in McCormick’s annual flavor forecast in 2007.
Old-fashioned skills such as cooking at home and gardening will become increasingly popular. As an added benefit, these home-based activities will also help people stretch their budgets further.
Manufacturers will focus on clear ingredient labels and product, positioning fresh, clean and pure as essential values. “Brands that can communicate what they really stand for and show how they can make life easier will earn consumers’ trust and loyalty,” says Holleran. Additionally, with people “cocooning” in their homes to save money, companies will create better products for dining, relaxing and entertaining at home.
• Rebuilding trust: Today’s consumers have high standards and will demand value for money, as well as consistently high levels of quality, safety and service. Crumbling economic markets, food scares and toy safety problems have fueled an era of doubt and insecurity. And so in the coming year, people will seek out trusting, open relationships wherever they can. People want to know all about the products they buy, from where they were sourced to how they were manufactured. They will cling to the long-standing, nostalgic brands they know and love, looking for products with a real sense of familiarity.
For many companies, the road to rebuilding trust with consumers will be long and difficult. Manufacturers will need to back up their words with actions and conduct business in a more open, honest way. Reassuring consumers that they are acting in the customers’ best interest will become a primary concern for businesses. Also, as companies see shoppers sticking to already-familiar products, long-standing brands will move into new markets to exploit their position as trustworthy companies.
• Trading down (but a little trading up too): As purse strings tighten, consumers will look for every possible way to make their pennies stretch further. They will trade down to cheaper store brands and eat out less. But everyone will still crave a little treat now and again, indulging in small, affordable luxuries, like premium chocolate, designer sunglasses or a favorite moisturizer.
As consumers split between the low and high end of the market, manufacturers will invariably follow suit. Many will start to focus on value brands. “The middle market will increasingly be squeezed and is going to have to prove its worth when faced with competition from newly improved basic lines,” says Holleran. Beyond this, many companies will position their products as a more affordable alternative to going out. Expect premium ready meals that give a restaurant experience at home or beauty products that bring a spa-like feel to the bathroom.
• Playfulness, lightening the mood: In tougher times, people not only crave life’s little luxuries, they also need to enjoy themselves. Small playful distractions such as neon make-up, fun-to-eat food or interactive stores such as Apple will become increasingly popular as people look to let their hair down and have some fun.
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Companies will focus on products and experiences that are light-hearted, and those that offer real entertainment will have a significant competitive advantage. Beyond this, manufacturers will launch products specifically designed to enhance people’s moods in unique ways. From food and beauty to household cleaners, Mintel expects to see a widening range of products that soothe, energize or simply lift the spirits.
Grocery store leverage increases
Economic pressures also are affecting the relationship food processors have with grocery retailers. Shoppers are packing their carts with lower-priced private label products, giving grocery stores some leverage in talks with their suppliers. Penny pinching consumers have increased sales of store branded products by 10 percent last year to more than $81 billion, according to New York’s Nielsen Co. (www.nielsen.com) and Cincinnati-based Kroger Co., the largest traditional food retailer in the U.S, reports Dow Jones.
To promote their brands, branded consumer goods companies may have to kick in more to a retailer’s marketing fund to pay for discounts, two-for-one offers or prime placement in supermarket circulars. Retailers may also get juicier rebate offers from their suppliers, as incentive to help push sales of branded products.
Sales of name-brand products still vastly outsell in-house goods, which accounted for 16 percent of dollar sales and 21 percent of unit sales in the past year, according to Nielsen. Also, most retailers can’t do without Coca-Cola Co. sodas or General Mills Inc. cereals to lure shoppers into their stores.
“The trick is to find a ‘coexisting strategy’ that is a balance between private label and national brands,” according to Thom Blischok, president of Information Resources Inc. (www.infores.com), Chicago.
And it’s better to plan for the unexpected. If the economy improves, consumers may revert back to their favorite brands, but those who have had good experiences with private label products, are likely to make permanent changes.
More, give me more
Health and wellness is expected to continue its march into new product development particularly foods with added health benefits for babies, children, aging baby boomers, seniors and pets. Hopefully, consumers will be able to afford them.
On the wellness front, the N.E.X.T. (New Emerging eXciting Trends) team at Wild Flavors (www.wildflavors.com), Erlanger, Ky., predicts growth in the following categories:
• Kids’ well-being: Recognition of the importance of a proper diet for kids will translate into a greater number of fortified products and better-for-you products for kids, and a focus on gluten-free children’s foods.
• Intestinal well-being, detoxification, probiotics, prebiotics: Immunity from the inside-out as U.S. consumers recognize the importance of digestive system health on overall well-being and body balance.
• Marine-type nutraceuticals: Health ingredients from the sea that go beyond standard fish oils. Exotic salts, seaweeds, kelp, sea cucumber, coral calcium, etc., will create renewed interest and a “back to blue” natural approach to healthy products.
• Bone & joint health: As baby boomers age, stress on bones and joints becomes more evident. Functional health ingredients for joint health and simplistic fortification with vitamin D and calcium will continue to grow in consumer products.
• More whole grains: Whole grains take the center stage again this year with new product offerings centered around heritage and exotic grains for unique flavors and textures – such as quinoa, amaranth, farro, kasha.
• Exotic herbs & vegetables: The movement and recognition of the powers of “superfruits” leads to a desire for more savory exotics, which also are important to the focus on globalization and ethnic inspiration in dining.
• Chocolate plus+: New ingredients will be added to an old-time favorite, which is already showing health benefits. Watch for fortification with omega-3s, plant sterols, probiotics, etc., to grow as chocolate continues to be the easiest functional good-for-you flavor choice.
Consumers also seek multiple benefits in the food products they buy – convenience, wellness, sustainability, anti-aging and beautiful skin, heart health and joint health, or brain and energy enhancing, all at an affordable price. When mom speaks, the food industry listens.
A look abroad
Beauty foods, detox products and eco-friendly-everything are the global buzzwords for consumer packaged goods in 2009, according to Datamonitor’s Product Launch Analytics. Looking ahead, the trends to watch include:
First Mars claimed heart-health benefits from the flavanols in chocolate. Now Mars takes its Dove line into new territory by adding “skin-nourishing vitamins.”
• Nuts about nuts (and seeds): Nuts are now hailed as nutritional powerhouses, which is why they are showing up in more new product launches. Snack bars, in fact, are increasingly going naked to showcase nut ingredients. Seeds too are getting their due on the health front, including flax seeds, sunflower seeds and pumpkin seeds.
• Don’t energize, relax: Energy drinks have certainly taken the world by storm. But if economic woes caused by an overly caffeinated worldwide financial system are a metaphor for what may happen in food and beverage markets, then get ready for more relaxation offerings. New product offerings include Drank Relaxed Energy Beverage, dubbed the “world’s first extreme relaxation beverage” that induces a natural calming and soothing effect when consumed. Also new are Purple Stuff Pro-Relaxation & Calming Elixir; Nescafe Body Partner Relax Coffee, which is decaffeinated coffee infused with chamomile (introduced in the Philippines) and Lotte Relax Gum Apple Tea Mint (in Japan). The last is a new functional chewing gum with theanine from green tea that delivers a relaxing effect.
• Beauty you can eat or drink: Move over cosmetics. The new way to look beautiful is with an emerging generation of specially formulated foods and drinks. Though the trend is very much in its infancy, it has attracted some attention from heavy-hitters in the food industry, including Nestle and Mars. Nestle USA’s new Glowelle Beauty Drink Supplement Powder fights signs of aging from the inside out with skin-beautifying antioxidants. Mars’ Dove Beautiful Milk Chocolate has skin nourishing ingredients such as vitamins C and E along with biotin, zinc and cocoa flavanols. And in the UK, Beauty Spring Water touts its Praventin ingredient as rich in lactoferrin to help reduce acne.
• Steam it up: Steam literally has a head of steam in the frozen food market as a growing number of food makers introduce products utilizing the cooking power of steam. Buoyed by a new generation of microwave cook-in-bags that vent excess steam during the cooking process, the trend is picking up momentum with launches such as Dole Easy Steamer Potatoes, Birds Eye Steamfresh Specially Seasoned Rice and, in France, Bonduelle Vapeur Vegetables.
• Detox me: New products are hitting the market that promise to “detoxify” in one way or another. Some food-based detox products use liver-friendly ingredients such as dandelion root as active ingredients. Regardless of the science behind the trend, consumers are paying attention to celebrities, including Beyonce and Oprah Winfrey, making a name for detox diets. Recent launches include Function Urban Detox Goji Berry Drink in the U.S. and Water Detox Vitamin Water in the UK.
• Get ready for stevia: See “Look to the Future" below.
• It’s an “eco” friendly world: Worldwide economies may be dipping, but that does not seem to have dampened the desire for companies and products to be perceived to be environmentally friendly. Mentions of the word “eco” for new food and non-food packaged goods from around the world have nearly doubled in the past two years, according to Datamonitor’s Product Launch Analytics.
• Flower power: Flowers are beginning to play a bigger role in new product formulations. Floral flavors such as lavender, hibiscus and jasmine are appearing in foods and beverages. Examples include Ooba Sparkling Refreshing Hibiscus Beverage, which is said to have a high level of antioxidants; lavender-jalapeno-flavored Theo Caramel Collection Chocolates and, in the UK, Simply Hibi Health Drink. Subtle, non-fattening and aromatic, floral flavors look to surprise in 2009.
• Brain power: In today’s world, mental fitness may well be more important than physical fitness, and a growing number of brain health products are hitting the market. Touting “good for your brain” ingredients – primarily DHA omega-3s -- are recent entries Kellogg’s Live Bright Brain Health Bar in the U.S., IQ Plus Brain Drink in Austria and Germany and Unilever’s Rama Idea! Margarine in Europe. Mentions of the word “brain” in new food and beverage products worldwide have nearly tripled in the 2007-2008 period versus the 2005-2006 period, according to Datamonitor.