Is organic really a sinking ship?

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2 Is organic really a sinking ship? Amid claims that consumers are becoming increasingly sceptical about the benefits of organic products, and given the economic climate; it is not surprising that the category has hit some turbulence. The organic market has dropped 8% in value this year and may continue this downward trend as manufacturers look elsewhere for USPs. Rachel s and Yeo Valley have both dropped organic from their brand names and now list it as one of many benefits rather than a standalone selling point. Yeo Valley moved away from organic following the success of their rapping farmers campaign which centred on creating a fun, and vibrant brand image with provenance at its core, rather than pushing nutritional promises; whilst Rachel s followed suit this quarter. Many commentators believe that the lack of scientific evidence backing the benefits of eating organic has left consumers cynical. The National Food Institute at the Technical University of Denmark consider the health benefits of organic foods to be highly contentious and not scientifically well documented and their research has shown that organically grown fruit and veg does not contain higher levels of antioxidants as previously claimed; making it harder for organic to justify its premium price tag. Baby food remains one category where the absence of proven nutritional benefits does not appear to be a barrier to 2012 / Q3 2

3 consumers buying into the broader appeal of organic. At the end of 2011 organic baby food represented 50.1% of the organic market; as some parents are reluctant to take a perceived risk and trade down when it comes to their children s food. Brands flaunt their organic credentials with many, such as Organix, using the o-word prominently in their branding and packaging. However, Paul Lindley CEO of Ella s Kitchen has long argued that whilst being organic is a great start, brands needs to provide something extra to be successful in increasingly competitive markets. Negative PR about organic s nutritional credentials is nothing new. So it is perhaps more likely that the 8% slump is a symptom of the wider economic climate. Price has long been the biggest barrier to buying organic as for many consumers the perceived benefits do not justify higher prices. With organic fairing so well in the own-label sector (accounting for 59% of all organic sales), perhaps organic will be increasingly accessible. Organic has a wholesome image with consumer appeal that goes way beyond nutrition Organic has a wholesome image with consumer appeal that goes way beyond nutrition, covering other factors such as clean label and low intensity production. Brands are not abandoning their organic credentials but rather supplementing and bolstering them with other strategies. Organic may not take centre-stage when it comes to some brands identity but that doesn t mean it has lost its appeal. Organic is not a sinking ship, but it might be changing course. Take a look at some of the headlines we ve noticed in the trade press over the last quarter. They provide a simple snapshot of industry developments showing who thinks what and why / Q3 3

4 Bakery The Half-Baked Cake Company is launching a new range of cake-mix kits to invigorate the home baking market. The chilled cake mixes are ready to bake immediately and are positioned as an easy way to start home baking. Klever Kalories has created a range of cakes that it claims encourage the body to burn calories. The cakes are made from natural ingredients that stimulate the body s metabolic rate by slightly raising body temperature. McVitie s is launching a new breakfast biscuit product. The market has grown 115% by value to over 40m in the past year. Hovis has launched a new range of breakfast biscuits to contend with Kraft-owned rival Belvita. Breakfast biscuits now account for 16% of total bakery retail sales. Zelected Foods is launching a new instant bake bread product. Consumers add water to the bread mix and wait for it to rise before baking it to produce fresh bread. The EaZy Bake mix doesn t require the addition of eggs, oil, milk; or the usage of bread-making machines and loaf tins. Warburtons is cutting the size of its roll packs from 6 rolls to 4. The move was driven by consumers looking to waste and spend less. Hovis has launched a limited edition pack of its bread featuring gold medallist Victoria Pendleton. Kingsmill is launching a new bread infused with berries to target consumers looking for a healthy breakfast product. Sales of ambient breakfast breads have risen 7.9% by value; a trend that Kingsmill Fruit & Fibre is looking to capitalise on / Q3 4

5 Confectionery & Snacks Walkers is launching a new range of ridged crisps, targeting male consumers. The Deep Ridged range will use crisps cut with 8mm ridges to give maximum surface area and therefore flavour. Warburtons has launched a ranged of spiced naan chips. The alternative crisp range comes in a number of popular curry flavours such as Creamy Korma and Classic Tikka. Cadbury is expanding its Dairy Milk range launching new flavours in smaller 90g formats. Marketing activity director Mathew Williams explained the move to smaller products was to encourage women into the category with products that are less guilt-inducing. Walkers is adding two new flavours to its Extra Crunchy range to encourage further growth. The new King Prawn Cocktail and Cheese & Red Onion flavours will be supported with a marketing campaign and sponsorship of ITV s X-factor. Nestlé is no longer producing large selection boxes for the Christmas market as the company believes that retailers have driven value from the category with excessive promotional offers. Nestlé have reduced the content of their Quality Street tins from 1kg to 820g in preparation for Christmas. Though the tins have been reduced by 18% they will retail for the same price at 5. Men are now eating more snack food on-the-go as families try to avoid keeping junk food away from the children. Men now eat 41% more crisps and 37% more chocolate out-of-home. The multiples are considering stocking American snacks and confectionery to delivery something different to UK consumers. Butterkist have repackaged their popcorn line in order to firmly associate the product with the movies. Kraft is launching US candy Maynards Sour Patch Kids to the UK in order to return the brand to growth. Intersnack is launching a new range of Pom-Bear crisps shaped like snowmen in order to capitalise on the winter season. Kellogg s is launching a new range of healthy crisps under its Special K brand. Each bag contains less than 99 calories and are popped rather than fried / Q3 5

6 Dairy Processor price cuts from Asda, Morrisons and The Co-operative could see some farmers lose up to 2p per litre on their milk. Milk prices are not linked to the cost of production and some farmers are now earning less on a litre than it costs to produce it. Waitrose has put up posters in its stores describing how it offers its farmers a fair deal for their milk. Robert Wiseman Dairies has launched a new functional milk called A2. The milk only contains A2 proteins and will target consumers who have problems digesting conventional milk products. Tesco is launching a branded spread range called Yum. The range will be exclusive to Tesco and will include an olive, a butter and a reduced-fat dairy spread. Danone has launched a range of single-serve yogurts with a granola topping targeting the breakfast market. Only 5% of breakfasts currently feature a yogurt and Danone are hoping to capitalise on this market gap. Kraft has launched a new line of its Philadelphia soft cheese infused with a Cadbury chocolate flavour. The company has championed the product as a resounding success having sold 5.5 million units of the chocolate flavoured cheese so far this year. Commentators have speculated that the success of the product could open up new avenues for flavoured soft white cheese. The NFU is looking into whether a Fairtrade equivalent can be introduced to support British dairy farmers. Farmers are calling for a responsibly logo to be placed on packs to enable consumers to show their support for fairly priced milk. Heinz Tomato Ketchup and Lee & Perrins Worcestershire Sauce are set to launch ranges of cheddar cheese infused with the famous sauces. Shaken Udder is releasing a whole and semi-skimmed milk drink to encourage children to drink more milk. The milkshake brand is hoping raise the health profile of milk by making a healthy immune system claim / Q3 6

7 Meat, Fish & Poultry Fresh Produce Young s is reformulating all of its surimi products after concerns over sustainability emerged. Morrisons is set to enhance the freshness and quality of its fish offerings after its new food processing site opens next month. Hugh Fearnley Whittingstall is set to turn his attention to the damage done by trawling and scallop dredging in his latest documentary Fish Fight 3. UK seafood suppliers are asking retailers to exert pressure on Iceland and the Faroe Islands to prevent overfishing of North Atlantic mackerel. Quality Meat Scotland is looking to boost consumption of minced beef with a new promotional campaign entitled Make More with Mince. Selfridges has stopped selling the Elsanta strawberry variety in favour of the Jubilee strawberry. Food Buyer Andrew Cavanna explained that the company believed the Jubilee variety to have superior taste. British fruit growers are warning that UK consumers may have to learn to like ugly fruit as the poor weather is likely to mean that many fruit crops come with more scabs and scrapes than usual this season. Spar is set to launch a series of fresh fruit and veg promotions after customer research revealed that a better fresh produce selection was a top consumer priority. Jamie Oliver is set to launch a new range of bagged salad under his name / Q3 7

8 Frozen & Processed Tesco has launched a range of premium ready meals with luxury flavours such as Beef Bourguignon and Coq au Vin with Gratin Potatoes. Sales of own-label ready meals have risen 9.7% in the last year. Tesco s Chokabloc ice cream is now available at zoos, pier and other public locations across the UK making it the company s first venture brand to be sold outside of Tesco. Birds Eye is releasing Hash Brown Waffles combining two of its popular frozen potato products. Cook has developed a microwavable fish & chip pot as the first part of a range of British themed ready meals. Consumers are undeterred from buying thawed fish where the packaging explains where the fish was frozen; frozen at sea was received particularly well according to research conducted by the Nofima. Wall s is launching a range of microwaveable sausage baps and muffins in response to growing demand for breakfast products that can be eaten out-of-home. Annabel Karmel has become the exclusive supplier of children s ready meals to Sainsbury s after launching its Fuss Pots range. The range was developed to provide a healthier children s ready meal. Aunt Bessie s had launched a new range of frozen casseroles to provide consumers with quality convenient food. The Home Cook Casseroles have to be mixed with water and then placed in the oven. Birds Eye has launched its first range of MSC-certified fish fingers. Goodfella s is launching a range of deep-pan pizzas to target students. The Flavour Fella range developed for consumers looking for a fuller flavour and bigger eat, said Andrew Elder head of marketing. Ginsters is launching a new range of frozen Cornish pasties to tap into the frozen savoury pastry market which has grown by 8.8% y-o-y. Heinz is launching a range of no-nonsense ready meals targeting men. The range has been developed to provide a filling meal with a wholesome taste / Q3 8

9 Functional Foods US brand Zevia is launching a range of soft drinks using natural sweetener stevia. Del Monte is launching a range of juice drinks with half the calories of standard juices. The Naturally Light range uses natural sweetener stevia and comes in Mango & Papaya, Pineapple & Lime and Superfruits ambient flavours. Yoplait has launched a range of functional yogurts with added vitamin D and calcium called Calin+. The European Food Safety Authority have approved the health claim that cocoa flavanols positively influence blood circulation in the human body. Arla has developed a range of lactose-free pizzas to cater for the 15% of the population that the company has identified as lactose intolerant. Nestlé Health Science is looking to create a range of nutritional products that help to manage and prevent disease. The company s Axona brand manages mild to moderate Alzheimer s disease and is currently on sale in the US. PomeGreat has launched a new range of juices using natural sweetener stevia. The PomeGreat Light range contains 30% less sugar than standard drinks. The UK organic sector has declined 8% by value this as consumers trade down to cheaper lines. Yeo Valley and Rachel s have dropped organic from their names, listing it as an additional benefit rather than a core selling point / Q3 9

10 Soft Drinks Britvic has recalled all of its Fruit Shoot drinks after a child nearly choked on the newly designed bottle cap. The recall is estimated to cost the company up to 25m. Cawston Press is launching a new range of sparkling soft drinks targeting adults. The sparkling apple and sparkling apple ginger beer drinks are positioned as alternatives to alcoholic evening drinks. PepsiCo s 250ml can format has proven to be successful as research has shown that many consumers prefer a smaller portion size. However, the larger 330ml size still accounts for 85% of the company s multipack sales. Coke Zero cans are getting a limited-edition, bond-themed makeover. The new can incorporates the iconic gun-barrel design from the film s title sequence. Tesco has launched a new energy drink called N-Gine at 25p per 250ml can. Tesco are looking to capitalise on the 86% of consumers who never trade up from budget line drinks. Mountain Dew is set to continue its association with the UK gaming industry as it unveils plans to launch a limited edition variant to coincide with the launch of Halo 4 later this year / Q3 10

11 Sauces & Soups Sacla is encouraging Brits to use more pesto with the launch of a new squeezy-bottle format. The company hopes the new format will boost the penetration of pesto products. Geet a Foods director Anita Samtani believes that Brits are developing hotter palates and consequently many sauce producers are focusing NPD on hotter products. Heinz has launched a range of chilli sauces as consumers look for increasingly spicy flavours. Heinz has announced its plans to replace its existing Big Soup range with new flavours, such as Angus Steak & Onion, to reverse the range s 7.9% decline in sales this year. New Covent Garden Soup Company is launching a new range of premium soups using the strapline Fresh fruit from our kitchen to yours. David Oliver is launching a new soup range to capitalise on the growing popularity of game. The Partridge, Pheasant and Venison Broths were developed to attract customers who were interested in game but put off by the preparation, explained company co-founder Oliver-Shute / Q3 11

12 Alcohol Carlsberg is launching a new cider brand called Somersby Cider. The cider contains no artificial additives, preservatives or sweeteners, giving it a more balanced taste. different packaging designs. The bottles were created using splash guns and colour matching algorithms to ensure that no two bottles are the same. Molson Coors has stopped producing its Animée beer after it failed to resonate with its female target market. Blossom Hill is launching a new 5.5% wine range called Vie. The company said it had waited to enter the lower-abv market until it had perfected a great tasting low alcohol wine. Research into consumer attitudes has revealed that many Brits overestimate the number of calories in beer with only one-in-five people giving an accurate estimate and 74% of women getting it wrong. A new Australian beer brand called Bondi is set to launch in the UK next month. Sales of whiskey have fallen 12.7% by value. Wilson Drinks MD Tim Wilson believes this to be down to the Mad Men Effect of the past year with many consumers buying a single bottle to emulate their tv heroes, which would last them the year. British consumers have bought 164 million fewer pints of beer, 27 million fewer bottles of wine and 6 million fewer bottles of spirits this year. Rising alcohol prices, health concerns and poor weather are all thought to have contributed to the category s 4% drop in value sales this year. Asda has reported a staggering 135% increase in sales of lower-abv wines this year. Each bottle of Absolute Unique will be just that after brand s owner Pernod Richard engineered over 4 million 2012 / Q3 12

13 Miscellaneous Many companies are struggling to meet their salt reduction pledges under the Responsibility Deal. Manufacturers are finding it difficult to reduce salt without compromising on taste or quality. Asda is launching a new store credit card to reward its customers. Details are yet to be confirmed though it appears that the card will not be a fully developed loyalty scheme like Nectar or Clubcard. Poundworld has increased its grocery sales by 88% over the last year. Trading Director Chris Edwards Jr. believes the company s success to be due to the recession, a 60% increase in stores and an enhanced grocery range. US trading groups are challenging the EU over its protection of food names such as feta and prosciutto. The US Consortium for Common Food Names is arguing that only geographical indications such as Greek Feta should be protected. Research undertaken by Leatherhead Food Research shows that companies have reached the limit of what is possible in terms of salt reduction. Industry bodies are now calling on the Government to scrap sweeping salt reduction targets. Companies are increasingly looking to utilise smart phone technology to augment their marketing campaigns. Manufacturers are using QR codes to take users to websites with recipe ideas, games and even localised weather forecasts. Consumers are less interested in healthy breakfast products and are increasingly looking for more indulgent offerings. Over half of the shops close to Olympic venues have reported a decrease in trade during the games. 65% of consumers would like more self-service checkouts in supermarkets according to research conducted by The Grocer. Tesco has adopted the traffic light labelling system leading some to believe that the system may be adopted as the universal labelling method for the food industry. Tesco has increased its local produce lines by 40% in response to growing consumer demand for regional produce / Q3 13

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