How food companies adapt to the gluten-free movement
Browsing the grocery store aisle, consumers have seen an array of foods labeled “gluten-free” pop up on everything from the snack and baking aisles to meats and frozen food. The likes of pizza and beer and the Girl Scouts have jumped onboard. And many consumers have not only seen a proliferation of gluten-free products, but they’re buying them too.
A recent Packaged Facts report, entitled "Gluten-Free Foods in the U.S., 5th Edition," reveals that sales for the gluten-free industry topped $973 million and has achieved a remarkable compound annual growth rate of 34% over the past five years. To prove gluten-free foods aren’t just a fad, the report also predicts that sales will exceed $2 billion in 2019. In short, the gluten-free label isn’t going anywhere.
It’s not just smaller niche brands making these specialty diet-friendly foods a reality. Major food corporations, such as General Mills, have added gluten-free products to their offerings as well. How are these food companies adapting to consumers’ growing demand for gluten-free products?
Gluten-free foods give some consumers what they want
A 2013 Mintel report — one that Food Dive has also noted in a gluten-free feature last year — found that 247 out of 2,000 surveyed adults ate gluten-free foods for reasons besides gluten intolerance or celiac disease. Of those respondents, 65% said this was due to the belief that gluten-free foods were the healthier choice, and 27% said it was because they thought gluten-free foods could help them lose weight. These beliefs fall in line with the expansion of “natural,” organic, and non-GMO foods, many of which are also gluten-free, which have increasingly appeared on supermarket shelves over the past decade.
According to the Packaged Facts survey data, more than one-third of consumers say that the gluten-free/wheat-free label is an important consideration when choosing which brands to buy. Further, “a quarter of respondents had purchased or used food products labeled gluten-free in the three months prior to the survey,” said the report’s press release.
How food companies are responding
Food companies in turn have responded with attempts to give consumers the gluten-free foods they’re looking for. And why wouldn’t they? According to Catalina, gluten-free customers spend about $100 on their average grocery basket as compared to $33 on average grocery spending overall.
The trick for these brands is to create gluten-free products that people want to buy, which often means gluten-free versions that look, feel, and taste similar to products with gluten. However, because the ingredients necessary to make foods gluten-free are often different in taste and texture from gluten-containing ingredients, food companies may undergo lengthy periods of experimentation, tastings, and product development to create foods customers actually want to buy — and buy again.
General Mills’ Betty Crocker brand went through some complex changes to offer gluten-free versions of its cookies, cakes, and brownies. Yellow cake posed a particularly difficult problem, as the company had to repeatedly adjust the recipe’s oil and butter, eggs, and egg whites until the cake lost its original persistent dense layer, which would have turned off many consumers.
Food companies also contend with the higher price tags that come along with specialty items. In 2011, a box of Betty Crocker’s gluten-free brownie mix retailed for about $1.50 more than its traditional mix, and specialty baker King Arthur’s brand sold its gluten-free brownie mix for nearly $4 more than Betty Crocker’s original recipe. Consumers in general understand that healthy foods often come at a cost and are willing to pay extra for the benefits. But food companies have to find a way to keep their costs down and offer gluten-free foods at competitive prices to stand next to other products on the market.
Smaller, locally-owned gluten-free producers dominate the space
Whether grocery stores confine gluten-free products to a separate specialty health foods section or disperse them throughout the store, consumers tend to find smaller, even locally-owned gluten-free companies more than any others. Many of these companies are small enough to subsist on selling only gluten-free foods, and others integrate gluten-free foods into an overall health foods line.
Udi’s was one of the first brands in the marketplace to produce what consumers would refer to as “actually edible” gluten-free bread. Bob’s Red Mill and Hodgson Mill offer an array of gluten-free flours and baking mixes. Hain Celestial is another leading natural and organic food producer and owns several brands that are well-known in the health foods space, including Arrowhead Mills, Hain Pure Foods, and Taste the Dream. Amy’s produces a host of prepared gluten-free foods that range from pizzas and wraps to rice bowls and chili, including a variety of Mexican, Asian, and Indian dishes.
These smaller companies are seeing promising sales and catching the eyes of larger food corporations. One of the big-little players in gluten-free foods, Glutino, was acquired by Smart Balance, a known investor in small healthy food companies, for $66.3 million in 2011. In 2012, Smart Balance made another industry move by acquiring Udi’s Healthy Foods division for about double the price. Sales improved by 50% for both companies in 2013. These appeared to be savvy moves for Smart Balance.
Major food corporations push their own gluten-free products
Gluten-free foods are stretching beyond the specialty health food aisles as more major food companies release their own gluten-free products. Nowadays, thanks to many of these companies, gluten-free means much more than breads and rice cakes.
In fact, these brands have figured out how to infiltrate every meal of the day with their proprietary gluten-free offerings: Kellogg’s retooled Rice Krispies recipe for breakfast. Tyson’s Gluten-free Breaded Chicken Breast Strips on a spinach salad for lunch. Prego Spaghetti Sauce (already gluten-free) over Hodgson Mill’s Gluten-free Linguine for dinner. Betty Crocker’s Gluten-free Devil’s Food Cake for dessert.
For some major food brands, the effort to provide gluten-free products is a small one. For example, in 2008, General Mills’ Chex reformulated its cereals to offer Rice Chex with just a few minor ingredient adjustments and a massive marketing campaign for support. Most recently, the company revealed the continuing adapting of Chex with a new gluten-free granola version to come out. For companies like Post, its already rice-based products like Cocoa and Fruity Pebbles just needed a re-branding as being gluten-free.
One issue larger food corporations face is the FDA’s requirement that products labeled as gluten-free are only allowed to contain less than 20 parts of gluten per million. Because these companies’ factories often manufacture gluten-containing products in close proximity (and wheat floats), it can be difficult for them to produce admissible gluten-free products without standalone captive facilities.
Large or small companies aside, gluten-free foods are a new health food staple and may remain a permanent resident on grocery store shelves. Food companies have and must continue to adapt to consumer demands as the industry grows. As the movement progresses, seeing how many of the bigger players expand their own gluten-free offerings or acquire gluten-free manufacturers will determine just how big this industry will get.