When a food product line doesn’t succeed, especially when the product features ingredients that are considered on-trend, manufacturers wonder what went wrong. For example, last fall, Chex announced it would stop making its gluten-free oatmeal. For Campbell Soup Co., the recent discontinuation of its V-8 protein line of shakes and bars was attributed to lack of uniqueness.
Manufacturers will find it takes more than adding a trendy ingredient to their products to attract consumers. Companies that are perceived by consumers as authentic and artisanal, which points to smaller and startup companies, have the momentum at the moment. "Big Food realizes they have an issue where they need to be more authentic with the consumer because they face strong competition from smaller startup companies," Jared Koerten, senior analyst, Euromonitor International, told Food Dive.
"Part of the challenge for the mainstream companies is they are adopting some of the characteristics that are popular and common in the natural channel but they are not natural channel brands or companies," Kara Nielsen, independent food trendologist, told Food Dive.
All about the brand?
Over time, consumers begin to see copycat nutrition benefits on brands that are existing legacy brands. For Campbell’s V-8 protein line, a disconnect comes because the V-8 core consumer may not be looking for a high protein benefit. "The guy that is going for a high protein alternative after his CrossFit workout or gym workout is probably not a V-8 consumer," Nielsen said. "That may be someone who may be picking up a Naked Juice protein or Odwalla juice protein."
Koerten said taking a traditional brand and making a high-protein variant is often not enough to compete with brands that lead the way in a particular segment, such as a Kind or a Clif Bar or other protein snack bar brands that continue to do well in the U.S. market.
"The big story is how can our legacy brands compete in this space when a new consumer, whether a millennial or health consumer, believes these things come more authentically for new, smaller brands," Nielsen said. "Which is why you see the bigger companies buying these smaller companies."
Millennials tend to be concerned about the newness of a product and not what the ingredients are. "It is hard for companies to grapple with that; always having something new," Nielsen said.
Large manufacturers may have an advantage because they do things really well, are able to make something taste really good, and have access to quality ingredients. "But they need a hook that makes it different so it isn’t, 'here is another gluten-free oat bar or high-protein item,'" she added.
Koerten offers another perspective. "There is an interesting movement of anti-industrial food, and a lot of the big manufacturers are coming to the market with a big disadvantage," he said. "Of course, a lot of people still love their brands and buy their brands; however, the strong growth is coming from startups, from these new companies that may be more local to a particular place." He mentioned Stubbs barbecue sauce, a Texas-based artisanal product that was purchased by McCormick & Co. Inc. last year.
Life cycles and what’s up next
Jumping into a crowded market segment with products that feature the latest, greatest ingredient is all about timing. Koerten says gluten-free has been a rising tide for many years but it is not necessarily expected to be a future driver. In fact, some companies, such as Boulder Brands Inc. which was strong in the space, have been struggling. Pinnacle Foods completed the acquisition of Boulder Brands earlier this year for $975 million, according to the Denver Post.
Nielsen believes some ingredient trends are beginning to top out, and with more natural channel grocery stores popping up everywhere, the market will be even more competitive.
So, where are the growth opportunities? With certified organic ingredients, in regard to packaged foods. "Certified organic has a lot of room to grow within the packaged foods world of the broader food market," Koerten said. One reason is because consumers continue to pay more attention to ingredient labels.
Nielsen added, "At the moment we see believable nutrition as a new benefit. We are going to see more plant-based nutrition, such as pea proteins and brown rice proteins." Savvy consumers are looking at not only the source of ingredients, but also the source of energy, and the source of the protein.