Better-for-you

Hershey, the largest U.S. confections company, is famous for churning out billions of its indulgent Kisses, Reese's Peanut Butter Cups, Milk Duds and other sweet treats each year. But as consumer tastes have changed, the 127-year-old company is focusing more attention on innovating these core brands through low- or no-sugar, organic and bite-size offerings in an effort to grab a larger share of the better-for-you snacking category.

Only 6% of candy, mint and gum sales come from products defined as better for you, or about $1.3 billion per year, according to IRI data cited by Hershey. The food company estimated if that share rose to as high as 20%, putting it closer to the average found in other snacking categories, sales of better-for-you confections could surge to more than $4 billion, said Kristen Riggs, Hershey's chief growth officer.

For Hershey, which posted $8.1 billion in sales in 2020, it could provide an opportunity to boost its annual revenue anywhere between $500 million and $1 billion, she said.

"We are really putting a big bet in growth in the better-for-you area," Riggs said in an interview. "If we want to participate in that growth then we need to have more solutions."

Hershey last year said it is using a multiprong approach to increase sales in the better-for-you candy segment in an effort to capture more consumers across a larger number of snacking occasions.

Much of Hershey's prior efforts have focused on portion-controlled sizes — a successful initiative that recently included the debut of Kit Kat Thins. Now, the company plans to expand its portfolio to deliver more reduced sugar, organic and plant-based alternatives, a strategy that provides the Pennsylvania company with "multiple levers for growth," Riggs said. 

"People are still going to eat a Reese's Cup — we know that. People are still going to choose Reese's Eggs at Easter — we know that," Riggs said. "But if we have solutions like Zero Sugar Reese's, Thin Reese's, Organic Reese's — then all of a sudden we start to meet a broader set of needs." 

Innovation will not only come from within Hershey, but also by teaming up with better-for-you brand partners to co-develop and launch new offerings, Riggs said. Hershey also will look at acquisitions that enable it to access new consumers or occasions that its core brands don’t reach today.

At the same time, Hershey plans to uncover ways to reduce sugar used in many of its products, both internally and by investing in companies working on similar breakthroughs. In 2021, the candy maker partnered with ASR Group — one of the world's largest sweetener companies — to co-lead an equity investment in Bonumose, a startup working on innovations in plant-based food ingredients, including rare and natural sugars. The investment will allow Hershey to advance the taste and texture of zero- and reduced-sugar chocolate, and apply that knowledge to its other snack offerings.

Riggs said while some niche and smaller brands have carved out a strong presence in the better-for-you snacking space, much of the category is controlled by large CPG brands like Hershey that can use their scale and innovation prowess to have a far-reaching impact. In ice cream, for example, 37% of sales are from better-for-you brands, which are low in sugar or use techniques such as churning to reduce their fat content. Of that segment, 85% is controlled by mainstream brands, she noted.

Under the watch of CEO Michele Buck, Hershey has created a "snacking powerhouse" by accelerating growth in the company's hugely profitable confectionary business and expanding its portfolio into new snack offerings.

Since Buck took over in 2017, Hershey purchased fast-growing SkinnyPop popcorn — the largest deal in the company's history — and protein-bar maker One Brands. It followed those last year with the purchase of fast-growing Dot’s Homestyle Pretzels and its Midwest co-manufacturer Pretzels Inc., for $1.2 billion — a combined deal that would be the second-largest deal for the food maker.

With better for you infiltrating all facets of the snacking category, Riggs acknowledged Hershey needed to do even more in candy, mints and gum, and had an untapped opportunity in front of it.

Hershey, for example, launched a sugar-free line in 2008 but the company "didn't really put its weight and support of the business behind it," Riggs said. The products were traditionally viewed as an option for individuals with diabetes rather than one for mainstream consumers. Still, Hershey's sugar-free line grew and has posted double-digit sales increases during the last few years with little involvement from the company.

Today, Hershey is rebranding the line as "no sugar" instead of "sugar-free" and overhauling the packaging. "That is kind of a hint for us that, 'Wait a second — this is happening organically in the business. How would we think about really making it a strategic priority?' " Riggs said.

Buck told analysts in early 2021 the relaunch was similar to what is being done in beverages and other categories when it comes to zero sugar. "Those products are just positioned entirely differently, in a much more contemporary way, and that's really our goal," she said.

As Hershey bulked up its portfolio through acquisitions in trendy snacks and entered into marketing partnerships to promote its brands, executives started believing they could bring what they learned in these areas to other parts of its business.

SkinnyPop, which has grown at a compound annual growth rate of 9.1% since Hershey added it to the fold in 2018 — compared to 5.6% for the ready-to-eat popcorn category as a whole — has deepened its insights and understanding of consumer needs in better-for-you snacking. And Hershey's marketing deal for Reese's with the NCAA helped further cement the brand's popularity by reaching beyond confections to connect the product with sports fans. 

"When you think about partnerships from a business perspective and bringing those in, it's become a bigger part of our strategy," Riggs said. "I think it's a smart way to bring in new thinking and breakthroughs that we need to develop the formulation that really unlocks a lot of growth in our mainstream business."

Even after expanding into other food categories where Kind's better-for-you mantra is resonating with consumers, the company's new CEO said it's just the beginning for a snack maker that became a household name through its popular bar. 

"Whenever we ask consumers, they're very open to trying Kind in new spaces," said Russell Stokes, who was appointed CEO of the food company last October. "We're really looking for places where we can bring our promise and deliver something ... that doesn't exist in the category today."

Stokes said the company is looking at additional ingredients for its bars, with plans to launch a new offering later this year. The success of its Kind Healthy Grains granola in breakfast has prompted the company to explore more ways it could bring healthier options to the morning.

Kind also is looking to create more products for kids. And Stokes said frozen, where its plant-based ice cream has further opened up the evening snacking occasion for Kind, is an area where the company "is just scratching the surface."  

In an effort to encourage people to eat more fresh, whole foods — and promote Kind as the next best option — the company temporarily stopped the sale of its popular snacks like its bars on its website on March 1 and 2. 

Instead, consumers had an opportunity to buy a Kind Whole Fruit and Nut Box with apples, oranges, kiwis, raw almonds, cashews and sunflower seeds for $30, including shipping. Kind plans to promote the campaign in New York City, anchored by a faux, bar-filled vending machine that opens into a speakeasy-like secret farmer’s market. Consumers trying to buy one of its snacks will be given the opportunity to fill their baskets with fruits and vegetables for free and explore the immersive pop-up experience.

The effort to encourage more fruit and vegetable consumption comes as most Americans fall woefully short. In 2019, the Centers for Disease Control and Prevention found only 12.3% and 10% of adults ate enough fruits and vegetables, respectively.

Stokes acknowledged the nut and bar box move is "not a financial winner" for Kind and that the company will "take a bit of a short-term hit" online. 

"We'd have to sell a whole lot of these boxes to offset our bar business," he said. "We're not doing this to drive sales in the short term." 

But if the Whole Fruit and Nut Box proves to be a hit, Kind could decide to make the item a permanent extension to its portfolio, Stokes said.

Stokes' appointment came amid an accelerated push by Kind to move beyond its core bars to become a broader snacking company. Since the beginning of 2020, Kind, which prioritizes the use of plant-based, nutrient-dense ingredients in its foods, has expanded into refrigerated items, chocolate, energy bars, frozen food, cereal and snack mixes. Sales rose approximately 5% in 2021 to about $1.7 billion.

The expansion gained momentum after Kind was purchased by Mars in 2020 for an estimated price tag that valued it at more than $5 billion. Mars took a minority stake in Kind in 2017.

Kind's bars, which make up the lion's share of its business, have topped sales recorded before the pandemic behind strength in its Kind Minis and Kind Thins. The smaller portion offerings have brought new consumers and usage occasions to the brand and the category, Stokes said. During the past year, sales of Kind's bars have risen 12%, compared to 9% in the bar segment overall, Stokes said. Its granola has evolved into the top-selling brand in its space, with sales growing two to three times faster than the category as a whole.

Stokes said he is "delighted by the performance of the [Kind] business." 

Still, with Kind only reaching about 20% of all U.S. households annually, there appears to be a long runway ahead for the nearly two-decades-old business. Stokes said with consumers snacking more and shifting their attention to whole ingredients in an effort to eat healthier — a trend that has only accelerated during the pandemic — Kind should be ideally positioned to benefit.  

General Mills launched Good Measure, a new brand of snacks with ingredients that don't cause a spike in blood sugar. The line includes three variety of bars — Blueberry & Almond, Peanut & Dark Chocolate and Almond & Dark Chocolate — that will be available on Amazon and at Hy-Vee stores in Minnesota. 

The bars feature natural ingredients like nuts and seeds and have fewer than five net carbohydrates per serving. Each bar is held together with nut butter. They each have three grams or less of sugar and derive much of their sweetening from rare sugar allulose.

Good Measure bars are targeted to consumers with diabetes or pre-diabetes, along with other medical conditions where blood sugar levels need to be monitored. As consumers are becoming more interested in eating to benefit their health, food companies are creating products that meet specific dietary needs.

The brand launch, which comes out of General Mills' Innovation Lab, aims to be a solution for consumers who have a difficult time enjoying snacks.

In a video on Good Measure's website, brand founders Ryan Backer and Tom Nack talk about how they were searching to find problems that could be solved through food. One mother they met needed to make meticulous measurements and consult charts in order to give her 10-year-old diabetic daughter a snack, and then dose her with an appropriate amount of insulin so her body could handle it. Backer, Nack and Good Measure's other founder, Jonathan Scearcy, researched the issue and worked to build snacks that people who have blood sugar issues could eat without having to do arduous calculations. 

While this brand seems like a niche offering, there are millions who would benefit from a diabetes-friendly snack that is easy on blood sugar. According to statistics released in 2020 by the Centers for Disease Control and Prevention, 10.5% of all people in the United States have diabetes. And more than a third of people in the U.S. have pre-diabetes, defined as a higher-than-normal blood sugar level that could turn into diabetes if not remedied. Blood sugar spikes could come from many foods that are actually natural and thought of as better-for-you such as fruit as well as foods that are high in carbohydrates.

Foods that help meet distinct consumer needs — especially when it comes to health and wellness — are becoming popular options for manufacturers. And this is a specific niche that not many manufacturers have met. A quick search for snacks that won't cause a blood sugar spike mainly includes foods like avocado or quinoa. And it's apparent that General Mills wants consumers to know Good Measure's effects. On each snack bar's packaging, the text "Little impact on blood sugar" is more prominent than the brand name.

General Mills is not the only company to make a food for a specific diet. Hormel has long made products for people who have trouble swallowing under its Thick & Easy brand. Nestlé also owns several brands that serve specific consumers, including the nutritional supplement drink Boost. Nestlé has been especially active in building this segment of its business, acquiring brands and supplements that help meet particular nutritional needs.

Good Measure is the beginning of what may be a new area of business for General Mills. Born out of its Innovation Lab, Good Measure shows that the company's product developers have their eyes open for health-related niches. There's more room to grow both for this brand — General Mills' blog has images of Good Measure Almond Crisps, which foreshadows more snacks in the future — as well as other white spaces for food that is both desirable and meets dietary needs.

As the better-for-you segment continues to expand, CPGs are grappling with how to keep their legacy brands relevant and stay on trend. For those products traditionally made with meat or dairy, creating a plant-based alternative has opened up the brand to new consumers. Others are embracing clean label, or reformulating to avoid gluten. Here are some of the latest legacy food products to undergo a makeover.

Barilla harnesses the power of legumes for pasta

In 2018, pasta giant Barilla debuted its One-Ingredient Legume Pastas line, which targeted two consumer trends at once: gluten-free and high-protein diets. It began with four varieties that each feature just one ingredient — chickpea or red lentil flour. The line has since expanded to six products, with shapes ranging from rotini and penne to casarecce and spaghetti. In September 2021, Barilla introduced the latest addition with One-Ingredient Chickpea Spaghetti. 

The products tout gluten-free and non-GMO verification. The chickpea varieties contains 11 grams of protein per serving, while the red lentil pasta packs 13 grams.

There is no doubt that Barilla was eyeing the success of Banza, a chickpea-centric brand that has seen significant growth with its pasta made of the legume. Bean pasta is projected to grow at a compound annual rate of 13% per year through 2025 to be worth more than $2.4 billion, according to Research and Markets.

 

Jimmy Dean’s breakfast sandwiches go plant based

In early 2021, Tyson Foods debuted two varieties of its popular Jimmy Dean breakfast sandwiches made with plant-based patties. The Jimmy Dean Plant-Based Patty, Egg & Cheese Croissant and Jimmy Dean Delights Plant-Based Patty & Frittata Sandwiches use the same seasoning as Jimmy Dean’s regular meat products in order to attract fans of its animal-meat based sausage. The plant-based patty on the croissant variety is made with soy protein and egg whites, while the frittata sandwich patty also contains black beans, quinoa and brown rice, the company said.

Tyson began dipping its toes in the plant-based segment in 2019 with its Raised & Rooted line of pea protein and beef blended burgers and pea-based nuggets. With the plant-based Jimmy Dean sandwiches, it was able to take advantage of a growth opportunity in the breakfast space and gain consumers increasingly embracing meat alternatives.

 

Mission Foods taps almonds, cauliflower and peas for tortillas

In September 2021, Mission Foods launched two new varieties to its Better for You line of low-carb, organic, whole wheat and gluten-free tortillas made with almond and cauliflower flours. The company said that it was expanding into the space due to market trends, and prioritizing consumers who are vegan or have dietary issues, along with those who just want to live a healthier lifestyle. The almond and cauliflower-based tortillas join the brand’s whole wheat pea protein-fortified wraps, which contain 7 grams of protein. 

Mission touts the almond and cauliflower products’ fiber content at 4 grams per serving. This compares to its flour and corn tortillas, which contain 1 and 3 grams of fiber, respectively. The new tortillas are also gluten free.

 

Hidden Valley remakes ranch for vegan appetites

Clorox-owned ranch brand Hidden Valley launched the plant-based, vegan version of its flagship product at the start of 2021. Plant-Powered Hidden Valley Ranch contains soybean protein isolate and is free of dairy, gluten and nuts. It contains 110 calories per serving, 20 less than regular ranch.

Crafting a vegan version of ranch seems like a sure bet, considering it is the most popular salad dressing flavor in the U.S., according to Statista data. While there have always been plant-based salad dressings, Hidden Valley’s foray into a vegan version of a traditionally dairy-based dressing shows how many more opportunities remain for food manufacturers to explore the trend. Plant-based dairy spreads, dips, sour cream and sauces were worth $61 million in sales in 2020, according to data from SPINS, the Good Food Institute and the Plant Based Foods Association.

 

Oreo goes gluten free

In 2021, Mondelēz launched a gluten-free version of its popular Oreo cookies. There are now versions of both regular and Double Stuf Oreos that eschew gluten, made with a mix of two types of gluten-free flour: white rice and oat.

Research and Markets estimates that the gluten-free market in the U.S. could approach the $6 billion mark by 2025. The growth is being driven by consumers who are increasingly questioning the effects of traditional ingredients like wheat-based flour — and it’s not limited to those with a bona fide allergy. One study by The Hartman Group even found that 35% of consumers who buy products free of gluten have no specific sensitivity or other special reason to do so.

In a survey of 5,000 U.S. consumers, the Brightfield Group's Evergi Consumer Insights platform gauged the attitudes of the "COVID-concerned" — or those who listed COVID-19 among their top three sources of stress. These consumers were 13 points more likely than the general population to say they maintained a healthy diet to deal with stress and improve their well being. 

Baby boomers made up the largest share of this group, likely because older people tend to suffer the most serious complications from the virus. The survey found more than half of the COVID-concerned were female. Evergi said this may be tied to the fact that women have felt more of the burden from closed schools and job losses.

With the COVID-concerned group skewing older, these consumers gravitate to products that offer support to heart and digestive health, boost the immune system and help lower cholesterol, according to the Evergi survey. While this group is just one segment of the total U.S. population, it has been driving product introductions and innovations during the past year that may linger long after the pandemic passes.

Food as medicine: It's not a new concept. A 2019 white paper from ingredients company Kerry Group found 65% of consumers seek functional benefits from their food and drink. The pandemic has amplified this attribute as a way for consumers to take control of protecting their health during a chaotic time.

In the Evergi research, nearly two-thirds of all consumers agreed an individual can substitute functional foods and beverages for some medicines. With digestive health top of mind, the COVID-concerned consumed more offerings like Icelandic yogurt. At the same time, since this group is also more likely to deal with health issues such as diabetes, they preferred low-sugar products, such as cauliflower-crust frozen pizza and hard seltzer. And they ate fewer items such as caffeinated snack bars, bean-based chips and protein cookies than the general population. Evergi suggested this may be because of the group's concerns around preservatives.

The functional products that most consumers reported purchasing during the past three weeks — the survey was conducted Dec. 3 to 14, 2020  — included energy drinks, high-protein yogurt, vitamin-enhanced water and low-calorie ice cream.

As consumers gravitate toward more of these offerings, manufacturers have been introducing more of them to the market place.

Molson Coors Beverage, for example, signed an exclusive distribution deal in early 2021 for ZOA, a nonalcoholic energy drink loaded with natural ingredients such as turmeric, camu camu and acerola cherry, as well as vitamins C, D and B, added electrolytes and amino acids. The beverage is made without preservatives, artificial ingredients or additives. In Evergi's research, the COVID-concerned consumers were more likely to say ingredient claims were important to them, with 52% preferring "real food ingredients" and 40% "no preservatives" statements. 

Enhanced waters offering atypical functional benefits also have increased in number. Hellowater and agri-tech firm Brandt announced an upcoming product line with immunity-boosting and detoxifying properties. In 2020, Ocean Spray debuted a line of sugar-free functional waters and CBD sparkling waters..   

When tracking conversations about wellness on social media, Evergi found the most commonly discussed ingredients were CBD at 22% of mentions. Beverage manufacturers such as Molson Coors and SweetWater Brewing are launching products in the space, with other manufacturers eager to jump in if regulatory guidance is put in place.

Evergi also measured higher mentions of garlic, lavender, ginger and collagen in wellness conversations on social media. These ingredients — as well as immunity-boosting options such as honey, turmeric, citrus, mushrooms and fermented foods — offer promise in meeting the demand for wellness during the pandemic.

The COVID-concerned group was 37 points more likely than the general population to like plant-based meats, the survey found. This dynamic is helping drive what has been a massive trend across food and beverage, with new introductions of plant-based cheese, investments flowing to dairy alternative milks and new partnerships forged by Big Food and startups eager to enter the growing category. 

For manufacturers, the challenge will be formulating products and wording labels that speak to the concerns and motivations of the COVID-concerned consumers — and holding their interest long after the pandemic shifts into the rear-view mirror.