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THE POWER OF NATURAL AND ORGANIC: HOW THESE INGREDIENTS CAN UNLOCK FUTURE SUCCESS FOR FOODSERVICE OPERATORS

For more information, visit dfifoodservice.com. TABLE OF CONTENTS

Americans’ Changing Perceptions of Healthy Dining Out 3 Healthy Is Now Purposeful Eating 4 Natural and Organic Perceived as Healthier Choices 5 Natural and Organic Go Mainstream 6 Natural and Organic in Foodservice 7 Young Consumers Drive the Demand – For Now 8 Natural and Organic Enhance Perceptions of Taste 9 Natural and Organic as Guilt-Busters 10 Natural and Organic as Traffic Drivers 11 The Future of Natural and Organic in Foodservice 12 Natural and Organic: & Sweetening 13 Natural and Organic Sugar/Sweeteners. Front-of-House 14 Natural and Organic Sugar/Sweeteners. Back-of-House 15 Future of Natural and Organic Sugar/Sweeteners 16 Key Takeaways 17 Contributors 19 Americans’ Changing Perceptions of Healthy Dining Out

Changing notions of health and healthy eating are impacting nearly every part of the foodservice – and understanding what’s happening, and why, can help operators plan for and capitalize on the recent trends. This white paper explores these trends and their implications for operators by focusing on two health-related terms that play an important role in this new environment: natural and organic.

First, a bit about how we got here. Study after consumer study supports the fact that American consumers are trying to eat healthier. Further, what’s becoming more evident is that they’re increasingly health-conscious when dining out.8 That’s especially important given how often Americans eat away from home. sales hit $825 billion in 2018, the ninth consecutive year of industry sales growth.6 The desire to make healthier choices away from home is impacting consumers’ dining-out decisions: six in 10 consumers say healthy options can sway their choice of .8 That’s not to say that eating healthier in restaurants isn’t a real challenge for many consumers. Multiple sources suggest that consumers believe that it’s more difficult to eat healthy when dining out than at home.

3 Healthy Eating Is Now Purposeful Eating

While interest in healthier eating continues to grow, the definition of what it means to eat healthy continues to evolve. Healthy eating today is less about weight management, dieting and calorie counting, and more about where and how is grown or raised, processed and prepared. According to Technomic, current perceptions of healthfulness revolve around qualities like “real,” “wholesome,” “fresh” and “additive-free,” and are less about specific claims.3

Goals, too, are changing. For many consumers the new goal of healthy eating is wellness: a holistic and overall sense of well-being and self-care. Of consumers who have changed their eating habits, more than half have done so to protect their long- term health; a similar percentage has done so to feel better and have more energy.11

In addition to their own health, some consumers are changing For many consumers their eating behavior to create a healthier world. For these the new goal of consumers, eating less processed, more natural is a part healthy eating is of living a more sustainable, environmentally conscious lifestyle: wellness: a holistic Of consumers who purchase organic food, one in three does so and overall sense of 12 to help the environment. In short, healthy eating is becoming its well-being and self- own reward for many consumers. The motivations driving the care. new healthy eating lifestyles tend to be more emotional, and less based on specific, measurable objectives.

4 Natural and Organic Perceived as Healthier Choices

Natural has not been defined by the FDA. Some food producers and consumers define natural to be a product that is “minimally Of those who buy processed”; others consider natural to be a product that is free organic food, of additives or artificial colors. Regardless of definition, food and three in four do beverages perceived as natural or identified as organic play a so because it’s critical role in guiding consumers toward eating choices that they healthier. believe will help them achieve a healthier, more natural lifestyle.

The perception that these items are healthier, along with concerns about the health effects of one’s , are the greatest drivers of increased natural and organic purchases among consumers.3 Most consumers say they feel healthier eating natural and organic food and beverages.3 Of those who buy organic food, three in four do so because it’s healthier.12

5 Natural and Organic Go Mainstream

Overall, interest in natural and organic has risen significantly. Organic product sales in the U.S. jumped almost 9%, to more than $21 billion in 2018.4

This trend shows no signs of slowing down. In fact, two-thirds of consumers have purchased organic food in the past 30 days.12 Three in 10 consumers are purchasing natural and organic items more often than they did a year ago.3 In particular, younger consumers, ages 18-34, have a greater interest in these claims than their older counterparts.3 As these consumers form households and have children, demand for natural and organic is likely to further increase.

What’s more, natural and organic food and beverage offerings are

firmly in the mainstream and available at traditional supermarkets, Organic product mass merchandisers and club stores. That means consumers retail sales in at many income levels are becoming exposed to natural and the U.S. jumped organic products regardless of where they purchase their food. As almost 9%, to consumers continue buying natural and organic products at retail, more than $21 their familiarity with these terms, along with their affinity for healthy billion in 2018. and purposeful eating, will increase, leading to increased demand for natural and organic items when dining out.

6 Natural and Organic in Foodservice

The effects of this are already observable in foodservice: Operators’ use of foods and ingredients perceived as natural or which are organic is growing. Shipments of natural food and nonalcoholic beverages grew 3.3% annually 2011-2016 and, as of 2016, accounted for 26% of foodservice shipments.3 Shipments of organic natural grew even faster, at 11.5% annually.3 In fact, growth of natural and organic food segments is exceeding the growth of total foodservice.3 It’s also cited as a top trend among chefs: natural ingredients ranked high among the concepts that will influence food and menu offerings at restaurants in 2019.9

The terms organic and natural are becoming more The terms organic prevalent on today’s menus. Organic is now on 11.4% and natural are of all menus, according to Technomic MenuMonitor.13 becoming more Excluding QSRs, the menu incidence of organic rises to prevalent on today’s closer to 20%. Similarly, natural is on 11.9% of all menus; excluding QSRs, the incidence rises to over 20%.13 menus.

7 NATURAL & ORGANIC: WHAT THIS MEANS FOR FOODSERVICE OPERATORS

Young Consumers Drive the Demand – For Now

Who the natural and organic consumer is continues to evolve and broaden. In the trend’s early days, natural and organic eating was driven by women. Today, few gender differences exist.3 Younger consumers – Gen Z and millennials – currently have the highest consumption and interest in natural and organic.3 But, according to Technomic, the appeal of natural and organic is increasing elsewhere too, both for baby boomer and Gen X consumers.3 Parents, looking for healthier options for their children, are also fueling the demand for natural and organic. As Gen Z and younger millennials begin to form families, this will further drive demand for natural and organic away from home.

KEY TAKEAWAY:

Don’t get left behind: the market has moved to expect more natural and organic food and beverage solutions. Committing to natural and organic today will help solidify a wide-reaching and dedicated customer base for decades to come.

8 Natural and Organic Can Enhance Perceptions of Taste

Natural and organic foods have evolved to be far tastier than in the past, and today’s consumers have noticed. For health claims like “low ” and “reduced sodium,” an increase in health perception comes with a decrease in perceived taste, according to Technomic.3 On the other hand, natural and organic are the exceptions; more than half of consumers say that food and beverages with these descriptors are tastier than their conventional counterparts, while only about one in 10 consumers thinks they are less tasty.3 Given that both terms are strongly associated with freshness and quality, the taste connection is no surprise.3

More than half of consumers The ability to combine flavorful, high-quality food say that food and beverages with the health halo these foods benefit from is termed natural and organic extremely powerful. Operators can leverage this message of health and taste in their marketing and are tastier than their menus in order to help consumers achieve their healthy conventional counterparts eating goals without sacrificing taste and satisfaction.3

KEY TAKEAWAY:

Offering natural and organic menu items is a way to appeal to the ever-expanding health-minded consumer market while enhancing perceptions of taste and .

9 Natural and Organic Can Help Upsell Indulgent Menu Categories

Natural and organic can effectively position even indulgent foods as better for you.3 The primary benefits of natural and organic fare are, unlike more specific health-related claims, largely emotional. Three in five consumers say they just “feel healthier” when they eat natural and organic foods.3

About half of consumers feel better about ordering and other indulgent fare if at least some of the ingredients About half of are natural or organic.3 That incidence rises among younger consumers feel consumers ages 18-34. Consumers, especially those trying better about ordering to eat healthier, often have some guilt or other negative desserts and other emotions about eating the occasional indulgent food. indulgent fare if at least Knowing that the indulgence is at least partly natural some of the ingredients or organic imparts a health halo that helps consumers are natural or organic. rationalize their decisions.3

KEY TAKEAWAY:

Increase sales of indulgent menu categories like beverages, appetizers, and desserts by touting natural and organic ingredients that may sway previously guilt-riddled customers to splurge.

10 Natural and Organic Can Drive Traffic and Increase Check Size

Natural and organic menu items have the ability to drive traffic and increase price thresholds.3 About half of consumers say they are more likely to choose a specific restaurant over others if it offers natural or organic food and beverages.3 The traffic-driving power of natural and organic is especially strong among younger consumers and parents of young children. This highlights the importance of offering these options on children’s menus.3 About three-quarters of consumers say they’re more likely to purchase an item labeled natural or organic from a restaurant or grocery store.3 And of those more likely to purchase natural or organic items, more than half (53%) say they’re willing to pay more for them.3

About three-quarters of consumers say they’re more likely to purchase an item labeled natural or organic.

KEY TAKEAWAY:

Hero your choice of ingredients to increase menu appeal, check averages, and capture a greater share of younger customers and parents, laying the groundwork for your future brand advocacy.

11 THE FUTURE OF NATURAL AND ORGANIC IN FOODSERVICE

Current consumer attitudes and behaviors suggest that the power of the terms natural and organic on menus will continue growing. The ubiquity of the terms at retail is likely to increase familiarization and trust, which in turn encourages foodservice sales as well.

Much research suggests that it will become increasingly important for foodservice operators across a variety of segments to offer natural and organic menu options. In particular, the QSR channel may be challenged to include these offerings to counter perceptions of unhealthiness and remain relevant to health-minded families with young children, a core consumer segment. According to Technomic, over the next five years, providing at least some natural and organic options on the menu may become standard for most foodservice operators.3

12 NATURAL AND ORGANIC: WHAT THIS MEANS FOR SUGAR AND SWEETENING

Sugar Is Perceived to Be a Natural Sweetener

The good news: Many of the and sweeteners currently prevalent on the market are derived from plants and are perceived as being natural by consumers, including cane sugar.14

Looking well beyond white, soft brown, and powdered sugar, there are a vast array of less processed sugars and sweeteners, which can further impart a natural halo to a foodservice establishment. Examples include raw cane sugar, turbinado (demerara), and piloncillo (panela), which is the most minimally processed cane sugar product. Less processing means greater retention of the cane molasses, found naturally in the sugarcane plant, which has a variety of positive effects on taste, color, texture, and mouthfeel.

13 MAKING NATURAL AND ORGANIC SUGAR/SWEETENERS WORK FOR YOUR OPERATION:

FRONT-OF-HOUSE

For foodservice establishments looking to incorporate more natural or organic products into their menu, front-of-house can be a great place to start. Offering a variety of sweetener packets is an easy and highly visible way to introduce sweeteners perceived by consumers to be more natural. This simple change is easily observable by guests, giving the operator credit for considering and catering to the varying dietary needs of its patrons.

Turbinado sugar – also known as demerara – is derived from sugarcane and has large glassy amber crystals. In application, it is frequently used to Seventy-two percent sweeten hot beverages. In back of house recipes, turbinado adds a crunchy of consumers say texture and sweetness. This sugar undergoes less processing than white that a “no artificial granulated sugar, which gives turbinado its golden tan color and delivers a hint of sweet spice and green fruity top notes. sweeteners” claim Stevia is a plant-based sweetener that quickly dissolves in beverage makes a restaurant applications. Derived from the stevia plant, stevia is a high-intensity, zero- item healthier. calorie sweetener. This makes stevia an ideal choice for consumers looking to restrict calories and avoid artificial ingredients.

Worth noting is that usage of zero-calorie artificial sweeteners – such as , , and - is trending downward,15 with consumers instead choosing sweeteners that they perceive to be more natural and healthful. Therefore, it’s not surprising that in terms of health claims that restaurants can offer, “no artificial sweeteners” is one of the strongest. Seventy-two percent of consumers say that a “no artificial sweeteners” claim makes a restaurant item healthier, ahead of a long list of other health claims, including antibiotic-

3 14 free (68%) and GMO-free (64%). MAKING NATURAL AND ORGANIC SUGAR/SWEETENERS WORK FOR YOUR OPERATION:

BACK-OF-HOUSE

When operators make the investment to add natural and organic ingredients back-of-house – including sugar and sweeteners – it should be visible and inspiring and not a hidden or a missed opportunity for operators or their patrons. Menu descriptors and wait staff suggestive selling can both be effective tools for communication. Look for opportunities to call out specific motivating ingredients – such as U.S. Grown Organic Raw Cane Sugar. Natural and organic enhance taste perceptions among guests, so it is to the operator’s advantage to employ these menu descriptors whenever possible. Yet fewer than half of operators report that they consistently call out natural or organic attributes on their menu currently.3

It’s worth mentioning that a concept doesn’t have to be fully organic or natural to take advantage of this trend. For example, Natural and concepts that offer more mainstream or traditional fare could start organic with simple substitutions. One idea is to consider incorporating mill- enhance taste made, less processed, raw cane sugar into recipes. Raw cane sugar perceptions can be adopted both front- and back-of-house as a direct one-for-one among guests. replacement to white granulated sugar. The flavor is similar, imparting just a subtle hint of caramel compared with white.

Regardless of where a concept may currently be on the spectrum of natural and organic, the bottom line is to not ignore that consumer preferences are changing - even right down to what they expect to be offered in a sugar and sweetener caddy. Offering on-trend, natural and organic sweeteners can positively enhance a foodservice establishment’s image and reputation. Keep it simple and avoid making the change hard to adopt or confusing for employees or customers.

15 What’s Ahead for Natural and Organic Sugar and Sweeteners

Diet trends and eating patterns will continue to evolve and change over time, but what remains constant is our enjoyment of food and that is sweet. The world of sweetening has never been so exciting and buoyant both in terms of rediscovering the value of less processed, single-ingredient traditional and even ancient sugars – all the way to pushing the limits of with new groundbreaking sweeteners.

One such innovation ASR Group is spearheading is Sugar Cane Reb M. Through a partnership with leading biotech company Amyris, Sweet Essence M™ was developed via a unique process of sugarcane fermentation. Sweet Essence M is crafted specifically to be the best-tasting, plant-based, non-nutritive sweetener in the market. Sweet Essence M has tremendous future potential to deliver the great taste of sugar without the added calories.

As younger generations demand more authenticity, experience and transparency, there will be a growing opportunity for leading-edge operators to reinvent, rediscover or fuse cultures and traditions to create new and exciting food and beverage offerings. The evolution of this landscape will provide the potential for an even greater role and adoption of natural and organic sugar and sweeteners.

In conclusion, it’s key to remember that sweet is always on trend, but the means through which sweet is incorporated into menus will continue to evolve in step with the latest eating trends. As a leader in sweetening, ASR Group is uniquely positioned to help operators stay abreast of new innovation and provide inspirations for incorporating these product solutions into foodservice menus.

16 KEY TAKEAWAYS

How Natural and Organic Ingredients Can Unlock Future Success For Your Foodservice Operation.

Don’t get left behind The market has moved to expect more natural and organic food and beverage solutions. Committing to natural and organic today will help solidify a wide-reaching and dedicated customer base for decades to come.

Appeal to healthy eaters Offering natural and organic menu items is a way to appeal to the ever-expanding health-minded consumer market while enhancing perceptions of taste and flavor.

Natural and organic sways customers to indulge

Increase sales of indulgent menu categories like beverages, appetizers, and desserts by touting natural and organic ingredients that may sway previously guilt-riddled customers to splurge.

Capture younger customers

Hero your choice of ingredients to increase menu appeal and capture a greater share of younger customers and parents, laying the groundwork for your future brand advocacy.

Plant derived sweeteners

Remember that many prevalent sugars and sweeteners are derived from plants (e.g. sugarcane) and are perceived as natural by consumers.

17 CONT’D KEY TAKEAWAYS

How Natural and Organic Ingredients Can Unlock Future Success For Your Foodservice Operation.

Switch to less processed Switching to sugars and sweeteners that are less processed can have a variety of positive effects on taste, color, texture and mouthfeel.

Front-of-house visibility Including less processed or plant-based sugars and sweeteners in front-of-house caddies is a visible way to show patrons your operation is keeping up with the latest eating trends.

Back-of-house incorporation Seek opportunities to also incorporate less processed sugars back-of- house, such as raw cane sugar which can be directly substituted for For more trends white granulated sugar in recipes. and inspiration, visit dfifoodservice.com.

18 CONTRIBUTORS

James Whiteley Global Category Development Director Natural Brown Strategic Business Unit and North American Marketing

James has been providing his expertise and experience in food and beverage to the ASR Group for eight years. A graduate of the University of St. Andrews in Scotland, James joined the ASR Group via the UK Tate + Lyle Sugars business. His previous experience in food and beverage sales and marketing includes tenures with Diageo, United Biscuits and Anheuser-Busch. James is responsible for developing the Natural Brown Sugar category opportunities across ASR Group’s North American and European markets.

Michelle Tittl Research & Development and Culinary Manager New Product Development

Michelle has worked for ASR Group for seven years dedicating her efforts to identifying and launching new technical and culinary focused sweetener opportunities across North American product categories. After receiving a B.S. in from the University of Wisconsin-Madison and attending the Culinary Institute of America’s Advanced Culinary Arts Program, Michelle honed her skills in foodservice, beverage, dairy and private label grocery retail at such noted establishments as Cargill Solutions, Sartori Foods, and Target Corporation (Owned Brand Foods).

Laura Reiser Marketing & Business Development Manager North American Marketing – US Foodservice

Laura came to ASR Group 18 months ago, bringing with her eight years of experience in foodservice marketing as well as marketing experience in consumer products and retail channels. At ASR Group, Laura is responsible for foodservice channel marketing and communications supporting the US market. Laura received a BSBA from Duquesne University and an MBA from Carnegie Mellon University. Previous employers include H.J. Heinz Company and Dick’s Sporting Goods.

19 SOURCES

(1) 2019 Organic Industry Survey, Organic Trade Association. (2) “Millennials and Hispanics Drive Boost in Organic Sales,” FoodDive, Jan. 7, 2019. (3) 2017 Technomic ASR Natural and Organic Multi-Client Study. (4) Nielsen Insights, “Top of 2018: Organic,” December 12, 2018. (5) Food Dive, “FDA should think of consumers when redefining ‘healthy’ and ‘natural,’ ” February 1, 2019. (6) National Restaurant Association, 2019 Restaurant Industry FACTBOOK. (7) International Food Information Council Foundation, “2018 Food & Health Survey.” (8) National Restaurant Association, “State of the Industry 2019.” (9) National Restaurant Association, “What’s Hot in 2019 Survey.” (10) 2018 Technomic Natural and Organic Opportunity Assessment Study. (11) Statista, “Eating Behaviors in the US Dossier.” (12) Statista, “Organic Consumers in the US Dossier.” (13) Technomic MenuMonitor, August 2019. (14) 2018 Smart Cube Sugar Perception Study. (15) The NPD Group/National Eating Trends®; 2 years ending May 2017.

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