Delivering on the Clean Label Expectation

MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET EWA HUDSON GLOBAL HEAD OF HEATH AND WELLNESS RESEARCH

FOOD MATTERS LIVE NOVEMBER 2016

GLOBAL DIGESTIVE HEALTH FOCUS: UK FUTURE OF DIGESTIVE HEALTH

MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 3 Digestion - the 3rd largest health trend within the £476 bn HW industry Global Retail Sales (£ billion) 2016

General Wellbeing £248 bn Bone and Joint Health £10 bn

Weight Management £67 bn Cardiovascular Health £5 bn

Digestive Health £44 bn Vision Health £4 bn

Energy Boosting £24 bn Brain Health and Memory £3 bn

Free From £21 bn Immune Support £2.5 bn

Oral/Respiratory Health £13 bn Urinary Tract Health £0.5 bn

Endurance £13 bn Beauty from Within £0.1 bn

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 4 Digestive health food and drinks equally important across key regions

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 5 Probiotics and fibre key in digestion-positioned packaged food

Global digestive health by categories 2011-2021 60 Others FF Bottled Water 50 Milk Juice 40 High Fibre Noodles FF Bread 30 High Fibre Pasta FF Milk Formula 20 High Fibre Sweet Biscuits NH Rice 10 Sour Milk Drinks High Fibre Breakfast Cereals £ billion, fixed 2016 exchange rates exchange 2016 fixed billion, £ Probiotic Yoghurt 0 High Fibre Bread 2011 2016 2021

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 6 Digestive health fragmented, an opportunity to establish or re-establish brand’s health credentials

Digestive health by leading brands, World

2015

0 10 20 30 40 £ billion

Yakult (Yakult Honsha Co) Activia (Danone, Groupe) Chobani (Chobani LLC) Cheerios (General Mills Inc) Quaker Oatmeal (PepsiCo Inc) Mengniu (China Mengniu Dairy Co) Yili (Inner Mongolia Yili Industrial Group Co) Nature's Own (Flowers Foods Inc) Lieken Urkorn (Agrofert as) Bimbo (Grupo Bimbo ) Quaker (PepsiCo Inc) Oroweat (Grupo Bimbo ) Nido (Nestlé SA) New Yakult (Yakult Honsha Co) Bio Danone (Danone, Groupe) Almarai (Almarai Co) Barilla (Barilla Holding SpA) Kellogg's Mini Wheats (Kellogg Co Joie (Yakult Honsha Co) Stonyfield Farm (Danone, Groupe)

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 8 Western Europe - the setback of probiotic claims in food to bring market opportunities for supplements Western Europe – Retail Sales of Probiotics by Type 2002-2021 4

Consumption gap between probiotic

2 yoghurt and supplements narrowing £ billion £ Probiotic supplements to outpace sour milk drinks 1

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Probiotic Supplements Probiotic Yoghurt Sour Milk Products

© Euromonitor International 4 billion US$ retail value of probiotics supplements in the world 2015 11% Retail value up from 2014 9% Retail value growth expected in 2016 38% Expected growth from 2016 to 2021 MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 10 Probiotic supplements to outpace all others throughout year 2021

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 11 £10.5 billion worth of digestive remedies sales highlights the need for improved preventative approach Digestive Remedies by Regions 2016 3,500

3,000 IBS Treatments 2,500

Motion Sickness Remedies 2,000 Paediatric Digestive 1,500 Remedies £ million £ Diarrhoeal Remedies 1,000 Laxatives 500 Indigestion and Heartburn 0 Remedies North Asia Western Latin Eastern America Pacific Europe America Europe

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 12 Diseases of digestive system cause 49 deaths per 100 k people in the UK

Death by Diseases of the Digestive System (per 100,000 inhabitants) 90 80 70 60 50 40 30 20 10

USA

Italy

Chile

India

Spain

Japan

Israel

China

Egypt

Brazil

Russia

France

Greece

Poland

Mexico

Turkey

Ireland

Austria

Canada

Taiwan

Finland

Sweden

Norway

Ukraine

Belgium

Slovakia

Vietnam

Bulgaria

Portugal

Hungary

Morocco

Malaysia

Thailand

Romania

Australia

Germany

Denmark

Colombia

Indonesia

Argentina

Singapore

Venezuela

Philippines

Switzerland

SouthAfrica

SouthKorea

Netherlands

Saudi Arabia

NewZealand

Czech Republic

UnitedKingdom HongKong, China 2015

MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 14 Weetabix the largest digestive health brand in the UK

Leading digestive health brands in the UK (% share), 2015

Weetabix (Bright Food (Group) Co)

Oatso Simple (PepsiCo Inc)

Warburtons (Warburtons Ltd)

Kingsmill (Associated British Foods Plc)

Hovis (Premier Foods Plc) 10g of fibre per 100g Shreddies (Cereal Partners Worldwide SA)

Kellogg's All Bran (Kellogg Co)

Alpen (Bright Food (Group) Co Ltd)

Dorset Cereals (Associated British Foods Plc) © Euromonitor International Others MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 15 Not just fibre&wholegrain, but also locally produced and in a responsible way with less fertilizer

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 16 Post Brexit digestive health? EU key but China the land of opportunity

Digestive health 2016 Digestive health 2021 9000 8000 7000

6000

5000

4000 £ million £ 3000 2000 1000 0 India China US EU UK India China US EU UK

MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 18 Food and mental disorders on the rise, as well as allergies, skin conditions, arthritis, autism, gut – the second brain

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 20 At £21 billion globally, the free from movement grows from strength to strength; improving digestion at its heart

Free from 2016 Free from 2021 9000 8000 7000

6000 5000 4000 £ million £ 3000 2000 1000 0 India China US EU UK India China US EU UK

Consumers look beyond traditional digestive approach

Local Sourcing Artificial Ingredient Steroids s

Pesticides

MSG

Safety

rBST Southampton

Artificials Study

Artificial Artificial Enzymes

GMOs Aspartame HFCS

Euromonitor Clean Label Types All Natural No Artificial Additives No Artificial Colours No Artificial Preservatives No Artificial Flavours No Artificial Sweeteners GMO Free

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 23 UK the second largest in the global £107 billion clean label movement

Top 10 clean label markets 2015 2015-2020 % Growth

45 30 40 25 35

£ billion £ 30 20 25 15 20 15 10 10 5 5 0 0

© Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 24 Which claim is most important from the consumer perspective?

No artificial colours, flavours No artificial colours Made with real fruit, no artificial colours, No added sugar, Zero added preservatives and preservatives or flavours preservatives or sweeteners no additives

Nothing artificial, No artificial preservatives, no added Water, lime cucumber, BC No artificial colours 100% pure & raw no added refined sugar MSG, free from artificial colours …and that’s it or preservatives

Cold pressed (never heat) 100% natural ingredients – yes! Say no to… Added sugar Added sweeteners Added preservatives Added water No artificial colours, flavours or preservatives Add taste, nothing else No added MSG 100% natural © Euromonitor International Vegetarian, vegan and coeliac friendly ingredients, skin & collagen Gluten and lactose free MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 25 UK’s £13.3 billion clean label driven by concerns around artificial colours

Clean label by leading categories, UK

2015

0 5,000 10,000 15,000 20,000 25,000 30,000 £ million

No Artificial Colours No Artificial Flavours No Artificial Preservatives All Natural No Monosodium Glutamate No Artificial Sweeteners GMO Free No Artificial Additives BPA Free

Ewa Hudson Global Head of Health and Wellness, Nutrition and Ethical Labels Research [email protected] @ewa_hudson

MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 28 Ethical labels research ENVIRONMENT/ ANIMAL PEOPLE SUSTAINABILITY WELFARE

Clean Label: Sustainable Trade and Farming: Free Range •All Natural •Fairtrade •No Artificial Additives •UTZ Certified •Other •No Artificial Colours Marine Sustainability •No Artificial Flavours Responsible Forestry: •No Artificial Preservatives •No Artificial Sweeteners •Rainforest Alliance Bird/Insects Friendly •No Monosodium Glutamate •FSC •GMO Free •Other •BPA Free Sustainable Palm Oil System Grass fed/pasture raised •RSPO/ISPO/MSPO Origin: •Other •Locally Sourced Prominent Vegetarian/Vegan Recycling Label: Religious Labels: •Widely recycled •Halal •Can be recycled •Kosher •Terracycle •From Sustainable/Renewable Charity/Sponsorship Sources •Other © Euromonitor International Carbon Footprint/No Air Miles Food MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 29 Ethical labels methodology

BRAND SALES (RETAIL VALUE) OF PACKAGED FOOD, Allocation of brands to categories based on recorded label SOFT DRINKS AND HOT DRINKS EXCLUDED: PRIVATE LABEL, OTHERS 2015: SUM OF BRANDS

CHECK PACKAGING WITH AT LEAST FOR 38 ETHICAL LABELS Scan of CSR reports of ONE ETHICAL LABEL leading players for commitments that directly affect our forecasts

Use of packaged food, soft drinks FORECAST MODEL: and hot drinks 2015-2020 growth 2015 VALUE OF ETHICAL LABELS as a base line for forecast growth + PK, SD, HD BASE LINE Application of commitments from CSR reports to overwrite + CSR COMMITMENTS the base line growth © Euromonitor International MARKET INSIGHT AND TRENDS FOR GUT HEALTH INGREDIENTS SHAPING THE DIGESTIVE HEALTH MARKET, FOOD MATTERS LIVE 2016 30 Clean label defined by packaging claims

Lacking a formal definition, Passport: Ethical Label bases its definition in the various claims found on product packaging that stress a shift away from complex artificial ingredients, toward familiar, natural alternatives. . GMO free/Non-GMO: GMO (genetically modified) foods involve introducing foreign genetic material into an organism artificially, usually to – increase yield, increase resistance to disease, extend shelf life or improve food properties (texture, flavour, nutrient value). This category quantifies sales of products under our coverage with a GMO-Free/Non-GMO claim. . All Natural/100% Natural: These terms refer to the natural properties of the product. Both All Natural and 100% Natural are to be recognised as the same ethical label. This includes references to 'all natural anything'. . Artificial Additives: This category aggregates sales of products with a claim "no artificial additives” and “free from artificial additives“ on product packaging. . Artificial Flavourings: This category aggregates sales of products with a claim "no artificial flavours/flavourings” and “free from artificial flavours/flavourings” on product packaging. . Artificial Colours: This includes all products with a claim "no/free from artificial colours". Several artificial colours have been banned by food standards authorities after being linked to an increased number of cases of attention deficit hyperactivity disorder (ADHD) and are thus avoided by certain consumers. . Artificial Sweeteners: This category captures aggregated sales of all products with the claim "no/free from artificial sweeteners“ on product packaging. . Artificial Preservatives: This includes all products with a claim "no/free from artificial preservatives and products with a claim "no/free from parabens". Parabens are a form of artificial preservative and when present in food usually come in the form of E numbers. . BPA Free: All products with a claim referring to "BPA free". BPA (bisphenol A) is an industrial chemical that is used to make certain plastics and resins. BPA is often used in containers that store food and beverages, such as water bottles. © Euromonitor International