Food Insider Journal Clean Label Strategy & Formulation Brought to You By: Natural Products INSIDER Sweeteners Balancing Label, Taste Concerns

Food Insider Journal Clean Label Strategy & Formulation Brought to you by: Natural Products INSIDER Sweeteners Balancing Label, Taste Concerns

Vol.1 No.2 ■ April 2017 ■ US$20 foodinsiderjournal.com CONTENTS foodinsiderjournal.com April 2017

3 5 19 Viewpoint: Sweeteners: Clean Label Sweet Success Balancing Label, Sweeteners Raise Taste Concerns the Bar in Beverages

Innovation in Action 28 32 Reed’s Inc.: Lotus Botanical Elixirs: Dosing the World Naturally Crafted with Ginger to Drink Life In

Food Insider Journal Clean Label Strategy & Formulation Brought to you by: Natural Products INSIDER

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2 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 VIEWPOINT

Sweet Success

early two-thirds of Americans are limiting or avoiding added sugars, and a quarter point to sugar as the most likely calorie source responsible for weight gain, according to the newest data from the International Food If you are N Information Council (IFIC).This heightened attention to sugar intake— one of those coupled with consumer demand for ingredients that are natural, sustainable and healthful—is forcing food and beverage companies to their rethink ingredient manufacturers selection and marketing messages, especially in key categories considered looking to clean indulgent or inherently caloric. up labels and If you are one of those manufacturers looking to clean up labels and reduce reduce calories calories and sugars, it’s critical to work with your ingredient supplier to identify and sugars, the appropriate natural sweeteners to help balance label and taste concerns. it’s critical to This issue takes a deep dive into the carbonated soft drink (CSD) sector, which has seen sales fizzle in recent years due to consumer concern over added work with your calories. To combat this, many companies are rolling out CSDs with natural ingredient sweetener alternatives including stevia, monk fruit, stevia blends and cane supplier to sugar. In particular, the craft and natural soda space is seeing an uptick in sales identify the thanks to the clean label movement. What’s more, craft and natural soft drinks appropriate also provide new flavor experiences, including blends of fruits, spices and herbs, natural while hitting naturally sweetened and premium ingredient trends. The Innovation in Action case study on page 28 examines how craft soda sweeteners to market leader Reed’s Inc. seized on the growing popularity of the Moscow Mule help balance cocktail to bring a low-calorie version of its best-selling ginger brew to market. label and taste By replacing raw sugar cane with stevia rebaudiana leaf extract, Reed’s Light concerns. 55 Calories Extra Ginger Brew achieved a 60 percent reduction in calories per serving without compromising taste. Visit foodinsiderjournal.com for more infographics, columns, videos and presentations that complement this issue. As always, please feel free to drop me a line with any suggestions on future topics.

Cheers,

Judie Bizzozero Editor [email protected] @judiebizz

3 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Enough sweet talk.

Taste the advantage of ViaTech ® stevia sweetener.

Let’s cut to the chase: ViaTech® goes further in reducing sugar – while controlling off-notes. The ViaTech® portfolio uses proprietary technology that makes it easy to develop a great-tasting stevia-sweetened food or beverage, allowing you to get to market sooner. Enough said.

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by Judie Bizzozero

hifting consumer demands across the globe In fact, obesity was a key focal point when drafting the 2015 Dietary Guidelines for have led to immense innovation in the food and Americans, which recommends consumers beverage space. The current trends are focused consume less than 10 percent of daily calories on health and wellness, and a desire for products from added sugars—a much smaller amount S compared to similar guidelines released in 2010. formulated with ingredients consumers can pronounce, The American Heart Association recommends as well as products with shortened ingredient lists. limiting intake of added sugar to six teaspoons for women and nine teaspoons for men; however, most Americans consume between 22 and 30 Consumption According to the 2016 Food & Health Survey from the International Food Information Council teaspoons of added sugar each day. and opinions Major sources of added sugars include regarding sugars (IFIC) Foundation, most Americans think about the regular soft drinks; juices; confectionery; dairy have changed healthfulness of the foods and beverages they over the past consume. Consumption and opinions regarding products such as milk-based drinks, yogurts and year, with sugars also have changed over the past year, ice creams; baked goods; desserts; breakfast with 61 percent of Americans limiting or avoiding cereals; and bars. While products with label added sugars and 25 percent pointing claims such as “no sugar added” or “100 percent to sugar as the most likely calorie fruit” seem like healthier choices in a consumer’s source responsible for weight gain. mind, that’s not always the case. Sugar content in foods and beverages has Innova Market Insights called out “sweetener been a politicized issue because of its association balance” as a top trend in 2017, noting interest in % with several chronic illnesses, chief of which sugar reduction has combined with the ongoing 61 include obesity, diabetes, cancer and heart emphasis on clean label. In terms of new product disease. Due to the global obesity epidemic, development, industry faces the challenge of of Americans nearly all forms of sweeteners are coming under balancing public demand to reduce added sugars limiting or avoiding intense scrutiny from healthcare professionals, and create indulgent experiences, while at the added sugars. lawmakers and consumer advocacy groups. same time delivering clean label products.

5 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 The good news is the food and beverage industry is meeting this challenge head-on. Over the past few years, efforts have been stepped up to remove sucrose and high fructose corn syrup (HFCS) from products and replace them with alternative sweetener ingredients that consumers consider natural or healthy. While some have a lower glycemic index compared to sucrose, the number of calories the substitute provides is usually similar, meaning consumers’ perceived health benefit and reality do not always align, per a December 2016 Passport report from Euromonitor International. This disconnect between consumer perception and nutritional benefit was a critical factor behind FDA’s 2016 sweeping overhaul of the Nutrition Facts panel on packaged foods that included modifying the list of required nutrients that must be declared on the label, and an updated design to highlight “calories” and “servings” to help consumers make informed food choices. “Sweeteners are a critical ingredient that consumers want to better understand,” said Shawn Kohlmeier, product line manager - Food Ingredients, Briess Malt & Ingredients Co. “This is one of the driving forces behind the ‘Added Sugars’ component of the upcoming FDA label changes. Consumers will want to know what sugars come from natural, nutritious whole foods and what sugars are added solely for flavor and/or sweetness.” Most food manufacturers will be required to use the new label by July 26, 2018; however, manufacturers with less than $10 million in annual food sales will have an additional year to comply with the new rules. Foods imported to the United States also will need to meet the final requirements. The attention to added sugar intake on packaging, and consumers’ shift away from sugar or artificial sweeteners, provides food and beverage manufacturers the opportunity to reformulate products and increase use of natural sweeteners.

Consumers Sweet on Clean Label Today’s consumers are demanding more food and beverage options made with recognizable ingredients. What’s more, they want those products to taste good and provide a healthy dose of nutrition. Subsequently, manufacturers must adjust to meet these needs.

2016 sweeping overhaul of the Nutrition Facts panel on packaged foods included modifying the list of required nutrients that must be declared on the label and an updated design to highlight “calories” and “servings” to help consumers make informed food choices.

6 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 The American According to Euromonitor International, the number of Heart Association companies committing to sugar reduction is growing at an unprecedented rate, leading consumer packaged goods recommends (CPG) companies to work with ingredient suppliers to find limiting intake of new alternatives to sweeten products while maintaining specific attributes such as taste, texture and mouthfeel. added sugar to Consumer perception of what is “natural” is one of the main drivers causing traditional sweeteners to struggle in the marketplace. Data from Euromonitor found global sucrose consumption recorded a compound annual growth rate (CAGR) of 2 percent over 2010-2015, but in Western Europe consumption posted a -0.3 percent CAGR, which is expected to be replicated over 2015-2020. HFCS had a global CAGR of zero percent over the historic period, likely due to concerns over effects on health and links to obesity. If consumer perception and consumption patterns continue in this manner, there will be significant growth opportunities for natural sweeteners that fit the better-for- you mold. teaspoons Need proof? Honey and fructose posted global CAGRs of 4 percent and 3 percent, respectively, between 2010 for women and 2015, from strong bases, noted Euromonitor. Sales of 6 high-intensity sweeteners also reflect the rise of natural, as stevia’s rise over 2010-2015 came at the same time as the artificial sweeteners aspartame and cyclamate declined, posting global CAGRs of -0.1 percent and -0.4 percent, respectively. Food manufacturers such as Campbell’s, General Mills, Kellogg’s, Kraft Heinz, Goya Foods, Mars, Mondelez International, Nestlé and Unilever have been working to change consumer perception of packaged foods by delivering innovative products made with healthy, functional and clean label ingredients. In fact, data from Innova Market Insights found 25 percent of new products in the United teaspoons States had clean label positioning in 2015, up from 17 percent in 2014. Non-GMO (genetically modified organism), for men gluten-free, organic and whole food nutrition labeling— 9 along with the absence of natural colors, sweeteners and preservatives—are leading the clean label movement. however, most Americans According to data from Mintel and Leatherhead Research, the global market for high-intensity sweeteners for use in consume between food and beverage manufacturing will reach $1.4 billion in 2017. However, high-intensity sweeteners have long had a problem with consumer perception as being “artificial,” so it’s no surprise to see clean label plant-based high- 22 and 30 intensity sweeteners such as stevia and monk fruit gaining teaspoons of added sugar momentum in the market. In fact, Mintel predicts the market for stevia-based sweeteners for use in food and beverages each day. will reach $275 million by 2017.

7 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 A Taxing Situation The move to tax sugary foods and beverages has been in the spotlight for years in the United States as health professionals and advocacy groups contend it would help reduce rates of non- communicable diseases (NCDs) such as obesity and diabetes and their associated healthcare costs. However, manufacturers and trade groups such as the American Beverage Association and the Grocery Manufacturers Association argue the opposite, calling into question studies that suggest sugar-sweetened foods and beverages increase Excess Sugar the likelihood of chronic diseases. Furthermore, they dispel studies and surveys that suggest taxing such products will change consumers’ Associated purchasing behaviors. In July 2010, the state of Washington enacted With Chronic a retail sales tax on nearly 3,000 candy and gum items made with sugar, honey, or other natural Disease Risk or artificial sweeteners combined with chocolate, fruits, nuts, or other ingredients or flavorings and formed into bars, drops or pieces. The tax, however, was repealed just four months later by voters. The National Confectioners Association (NCA) said the repeal sent a clear message HYPERTENSION against arbitrary food and beverage taxes to state governments throughout the country. One of the most contentiously debated regulations began in 2012 when the New York City CANCER Board of Health passed a controversial measure banning the sale of soft drinks and sweetened drinks containing more than 25 calories per 8-ounce serving sold in areas regulated by the health department. While the ban did not include OBESITY packaged drinks sold at retail, CPG manufacturers took it as a sign of things to come from an overreaching government. A lawsuit filed by the beverage and restaurant industries argued the HEART DISEASE rule—the brainchild of former mayor Michael Bloomberg—would have imposed undue burdens and was arbitrary and capricious because it excluded several businesses. After numerous INSULIN appeals, the New York State Court of Appeals in RESISTANCE July 2014 killed the “Portion Cap” rule, effectively ending the issue. However, the government’s role in promoting nutrition through legislation didn’t abate. In November 2014, voters in Berkeley, TYPE 2 California, approved a 1-cent-per-ounce tax on DIABETES the distribution of most sugary drinks, becoming the first U.S. city to do so. In 2016, Boulder, Colorado, added a 2-cent-per-ounce excise tax on distributors of sweetened drinks such as

8 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 carbonated soft drinks (CSDs), sports drinks and sweetened evidence suggesting pricing policies can influence purchasing iced tea. San Francisco, Oakland and Albany, California, also patterns and have an impact on dietary behavior. A study adopted a 1-cent-per-ounce excise tax. published in January 2016 in BMJ found sales of the taxed On Jan. 1, 2017, Philadelphia began a 1.5-cent-per-ounce beverages in Mexico fell by an average of 6 percent in 2014, tax to the cost of most sugary beverages except for infant and declined by as much as 12 percent in December 2014. baby formula; drinks containing more than 50 percent milk, In addition, purchases of water and non-taxed beverages fresh fruit or vegetables; and unsweetened drinks. Beginning increased by about 4 percent on average. in July 2017, Cook County residents in Illinois will pay a “Our study shows that taxing sugar-sweetened beverages 1-cent-per-ounce tax on sugary and artificially sweetened has a legitimate place as part of a toolkit for the prevention beverages. In May 2017, voters in Santa Fe, New Mexico, of obesity. Taxation alone will not solve the problem, but can will decide the fate of a proposed 2-cent-per-ounce tax on contribute to its prevention and control,” said Juan Rivera, sugar-sweetened beverages. Ph.D., co-author of the study and director of the Mexican Globally, the picture is similar. According to the World Health Research Center in Nutrition at the National Institute of Organization (WHO), Finland has taxed sweets and drinks on Public Health. and off since 1926. In 2011, Hungary introduced a 24-cent- The soft drinks manufacturers association of Mexico per-liter tax on a range of foods and beverages with more than questioned the researchers’ conclusions, arguing that the 0.5 percent sugar content, while France adopted a tax in 2012 measure was regressive in that it hit poor households hardest, on sugar- and artificially-sweetened drinks, including fruit but failed to make a significant reduction in Mexicans’ average beverages and flavored waters. caloric intake. In January 2014, Mexico implemented a 6-cent-per-ounce “Unfortunately, the soda industry in Mexico is winning the tax on sugar-sweetened beverages to help curb rising rates battle for public opinion, saying that the tax doesn’t work of obesity and diabetes. The 2015 WHO report “Using Price and that it is regressive,” argued Rivera, noting the impact Policies to Promote Healthier Diets” noted a growing body of on the poor has to be measured in terms of improving their

Global Obesity Rates Worldwide obesity has more than doubled since 1980.

In 2014, more than 1.9 billion adults, 18 years and older, were overweight. Of these, over 600 million were obese.

39% of adults aged 18 years and over were overweight in 2014, and 13% were obese.

41 million Most of the world’s population live in children under the countries where overweight and obesity age of 5 were overweight kills more people than underweight. or obese in 2014.

Source: World Health Organization

9 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 health. “Our study found that the reduction in soda purchases was greater among the poor (an average 9 percent reduction), so we expect greater health gains among poor people,” Rivera said. The money raised by Mexico’s soda tax is being reinvested in obesity prevention such as installing drinking water fountains in low-income schools. A national survey to gauge whether the soda tax is helping to reduce obesity or type 2 diabetes is planned between 2016 and 2018. However, Rivera said ”the effects on weight are probably going to show in five years or more. We estimate that about 400,000 cases of diabetes could be averted by 2050 if Mexico keeps the soda tax.” In 2015, other countries in the region followed Mexico’s lead. Barbados levied a 10 percent tax on sugar-sweetened beverages, while the Dominican Republic slapped a 10 percent tax on sugary drinks and chewing gum. Chile tacked on an 18 percent value added tax (VAT) on beverages containing more than 6.25 g of sugar per 100 ml. In the United Kingdom, a two-tiered tax on sugary soft drinks is set to take effect April 2018. Sugar-sweetened beverages with more than 5 g of sugar per 100 ml will be taxed at one rate and beverages with more than 8 g per 100 ml will pay a higher tax. Pure fruit juices and milk-based drinks will be exempt due to concerns that children, particularly girls, are not getting adequate intakes of calcium. The Office for Budget Responsibility anticipates the tax will raise approximately US$313 million in the first year. In Ireland, a similar tax will take effect around the same time.

Industry Taking Action In May 2010, with then first lady Michelle Obama, the Healthy Weight Commitment Foundation’s food and beverage members pledged to reduce calories sold by 1.5 trillion by the end of 2015. As an interim goal, the companies were to reduce calories by 1 trillion by the end of 2012; however, they exceeded that goal and slashed 6.4 trillion calories from the U.S. food supply that year. The reduction came three years ahead of schedule and by more than 400 percent over the original pledge. Companies participating in the calorie- reduction pledge included Bumble Bee Foods LLC, Campbell Soup Co., ConAgra Foods (included Ralston Foods), General Mills Inc., Hillshire Brands (previously Sara Lee Corp.),

10 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Consumers will want to know what sugars come from natural, nutritious whole foods and what sugars are added solely for flavor and/or sweetness.

— Shawn Kohlmeier, product line manager - Food Ingredients, Briess Malt & Ingredients Co.

Kellogg Co., Kraft Foods Group/Mondelez, Mars Inc., McCormick & Co. Inc., Nestlé USA, PepsiCo Inc., Post Foods, The Coca-Cola Co., The Hershey Co., The J.M. Smucker Co. and Unilever. Today, more than ever, companies small and large across the globe are committed to creating healthier products and promoting improved lifestyles. New data from The Consumer Goods Forum (CGF) found more than 180,000 CPGs were reformulated in 2016, while more than 30,000 communities worldwide have been involved in industry-led programs that promote healthier diets and lifestyles. The data is part of the 4th annual CGF Health & Wellness Progress Report, developed in conjunction with Deloitte, which details how its members are working together to empower consumers and employees around the world to live healthier lives. Results from the survey found food and beverage companies targeted the removal of sodium and sugar in their reformulation In September 2014, efforts, while working to add whole grains and vitamins. The number of companies reporting in 2016 on how they are America’s Big 3 soda implementing the CGF’s Health & Wellness Resolutions and Commitments increased more than 30 percent compared to makers—The Coca- 2015. The Resolutions and Commitments, approved by the CGF’s board of directors in 2011 and 2014, respectively, look Cola Co., Dr Pepper at specific areas where retailers and manufacturers can work together to drive positive change and empower people to make Snapple Group and informed choices for healthy diets and lifestyles. While results PepsiCo—pledged a overall show positive progress, the speed of implementation of these specific targets has proven a challenge. “We recognize that CGF members are making visible efforts % to improve the health and wellness of people around the world,” said Paul Bulcke, member of the board and chairman 20 designate, Nestlé S.A., and Dick Boer, Ahold Delhaize president and CEO, and board co-sponsors for the CGF’s Health & reduction in Wellness Pillar. “That said, this is an ongoing journey and we strongly encourage all companies to join the collective effort.” beverage calories In September 2014, America’s Big 3 soda makers—The Coca-Cola Co., Dr Pepper Snapple Group and PepsiCo— consumed per person pledged a 20-percent reduction in beverage calories consumed nationally by 2025. per person nationally by 2025 by increasing consumer education and aggressive marketing of smaller portion sizes, water, and other no- or lower-calorie beverages.

11 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 stevia

monk fruit agave

erythritol

According to SPINS data, stevia and stevia blends in the alternative sweetened soft drink sector accounted for a growth in sales since 2015 across all retail % channels; some successful combinations include 16 stevia plus agave, erythritol or monk fruit.

Recently, organic yogurt maker Stonyfield announced a benefits of yogurt like calcium, protein and added vitamin D. comprehensive plan to reduce added sugar across its portfolio. We’re accomplishing reductions across the portfolio through The company spent two years utilizing its proprietary library of a committed team who’s finding a better way to deliver all of culture strains to achieve a formula that reduces tartness and the nutrition and taste benefits of Stonyfield yogurts with less balances the sweetness of yogurt, allowing for sugar reduction sugar,” said Linda Lee, chief marketing officer. without sacrificing taste. The company is working to reduce Food giant Nestlé has been leading the charge to create sugar in all its yogurt offerings this year and already offers healthier products across its entire portfolio. By the end of plain, unsweetened options in its Stonyfield YoBaby, Stonyfield 2015, the company had reduced its added sugar content Greek and Stonyfield core lines. by 18,000 tons, or 4.1 percent, toward its objective of a 10 “The commitment to reducing sugar across the product percent reduction. “The challenge for us lies in consistently portfolio was born from Stonyfield’s mission to continually providing tastier and healthier solutions that meet consumer provide healthier food both for our consumers and the planet,” preferences,” the company said in a statement. said Nichole Cirillo, mission director, Stonyfield. “We are In 2015, together with Cereal Partners Worldwide (its joint achieving a lower amount of added sugar in all Stonyfield venture with General Mills), Nestlé continued to reformulate yogurt without compromising taste or organic standards recipes to achieve its objective to reduce the sugar and are working toward purchasing 25 percent content in breakfast cereals to 9 g per serving. less sugar as a company this year.” In February 2017, Nestlé announced plans By the end of this year, Stonyfield for a 10 percent reduction in the amount Smooth & Creamy varieties and of sugar in its confectionery products lowfat Smoothies will have at least sold in Ireland by 4Q18—a move 25 percent less sugar than previous that would slash 400 tons of sugar recipes. “Consumers want to limit the across numerous brands by replacing amount of added sugar in their diets, it with higher quantities of existing or without sacrificing taste and the great natural ingredients.

12 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Finding the ‘Sweet Spot’ Brands looking to stake a new claim to consumers’ purchases are turning to natural alternative sweeteners that carry consumer associations of health benefits, such as fewer calories, lower glycemic impact and clean label attributes. Examples of natural sweeteners increasingly being used include stevia and stevia blends, monk fruit, sugar alcohols, syrups, prebiotic fibers and honey. According to SPINS data, stevia and stevia blends in the alternative sweetened soft drink sector accounted for a 16 percent growth in sales since 2015 across all retail channels; some successful combinations include stevia plus agave, erythritol or monk fruit. Even stevia blends with cane sugar are emerging in the soft drink segment. Stevia is now being used by some leading players and brands, most notably Coca- Cola for Coca-Cola Life and Pepsi with Pepsi True. Monk fruit is generally recognized as safe (GRAS) by FDA for use as a flavor enhancer, sweetener ingredient in food, and as a tabletop sweetener. In the natural channel, monk fruit saw 50 percent growth in the sweeteners category and its presence expanded into alternatively sweetened sodas and a wide range of food and beverage categories—appearing in more than 20 food, beverage and dietary supplement categories tracked by SPINS. Examples include Chobani Simply 100, Bolthouse Farms Protein PLUS, Skinny Cow Creamy Iced Coffees Sheila Fitzgerald / Shutterstock.com and Zevia Zero Calorie Soda. Honey and syrups also are being used to add sweetness and functional attributes in a wide variety of foods and beverages, including bars, soft drinks, baked goods, cereals and granola, confections, dairy and more. Examples include syrups being derived from coconut, palm, maple, sorghum, agave, rice and tapioca. Other clean label ingredients used for sugar replacement and functionality include sugar alcohols such as xylitol and erythritol that have been clinically proven to promote dental health, and fiber ingredients such inulin and oligofructose that offer digestive health benefits. LunaseeStudios / Shutterstock.com

Honey and syrups also are being used to add sweetness and functional attributes in a wide variety of foods and beverages, including bars, soft drinks, baked goods, cereals and granola, confections, dairy and more. Examples include syrups being derived from:

COCONUT PALM MAPLE SORGHUM AGAVE RICE TAPIOCA

13 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Interestingly, recent Nielsen and Label Insight data found products containing low-glycemic clean label alternatives are growing across the store, as sales of these sweeteners grew 19 percent in 2016 over 2015, and 200 percent compared to four years ago. In fact, 56 percent of U.S. respondents strongly or somewhat agreed they are willing to pay more for foods and beverages free from undesirable ingredients. “Many definitions of clean label are being circulated throughout the industry. We are seeing consumers become more interested in learning about the quality and nutritional benefits of their food. To us, clean label means ingredients that consumers understand and recognize, with fewer ingredients, free from artificial additives,” said Veronica Cueva-Beach, vice president, Global Technology, Specialty Food Ingredients, Tate & Lyle. Data from Ingredion Inc.’s proprietary research MMR, Consumer Study, USA, April 2015, found 72 percent of U.S. consumers usually or always read front of package claims, while 64 percent read the ingredient list on the side or back of the package. What’s more, 73 percent of consumers find it important to recognize the ingredients used, and 67 percent find it important to have a short and simple ingredient list. %of U.S. consumers usually or always Afrouz Naeini, senior marketing manager - Sweetness 72 read front of package claims & Beverage, Ingredion, said clean label becomes more important to consumers when there is an expectation for % read the ingredient list on the side “freshness” and “wholesome,” such as in dairy products, or back of the package baby foods, snacks, nutrition bars and some beverages 64 and cereals. of consumers find it important to “We see CPG companies seeking out simple label % sweeteners like tapioca syrup as well as non-GMO 73 recognize the ingredients used sweeteners. Plant-based sweeteners like stevia are continuing growth in line with the interests of customers for % find it important to have a short and sugar reduction in anticipation of changes to the Nutrition 67 simple ingredient list Facts labels and addition of ‘Added Sugars,’” he said. Bob Hansen, technical services manager, Briess Malt & Ingredients Co., said convenience foods like bars, cereals and healthy beverages are being closely scrutinized for label- friendly sweeteners because consumers more frequently use these products to make it through the day as small meals or between-meal healthy snacks, and don’t realize they are consuming excess sugars with them. For this reason, finding natural solutions that provide sweetness without adding to the “added sugars” section of the new nutritional label is paramount. “Products that have a strong basis in the use of large amounts of sweeteners, such as cereals, bars and drinks that have been marketed as healthy but have in fact contained large amounts of refined sweeteners will have challenges in continuing to make nutrition-label-friendly products with the same consumer acceptance,” Hansen said.

14 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Baked goods, confectionery, snacks, breakfast cereals, dairy and other applications all have unique taste and functional benefits linked to sugar or other sweeteners. — Jim Carr, Ph.D., vice president - Applications and Technical Services, Tate & Lyle

Clean Label Challenges & Sweet Solutions Replacing sweetening ingredients is not a simple task. While many manufacturers are looking to clean up labels and reduce calories and sugars, they cannot sacrifice great taste to do so. “The extent of sugar reductions has been limited by the quality of sweetness or presence of aftertastes, such as bitterness, from high- intensity sweeteners,” said Wade Schmelzer, principal food scientist, Cargill. “With continued pressure to reduce sugar and calories in food and beverages, maximizing sweetness intensity without compromising quality has become the critical taste hurdle.” Cueva-Beach concurred, noting: “One challenge manufacturers face when formulating with natural high-potency sweeteners such as stevia is A popular stevia ingredient is the bitter aftertaste associated with some of these ingredients. A popular rebaudioside A [Reb A]; but as stevia ingredient is rebaudioside A [Reb A]; but as many as 83 percent of consumers are sensitive to rebaudioside A bitterness. Therefore, many % products formulated with rebaudioside A must be combined with other many as sweeteners that serve as masking agents.” 83 Pam Stauffer, global marketing programs manager, Cargill, said of consumers are sensitive to effective blending of sweetener ingredients, such as stevia and erythritol, rebaudioside A bitterness. can significantly improve the quality of sweetness, enhance sweet/sour balance and deliver a more robust flavor, which are all critical sensory characteristics for a successful product launch. Using stevia and erythritol together can result in an excellent-tasting beverage and even optimize formulation cost. Cargill has been actively working on sugar reduction with stevia for many years across multiple categories, including beverages, bakery, cereal and dairy products. The ViaTech® stevia portfolio has been designed to provide significant improvements in sweetness quality compared to traditional stevia leaf extracts, which enables deeper levels of sugar reduction and creates opportunities for its customers to develop new products or reformulate existing products with these upcoming label changes in mind. “Ongoing innovation through our stevia sweetener portfolio is helping Effective blending of food and beverage manufacturers achieve optimal sweetness and sweetener ingredients, such significant sugar reduction across categories, including beverages, bakery, cereal and dairy products,” Schmelzer said. as stevia and erythritol, can Baked goods, confectionery, snacks, breakfast cereals, dairy and other significantly improve the applications all have unique taste and functional benefits linked to sugar quality of sweetness, enhance or other sweeteners, noted Jim Carr, Ph.D., vice president - Applications sweet/sour balance and and Technical Services, Tate & Lyle. “For example, when manufacturers deliver a more robust flavor. are seeking to reduce calories and sugar in solid and semi-solid food

15 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 There has been a % 52 yearly CAGR in product launches with monk fruit extract in the last four years and a % 37 yearly average growth for food and beverage launches using stevia.

applications, the delivery of appropriate textural properties becomes extremely important,” he said. “In these cases, innovative solutions require the selection of specific clean label ingredients that provide not only desired sweetness, but also proper functional attributes such as browning, water activity, bulk solids and other performance properties, to deliver the appropriate textural and taste experiences.” Solid-type food applications also require the sweetener to make contact with taste receptors during consumption. Because only a slight dilution and textural change occurs during chewing in the mouth, higher sweetener levels are required to achieve a perceived sweetness level, Carr said. Solid foods, Taste is other than those surfaces coated with sweeteners, inherently will require the the biggest use of higher levels of sweeteners. Additional challenges are accompanied by challenge we higher use-level limitations for these products. Cost constraints add another level of formulation challenges, and attention still face when must be paid to balancing the choice of sweetening ingredients with the it comes to affordability for the application. “Synergistic combinations of clean label clean label sweeteners and complementary clean label ingredients can help deliver sweeteners. acceptable overall formulation cost and total cost of production when design to cost is a focus,” Carr said. — Laura Dembitzer, marketing director, One of the key tasks of product developers is finding clean label Imbibe sweeteners that can deliver both a higher level of sweetness and improved quality of sweetness, essentially allowing deeper sugar reductions. Stevia continues to resonate with consumers as a label-friendly sweetener. According to Cargill’s proprietary research, stevia leaf extract is seen as healthful and is an ingredient that will drive purchase interest on pack. Citing data from Innova, Cueva-Beach said there has been a 52 percent yearly CAGR in product launches with monk fruit extract in the last four years and a 37 percent yearly average growth for food and beverage launches using stevia. “Categories most likely to be formulated with monk fruit extract are sports nutrition supplements and meals, and sweetener packets and liquids,” she said.

16 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 “Taste is the biggest challenge we still face when it comes to clean label sweeteners,” said Laura Dembitzer, marketing director, Imbibe. “There’s been a lot of progress with stevia in the past few years, in that there are a lot of different varieties on the market and it has improved. But when you are comparing it to a traditional carbonated soft drink or sports drink, there is a definite taste profile in mind and you are working toward that benchmark.” To meet this demand, Imbibe offers SweetSense, an ingredient that “can be labeled as natural flavor to mask bitterness and amplify sweetness for ingredients like stevia,” she said. Mouthfeel remains yet another challenge, as does aftertaste. And, not to mention, cost. “A lot of brands want a natural Fruit extracts sweetener, and then balk when they see the price,” Dembitzer added. “But and natural the costs have started to drop as ingredients become more widespread.” distillates ADM’s range of sweeteners and sweetener solutions provides developers the tools to strike the right balance, noted Mark Rainey, vice president, global can provide food marketing. “This includes single-ingredient sweetener solutions and sweetness blends including stevia and monk fruit. Like stevia, monk fruit, for example, while also is an all-natural, clean label sweetener that’s yet another great solution satisfying the for natural or better-for-you food and beverages offering great taste with growing trend sugar-free, no-sugar added and reduced-sugar options. It can be used alone for real food or blended with other high-intensity sweeteners, flavor modifiers, natural masking agents and more,” Rainey said. “Fruit extracts and natural distillates ingredients. can provide sweetness while also satisfying the growing trend for real food — Mark Rainey, vice ingredients. These non-nutritive ingredients can add color, aroma, flavor president, global food and important taste aspects to foods lower in sweetness—especially when marketing, ADM combined synergistically with other ingredients.”

Market Forecast It’s apparent that clean label is a driving force behind the way that companies are thinking about new and existing products. This new attention to added sugar intake on packaging—as well as consumer demand for sweeteners that are natural, sustainable and healthful—provides brands the opportunity to increase use of alternative sweeteners when developing or reformulating products. The key is identifying go-to-market segments for naturally sweetened products and working with ingredient suppliers to achieve brand success.

17 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017

CATEGORY INSIGHT

Clean Label Sweeteners Raise the Bar in Beverages

by Melissa Kvidahl

hat comes to mind when you picture a natural ingredients are healthier than those made with artificial ingredients. Further, 34 percent clean label beverage? Perhaps it’s an hoped to see CSDs with added benefits on artisan brew made in small batches with the shelf. ingredients you might find in your own On the performance beverage side, consumers W are looking for holistic health benefits rather than home pantry. Maybe it’s an organic tea made with an the caffeine boost provided by first-generation eye to a more sustainable food chain. Or, maybe it’s a offerings. Mintel found nearly 90 percent of natural shot boosted with health benefits. But, likely, consumers agreed performance drinks can help them maintain a healthy lifestyle. In fact, three in what doesn’t come to mind is soda or an energy drink. five currently look to such beverages as a meal Carbonated soft drinks (CSDs) and energy replacement, up from just 20 percent of those drinks have both come under fire in recent who did so in 2012. years. Soda, one of the latest targets of “sin” What these two beverage categories have taxes in American cities and states, is public in common is they’re in a position to challenge Nearly of U.S. adults enemy No. 1 at the American Heart Association, expectations and deliver on better-for-you said carbonated where decreasing sugary drink consumption is a products that meet the clean label demands of % soft drinks primary goal. Performance drinks, too, face a bad consumers. One place they’re already starting 60 made with reputation, as high doses of caffeine can lead to to do this is sweeteners, which, if you ask Laura natural health problems. Dembitzer, marketing director at Imbibe, is the ingredients are The good news is consumers aren’t “No. 1 place to look.” healthier than discounting their favorite beverages. They’re just Dembitzer pointed out “all natural” claims those made asking more of them. don’t cut it anymore. Not with consumers, who with artificial One recent Mintel study found nearly are highly educated on such matters and want ingredients. 60 percent of U.S. adults said CSDs made with more information, and not with brands and

19 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 manufacturers, some of which have faced legal action for using the term and have since had to pull the claim. “Now, to get the clean label positioning, brands need to state the absence of a negative rather than the presence of a positive,” Dembitzer said. “So rather than saying ‘all natural,’ they’ll say ‘no artificial sweeteners.’ And that’s a really important claim.” When it comes to CSDs, much of the movement toward clean label sweeteners is in the craft and natural soda category. And it’s a category poised for growth, as a majority of Americans aren’t currently purchasing such offerings—but nearly half are interested in trying them. “The definition of health is changing from desiring low/no-fat and -sugar, to ‘real’ or unadulterated ingredients,” said Elizabeth Sisel, Mintel’s beverage analyst, in a statement addressing craft offerings. “Craft and natural sodas also provide new flavor experiences, including blends of fruits, spices and herbs, while hitting naturally sweetened and premium ingredient trends.” Dollar sales of shelf- Sales data from SPINS supports these findings. Dollar sales of shelf-stable stable sodas and sodas and carbonated beverages sweetened with fruit juice soared nearly 20 carbonated beverages percent between February 2016 and February 2017. It’s agave-sweetened sweetened with options, though, that steal the show with 72.4 percent growth between 2016 and 2017, reaching a market value of nearly $8 million. Keeping in line fruit juice with this trend, sales of sodas sweetened with natural and artificial blends soared nearly plummeted 33 percent. Sodas sweetened with stevia, which still suffers from a reputation of having an undesirable aftertaste despite strides in ingredient formulation, also fell about 76 percent in sales. That said, consumers aren’t % discounting this ingredient entirely, as sales of sodas sweetened with stevia alongside another sweetener jumped 12.4 percent. Interestingly, clean label sweeteners aren’t yet making the same waves 20between February 2016 in the sports drink aisle. Though the category overall grew nearly 25 and February 2017. percent between 2011 and 2016 to reach nearly $8 billion, per Euromonitor International, alternative sweeteners aren’t yet widely popular. According to SPINS, sales of performance beverages sweetened with agave shrunk

It’s agave-sweetened options, though, that steal the show with % 72.4 growth between 2016 and 2017, reaching a market value

of nearly $8 million.

20 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 On the other hand, sugar is also seen as more desirable over artificial ingredients like aspartame for a large portion of the public and especially the clean label consumer.

— Chris Reed, CEO and founder, Reed’s Inc.

36 percent between 2016 and 2017, as did sales of those levels more quickly than honey or agave, which are both lower sweetened with stevia (nearly 25 percent) and a natural and on the glycemic index,” Dembitzer said. “There’s also the artificial blend (down 46 percent). impression that sugar is more processed. It’s a white, powdery Indeed, a 2015 report from Packaged Facts found while substance. It didn’t come from the earth, whereas honey and 36 percent of all U.S. adults consume sports drinks, there is agave, for example, are perceived as more natural. Sugar is a major gap in the market as far as natural is concerned. An bad for your teeth. These are the things people think of.” opportunity exists, then, for new products with natural and On the other hand, sugar is also seen as more desirable organic ingredients, as well as both caloric (cane sugar and over artificial ingredients like aspartame for a large portion of agave) and non-caloric (stevia, monk fruit, etc.) sweeteners. the public and especially the clean label consumer, said Chris Only recently are sustainability and Fair Trade claims reaching Reed, CEO and founder, Reed’s Inc. “Sugar is vilified but not to the sports drink aisle. And, going forward, Packaged Facts the degree we’re seeing with aspartame,” he added. “That’s suspects a focus on sugar in the years ahead will continue to considered really detrimental to health. So, many people, put sweeteners at the forefront of differentiation. especially Lifestyles of Health and Sustainability (LOHAS) consumers, will choose a sugar-sweetened beverage over an What’s Up with Sugar? artificially sweetened diet beverage.” According to SPINS, sales of soda sweetened with sugar According to Mintel data released June 2016, cane sugar remain flat. As it turns out, consumers aren’t rejecting sugar was consumers’ ideal carbonated drink sweetener, topping across the board in their beverages, despite media and health both honey and stevia in popularity. Driving its popularity is the industry pressure to the contrary. iGeneration, with 50 percent of respondents in that age group On the one hand, sugar undeniably suffers from some preferring cane sugar over other sweeteners. To compare, negative publicity. “Sugar can cause a peak in blood sugar 35 percent of Millennials and Gen Xers chose the ingredient

Sodas sweetened with stevia, which still suffers from a reputation of having an undesirable aftertaste despite strides in ingredient formulation, also fell about 76% in sales.

21 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 (Millennials chose honey at an equal clip), and just 30 percent of Baby Boomers chose it. That said, it’s possible that consumers’ love affair with sugar might be one that’s easily swayed. Across the pond, U.K. shoppers are preparing for a tax on sugary soft drinks and sport drinks, set to go into effect April 2018. Mintel research reveals one in three sports drinkers are preparing to cut back on the amount of sugary varieties they consume, whereas one in five are preparing to stop drinking such varieties altogether. And that’s saying a lot, since more than 70 percent of energy drinkers currently pass up low-, no- or reduced-sugar options in favor of the sweet stuff. Further, half of respondents said they would abandon their sports drinks altogether in favor of another category like juice, smoothies or milk. Mintel’s take? Products with naturally derived ingredients are poised to grow in this time of flux. Whether that means appealing to the 37 percent of consumers who want to know an ingredient’s origin or the 30 percent who want plant-derived sweeteners, opportunities exist for brands that know what their consumer wants and choose a sweetener accordingly.

Sweet Success According to Dembitzer, there are two distinct consumer groups at play in the CSD and sports beverage markets. The first group is made up of consumers who want to reduce their sugar intake and are “happy to do so via artificial sweeteners,” she said. “This is still a large portion of consumers.” The other group is interested in clean label and natural sweeteners—and they’re even willing to sacrifice some taste to achieve their health goals. Large brands like Coca-Cola and Pepsi are arguably making an effort to appeal to both of these consumer groups with various offerings each featuring a different sweetener approach. In 2014, Coca-Cola launched Coca-Cola Life in the United States, a reduced-calorie soda that uses a blend of cane sugar and stevia leaf extract. This joined Coca-Cola (sweetened with high fructose corn syrup), Diet Coke (sweetened with aspartame), Coca-Cola Zero (sweetened with a blend of aspartame and acesulfame potassium, or Ace K) and other products. Similarly, PepsiCo added Pepsi True to its line of beverages in 2014. With 30 percent less sugar, Pepsi True is sweetened with sugar and stevia leaf extract.

More than Further, half of respondents % said they would 70 abandon their of energy drinkers sports drinks currently pass altogether up low-, no- or in favor of another reduced-sugar category like options in favor of juice, smoothies the sweet stuff. or milk.

22 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Fanta, a Coca-Cola brand launched in 1955, just debuted the biggest changes to the brand in its history. The transformation includes a new visual identity, a revolutionary asymmetric, spiral bottle, and a new recipe for Fanta Orange that contains one-third less sugar. At the heart of the brand’s transformation is a new visual identity, designed to reflect Fanta’s fruity, fun and vibrant nature. The new look will be supported by a multimillion-dollar integrated marketing campaign that puts social at its core and will feature out-of-home advertising, sampling and in-store promotion throughout the year. The new Fanta Orange Zero Sugar completes the brand’s fresh look and feel, with one-third less sugar compared to before. This builds on a 33 percent reduction in the sugar content from 2006, with the recipe now down to 4.6 g per 100 ml from 6.9 g sugar per 100 ml. “This year looks set to be the biggest in Fanta’s history, with a fresh new look inside and out. We’ve been working hard to reduce the sugar without compromising on the taste, and we’re delighted to be launching this new look alongside a new recipe with one-third less sugar than before, which consumers have told us tastes better than ever,” said Aedamar Howlett, marketing director, Coca-Cola Great Britain. Though Mintel found only one in 10 consumers is concerned the natural version of their favorite soda brand wouldn’t taste the same, sales of Coca-Cola Life and Pepsi True are, by most accounts, not meeting expectations. At Coca-Cola, an effort to unify the brand is underway with the “One Brand” marketing strategy which, among other initiatives, repackaged all its offerings with similar graphics. Time will tell if this approach can persuade Coke consumers to try the stevia version. Still, while mainstream products like Coca-Cola are seeing some challenges here, artisan brands are experiencing explosive growth. Hansen’s Sodas and Blue Sky Sodas, owned by The Coca- Cola Co., were recently relaunched with new branding and packaging to highlight their craft status and capitalize on Cane sugar was consumers’ ideal market differentiators: both have a long history, having been carbonated drink sweetener, launched in the 1970s, and both are sweetened with cane topping both honey and stevia in sugar. Hansen’s new branding features a throwback logo and popularity. Driving its popularity is glass packaging, while Blue Sky’s new branding includes the the iGeneration, with tagline “Rooted in Real.” of respondents in Market leader Reed’s Inc., founded in 1989, finds success % by targeting a specific consumer somewhere in the middle of that age group Dembitzer’s spectrum that places aspartame users and clean 50 preferring cane label extremists on each end. sugar over other sweeteners.

23 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 “Our consumer is someone who does care about what drink clocking in at 120 calories per bottle, features just seven they’re putting in their body, but they’re not on a fanatical diet,” ingredients on its panel, including organic cane sugar. Reed said. A self-proclaimed early adopter, Reed bet on the fact “Consumers are starting to demand more from their sports that his personal inclinations toward healthy living would reach drinks than just functional rehydration,” said Ami Mathur, the populous. “I bet my whole life and career on that fact,” he general manager - brand marketing, Honest Tea, which recently said. “Clean eating is not a fad. It’s a trend, and it’s going to launched the Honest Sport line of performance beverages. keep going.” “They’re more aware of what they’re putting in their bodies, so For Reed, a clean label sweetener is paramount. While there’s more of an emphasis on ingredients than ever before.” the company offers a variety of beverages with different sweetening options—no sugar, low sugar, stevia, etc.—the sweetener of choice in Reed’s Ginger Brew is fruit juice, from apple and pear to grape. And the reasoning behind it parallels consumer motivation: personal preference. “I believe fruit juices are a more natural option than sugar,” Reed said. “I don’t think all sugars are the same. Some are more processed than others, and we use fruit juices with minimal processing. Given the choice, I personally would rather have a fruit sugar than a white sugar in a food or beverage.” At Rocky Mountain Soda Co., a clean label means a short and recognizable ingredients list. “We are proud that our Rocky Mountain Soda and Oogave products only contain four ingredients, all of which you can pronounce,” said Drew Fulton, company founder. The lines are also non-GMO (genetically modified organism), vegan, kosher and all natural. Oogave is sweetened with organic blue agave nectar, while the brand’s LOCA line (short for low calorie) utilizes a blend of organic stevia and organic agave nectar. Fulton said the company worked with over a dozen different brands and strengths to find the right stevia that didn’t have a strong aftertaste (it went with a high-purity organic option in the end). The DRAM Apothecary line is sweetened with honey. Similar to soda market trends, mainstream sports drink brands are noticing the shift toward clean label and are following suit with their sweeteners. Launched in August 2016, Gatorade G Organic, a USDA Certified Organic sports

24 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Specifically, the sweetener of choice is organic cane sugar along with organic fruit juice because we believe that it provides a great taste while still providing the carbohydrates necessary for a functional sports drink.

— Ami Mathur, general manager - brand marketing, Honest Tea

The definition of a clean label sweetener at Honest The Future’s Still Fizzy Tea wouldn’t be complete without mentioning the brand’s In October 2016, the World Health Organization (WHO) commitment to organic and Fair Trade. At 100 calories or published a report maintaining that taxing sugary drinks could fewer per bottle, Honest Sport beverages include such options lower consumption and thereby reduce obesity, type 2 diabetes whenever possible. “Having to meet third-party criteria gives and tooth decay. The report took aim at not just added sugars, our ingredients another level of scrutiny that we think our but those naturally present. And it targeted not just processed consumers have come expect,” Mathur said. Specifically, sugars like HFCS, but also clean label sweeteners like honey, the sweetener of choice is organic cane sugar along with syrups, fruit juices and fruit juice concentrates. organic fruit juice because “we believe that it provides a great WHO suggested a tax of at least 20 percent on such taste while still providing the carbohydrates necessary for a products could save lives. According to the organization’s functional sports drink,” she added. most recent data, about 40 percent of adults worldwide are Still, sourcing clean label sweeteners can be a challenge overweight, and worldwide prevalence of obesity has doubled for companies like Rocky Mountain Soda Co. and Honest Tea, since 1980 to reach 11 percent of men and 15 percent of which place great value on certifications. Rocky Mountain women. Additionally, 42 million children under age 5 years Soda Co., for example, used locally sourced beet sugar when were considered overweight or obese in 2015—up 11 million it first launched. “It was what truly set us apart,” Fulton said. over the course of the last 15 years. Diabetes diagnoses are on But when Colorado farmers switched to GMO beets (despite the rise, too, with 422 million living with the disease in 2014. his pleading them not to), Fulton was forced to switch up the WHO estimates diabetes was directly responsible for 1.5 million sweetener. Ultimately, he ended up sourcing the non-GMO cane deaths in 2012 alone. sugar they use to this day. In light of this, the future of the CSD and sports drink “Historically, we’ve had difficulty finding sourcing categories will hinge on whether manufacturers can continue communities that can provide both organic and Fair Trade to offer functional beverages with minimal amounts of natural ingredients on the scale that we need,” agreed Mathur. Today, sweeteners, and a clean label that consumers can feel good leveraging partnerships with brands like Coca-Cola have about—even if their products are considered a treat rather enabled Honest Tea to develop a supply chain with options. than a daily indulgence. “I hear it all the time: ‘Yours is the

25 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Food Category of Added Sugars in the U.S. Population Ages 2 Years and Older

Vegetables Fruit & Fruit Juice 1% 1%

Snacks & Sweets Beverages 31% (not milk or 100% fruit juice) 47% Grains 8% Mixed Dishes 6% Sparkling In 2017 Dairy Condiments, Gravies conversation about soft drinks 6% Spreads, Salad Dressings A wouldn’t be complete without 2% taking note of a trend poised to transform the beverage market in 2017: sparkling beverages. Source: What We Eat in America (WWEIA) According to Mintel, taste is the Food Category analyses for the 2015 Dietary Guidelines Advisory Committee. No. 1 driver in this category, with 70 percent of shoppers perceiving them to be tasty—well above the 42 percent of shoppers who say only soda I drink.’ Or, ‘I was off soda and then I started yours.’ the same about non-sparkling Consumers recognize our product as something different options. Further, consumers also than a soda,” Reed said. “It’s just ginger and spices. It’s as perceived sparkling beverages natural as it gets. And it’s this quality of our products that to be refreshing as opposed to has catapulted us into a market leader. We were the first to other options. brew a soda commercially using fresh ginger instead of flavor. Sugar-free Cascade Ice in the That’s still a crazy idea today. I’m an herbalist, and inspiring Organic Raspberry Lemonade flavor functionality is a new way of thinking about these beverages.” topped the list in terms of purchase Indeed, for carbonated beverages to bounce back from their intent (74 percent), sweetened bad rep, serious rebranding—and reformulating—needs to with just fruit oils. Not far behind continue. And if you ask Dembitzer, the future is bright. “There was sugar-free Dasani Sparkling is still so much research and development going on, with and Minute Maid Sparkling Fizzy formulators looking for ways to use new and better sweeteners with less aftertaste and better mouthfeel,” she said. “Brands Lemonade, made from carbonated need to get as close to the taste profile of sugar but not be water, lemon juice, sugar and filled with sugar. That’s where the opportunity is.” other ingredients.

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Reed’s Inc.: Dosing the World with Ginger

by Judie Bizzozero

eed’s Inc. has been a leader in the natural soft drink segment since it rolled out its first product, Reed’s RGinger Brew, in 1989. In fact, there’s a strong argument that Founder and CEO Chris Reed was the father of the craft soda category, when his idea for creating a refreshing, functional soft drink made with only natural ingredients became a reality. Today, Reed’s is a market leader in the growing craft soda category and one of the top-selling brands in the natural and specialty foods industry—offering more than 30 beverage products under the brands Reed’s Ginger Brews, Virgil’s Natural Sodas, Sonoma Sparklers, China Cola and Reed’s Culture Club Kombucha. Since its inception, Reed’s has sold more than 500 million bottles of its brewed soft drinks, and its product lines can be found in over 15,000 natural and mainstream supermarkets nationwide. Products also are sold through an additional estimated 40,000 accounts that include specialty gourmet, natural food stores, retail stores, convenience stores and restaurants nationwide and in select international markets.

Ginger Does a Body Good Reed wasn’t looking to become a multimillionaire. All he wanted was to create a refreshing nonalcoholic soft drink made Reed’s Inc. with natural, functional ingredients—“something that tasted Headquarters: Los Angeles really good and was good for you.” Unfortunately, nothing reedsinc.com existed in the marketplace … yet.

28 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 flavors; the company would later acquire the China Cola natural cola product line. In 2012, Reed saw a go-to market opportunity in the booming kombucha segment and launched Reed’s Culture Club Kombucha, containing a probiotic kombucha culture grown in a special tea blend brewed from yerba mate, oolong tea and spring water. The product line was so good it won the 2013 SupplySide CPG Editor’s Choice Award in the beverage category.

Cutting Calories Without Compromising Taste In this new norm of clean label, there is an intense focus on sugar reduction, which creates enormous opportunity for natural sweeteners. With obesity levels ballooning and the CEO and Founder Chris Reed explains his passion for dosing vilification of sugar by health professionals and consumers, the world with ginger and how Reed’s Inc. became the market the timing was right to introduce a low-calorie version of the leader in the U.S. craft soda category. company’s popular ginger brew. “Today more than ever, sugar is in the spotlight,” Reed said. “There’s so much chatter on the internet about how sugar is the enemy, and nearly every day you read a news article In 1987, he began researching the history of sodas and on its harmful effects on the body, including inflammation found recipes dating back before the beginning of the modern and obesity.” soft drinks industry. At the UCLA library, he discovered a book from the 1780s containing information about home brewing sodas from whole roots, spices and fruit juices. What’s more, these beverages also were used as herbal tonics. Reed was hooked. His background in holistic medicine eventually would lead him to choose ginger as his go-to ingredient because of its potential health benefits on digestion and inflammation. He noted ginger has been used for centuries as a digestive aid, motion sickness cure and general tonic. The recipe hails from the Caribbean, where the art of home brewing ginger beer is still practiced. Each batch of Reed’s ginger brew is carefully brewed from fresh herbs, roots, spices and fruits aged in small batches by expert brewmasters. The bold ginger flavor comes from the actual ginger root; in fact, each bottle of ginger brew contains between 8 and 26 g depending on the variety. “We’ve been the biggest proponent to moving ginger into the United States,” Reed said. “If your digestion is working well, then you have your health because you get all the nutrition out of the food, and ginger is key to that digestive health,” Reed said. “I recognized the market opportunity for a natural, functional beverage. Plus, my love of ginger root as a flavor and super healing root made me want to dose the world with its health properties.” Reed’s love for ginger didn’t stop him from pursuing other natural soft drinks. In 2000, the company bought Virgil’s Root Beer and has since expanded the line to include additional

29 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 We chose stevia because it is the cleanest of the diet sweeteners and it has a pretty good flavor. The flavor isn’t exactly like the full-calorie version, but for many consumers, it’s a fair trade-off for a 60 percent reduction in sugar.

— Chris Reed, CEO and founder, Reed’s Inc.

Reed said Reed’s Light 55 has become a solid seller, thanks in part to the popularity of the Moscow Mule craft cocktail. The sweet, vodka- infused cocktails go down far too easily and can pack a high calorie count, so offering a reduced-calorie ginger brew was a no-brainer for Reed. The company spent six months perfecting a recipe for its Reed’s Light 55 Calories Extra Ginger Brew that hit the market in 2012. The low-cal version contains the same ingredients found in Reed’s Extra Ginger Brew—fresh ginger root, honey, sparkling filtered water, exotic spices, pineapple, and lemon and lime juice concentrates—with the exception of raw sugar cane, which was replaced with stevia rebaudiana leaf extract. The substitution enabled the calorie count to be in sugar. The reality is that if people accepted the flavor of trimmed from 135 to 55 per serving. Like all Reed’s products, aspartame, they will get used to stevia much easier. It just the low-cal version is free from preservatives, caffeine, gluten takes a bit of time.” and genetically modified organisms (GMOs). Reed’s is also finding success with its new fountain business “We chose stevia because it is the cleanest of the diet that was launched at the 2016 Natural Products Expo West, in sweeteners and it has a pretty good flavor,” he said. “The part due to requests from large fast-casual restaurant chains flavor isn’t exactly like the full-calorie version, but for many looking to add naturally sweetened, reduced-calorie beverage consumers, it’s a fair trade-off for a 60 percent reduction offerings to their menus.

30 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 “Many restaurant chains are committing themselves to remove GMOs, artificial ingredients, sweeteners, colors and flavors out of the foods they are selling to their Food consumers. Simply put, restaurants all over the country are backing ‘clean food’ concepts due to consumer For demand,” he said, noting the company spent more than two years developing and crafting the all-natural “Bag in Thought the Box” fountain soda flavors.

Small Marketing, Big Returns Always the entrepreneur with an eye on the bottom line, Reed invests in procuring the best ingredients for Discovering untapped white space his products, as opposed to allocating a large marketing can help companies to create and budget. “We rely heavily on word of mouth and social media buzz created by loyal consumers,” he said. “This own a new market segment. thinking allows the company to focus its money on sourcing superior ingredients, and that quality makes us stand out from our competitors.” Sourcing clean label, natural Reed’s uses Facebook, Twitter, YouTube and its website to create interest and educate consumers about ingredients may be more expensive, its products. The brand only recently rolled out its first but keeping it “real” reaps more commercial featuring Chris Reed touting all the healthy benefits of ginger brew. rewards and loyal customers. Marketing aside, being successful in any business takes having the right product at the right time. “You have to have a reason for everything you do. For me, it’s Word of mouth and social media dosing people with ginger because it tastes great and is sometimes can be more powerful good for digestive health,” Reed said. “You really have to think about the marketplace and determine what’s not than an expensive marketing and being done and then fill the void with a great product.” Looking forward, Reed said products in the pipeline advertising budget—enabling more include more low-calorie options and beverages that money to be earmarked for product contain additional exotic flavors—all served up with a healthy dose of ginger. innovation.

31 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 INNOVATION IN ACTION

Lotus Botanical Elixirs: Naturally Crafted to Drink Life In

by Judie Bizzozero

alancing life and work is a difficult task, and one that can lead to stress and fatigue. While energy drinks Lotus Botanical Elixirs Bprovide a quick pick-me-up, it’s often followed by a Headquarters: Indian Wells, California crash that leads to more mental and physical stress. Energy lotuselixirs.com drinks also have come under intense scrutiny for their high concentrations of ingredients such as caffeine, taurine and sugar, and for deceptive advertising and marketing practices. Harnessing Natural Power Realizing the need for a natural, ready-to-drink (RTD) Launched in 2014, Lotus® Botanical Elixirs are lightly functional energy product that would nourish the body from carbonated beverages infused with lotus flowers,Rhodiola the inside out, Scott Strader had a vision to create the ultimate rosea and schizandra berry, widely recognized by many refreshment crafted from plants, trees and flowers made by cultures for thousands of years for their legendary rejuvenating Mother Nature that would promote balance in the human body. effects, Strader said. The group of botanicals is classified as “We felt there was a need for a great tasting, efficacious adaptogens, which refers to herbs and herbal products used to beverage that could provide a natural lift with nothing normalize body functions and strengthen systems compromised artificial,” said Strader, CEO and founder, Lotus Elixirs North by stress. America. “Coca-Cola started as a botanical elixir sold in “We believe in the power of nature, and what we put in our a pharmacy with all-natural ingredients, but today, it contains bodies enriches the lifestyle we live. Plants create all of the life- artificial ingredients.” giving oxygen we breath, and ingesting them is nature’s way of

32 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Going for the Gold Lotus Elixirs recently expanded its line of lotus- flower-infused drinks with a new sugar-free Gold Lotus that launched at Natural Products Expo West 2017. Gold Lotus features a proprietary natural sweetening system with Lotus Elixirs’ same unique formulation of botanical extracts, highlighted by pure natural flavor of citrus and peach. “We discovered a new stevia that is just now coming to market that we feel is a game changer for sugar-free natural beverages, so we immediately created our own proprietary blend with organic erythritol that doesn’t sacrifice the taste of our product,” Strader noted. “Stevia’s reputation for its bitter aftertaste was a top concern because it is detectible in carbonated beverages. I was not a fan of stevia from a taste perspective until I was introduced to this latest version that has done a nice job of isolating the only sweet part of the plant. “Once we made the decision to use this providing their pure natural power,” Strader said. new stevia as part of our zero-calorie natural “Lotus Elixirs provide a healthy natural alternative sweetening system, all our ingredient suppliers to help the body restore balance, renew energy and formulators worked seamlessly to come up and vibrant well-being.” with the best product possible,” he concluded. Lotus Elixirs originally launched in three superfruit-infused flavors—Wild Berry, Cranberry and Raspberry—containing all-natural ingredients such as organic pure cane sugar and caffeine from organic green coffee beans. Each 12-ounce can boasts only 60 calories. Strader originally conceptualized a sugar- free line of products; however, natural zero- Consumers are calorie sweeteners were just entering the asking for more beverage space, and achieving the taste needed transparency to attract and retain brand loyalty proved and better-for- challenging. Not one to rest on his laurels, he chose to sweeten Lotus Elixirs with small you options, so amounts of organic pure cane sugar and natural the solution is fruit juices. simple: give it And consumers drank it up. In 2015, Lotus to them. Elixirs was the winner of the energy drinks category in the 4th annual SupplySide CPG — Scott Strader, CEO and founder, Lotus Editor’s Choice Awards. But Strader still had his Elixirs North America eye on the zero-calorie prize. “Consumers are loyal to brands they trust, and that’s a concept some of the big beverage companies have lost along the way,” he said. “Consumers are asking for more transparency and better-for-you options, so the solution is simple: give it to them. In our case, they were asking for low to no sugar with nothing artificial.”

33 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 Rhodiola rosea

Schizandra Food For berry Thought Lotus Waiting to bring a product to market Rhodiola rosea and schizandra berry with the right ingredient can be better have been widely recognized by many cultures for thousands of years for their than compromising your reputation to legendary rejuvenating effects. enter a trending category.

Communicating your desired

Getting the Word Out, Naturally outcome to your ingredient suppliers Response to the line has been positive, with and partners helps create a recipe Lotus Elixirs sold nationwide on Amazon and through direct store delivery (DSD). “We started for success. out in a few stores in Southern California, focusing on the natural channel, which quickly grew to hundreds of stores in select retail outlets, Using various formats such as and national online sales through Amazon.com,” video, audio and social media can Strader said. Product packaging and positioning in the communicate a targeted concept marketplace has required more thought because to consumers. the terms “Balance Mind & Body” and “Balance Supplement” are conceptual and subjective. Packaging is bold and sleek, and the company’s website contains a treasure trove of information in the form of articles, audio and video clips explaining the benefits of the ingredients and products. What’s more, the company relies on social media platforms including Facebook, Twitter and Instagram to gain a loyal following of consumers who are looking for a healthy lifestyle balance. “We have strategic influencers who are instrumental in creating our lifestyle brand image, which suggests Lotus Elixirs is all about balance and happiness under the stressful demands of life,” Strader said. “A visual image has more than 60 times the mental assimilation than written words. We can go anywhere our minds can dream and our bodies can carry us. Consumers don’t care how you get there, but they will reward This company video explains how Lotus Botanical Elixirs nourish the you for all your hard work.” body from the inside out, naturally.

34 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017 CONTACTS

Food Insider Journal Clean Label Strategy & Formulation

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35 Food Insider Journal Sweeteners: Balancing Labels, Taste Concerns April 2017