rganic OpportunitieBY LU ANN WILLIAMS s

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end of April 2017 were positioned on an organic Around the globe, sales of platform, rising to nearly 11% in the United organic products are surging, States and to over 13% in Western Europe. This trails behind the use of no additives/preservatives boosted by widespread claims but is well ahead of the use of natural posi- consumer interest in products tioning, particularly in Western Europe, perhaps reflecting ongoing difficulties with definitions of that are viewed as healthful naturalness for some types of products.

and natural. A Strong Organic Market The global organic foods market is now valued at nterest in naturalness, minimal processing, more than $80 billion a year, dominated by the and clean labeling is no longer new in the food United States, with about $40 billion of that, and industry and, indeed, has been a running Europe, with about $30 billion, although esti- Itheme through all Innova Market Insights’ mates vary markedly according to source and trends forecasts in recent years. As long ago as definition, particularly as to whether natural 2008, “Go Natural” led Innova’s annual trends foods are also included. Data from the Organic listing, and since then it has been featured each Trade Assoc. in the United States show that year in different forms, culminating in a theme nearly 5% of all food sold in the United States is weaving throughout the entire Top Trends list for now organic. In Europe, the largest organic food 2017, while more specifically appearing as the markets are in Germany, France, the United No. 1 trend, “Clean Supreme.” Kingdom, and Italy, although penetration is The rules have been rewritten, and clean and higher in some smaller countries, such as clear label is now targeted as the new global stan- Switzerland, parts of Scandinavia, and Austria. dard. Its mainstream status is illustrated by the The most significant categories for organic fact that nearly a quarter of global food and drink launches globally are dairy, sauces and season- launches recorded by Innova Market Insights in ings, and bakery, with 10%, 9%, and 9%, the 12 months to the end of April 2017 used one respectively, of the total recorded by Innova or more claims relating to naturalness, freedom Market Insights in the 12 months to the end of from additives and preservatives, or organic cer- April 2017. Baby/toddler foods, ready meals, and tification. In Western Europe that figure was hot drinks are not far behind, with about 8% nearly 28%, and it was over 30% in the United each. In terms of category penetration, however, States. it is baby/toddler foods that lead with just under The organic food and drink market has been a 30% of launches using an organic positioning, particular beneficiary of this trend, with penetra- ahead of sugar/sweeteners (21%), hot drinks tion rising steadily in recent years. Nearly 9% of (17%), and cereals (16.5%). global food and drink launches recorded by This disguises a more complex picture, how- Innova Market Insights in the 12 months to the ever, with particular subcategories having relatively high organic penetration levels. In Nearly 30% of baby/toddler food launches have an organic dairy, for example, the share of organic launches positioning. © idal/iStock/Thinkstock is slightly above average at 10.4%, but within that

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penetration, it varies from less than 5% in cheese to nearly 50% in spoonable nondairy yogurt. Although there are some variations within the two leading markets—the United States and Western Europe—in terms of development, the top four catego- ries in terms of penetration are common to both regions, albeit with different shares. The strength of organic certification in the baby/toddler category is not really sur- prising given parents’ desire to provide the best for their children, with naturalness, purity, and quality always high on the agenda. Penetration is particularly high in the United States, where the market is highly developed and more than half of launches used an organic positioning. Organic claims are strongly concentrated in the baby meals subcategory, particularly in fruit and vegetable products in pouches. This subcategory accounted for nearly three-quarters of organic launches in baby/ toddler foods in the United States, with penetration of nearly two-thirds compared with the category average of just over 50%.

Specialist Product Launches German organic baby food maker HiPP has a well-segmented Looking at recent launch activity, specialist array of product offerings for babies and toddlers. Photo organic baby food companies and brands, courtesy of HiPP such as Hain Celestial’s Earth’s Best and Campbell’s Plum Organics, are active along- side organic variants from mainstream Sweet Opportunities players, such as Hero’s Beech-Nut and even The ongoing demand for clean labeling some private labels, such as Walmart’s combined with growing concern with cut- Parent’s Choice and Kroger’s Simple Truth. ting sugar intake has also boosted the use of Recent efforts to add something new to organic claims in the sugar and sweeteners a highly competitive market include Sprout category, with nearly 21% of launches using Organic Foods’ introduction of what it an organic positioning in the 12 months to claims to be the first plant-based baby food the end of April 2017. This has been partic- lines in the United States with its organic ularly true in the United States although, in plant-based-protein baby food purees and fact, penetration falls slightly behind that of its Power Pak toddler purees in clear pouch natural claims in terms of use, at 28% and packaging that allows the contents to be 30%, respectively. The use of natural viewed as well as its Organic Curlz toddler sweeteners has been an area of particular snacks made with organic chickpeas and interest, with natural alternatives encom- lentils. passing a wide variety of ingredients; In Europe, German organic baby food traditional sweeteners, such as maple company HiPP has also been active in syrup, cane juice, molasses, agave, and developing new areas of the market by seg- monk fruit, have been more widely used menting its offerings to target a range of and increasingly feature an organic posi- tastes and need states, introducing its tioning as competition increases. HiPPiS range of pouched fruit products for These sweeteners are now being joined toddlers aged one year and older. The range by newer products, such as stevia, which in encompasses 100% fruit, fruit and cereal, some instances is now using organic claims Sport, and Smoothie Drink varieties. alongside its original natural positioning. pg 44 09.17 • www.ift.org Again, this is more prevalent in the United States, where 25% of organic sugar and sweetener launches contained stevia com- pared with fewer than 2% in Western Europe. Hot drinks take third place globally in terms of organic penetration, and share is particularly strong in Western Europe, at over 27%, compared with 25% in the United States and 17% globally. The major organic subcategory is tea, which accounts for more than three-quarters of organic hot drink launches, compared with 53% of cat- egory introductions overall. Just under a quarter of tea launches were organic, com- pared with 8% for both coffee and hot chocolate. This share rises to over 40% in both the United States and Western Europe. Organic options also have a relatively high penetration level in iced or ready-to- drink tea, particularly in the United States, where it is generally a more popular bever- age. Organic claims were used on 19% of U.S. soft drink launches overall, but this rises to 25% in juices and juice drinks and to nearly 37% in iced tea.

Adding Clean Value Many organic products carry additional clean label claims to add value and aid differentia- tion in a dynamic and generally very competitive market. In the case of iced tea, organic prod- ucts may also carry claims such as non- GMO and vegan-friendly, with yet more

Exotic ingredients enhance the appeal of organic iced tea in Unilever’s Pure Leaf Tea House Collection.

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value added with the growing range which made up 16.5% of global relating to naturalness, freedom of ingredient and flavor blends. launches in the 12 months to the from additives and preservatives, There is also a focus on real brewed end of April 2017, rising to 24.7% and organic certification, rising to tea as the core ingredient, as illus- in the United States and 25.9% in nearly 52% for cereal/energy bars. trated by such recent U.S. launches Western Europe. Organic claims play a significant as Unilever’s Pure Leaf Tea House Cereals can be divided into two role in this; they are used on just Collection Organic Black Tea With a main categories—breakfast cereals over 26% of cereal/energy bar Hint of Valencia Orange Peel and and cereal/energy bars—and glob- introductions and just under 23% Nestlé Waters’ NESTEA Slightly ally the former outstrips the latter of breakfast cereal launches. Sweet Organic Real Brewed Green Tea. in terms of launch activity, although The cereal/energy bars subcat- Kombucha is also increasingly cereal bars are slightly ahead in egory encompasses a wide range of popular, featuring in a range of terms of organic penetration. In the products, including granola or organic ready-to-drink tea launches United States, however, the rela- muesli bars and breakfast bars, as under brands such as One Breath, tively large and highly developed well as nutrition, energy, and per- Simple Truth, and Nature’s Promise. cereal bars market accounts for the formance bars. With rising levels of Meanwhile, more traditional fla- lead (nearly 57%) of total category competition, however, many prod- vors, such as lemon, peach, and launches in the 12 months to the ucts now seek points of difference honey, have been joined by more end of April 2017, taking it well by combining features and blurring unusual blends, such as ginger- ahead of breakfast cereals. definitions. A wide range of prod- turmeric, raspberry-hibiscus, blue- Both subcategories have a fairly ucts are now using organic claims, berry-basil, and rosemary-lemon. healthy image despite concerns over including both specialist and more the amount for sugar in some prod- mainstream lines, often combined Cereal Developments ucts, and a relatively high number with other on-trend health claims, The cereals category, although see- of health claims are used. Concerns such as GMO-free and vegan- ing relatively limited launch activity over clean labeling have been a key friendly, as well as more unusual overall in comparison with some focus in recent years, with nearly and indulgent ingredients and markets, has relatively high pene- half of all launches in the United flavors. tration levels for organic products, States using one or more claims A review of recent new product activity recorded by Innova Market Insights reveals launches from CLIF Kid Zbar is an organic energy bar snack with 9 g of whole grains. organic specialists such as Nature’s Path Foods, which introduced its Apple Pie Crunch Chia Plus Crunchy Granola Bars, featuring claims relat- ing to non-GM, whole grains, and omega-3, as well as being organic, with a relatively complex flavor of green apple and cinnamon pie with added crunch from chia seeds. Kellogg’s Kashi whole grain nutri- tion range was also extended with Chewy Nut Butter Bars in Coconut Cashew Macaroon and Chocolate Trail Mix varieties, marketed as non-GM and gluten-free as well as organic. Pioneering energy bar maker CLIF extended its Kid children’s range with Zbar Organic Fruit & Veggie Bars and its Zbar Iced Oatmeal Cookie, while Raw Rev launched a range of Organic Fruit, Nut & Seed Superfood Bars in a number of variet- ies, including Spirulina Dream and Chunky Peanut Butter Chocolate, also carrying non-GM, vegan-friendly, and gluten-free positioning, as well

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European plant-based food and drink pioneer Alpro offers an organic product line under the brand name Provamel. Photo courtesy of Alpro as an on-trend raw formulation. subcategory, dairy alternative appeal by offering products with In the breakfast cereals market, drinks, also strong at just over 40%. multiple benefits. The subcategory granola continues to be a key There are relatively low launch still tends to be dominated by com- growth area and one that has seen numbers overall in these two sub- panies with plant-based dairy-free ongoing activity in organic options, categories, but there is a strong offerings where organic is an addi- both from branded producers and focus on health claims, particularly tional benefit for certain products, retailers. Specialist organic brands relating to clean label and free however. Califia Farms in the such as Cascadian Farm and Nature’s from, with many launches carrying United States, for example, has Path are being joined by healthy and multiple positionings of this kind. organic cashew, almond, and coco- clean label brands from retailers, Organic claims often run alongside nut milks as part of its extensive including Aldi’s SimplyNature and others, such as dairy-free, vegan, plant-based milks range, while Target’s Simply Balanced ranges, and non-GM, to broaden market Alpro sells nonorganic and organic which both include cereal products. A New Breed of Clean Label Claims. From Innova Market Insights A Diverse Dairy Market (% compound annual growth rate for selected claims globally, 2011–2016) While the dairy category leads in total numbers of organic launches globally, penetration is lower than in some categories, at 10.4%, partly reflecting the high number of launches overall and partly the diversity of the market. Western Europe, where the dairy industry and market is strong and estab- lished, has a higher penetration level than the United States, with organic launches accounting for over 18% of total dairy introduc- Grass Fed Animal Welfare Antibiotic Free Farm tions, compared with just under 15% for the United States. +74% +40% +29% +18% As has already been mentioned, spoonable nondairy yogurt has the highest organic penetration at nearly © ayax/iStock/Thinkstock, © miu_miu/iStock/Thinkstock 50%, with the other nondairy

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Organic Valley Pasture Butter is a limited edition organic product made from the cream of cows that graze on organic pastures from May through September.

plant-based drinks and other ingredients. These include dairy alternatives in Europe. grass-milk varieties, not only in Organic penetration in other drinking milks but also in but- dairy subcategories is led by ter, cheese, and yogurt; spoonable dairy yogurt, at just lactose-free lines; protein over 11%, ahead of cream/ shakes; handheld milk-and-fruit creamers with 10% and fats and pouches; and snacking cheese. spreads with just over 7%, There has also been rela- although both of the latter are tively strong interest in from relatively low bases overall. non-GM labeling in the dairy industry, where a natural image Under Mainstream Umbrellas has traditionally been impor- There are some very strong and tant and growing interest has well-established organic brands also led to ongoing activity in in the U.S. dairy market run- milk from pasture-raised cows. ning alongside newer entrants There is a strong link between and organic options under organic dairy lines and non- mainstream umbrellas. There GMO certification, with many are two organic brands in the products using both types of top 10 suppliers to the milk positioning. Some leading market through multiple retail- organic dairy producers, such ers, for example. Horizon as Stonyfield Farm and Organic Organic (now part of Danone) Valley, have also been at the was the leading brand in the forefront of the promotion of private label–dominated sector pasture-raised or grass-fed milk overall until Dean Foods’ 2015 and fresh dairy products in the combination of its 30-plus mainstream market. In addition regional milk brands to create to their standard ranges, both DairyPure, which moved straight now have grass-fed options, into the leadership position, with Stonyfield’s Organic 100% pushing Horizon into second Grassfed Yogurt and Organic place. Organic Valley is also in Valley’s Grassmilk whole milk and the top 10 ranking, with eighth yogurt and Pasture Butter, all of place in both whole and which are also GMO-free. reduced-fat milks. One of the most interesting The two brands have also developments in the dairy been actively extending their industry in recent years has ranges, adding value with ben- been the purchase of efits in addition to organic WhiteWave Foods by the pg 50 09.17 • www.ift.org rganic Opportunities

Three-quarters of all organic product launches tracked by Innova Market Insights come from either the United States or Western Europe. world’s largest yogurt com- much more sophisticated, pany, Danone, first announced focusing more on value-added in 2016 and finalized in 2017. products and combining both The deal clearly illustrates the specialist organic brands and move of natural and organic organic variants in existing con- foods into the mainstream mar- ventional ranges. Organic ket as the dairy industry claims alone may not now be continues to consolidate. enough, and companies are The WhiteWave acquisition focusing on additional benefits, was particularly significant for including related clean label the organic arena, as it left areas, such as non-GM, vegan- Danone with large and cate- friendly, raw, and Paleo, as well gory-leading brands in North as local ingredients and sourc- America and Europe in high- ing, minimal processing, and growth categories. One of unusual and premium-style rec- these was premium organic ipes and flavors, including the dairy, but they also included use of seasonal and limited edi- non-GM, plant-based alterna- tions. (See figure on page 49 for tives to milk and yogurt, fresh some additional kinds of clean foods, and coffee creamers. The label claims.) deal gave Danone Horizon The market remains highly Organic, although Danone also concentrated geographically, agreed to sell its pioneering however, with opportunities in organic yogurt company, organic options currently being Stonyfield, to allow the deal to most actively pursued in North be pushed through. America and Europe. In fact, Organic options accounted three-quarters of all organic for just under 7% of global milk product launches tracked by and milk drink introductions, Innova Market Insights come rising to nearly 18% in the from either the United States United States, and it is here that or Western Europe. Danone’s recently acquired It is in the other regions, Horizon Organic brand has such a particularly Asia and Latin high profile. While overall sales America, where the market of milk in the United States are has yet to take off, although in long-term decline, the there are signs of rising levels organic milk sector is continu- of interest. It remains to be ing to grow, particularly for the seen whether these markets relatively small whole milk sub- present the next big opportu- category, which appears to be nity or whether cultural staging something of a recovery differences may make them or at least strongly outperform- difficult markets to enter, ing the subcategory of resulting in the existing mar- reduced-fat products. kets remaining the best option for development despite Sophisticated Competition increasing maturity and stron- While interest in clean label has ger levels of competition. FT kept organic claims in the spot- light in many countries, rising Lu Ann Williams, a member of IFT, is director levels of competition mean that of innovation at Innova Market Insights product offerings have become ([email protected]).

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