Global Trends & Opportunities in Free-From Foods David Jago, Director of Innovation & Insight, June 2013 © 2013 Mintel Group Ltd. All Rights Reserved. Confidential to Mintel 1 mintel.com Agenda FREEFROM FOODS WORLDWIDE • What is happening in the UK versus the US • The development of the global free from market • What does global launch activity tell us about the lifecycle of the sector • What is the experience of major players getting into free from • Is the market maturing or is there more opportunity for growth 2 mintel.com UK free-from market growth will slow but is still impressive UK retail sales of free-from foods, 2006-16 +71% +109% Dairy/ lactose free 47% Gluten free 45% Other 8% 3 Source: Mintel Oxygen mintel.com Consumer: significant purchase levels Types of free-from foods purchased (in last six months), UK, June 2012 4 Source: GMI/Mintel mintel.com Lifestyle choices as important as allergy/intolerance in avoidance Foods/ingredients avoided, UK, June 2012 5 Source: GMI/Mintel mintel.com Wider range in demand Attitude towards free from foods, UK, June 2012 6 Source: GMI/Mintel mintel.com UK vs. US – growth similar, market definitions affect actual sizing UK gluten free sales US gluten free sales (not including mainstream products labelled gluten-free but which did not contain gluten in the first instance) (all products labelled gluten-free) +30% 7 +27% Source: Mintel Oxygen mintel.com ‘Gluten sensitivity’ & ‘health’ perception drives the US market 40 million people is the current or potential gluten-free audience in the US • 14% of adults are potential or current users of GF food, either from need or want • Roughly 10% are current users, at least occasionally • Equates to more than 30m Americans who are current GF food users, and up to 40m who are a potential market 8 Base: 3,000 internet users aged 18+ Source: Mintel Oxygen mintel.com US market growth fuelled by salty snacks US sales of select leading gluten-free food segments, 2009-11 • Consumer desire for healthy snacks helped segment growth 0 100 $million 200 300 400 500 Chips, pretzels, and snacks Cold cereal Frozen lunch and dinner entrées Baking mixes, supplies, and flours Energy bars and gels • Bread & baked goods, along with energy bars & salty snacks drove sector growth overall Bread and baked goods Crackers and crispbreads Cookies and snack bars Shelf-stable pastas Beans, grains, and rice 2009* 9 SNACKS Entrées and mixes 2010* 2011* * 52 weeks ending Oct. 31, 2009, Oct. 30, 2010, and Oct. 29, 2011 Sales in FDMx, natural, and specialty markets only. Source: Mintel/SPINS/Nielsen mintel.com NPD in gluten-free continues to show an upward trend New product introductions of gluten-free food & drink, globally, 2009-2012 3500 Other 3000 2500 Fish, Meat & Egg Products 2000 Bakery 1500 Dairy 1000 Snacks 500 Sauces & Seasonings 10 Q4 - 2012 Q3 - 2012 Q2 - 2012 Q1 - 2012 Q4 - 2011 Q3 - 2011 Q2 - 2011 Q1 - 2011 Q4 - 2010 Q3 - 2010 Q2 - 2010 Q1 - 2010 Q4 - 2009 Q3 - 2009 Q2 - 2009 Q1 - 2009 0 Sauces, Snacks, Dairy & Bakery account for around 45% mintel.com UK is one of the leaders in gluten-free NPD, but US dominance is clear New product introductions of gluten-free food & drink, 2010-12 (% share) 11 Source: Mintel GNPD mintel.com GF variants take an increasing share in NPD of cereal-based products Gluten-free penetration in launches of cereal-based products, 2009-2012 12% Cereal-based Snacks 10% Bakery Breakfast cereals 8% Pasta 6% Pizza & Prepared Meals Beer 4% 2% 0% 2009 12 2010 2011 2012 Certainly more potential in pizza/prepared meals, & beer Source: Mintel GNPD mintel.com Big brands get on-board General Mills in the US has identified gluten-free as a “significant incremental opportunity” & has its own “community” consumer website promoting its ranges (GlutenFreely.com) Warburtons Gluten Free (UK, 2010) 13 General Mills Cinnamon Chex Oven Toasted Rice & Corn Cereal (USA, 2012) Kellogg’s brown rice Rice Krispies (US, 2011) Sales in first year: $5m Source: Mintel GNPD mintel.com Specialists expand Genius, a £10m gluten-free bread brand, for example, has expanded to more varied bread types, pies/pastries, pizzas, and cakes in the UK (and is also expanding internationally) Genius Gluten Free Tomato & Herb Pitta Bread (UK, 2012) 14 Amy’s Kitchen US company now producing in the UK (UK, 2012) Dr Schär (2012) Expanding internationally Source: Mintel GNPD mintel.com Leveraging the appeal of ancient grains and seeds The buzz around ancient grains & seeds has grown (especially chia) as they offer health benefits & a way to provide differentiation, as well as being gluten-free with sunflower seeds, millet, linseed, quinoa & poppy seeds made with quinoa, chia and millet Waitrose Love Life Free From... Seeded Thick Sliced Loaf (UK, 2012) Two Degrees Chocolate Banana Bar (US, 2012) 15 Kez's Free Cranberry Choc Crisp with Chia (Australia, 2012) Source: Mintel GNPD mintel.com The opportunity in beer Gluten free beers are growing in number • Among UK beer drinkers, 34% agree that they would drink gluten-free beers if they tasted as good as standard varieties while another 43% neither agree nor disagree (e.g. only just over 20% disagree) St Peter’s GlutenFree Beer, UK 16 Green’s GlutenFree Beer, USA • Brands such as Green’s (in the UK, Europe & North America) are not just targeting coeliacs – as the brewer does not use gelatine-based products or Isinglass in the production process, the products are also suitable for vegetarians /vegans mintel.com Naturalness important for gluten-free products Claims made by gluten-free product launches, 2009-2012 35% 30% 25% 20% 15% 2009 10% 2010 5% 2012 2011 0% 17 Source: Mintel GNPD mintel.com Gluten-free using naturalness to aim to a wider audience Doves Farm Organic Gluten Free Stem Ginger Cookies (UK, 2012) Nature's Path Organic Crispy Rice Bars (UK, 2012) made using artisan methods, organic, fairtrade, GMO free, free from additives & hydrogenated fat made using organic honey, good source of fibre, suitable for vegetarians, perfect on the go & contains no artificial additives 18 Source: Mintel GNPD mintel.com NPD in lactose-free recovers from a first half 2010 dip New product introductions of lactose-free and lactose-reduced foods by major category, globally, 2009-2012 800 Other 700 Snacks 600 Desserts & Ice Cream 500 400 Bakery 300 200 Fish, Meat & Egg Products 100 Dairy 19 Source: Mintel GNPD Q4 - 2012 Q3 - 2012 Q2 - 2012 Q1 - 2012 Q4 - 2011 Q3 - 2011 Q2 - 2011 Q1 - 2011 Q4 - 2010 Q3 - 2010 Q2 - 2010 Q1 - 2010 Q4 - 2009 Q3 - 2009 Q2 - 2009 Q1 - 2009 0 Dairy accounts for around 40% Bakery & snacks a growth area mintel.com UK a smaller player in lactose-free NPD New product introductions of lactose-free and lactose-reduced food & drink, 2010-12 (% share) Source: Mintel GNPD 20 mintel.com In Finland, lactose-free is in mainstream use across categories Valio Lactose Free Milk (2012) Laktoositon Oma Lactose Free Raspberry Ice Cream (Nestlé, 2012) Arla Ingmariini Lactose Free Fat Blend Spread (2012) Source: Mintel GNPD 21 mintel.com In Germany, specialist player Omira has a strong position with MinusL Lactose-free chocolate (2012) Gluten & lactose free bread (2012) Lactose free stuffed green peppers (2012) Source: Mintel GNPD 22 mintel.com In the UK, Arla’s Lactofree moves into ice cream “all the taste but none of the lactose of real dairy” Lactofree milk sales grew 36% in 2011 to over £16m Extended to hard & soft cheese, cream, yogurt, spreads In 2012 moved into dairy ice cream The most successful lactose-free brand to date in the UK is non-dairy soyabased Swedish Glace (Fayrefield Foods) with sales of £4m in 2010 having grown 60% since 2008 UK, 2012 Source: Mintel GNPD 23 mintel.com Lactose-free is of comparable size to gluten-free in the UK UK dairy/lactose-free market value, 2009-2011 • Since lactose intolerance is more widespread than coeliac disease or gluten intolerance, the category should – by rights – be correspondingly larger • Unlike gluten-free, lactose-free appears to be unable to garner the wider appeal beyond those with a medically-diagnosed condition Source: Mintel Oxygen 24 mintel.com Lactose-free dairy no longer just about soy US almond milk sales +74% in 2011 WhiteWave Foods, the maker of top soy milk brand Silk, introduced brand extension Silk Pure Almond, whose sales grew 66% to $86m Chilled formats drive growth - Blue Diamond Growers chilled almond milk grew 56% to $96m (its ambient line 4% to $28m) 25 Almond milk – moves from the US to the UK Almond milk is challenging the established soy milk category with Silk & Blue Diamond top brands Alpro’s almond milk, launched in 2012, sold £1.6m in its first year Tesco has also entered & so has Almond Breeze from the US! Source: Mintel GNPD mintel.com US yogurt companies are hoping lactose-free is the next Greek yogurt Yoplait Lactose Free (US, 2012) Sales of $8.7m in first year 26 Almond Dream Plain Non Dairy Yogurt (US, 2012) Kroger Plain Greek lactose reduced yogurt (US, 2012) Source: Mintel GNPD mintel.com Coconut milk rises on the back of popularity of coconut water in the US So far coconut milk has not matched the growth of almond milk but reflects the growing number of non-dairy alternatives that offers variety to both cow’s milk users and non-users Silk PureCoconut Original Coconut Milk (US, 2012) 27 Kara Dairy Free Original + Calcium Milk Alternative (Finland – also available in the UK) Trader Joe's Original Unsweetened Coconut Milk (US, 2012) Source: Mintel GNPD mintel.com Ethical claims see growing use in lactose-free products Claims made by lactose-free product launches, 2009-2012 60% 50% 40% 30% 20% 2009 10% 2010 0% 2011 2012 Source: Mintel GNPD 28 mintel.com Lactose free brands embrace ethical claim trends Moo Free (Finland, 2012) (note actually a UK brand) Mini Moos Scrummy Hunny-Comb Bars are an alternative to milk chocolate & are Fairtrade & Organic 29 Naturata White Chocolate (Finland, 2012) Rice Milk with Chocolate Chips and Sour Cherries. This lactose-free, organic chocolate is climate neutral, & fair trade certified Source: Mintel GNPD mintel.com We do not believe free-from to be a fad Increase in consumer base Better diagnosis will increase numbers of consumers who require such products While the ‘celebrity diet’ aspect may fade, the number of consumers looking for free from products for general health purposes is likely to increase Young adults are most aware of intolerances/ sensitivities, meaning a longer lifespan for trend Source: Mintel 30 mintel.com We do not believe free-from to be a fad More & better ranges Many major players yet to enter – more will come in to spur NPD on further Further development in quality & overcoming taste issues will reduce barriers to purchase Continued growth should allow a reduction in price differential, also reducing barriers to purchase More products will be positioned ‘for everyone’ and just happen to be gluten-free Source: Mintel 31 mintel.com We do not believe free-from to be a fad Harnessing other trends Technology – access anything anywhere The free from community is highly active online offering scope for brands to better connect with them, social media & apps give consumers the power to seek out free from solutions Healthy, natural, sustainable Free from foods have an opportunity to promote a strong over-lap with healthy eating, “natural” & environmentally friendly trends which ensures they can maintain multi-layered appeal Source: Mintel 32 mintel.com David Jago Director of Innovation & Insight Tel Email Twitter +44 20 7606 4533 djago@mintel.com @mintelnews © 2013 Mintel Group Ltd. All Rights Reserved. Confidential to Mintel mintel.com