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Going clean: reformulating to meet demand

16 June 2016  •  Author(s): Alan Rownan, Euromonitor International

Euromonitor International’s latest research system, Passport: Ethical Labels has shown that sales of packaged food and drinks products with clean labels, that is products with variations of all natural and no artificial claims (full clean label definition below) in 2015 reached $166 billion in retail value sales across 26 key markets.

Going clean; clean label

Products bearing the ‘no artificial preservatives’ claim exhibited the strongest performance of all labels tracked, with value sales of $74 billion globally. US consumers showed a preference for ‘all natural’ claims, products bearing this claim accounted for over $25 billion in 2015.

Overall, products in the US bearing at least one clean label accounted for $62 billion alone in 2015, followed by the UK, China and Germany, which also fuelled the trend, experiencing strong sales of products with varying renditions of clean label claims and combinations.

Historically, large food companies may have disagreed with the adage that the only thing that’s constant is change. Recipes were sacrosanct. Supply chains were rigid. The bottom line was, well, the bottom line.

However, this reluctant, sluggish approach to change has become an anachronism, and clean label products are transitioning from niche to necessary at an impressive rate.

As many major food and drinks players rise to meet demand, and as the growing consumer chorus demanding ‘all natural’ reaches a crescendo, artificial ingredients have become the villains of a largely millennial driven shift toward familiar, recognisable food and drinks labels.

For reformulation, categories remain key

Passport: Ethical Labels data show that while the strong global performance was underpinned in no small part by the performance of the aforementioned markets, there is reason to be optimistic about growth in sales of products with clean labels in emerging markets.

Brazil and Mexico combined will see absolute growth over the forecast period, (2015-2020) of over $1.1 billion illustrating that clean label is a trend that is not constrained by niche markets or consumer types.

In packaged food, clean label sales are largely derived from high consumption categories with relatively few ingredients. Dairy products bearing at least one clean label were worth over $26 billion in 2015, the category effectively leading the anti-artificial revolt.

If the fewer ingredients factor is the rule of thumb, there are exceptions to the rule. Ready meals bearing at least one clean label were worth $15 billion in 2015, showing that more complex products are not automatically excluded from playing the clean label reformulation game.

Other prevalent categories showing an abundance of clean label sales included sauces, dressings and condiments, and sweet and savoury snacks, with approximately $14 billion for each category, respectively.

Global leaders look for a clean sweep

The decision to go clean is not one that exists in a vacuum. A category where there is a heavy focus on reformulation is breakfast cereals, where clean label is quickly becoming the norm.

In 2015, clean label breakfast cereal value sales were $3.3 billion globally, the category elevated in no small part by recent commitments by General Mills to revamp its products and remove artificial ingredients from heritage brands such as Cheerios, which had sales of $960 million and boasted ‘no artificial colours’ and ‘no artificial flavours’ on product packaging.

Conversely, in UK confectionery, the movement to remove artificial colours and flavours from popular brands has become mainstream, with Nestlé leading the way, accounting for nearly half of all clean label confectionery sold in 2015, with sales of $1.1 billion.

The strength of clean label is driven by this dual pronged influence of consumers seeking natural and no artificial ingredients, and the willingness exhibited by major players to respond with clear, transparent claims on packaging, effectively forcing competitors to align their strategy with category leaders, or risk smothering the opportunity that clean label represents with a stubborn and uncompromising outlook.

Proactivity continues to trump reactivity

Reformulation is essentially self-improvement for brands. It is not asking brands to destroy the historic foundations and build from scratch, but works to re-master the product into a better version of itself or highlight the already present natural characteristics of the product.

The nuts and bolts of what this means changes depending on product, category, and approach, but the degree to which large food players have and will continue to engage with the reformulation revolution has been the first step towards making clean label products an abundant presence in retailers, no longer held hostage to the aisles of premium, health specialist retailers.

The key to success is to stay on trend with the pacesetters. Just as General Mills leads the way in clean label cereal sales, the key for other players will be discovering the practicable medium between satisfying consumer demand and remaining cognisant of the fact that while the bottom line is still the bottom line, a long term competitive advantage can be derived by harnessing transparency and accountability and rising to the reformulation challenge, sooner, rather than later.

Definitions: Clean Label claims captured on packaging – All Natural, No Artificial Additives, No Artificial Colours, No Artificial Flavours, No Artificial Preservatives, No Artificial Sweeteners, No Monosodium Glutamate, GMO Free, BPA Free

Geographic coverage:
Western Europe: Belgium; Denmark; Finland; France; Germany; Italy; Netherlands; Spain; Sweden; UK
Eastern Europe: Poland
North America: Canada; US
Latin America: Brazil; Mexico
Asia Pacific: China; Hong Kong; Indonesia; Japan; Philippines; Singapore; South Korea; Taiwan
Australasia: Australia
Africa and Middle East: Israel; United Arab Emirates

Research captures claims made on branded Packaged Food, Soft and Hot Drinks products and excludes private label (approx. 26,000 brands)

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