SPECIAL ANNOUCNEMENT:
I’m very excited to announce that 3Squares podcast is coming soon. Join me and my co-hosts Susan Schwallie (President, Food & Beverage Practice of the NPD Group) and Charlie Arnot (CEO of the Center for Food Integrity) for our conversations on the food industry. We’ll have serious, and not so serious, discussions on everything food, foodservice and grocery. Plus, we’ll be joined each episode by special guests to offer their thoughts and commentary.
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Premium meets Practical
A new company called Graza is launching premium olive oil in a new way. The brand, founded last year, sources high-quality, extra virgin olive oil from Spain and packages it into opaque squeeze bottles. Currently the company makes two varieties: Sizzle ($15/bottle; best for cooking/frying) and Drizzle ($20/bottle; best for topping and dressing). The products are available via the company’s website.
Opopop, the Denver-based gourmet popcorn company that launched the innovative Flavor-Wrapped Popcorn Kernels last year, is introducing Peel + Pour Popcorn Cups. The 1.5oz cups contain raw popcorn kernels and a flavor core that can be popped, in the microwave, using the company’s silicone microwave popping bowl. The new smaller offering, Opopop’s president Sarah McDowell recently told Nosh, is not only “supremely snackable” but also “quite a bit cheaper” than their larger packs. Flavors include Salty Caramel, Like Buddahh, Vanilla Vanilla, and Lightly Salted.
Posh Cow, a dairy company out of Kent, UK, has launched a line of whipped Welsh butters seasoned with premium ingredients. Each 150g tub has a resealable lid for everyday use or can be turned out for an elegant presentation. Its whipped texture makes it convenient right out of the fridge. Varieties include Smoked Sea Salt Butter, Blossom Honey and Cinnamon Butter, Earl Grey and Apricot Jam Butter, and Seaweed Butter. The butters are available at M&S Food and Booths.
Japanese sauce maker Kikkoman is introducing a premium line of all-natural broths that are prepared using a method similar to that used with trendy ‘pour over’ coffee. Yohaku Drip consist of small paper cones with tiny ‘wings’ that allow it to sit upright in a cup or bowl. Hot water is poured over and allowed to steep. Varieties include: Katsuo Karebushi (made from smoked, fermented, bonito fish from Kagoshima Prefecture), Katsuo Arabushi (made from bonito from Shizuoka Prefecture) and Magurobushi flavor (dried tuna flakes and Hokkaido kelp).
So What?
My parents never really took us on vacation. With five kids, the best we ever did were local amusement parks and trips to the fancy ice cream parlor. So, when I was 10 and actually stayed at a nice hotel for the first time, I was in awe; the room, the pool, the service, it was all amazing to me. However, I was particularly entranced by the small condiment containers that came with room service. Not that my parents sprung for room service, but a 10-year-old walking down a hotel hallway can pick up a lot of unused mini-ketchup and mustard jars from trays! I thought these were the height of luxury.
Today, I curse their existence. More glass than sauce, with an opening so small that no knife can enter. Meals becomes physics experiments as you attempt to calculate the correct angle, bottle force and angular momentum necessary to get out that one tablespoon of ketchup before your fries are cold. My kingdom for a squeeze packet!
Funny enough, a few years ago I was running an innovation session for a high-end condiment company when the topic of these little bottles came up. A seasoned packaging designer told me that he hated them as much as I did, but he understood why they existed. He said the brand was just following the DHAM rules.
DHAM (as in, “DHAM look at that product”) was his acronym for designing premium/luxury packaging, it stood for:
Differentiation: the look of the product must be different enough from the category norms to make it stand out on shelf.
High Quality Materials: the materials need to look and feel as expensive as the stuff inside
Authenticity: the package needs to reflect the story of the maker, versus industrialized
Minimalistic Design: busy, complex packages are working too hard to be noticed, premium speaks for itself
This simple acronym, he said, had served him well designing everything from $400 bottles of scotch to $1000 boxes of cigars. However, he warned, it had to be used wisely. High quality in an expensive bottle of scotch might equate to making it out of heavy glass, the heft was expected and pleasing on those rare occasions you indulged. However, ketchup, he reminded, is not scotch. Even if its three times line price, its still going to be used with greater frequency than $400 scotch. In this case, a heavier, unwieldy bottle becomes more of a frustration than a benefit. Premium food packaging still needs to be practical.
As premiumization becomes more prevalent in CPG, I think its important to reflect on this. As IRI recently pointed out, premiumization skyrocketed during the pandemic, with high-income as well as low-income consumers. However, we aren’t talking caviar and truffles. The top three food categories experiencing the most premiumization are pasta sauce, hot dogs, and frozen meat. We have reached an era of everyday premium, where the products may be more expensive, but they aren’t always reserved for special occasions. This means that their design needs to meet (likely exceed) the convenience benefits set by lower-priced options.
I think products like those above are just the tip of the everyday premium iceberg, a rethinking of quality products with convenient design.
Bowl Fight: Health vs. Wellness
Three new keto cereals have hit the market. First up is Surreal, a UK startup that is producing high protein, high fiber, zero sugar cereal in classic flavors. The puffed O’s, made from a mix of tapioca starch, soy protein and agave-sourced inulin, are available in four flavors (cocoa, vanilla, peanut butter and frosted). Available via the company’s website. Next is Nature’s Path Organic Foods new line of Keto cereals and granolas (sorry, Ketolas). The cereals are keto-certified, non-dairy and gluten free. Last up is a quieter launch (i.e., not on their website) of Post Holdings Incredi-Bowls. Currently offered in two varieties, Frosted Flakes and Honey Nut Hoops, the cereals are made with milk protein.
Kellogg has released a new Brown Sugar Cinnamon Special K with 100% of the daily value of 10 key vitamins and minerals. This level of fortification is a first for the brand.
Alter Eco Foods has launched a new line of organic granolas. The certified climate neutral granola, produced via regenerative agriculture, contains no sugar but is naturally sweetened with date powder and monk fruit. The product is gluten-free (excluding two flavors) and comes packaged in post-consumer recycled plastic packaging.
Cinnamon Toast Crunch has announced an expansion to their line with the addition of Cinnamoji Toast Crunch. The new brand has what are called ‘Cinnamojis,’ cereal-inspired emojis. Celebrity Cinnamojis were announced including Chloe Kim, SpongeBob SquarePants, Justin Jefferson, Leslie Grace and Manuel Turizo. Fans can also win a custom box with their own Cinnamoji, that they create, printed on the box.
So What? If you have been in the food industry for any span of time, you’ve heard the term ‘health and wellness’ thrown around. For some reason, these two terms are always stuck together. Like peanut butter and jelly or peas and carrots, their consistent verbal partnership has made them almost inseparable or even interchangeable. However, that’s a problem and a mistake, and I believe it is weighing down CPG companies’ attempts to grow.
Before I get into specifics, let’s settle on definitions, starting with health. Health is a measure of how far away something is from illness. We often use phrases like ‘heart health,’ ‘gut health’ or even ‘mental health’ to indicate whether these things are working according to spec. In other words, ‘health’ is a word meant to measure the fitness of a particular item. Contrast that with wellness. Wellness isn’t a measure of the fitness of a thing, it’s a measure of the integration of unique ‘healths.’
In other words, health is reductionist, wellness is holistic.
With that out of the way, let’s get back to cereal, a category that started with a focus on physical health. Through the decades this hasn’t really changed. The type of physical health may have shifted (from cholesterol lowering to weight loss), but cereal manufacturers consistently made physical health products. Then, a few years ago, ‘wellness’ became a buzzword and ‘health initiatives’ became ‘health and wellness initiatives.’ The problem is that, while the name may have changed, most cereal companies struggle to make real wellness cereals.
To be fair, the types of ‘health cereals’ have expanded, although most would not be considered traditional ‘health’ cereals by their makers. There were cereals for environmental health (e.g., eco-friendly), spiritual health (e.g., natural), emotional health (e.g., nostalgic), and even social health (e.g., the Cinnamoji example above), however few companies have successful blended the ‘pie wedges’ to create real wellness.
The early startup keto launches had a glimmer of wellness. They blended physical health (i.e., keto) with emotional health (i.e., the child-like joy of being able to eat a cereal from your youth guilt-free). However, so many of the latest keto launches seem less gleeful in celebrating the emotional, nostalgic side, instead retreating to physical health. Perhaps those that blend physical and environmental or physical and spiritual health will fair better?
I’m not picking on cereal makers. This health vs wellness struggle is happening all over the supermarket, cereal was just early to the fight. As consumers seek more wellness, the question remains if CPG manufacturers can learn to truly deliver on it.
The Long Arm of Inflation
Kroger and egg production company Kipster Farms announced a strategic partnership to bring the world's first carbon-neutral, cage-free eggs to retail shelves in the U.S. Launching under Kroger’s Simple Truth brand, the new eggs sustainable, zero-waste eggs are seen as a major win for Kroger's Zero Hunger/Zero Waste commitment.
GoPuff, the ultra-fast grocery delivery, has announced the launch of their own private label called Basically, (yes, the comma is part of the name). Spanning multi-categories, Basically, will include water, snacks and home essentials.
Dominos has said that they will be reducing the number of chicken wings in their $7.99 meal deal from 10 wings to 8 to offset food and labor costs. In addition, the company says that they are making the deal online only to reduce the costs of having a person on the phone take the order.
Anheuser-Busch says that they are signally a “Next Chapter” with the announcement of their new logo and visual identity. The new logo renders their iconic A&Eagle design in gold to reflect the color of beer and barley. The eagle is also facing right and in-flight to represent the company’s innovation push. Part of their new outlook on innovation is their recent partnership with Clara Foods via AB InBev’s XZ Ventures. Clara Foods specializes in production of animal-free egg protein produced via precision fermentation. The partnership allows Clara Foods to work with BioBrew, XZ Ventures’ technology venture that is looking to leverage AB InBev’s fermentation expertise outside of beer for the scale-up of alternative foods.
So What? Last week, the US government announced that inflation had hit a 40-year high. Food prices, specifically, have climbed, with the Labor Dept seeing a large spike in all 6 of the major food categories measured (dairy up 1.6%, meat up 12.8%). Most major CPG companies have passed these inflation increases on to consumers through price increases or shrinkflation (e.g., Domino’s wing reduction above). Interestingly, consumers haven’t rebelled against big brands price increases yet, perhaps due to a greater amount of cash on hand and their lack of other expenditures (e.g., less eating out, less vacation). Price elasticity (a measure of how sensitive consumers are to price change) has remained low. A recent study by Ingredient Communications company found that, on average, consumers say they would have to see a 40% price hike before they would stop buying a product. That’s on average, when you break it down to category it gets more interesting. For example, consumers said that when it came to dairy products, the price would have to rise 65% before they’d stop purchasing it. For bread, it would need to rise 62%, fresh veggies, 60%. Conversely, the highest sensitivity is in health products. Prices would only have to rise 17% for consumers to stop buying protein powder, 23% for probiotics, and 20% for supplements in general.
While private label hasn’t done well during the pandemic, partly due to the low price inelasticity and partly due to supply chain issues, that appears to be changing. Consumers are slowly turning to bulk and private brands to save cash. That might be why companies like GoPuff are making their own label play now. However, the major wins for private label, in my estimation, will likely be those categories where consumers are most price sensitive—i.e., health, natural/organic or fitness categories. For that reason, Kroger’s private label push into carbon neutral eggs starts to make more sense.
Inflation will also lead many companies to start to consider vertical investment to lower price volatility and speed innovation. While not common in CPG companies today, you see it other industries. For example, fashion houses like Gucci own python farms to control the price of snake skin for their luxury boots and purses. Could big CPG companies make agricultural investments? I can see great upside in a company like Nestle, General Mills or Campbell’s investing in precision fermentation like AB InBev. If these companies could guarantee a consistent, uninterrupted supply of inexpensive raw ingredients, it would be boon to their bottom line.
Call it inflation or just the lasting effects of the pandemic (i.e., labor shortages, supply chain issues, etc.), but we will see long-lasting effects of this in the food industry.
Things I’m Watching
E-commerce analysis site Brick Meets Click reported data last week that shows a 6.8% y/y decline in e-commerce same store sales at US supermarkets from September 2020-September 2021. Stores that offered both pickup and delivery faired better than those that offered only one of the options.
Business Insider reported last week that connected fitness bike maker Peloton was pausing all future equipment manufacturing due to a significant drop in new orders. The report, apparently sourced from anonymous employees, was denounced by Peloton’s CEO, John Foley, in a memo to the whole company. Foley said that the pause was merely a ‘right-sizing’ of the company’s portfolio.
So What? We are still in the mess of the latest Omicron wave, but this could be a sign of a post-COVID adjustment. For the last two years, pundits have been predicting that COVID would fundamentally change the public’s behavior. We’d fully embrace e-commerce for groceries and ditch the gym for good. The problem with this assessment was that it was made absent good data and real empathy. Sure, there were a lot of surveys asking people if they would stay with ecommerce after the pandemic, but asking consumers to predict future behavior is fraught with problems. Not to mention that most average consumers can’t afford to order all their groceries or buy an expensive pieces of exercise equipment and subscriptions (i.e., a point missed by rich pundits). Which makes all the other COVID predictions questionable. Will people continue to cook at home? I doubt it. Just look at the success of Uncrustables in the last year—record-setting! If kids weren’t going to school with a lunch and frozen sandwiches were knocking it out of the park, there was a lot of ‘not cooking’ going on. Net-net: post-COVID will likely look a lot like pre-COVID on the surface. The real changes will be structural (supply chain, automation) and small boosts in technology (e.g., single-digit growth in e-commerce).
Virtual Dining Brands, the company behind some of the popular virtual brands of the last few years (e.g., Mr. Beast Burgers, Barstool Bites, Mariah’s Cookies, etc.), has announced the launch of TikTok Kitchen. The delivery-only concept will offer meals made popular on the social media site.
So What? If you’re an ‘old’ like me and don’t spend much time on TikTok, you might see this launch as a ridiculous cash grab. However, a recent survey from Instacart (2021 Year in Groceries) might just change your mind. According to their Harris poll, 44% of shoppers say they’ve tried making a social media food trend this year, and 36% said social media has changed how they cook at home. Of those that said they’ve tried a social media trend when cooking, a whopping 90% said they added at least one dish to their regular cooking rotation, and 11% said they added more than five. It appears that social media has a profound affect on the way people cook. Whether the best way into that is a virtual brand is anyone’s guess, but it definitely should say something about your own marketing strategy.