In today’s newsletter:
Excitement Tiering: From boring to bold
Ice Cream’s New Age: Frozen snacking
What’s Wrong with Pet Food?: Where is premium pet food going?
Bread is Back: Now including fun
Tidbits: Quick links to fun and interesting food news
Did you miss the last newsletter? Find it here
The Wizard of Oz Strategy
Doritos Australia is launching a Coriander flavored (i.e., Cilantro for US readers) version of their classic chip. The extremely limited edition chip (mostly just a giveaway) is being advertised with ads declaring “Boldly fragrant & Indulgently Soapy Chips,” playing on the fact that some people genetically perceive cilantro as soapy.
Jack Links and Frito Lay showcased a crossover snack called Jack Link's Fritos Chile Cheese Jerky at last week’s NACS (National Association of Convenience Stores) show. The product is 100% beef flavored with the corn chips brand’s “bold taste” smoky, cheese flavor. The product will be available in convenience stores nationwide.
Simple Mills has launched a new Vanilla Cupcake & Cake Mix. Made from seven “nutrient dense” ingredients, the mix is certified gluten-free, grain-free, and corn-free, and is sweetened with coconut sugar. The mix is available online or in stores.
Trader Joe’s has launched Garlic & Black Pepper Almonds. The nuts are made from “a simple suite of savory seasonings (black pepper, sea salt, and dehydrated garlic and onion)” and are available in store.
Trader Joe’s has also launched an All-Butter Sugar Cookie Dough. The 16oz chub contains ready to bake all-butter dough that can be sliced or used in other holiday creations. The limited-edition offering is available in stores.
Emmy and James Beard award-winning chef Andrew Zimmern has launched a line of frozen meals called By Andrew Zimmern. Available exclusively at Walmart, the comfort food-centric offerings come in the following varieties: Pulled Pork Mac & Cheese, Meatloaf, Turkey Dinner, and Swedish Meatballs.
Chicken of the Sea has launched a new range of seasoned tuna and salmon pouches. Some of the new flavors are co-branded (e.g., Thai Kitchen Sweet Red Chili Tuna, McCormick Lemon Garlic, McCormick Dill) whereas others are not (e.g., Everything Bagel Salmon, Maple Smokehouse Salmon). Available at retailers.
So What? Have you heard of Goldilocks Pricing? This is an old pricing strategy where one company creates products in a specific category that are ‘good, better, and best.’ Retail examples of this are Old Navy, Gap, and Banana Republic—one master company spread over three pricing strata. In CPG, Anheuser Busch makes Natural Light, Budweiser, and Goose Island. The rationale for this strategy is that no matter where your consumer enters the category, your company is sourcing volume. Also, because you have a voice at each tier, it’s easier to ‘trade up’ consumers to the next level.
Goldilocks pricing has been around for more than 100 years (Sears used it in their famous mail order catalogs) and it works quite well. However, I think we are starting to see a new type of tiering within CPG, something I call The Wizard of Oz strategy. This is when a company purposefully offers a range of products and varieties at different excitement levels, from benignly basic to radically bold. This can be under just one brand, or it can be several brands under one company.
The beginnings of this strategy can be traced back to Oreo and Starbucks, who have made a point of launching increasingly strange LTOs over the past ~10 years (e.g., Swedish Fish Oreo or Unicorn Frappuccino). From the outside, these launches may have seemed random, but if you peek behind the curtain (Wizard of Oz reference #1), they were quite purposeful. While these LTOs may have had minor success, the real strategy was to bring consumers back to their core products (because everyone goes back to Kansas in the end; Wizard of Oz reference #2).
Today, brands are learning that they must offer multiple tiers of excitement to draw and retain consumers. Even Trader Joe’s, a retailer known for trendy and uniquely flavored products, now makes a point of launching plain cookie dough. If a consumer must leave TJ’s ecosystem to source a basic product, it’s possible the retailer will lose overall volume. So, the company must find the balance between provocatively quirky and comfortingly simple.
CPG brands are learning something similar. While it’s fun to be the brand that’s wild and fun, sometimes consumers just want plain. If you don’t ‘own the spread’, you run the risk of having only limited success. On the flipside, if you only deal in basic, simple flavors, you might be typecast as boring (and few consumers want to identify themselves with that). So, providing the choice (either through LTOs or via another brand in the category) allows you to retain attention no matter a consumer’s need for excitement.
However, the question then becomes “how to find the balance?” and “what to launch?” This is likely where AI and data will show its strength. Michigan-based Founders Brewing Company was recently profiled in FoodDive discussing how they have utilized Sales data to help them create the right mix of beers and the right varieties to keep their core audience interested. I can see a future forecasting AI tool (i.e., the Wizard) that can help companies balance their excitement mix and point teams in the direction of what will engage their core and new users.
Ice Cream Disruption Round 2
London-based frozen sweet brand Doughchi is out with a new Sweet & Salty Popcorn flavor. The new product, like the others in their line, consists of flavored cookie dough wrapped around a core of ice cream. The 2-bite treats are available online or in UK stores.
LA-based ice cream company CVT has a cult-following in California. Now the brand has launched CVT2Go, a portable version of their famous soft serve. Each pouch contains the brand’s chocolate or vanilla soft serve, an experience previously only available from their ice cream truck. Made with 7 natural ingredients, the pouches are available in the freezer case of LA area stores (and via DoorDash).
Freeze dried candy company Sow Good has rapidly grown in popularity thanks to social media interest in freeze dried sweets. Now the company is branching out into a new line of Crunch Cream Freeze-Dried Ice Cream Sandwiches. The new sandwiches come in two flavors Vanilla and Neopolitan.
Hershey is launching a frozen treat that is a hybrid fruit and chocolate. Branded with iconic Hershey brands (like Reese’s), the Frozen Fruit product combines a core of real fruit and a chocolate coating. Varieties include Reese’s frozen banana, Hershey’s White Crème and Milk Chocolate Blueberry, Hershey’s Cookies and Crème Strawberry, and Hershey’s White Crème and Milk Chocolate Raspberry. No word yet on full distribution of these TruFru-like offerings, but they may be a Walmart exclusive.
BFY ice cream and frozen yogurt brand Enlightened is out with a line of frozen yogurt barks. The barks are made with combination of fruit, chocolate and Greek yogurt. While not yet showing up yet on the brand’s website (potentially a Walmart exclusive), the varieties include Pineapple Coconut, Triple Berry, and Banana Peanut Butter.
So What? Ice cream is an old and established category. We’ve had tubs, pints and novelties for nearly a century. However, in the last decade we saw the category get disrupted with lifestyle innovation, keto and other low carb offerings that gave people permission to eat ice cream again. Now that that phase seems to have subsided (Halo Top saw a 43% sales decline in 2022 off their peak), it appears that the industry is turning to snacking and convenience for its next growth spurt. Through a combination of portability, portionability and ‘freshness’ (i.e., fruit, yogurt, etc.), frozen treats are exploring new territories of snacking. Therefore, it makes sense that a snack brand like Hershey (or Mars with TruFru) is making quick in-roads. Hand-to-mouth frozen may very well be the next frontier in snacking.
Is Pet Food in a Rut?
Post Holdings announced last week that they were acquiring the assets of Perfection Pet Foods for $235 million. Perfection is a manufacturer and packager of private label and co-manufactured pet food and baked treat products. This follows Post’s purchase of several pet food brands from J.M. Smucker’s (Rahael Ray, Nature’s Recipe, Kibbles and Bits) earlier this year.
Japanese brand DoggyMan has launched a lactose-free Puppy Milk for dogs of all ages. Made from Australian fresh raw milk, the product contains vitamins, minerals, calcium, and taurine. It also has lactose-degrading enzymes, vegetable fats and oils, and yucca extract to help with digestion and reduce fecal odor. Available on Amazon and in retailers in Japan, Singapore and the Philippines.
Korea-based company Youngin Bio, is expanding their hit product (originally launched in Korea under Ansim Daengmyeon) into the Philippines under the brand Dr. Pat Pat. The new product is an instant noodle designed specifically for dogs. The salt-free noodles contain beneficial bacteria, turmeric, egg yolks, apple, chicken powder and sweet pumpkin.
Phelps Pet Products’ Disney Table Scraps line of dog treats was recently named Upcycled Dog Treat of the Year by the Independent Pet Innovation Awards. The line contains 7 dog treats and 2 cat treats, all featuring favorite Disney characters.
Turkish pet food brand Bonacibo has launched an a ’la carte line of cat and dog foods targeted based on energy levels. Each of the 12 formulas utilize specific nutrition based on the energy needs (and output) of the pets.
Australian pet food brand Billy + Margot has launched a new Salmon+ Superfood line for puppies. The grain-free foods contain not only fish but also superfoods like coconut oil, manuka honey, alfalfa, cranberry, pumpkin blueberry, carrots, chia seed, ginger root, turmeric, spinach and kale.
Japanese company AIXIA has launched Myu Myaw Juicy Feast, a line of cat foods containing a-i peptide, a “unique ingredient that helps reduce stress in cats, enhances the taste and is more easily digestible than normal protein.” The product consists of fish and shrimp flakes in a soft jelly.
So What? Post’s recent acquisition is just the latest in a “land rush” for major CPG companies to get into the pet food business. Seeing a decline in traditional categories, these companies are looking to realign their portfolios into higher margin growth businesses.
However, the waters are getting rough. General Mills recent Q1 earnings showed net sales growth of 4%, with top line improvement but a bottom line decline (y/y). The challenge is coming from the declining cereal category but also a flattening of Pet sales. As supply chain costs have increased and the company has had to take pricing, it looks like consumers are retreating to more value offerings in pet (and the return to work isn’t helping, potentially impacting treats and wet food).
This is odd. One of the reasons big CPG companies are rushing into Pet is that it is historically stable in rough economic times. I think a few things are happening:
As big CPG companies have come in and bought up smaller players, they’ve ‘raised all boats.’ What was once a category with either ‘decent’ or ‘dreck’ is now much more solid in terms of quality products and smart marketing. This makes pet owners feel safer about migrating to other brands.
The arrival of the oxymoron ‘premium value’ brands, like Nature’s Menu at Dollar General. For cash strapped consumers, this brand hits the look, feel and (most importantly) price that they are searching for. Meat is the #1 ingredient, its free of soy and fillers, and contains pre/probiotics. In essence, it sounds like every other dog food on the market. Which takes me to…
Too much of the category feels the same. The forms are the same (dry or wet), the flavors are the same, and brand promises are becoming more consistent across the board. Everything focuses on being free of artificals, meat-centricity, and (increasingly) reflects on the ‘natural’ diet of the animal. All of which has its place, but it’s definitely a niche way of thinking. More and more, as I walk into the pet food aisle, I think to myself “did Whole Foods designed this category.”
So, barring one of these big CPGs going the value route, where is growth going to come from? How will someone re-disrupt Pet?
Of course, the answer will come from understanding pet owners. At a macro-level, from my experience, pet owners (dog owners specifically) view their dog in one of three ways. These greatly affect how they feed their animals:
1. Perpetual Puppies: These are owners that see their dog as a puppy or baby no matter how old they are. They likely refer to them as ‘puppy’ and shop for them like a parent would a newborn (think organic, natural, free from).
2. Companion Preservers: These are pet owners that see the animal as a friend. They lean on them for companionship and emotional support and dread the fact that they have such limited lifespans. These owners focus more on the health aspects of food for longevity and vitality (e.g., shiny coats)
3. Joy Maximizers: These are owners that see the finite natural of their dog’s life and think “Let’s live it up!” They make sure the dog has adventures and lives an unrestricted life. They tend to feed their dog whatever they want, from steak and eggs to ice cream.
While supply chain efficiencies and catman competencies will definitely have a major impact on who wins in Pet, the true differentiator will come from innovation. Specifically, innovation from a deep dive into one of these three Owner Types (and likely form breaks from existing SKUs). As you can see from some of the products listed above, there is a lot of interesting innovation coming from markets outside of NA, each hitting on different mindsets of the pet owner.
Joyful Bread: Worth It
Arnold, Brownberry, and Oroweat (Bimbo brands) have announced the nationwide expansion of their Grains Almighty line. The bread contains natural ingredients and targets specific consumer concerns in terms of Gut Health (whole grains, prebiotic fiber, and sprouted grains) or Plant Protein (sprouted whole grains, chickpea flour, and pea protein). Grains Almighty is available in major retailers.
English muffin maker Thomas’ is launching a new line of Croissant Bread. The product blends the familiarity of a bread loaf with the lamination (i.e., flaky layers) of a traditional croissant. The brand recommends consumer toast the bread and enjoy its unique texture. Available at retailers nationwide.
King’s Hawaiian, makers of the iconic sweet bread, are out with a Rainbow Bread and a Coconut Macadamia Bread. The swirled Rainbow Bread contains no artificial colors but instead is tinted with turmeric and paprika. The breads are available online only.
Take and Bake Pizza chain Papa Murphy’s is out with new Monkey Breads. The pick-apart breads are available both sweet (cinnamon with icing) or savory (garlic with marinara). The breads are available at participating Papa Murphy’s.
So What? After years of carb restriction, consumers are going back to bread, with levels of consumption expected to return to levels not seen in years. However, consumers aren’t consuming plain, boring bread anymore. If they are going to eat bread now, it must be worth it. That can mean it’s full of nutrients (see Grains Almighty or Dave’s Killer Bread), but it’s increasingly taking an indulgent bent as well.
Consumers are asking of bread “Is it providing adequate and enhanced nutrition” or “is it bringing more joy to the meal.” Many consumers learned how to cope with meals without a starchy side, so if bread is only a bland carrier, they can do without it.
It started in foodservice (everyone wants to put your burger on a brioche bun now) and it is working its way into retail. We are entering a new era of joyful bread.
Things I’m Watching
Cheerie Lane is introducing their line of Popcorn Pods. The pods, shaped like small ears of corn, are made of heirloom corn, cacao butter, and seasoning. To make, the consumer places the pod in the bottom of a pot, covers, and heats until popped. Varieties include Butter, Rosemary Garlic, Tomato Basil, Spicy, and Lemon Black Pepper.
DripKit Coffee (a division of NuZee) has partnered with La Colombe Coffee Roasters to launch a co-branded Dripkit, a single serve pour-over kit that contains 17 grams of freshly roasted and ground coffee. The DripKit is a self-contained device that allows users to prepare a single cup of pour-over coffee. Available this month.
So What? Popcorn and coffee are currently popular with startup companies. However, from what I’ve seen, most innovation prioritizes ‘cleaner’ versions of modern, convenient methods. So, we see BFY versions of microwave popcorn or coffee concentrates. However, these two products above are different. They offer a convenient spin on the old school method of preparation. While both products require more work than many of today’s convenience products, I wonder whether their return to older prep methods give users a stronger feeling of doing it the ‘right/better way? It will be interesting to see if more products like these are launched.
Walmart made big food news last week when the company’s U.S. CEO, John Furner, told Bloomberg News that Walmart was seeing signs that people taking GLP-1 agonist appetite suppressant medications are buying "less units, slightly less calories." Shares in Walmart (and some snack makers) fell on after the comment. Very quickly, Walmart and Morgan Stanley (who did some of the retailer’s analysis) released a statement clarifying that while total food spend by these users dropped, total basket actually increased as these customers bought more in lifestyle, fitness, and "medications to relieve side effects of the drug."
So What? Should food and bev companies panic or have patience here? While I’m not advising companies to be blasé about this Walmart announcement, I’m telling all my clients to remain calm. As Morgan Stanley noted, this was a very small sample size, plus when you dig into their report, you find they estimate that 7% of the population could be on these drugs by 2035. While that number is significant, that doesn’t likely reflect the number of people that will stay on the drug (i.e., all the research to date has been done under clinical trials, some with drug recipients receiving counseling in addition to the drug). I would suggest companies take their time in understanding would the future might look like in the real world, versus jumping to conclusions.
Honestly, the most interesting think about Mr. Furner’s comments were not about these drugs, but the company’s ability to hash the data from their pharmacy with their grocery. This speaks volumes about the future of retail juggernauts (e.g., Amazon and Walmart) and their move into health and pharma. What insights can they bring to bear looking at other pharmacy and food data?
TIDBITS
· Fast food drive thru wait time times are shrinking
· Mr Beast will advertise his Feasables snack brand on a patch on the Hornets’ jersey
· Chipotle tests automation for burrito bowls and salads
· Krispy Kreme looks to sell Insomnia Cookies unit and focus on doughnuts.
· Which restaurant is the best indicator of mall’s financial health?
· Popeyes surpassed KFC for the second-place spot in the US chicken chain rankings. Chick-fil-A remains on top.
· American baseball teams are having a hard time convincing the Japanese to eat peanuts at games
· Avocados should have gone extinct thousands of years ago
· Our sense of smell affects our vision
· California bans four food additives
· Every State's Most Popular Halloween Candy
· Why some California restaurants are now charging ‘vomit fees’ at brunch
· Alaska Airlines and Stumptown partnered on a new coffee that doesn’t taste bitter or weak at high altitudes