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Craving fresh over fake: How the growing trend is making waves in packaged foodsTuesday, August 05, 2014 > 08:58:36
Fresh is better than packaged or fake. It’s a broadening consumer sentiment underlying tepid sales at Coca-Cola and Campbell Soup Co. that has sent packaged goods makers scrambling in recent years.
Fuelled in part by nutrition experts advising people to avoid artificial sugar substitutes as much as or even more so than the diabetes-stirring alarm of real sugar, Coca Cola’s quarterly sales fell short of Wall Street estimates on Tuesday amid ongoing weak demand for Diet Coke in North America. Coke’s sales rose 3% globally, but a decline in its artificially sweetened signature soda in North America was one key culprit behind flat sales on its home turf.
“Negative consumer sentiment regarding the high-sugar content and the low nutritional value of [regular] colas remains at the fore [of a consumer pullback from carbonated drinks],” said Svetlana Uduslivaia, senior research analyst at Euromonitor International.
“But many are now questioning the health implications of consuming artificial sweeteners such as acesulfame potassium, aspartame and sucralose, that are commonly used in low-calorie sodas.”
In general, consumers are much savvier than they were in the past about the contents of packaged food, she said. “There is basically a tendency towards fresher and more natural, as well as more wholesome, products,” Ms. Uduslivaia said of declining or weakening sales in products such as diet soda and margarine.
“It doesn’t mean that what you call ‘fake’ products are disappearing. It is a still a huge business in terms of actual sales, and not every consumer is on a health and wellness trend, or agrees with it.”
On Monday at a meeting of Campbell Soup Co. investment analysts, chief executive Denise Morrison touched on the changes, citing a “new normal” in packaged food. “Consumers are clearly demanding greater transparency about their food,” Ms. Morrison said. “They want to understand how it is grown, produced and marketed.”
Campbell lowered its net sales guidance for 2014 in May to 3% growth from its prior estimate of 4% to 5% after reporting disappointing third-quarter results.
The company has reduced the amount of salt in its traditional products such as canned soups while diversifying other lines to keep up with consumer trends. Its Bolthouse Farms division is debuting a new children’s food line in August that will include smoothies and vegetable snack packs with no added sugar. And its V8 line has expanded to compete with the fresh juicing trend: the V-Fusion line includes flavours such as Pomegranate Blueberry, which incorporates sweet potatoes, purple carrots and tomatoes into the fruity beverage.
Consumers’ gravitation towards all things perceived as fresh is also making waves in the foodservice sector, with more people flocking to fresh-prepared “fast-casual” chains such as Chipotle over old-school burger chains like McDonald’s.
The largest restaurant chain in the U.S. fell short of analysts’ second-quarter profit estimates Tuesday amid ongoing weakness in its home market, where same-store sales fell 1.5%, compared with a 1.7% decline in the previous quarter.
This month, McDonald’s finished behind 20 other hamburger chains in a Consumer Reports ranking of fast-food chains. In-N-Out-Burger was named the best hamburger chain in the U.S., based on food quality, value and service, followed by The Habit Burger Grill and Culver’s.
“More and more, food quality — not just low price — is emerging as a deciding-factor for many Americans,” said Tod Marks, senior projects editor for Consumer Reports, told Reuters this month.
In packaged goods, the trend can be seen when it comes to margarine and spreads, which account for 7% of the US$66-billion in annual revenue at consumer packaged goods giant Unilever PLC. Per capita butter consumption hit a 44-year high in 2012 and margarine reached a 70-year low, according to U.S. government data.
In Canada, market research firm Euromonitor International predicts a combined annual volume growth rate of just 0.84% in the spreadable oils and fats category, which includes margarine, between this year and 2019, compared with growth of 2.7% in the 2009 to 2013 period.
“What used to be considered a specialty item is not so much anymore,” said Fiona Birch, a principal at Toronto marketing firm Tonic Global who has a background in health science and nutrition.
“A few years ago people were just concerned with ‘how much salt, how much sugar and how much fat?’ People are now wondering is it organic, is it a whole food, is it GMO-free? You see mass marketers are jumping on it — you’ve got Becel marketing a spread made with olive oil instead of always promoting its low-fat qualities.”
Last fall Unilever began blending butter into its Rama product line, Germany’s biggest spread brand, and into a spread line sold in Finland.
The shift away from diet soft drinks illustrates perhaps the most profound example of shifting consumer tastes.
The U.S. trade publication and data service Beverage Digest estimated U.S. retail sales of carbonated soft drinks fell 1% to US$76.3-billion in 2013, the first downturn in dollar terms in at least 15 years, The Wall Street Journal reported earlier this year.
Sales volumes of full-sugar Coca-Cola fell 0.5% last year and Diet Coke sales plunged 6.8%; Pepsi-Cola dropped 3.6% and Diet Pepsi fell 6.9%.
In Canada, Euromonitor predicts a combined annual volume decline of 1.78% in diet pop between this year and 2019. Volume in diet soft drinks has been on a downward slide for the past three years, with sales volume falling 4.53% last year.
“We are seeing some stevia-based products making their way into the marketplace,” Ms. Uduslivaia said. “It remains to be seen whether these will make any difference in the overall performance.”
Coca-Cola has planned to introduce a low-calorie cola drink sweetened with stevia, a calorie-free plant-based sugar substitute, in the U.S. The beverage, Coca-Cola Life, has been introduced in Argentina.