presentation presented by successful nutrition science in the global market

Presentation

Presented by

Successful nutrition science in the global market

NEW NUTRITION BUSINESS

Director of a company dedicated solely, since 1995, to researching, analysing and forecasting developments in the business of food and health, globally.

Offices in London, New Zealand, US and Finland.

Publishes New Nutrition Business.

Julian is also co-author of Functional Foods Revolution, the best-selling (54,000 copies sold) and first-ever book on the business of functional foods, now translated into Japanese. He is also co-author of the The Food & Health Marketing Handbook.


Consumers may say in research that they know that:

“This nutrient is good for me.”

“I should have more of this good thing in my diet.”

“Environmentally friendly packaging is important to me.”“I am interested in the carbon footprint of what I buy.”

But getting them to translate that into making a sustainable choice or a healthier choice when they are in the supermarket is driven by their beliefs about:

• Taste

• Price• Convenience• Packaging design• Their beliefs about “what is right for me as an individual” and “the future of the planet”

The challenge

Technology, health and environment

• Yoghurts that are organic, GM-free, free-from rBGH (bovine growth hormones)

• Company donates 10% of profits to organic farmers to help them convert and invest in improving their production.

• Plants enough trees each year to off-set its CO2 emissions and is a carbon-neutral company.

• Undertakes social campaigns, such as carrying pro-gun-control messages on its yogurt lids

• No advertising, the advertising budget is used to fund the communication campaigns of child poverty action groups

• Ingredients include the patent-protected, clinically- proven probiotic L. reuteri from Sweden’s BioGaia and fructo-oligosaccharides (inulin) from Belgium’s Orafti

• No health claims on the label

• Brand marketed on consumer benefits and wellness, not on ingredients and disease-prevention

• Growth from zero to a US$300 million brand.

• Today the company is owned by Danone.

• Stonyfield Farm founder and CEO Gary Hirschberg became Danone’s chief strategist in North America.

Technology, health and environment

Danone grameen bank

But who makes the money?

In 2002 (the year Stonyfield sold out to Danone) the brand had retail sales of $300 million.

Of this:

• The retailers earned $100 million• Stonyfield earned an 8% pre-tax profit ($24 million) after all costs.• BioGaia – Stonyfield was its biggest customer – had total company sales of $2.8 million and was showing an operating loss of $1.8 million

This brand made money for everyone except the people who had done the science on which it was based.

Who earns what

Few technologies turn a profit

The flaws in science most commercialisation models are more apparent than ever.

2001 on behalf of a client we reviewed 50 IP-based nutritional ingredient businesses in Europe and North America.

Criteria included must already have some commercial sales, must be established five years or more.

Of the 50 only two were making a profit

Reviewed same group 2003, 2005, 2008.

Only six now making a profit, some disappeared, some absorbed by larger groups.

Forbes Medi-Tech: What science commercialisation often looks like

Total sales 98-08 C$62m (NZ$86.5m)Cumulative losses C$106.5m (NZ$148.5m)!Capital invested over C$100m (NZ$140m)!

A path to commercialising science can only be based

on understanding consumers and markets…


Natural Free-from preservatives Free-from pesticides Dairy-free Lactose-free Wheat-free Gluten-free Sugar-free Reduced-sugar Reduced-fat

Today’s market for “health” is fragmented into many, often overlapping, niches - which means that nutrition-oriented products most often perform as niche products.

“Health” has fragmented

MASS MARKET

TIME

SALES

• Healthier products and ingredients appeal initially to early adopters and gradually evolve towards the mainstream.

• Very few science-based products have yet made it to the mainstream.

• The time to commercialise is long - plan for ten years.

The nutrition science life-cycle

EARLY ADOPTERS

- People with illnesses and

allergies to fix and the “lifestylers”

Source: Food & Health Marketing Handbook, Mellentin & Wennström

Volume

Unit selling price (price per litre)

LIFESTYLECONSUMERS

MASS MARKETCONSUMERS

TECHNOLOGYCONSUMERS

Products that talk about medicalised benefits appeal most (only?) to those who need those benefits right now

Sales of cholesterol-lowering products are niche! Even in Europe. Rarely do they account for more than 3% of any market (measured by volume).


LIFESTYLECONSUMERS

MASS MARKETCONSUMERS

TECHNOLOGYCONSUMERS

The lifestyle consumer

• An early adopter if the product supports their self-image.

• Willing to pay a price premium for health – but want ”wellness” products

• Skews to higher income, education and age.



Digestive health brand Activia is marketed with the same messages everywhere:

Helps improve slow transit

Helps improve digestive transit time

Supported by message that helps reduce bloated feelings – a key message for women everywhere.

Benefit can be experienced by the consumer

The concept “works” across all cultures and has created a €2.5bn brand (NZ$5bn).

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Feel the benefit…


MASS MARKET

• Unwilling to pay a premium price• Prefer to get their benefits from trusted brands• Very slow to accept new ingredients – and may reject anything they have not heard of, even from a trusted brand• Few examples of mass-market success


The mass market consumer

NICHE MARKETS EARLY ADOPTERS


Pom Wonderful sales >$95m per annum.Despite selling at a 400% price premium to rival brands.

Supported by $12 million of research into the heart health benefits of pomegranate juice.

Minute Maid HeartWise achieved sales of $35m before falling to $20m.

Consumers prefer natural benefits over added science


Feel the benefit…


“Feel the benefit” – what consumers want most

One of the biggest advantages a product can have is to deliver a benefit that the consumer can quickly see or feel.

A benefit that consumers can feel is the underpinning of many successful brands and will become an even more important in a world in which people are becoming more careful about how they spend their money.

When people can feel the benefit that is being offered to them, they can see that they are getting value-for-money.

The best examples are:• energy drinks• products for digestive health

The two largest segments of the functional food and beverage markets.


Convenient energy for mature consumers – the most successful idea of the last two years

Carl Sperber, the marketing director for Living Essentials, which makes the successful energy brand 5-Hour Energy:

“We’ve found an audience among working adults. If you’re a 35-year-old man or a bust mother, do you really want to be seen with a product called Monster, Freek or Power Horse?”

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Energy – new market segments await discovery

US market leader and new category creator is 5-Hour Energy:

- 2008 market worth $250m

- 2009 will be $700m

Despite recession.

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2,000,000

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1 2 3 4 5 6 7 8 9 10 11 12 13

5-HOUR ENERGY

TOTAL OTHER SHOTS


Energy drinks – another Asian innovation

Red Bull has been on the market in Thailand.

Red Bull in the west is still 50% owned by Thailand’s biggest brewing family.

Energy shots are also an old idea in Asia…

Otsuka Pharmaceutical’s Oronamin C energy drink brand is the biggest functional food brand in Japan, with annual sales of over JPY42 billion ($475 million/€317 million).

Launched in 1965, it sells in a 120ml bottle.


New energy shots category grows in recession despite super-premium pricing

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Digestive health – the biggest trend

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NEW NUTRITION BUSINESS27

Italian economy shrank by 6% - Activia salesgrew by 19.5%, to €222.5 million (NZ$450 million), despite selling at a 100% premium to regular yoghurts.

“It doesn’t have broad penetration among consumers but rather dedicated usage amonga narrow slice of consumers – sales are driven by about 5% of consumers.”

Source: Danone

Digestive health beats recession


• The US economy shrank 6% in 2009, but General Mills Fiber One grew by 20%, to total sales of over $225.28 million (€149.8 million).

• Despite selling at a 50%-80% premium (compared on a price per kilo or price per ounce basis) over competing cereals.

Digestive health beats recession


Anlene: the expert brand in movement and bone health

Fonterra Brands’ Anlene, the world’s biggest clinically proven bone-health dairy brand.

Annual retail sales in Asia in excess of $300 million (€200 million) and an average 75% share of the high-calcium milk market – despite selling at a 100% price premium to regular milk.

Concentrate provides four times as much calcium as 250ml of regular milk.

Clinically proven brand.

But how does the consumer feel the benefit?


Demonstrate the benefit


Omega-3 products don’t deliver a benefit you can feel…

Müller Dairy dropped omega-3 from its Vitality yoghurt ingredients because it “didn’t make any difference” to consumers.

According to Nielsen data, Australian sales of omega-3 milk have declined by up to 30%.

Consumers not willing to pay 60% premium for omega-3 milk vs regular milk when benefit is not clear value-for-money.


Whole fresh fruit is simply not convenient enough for today’s consumers. Even fruit companies, such as Australia’s Ardmona, must offer ‘fuss-free fruit’.

Convenience: what consumers want most


Innovation in packaging is needed to make innovation in

science commercially successful.

Many of the profitable niches of the last ten years are the

result of packaging innovation + science.

Packaging signals “this is different”

Innovation in packaging creates new markets


“Benefit to me” - the key driver of choice


SUV vs “Pious”

Two houses side-by-side in same neighbourhood, same type of family homes, both households Generation X, both with kids of same age, with similar education and incomes – but different Individual values.

STREET PIC OF PRIUS next to SUV


Are environmental concerns a key driver for food?

“History does not repeat itself – people do.”

Winston Churchill

The trigger for change is when the personal benefit of changing becomes clear. And even then…

The Greenland Vikings did not respond to climate change and the depletion of their natural resources.

They were very reluctant to change their food habits:

• continued to try and produce dairy and meat even as climate change made it more difficult and eventually impossible. • refused to substitute with increased consumption of fish (even though these were super-abundant in Greenland) owing to low social status accorded to eating fish


To change people must feel the benefit…

Those at the bottom of the Viking economic pile were hit first and experienced hunger and deprivation.

Those at the top were able to maintain their lifestyle and consumption habits right up to the point where their society could no-longer function.

Without clear incentive people change very slowly.…

Report on the first academic conference on the psychology of climate change, March 2009.


First step on long road to consumer carbon awareness

Tesco has trialed carbon labeling on orange juices and potatoes

PepsiCo uses it on many products

Many Scandinavian brands use carbon labeling

2007 Tesco told suppliers who were air-freighting product they must place a “by air” label on product because of consumer concern shown in research

Tesco supplier ScotHerbs in Scotland was air-freighting fresh herbs from Israel and Tenerife

This family-owned company was afraid it was going to spell trouble for their business….

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Summary

• Whatever challenges we face in the environment, whatever health benefits you offer, people will respond slowly and only when the benefit of change is very apparent and personal to them.

• Consumer markets are fragmented into many niches, driven by a wide range of benefits and “values”.

• Accept the future of niches, choose your niche – focus on that totally, become an expert in that niche.

• Get as close to the consumer as possible – that is where value is captured most.

• Focus on convenience and packaging innovation.


Thank you for your attention

Contact: [email protected]

Or visit: www.new-nutrition.com

presentation presented by successful nutrition science in the global market

Documents

environment slide

challenge slide

global market slide

business of food

danone grameen bank

health claims

biogaia stonyfield

business of functional