While trying to keep up with increased demand during the pandemic, fermented food brands can’t lose sight of their core values and business strategy.
The COVID-19 outbreak has altered retail sales, with fast-paced, constantly changing sales and production cycles. Customers are going out of their way to find natural and fermented products, believing healthy food will be one of their best defenses against the global virus. But there is also pressure on pricing, with soaring unemployment and large segments of the economy shut down.
Dan Lohman, author of Brand Secrets and Strategies, says brands that sacrifice quality in order to compete on price will suffer.
“We as a natural (industry), we need to do everything we can to help leverage this storm,” he says “The mainstream retailer’s Achilles Heel is price – and you’ll struggle to compete if you just think about price. … Don’t apologize for quality. Always, always focus on the quality of the product.”
Lohman, an organic and CPG industry strategic adviser, shared business advice in a webinar sponsored by Whole Foods on “How Do You Future Proof Your Store in Uncertain Times.” Here are four of his strategies to help brands survive the pandemic.
1. Focus on Quality
As consumers experience wage loss and unemployment, brands will be tempted to drop their prices and offer a cheaper product. Lohman calls this a tired strategy.
“When you’re thinking about gluten-free, plant-based, some of these other things that we champion that start in our industry, these are the things that are driving sustainable sales across every single channel,” he says. “We should never have to apologize for good quality. Understand it’s our products, our industry, that’s responsible for growth across every category.”
Nielsen Data shows total U.S. food sales are up 1.9%, but natural and organic sales are up 11%.
The modern consumer frames their shopping list by the adage “You are what you eat.” They know eating a healthy, nutritionally dense food will keep them full for longer than a cheap, generic product.
“If I buy the cheap generic bread, I’m hungry almost before I finish eating it. If I eat the best mainstream bread, I may be satiated for a few hours. But if I eat the organic bread and that organic bread provides me the nutrition I need, that might satiate me longer. Even though I’m paying more (for the organic bread), I’m paying less overall. That’s the argument this industry needs to make,” he says. “Unfortunately, this is where we need to rethink how we need to go to market. Its not about price, its about value.”
“Focus on that, focus on how you are delivering that real value to your customer.”
2. Know Your Shopper
The natural shopper stereotype is someone who eats a salad and takes a walk. Defining the shopper in a small scope is limiting. Today’s natural shoppers are diverse and united in a common purpose: craving healthy food.
“Creativity is our single greatest asset. This is how we stand out on a crowded shelf. This is all about having a purpose. Natural is really good at that because were all purpose driven,” Lohman says.
3. Maintain a Score Card
Critical during the pandemic is continuing to track sales measurements. Brands need to tell retailers average turns, anticipated sales, ideal backstock, customer insight and category trends.
“A lot of brands today are reactive. They need to be proactive. It’s your name on the package,” Lohman says. “When a customer sees your product out of stock, they’ll blame the brand, not the retailer.”
Eighty percent of natural food brands fail in the first year of operation. Measurements are key to surviving, Lohman says. They show the retailer “the contribution a brand brings to the store.” Your band may not be the top-selling brand in the category, but it may be bringing the most dollars to the category.
4. Market Intentionally
As grocery store shelves quickly deplete of essential goods and medical supplies, natural brands can market their product as a health alternative.
Shoppers are struggling to find cold medicine. How does your product help alleviate cold symptoms? Grocery stores are selling out of flour. Is your product a healthy alternative to a carbohydrate?
“Help customers understand you’re there to solve their unique problems,” Lohman says.
“I’ve Never Seen Such A Time of Challenge” Grocery Industry Ripe for Disruption from Small- to Mid-Sized Brands
The grocery market is being disrupted in a way never seen before – and the opportunity for success is great for small- to medium-sized food brands wanting to get in the door.
“I’ve never seen such a time of challenge up and down the value chain from the seed all the way to the table,” says Walter Robb, former CEO of Whole Foods and the founder of investment firm Stonewall Robb. “We’re going to see a whole explosion in the new types of foods that are coming to market.”
A report by Biodiversity International found that three-quarters of the world’s food supply comes from just 12 crops and five livestock species. That jarring lack of diversity in the average diet is changing, Robb said. We’re in a frontier where food “will come back in a way we’ve never imagined.” More than 10,000 new products are introduced to the grocery market every year, and customers Robb said are “clamoring” for something new.
“We have a disruption up and down the value chain like I have never seen,” Robb said. “Your chance to come and bring a new product to market is there.”
Robb spoke at the NOSH Live event in New York, and shared insights into where the food industry is headed. Here are Robb’s five main points.
- Integrated Shopping
“The integrated retail is the table stakes for the future,” Robb said. “We’re going to see the line between digital and physical is going to collapse and it’s really going to be all about the customer and how you’ll serve the customer.”
The food industry will thrive on an “extended experience,” a term Robb came up with in the ‘90s while at Whole Foods. The extended experience extends outside the four walls of the stores. The problem at Whole Foods, Robb pointed out, was the natural grocer didn’t digitize fast enough. So in 2017, Amazon bought Whole Foods in a $13.7 billion deal.
Though customers are making more digital purchases, they are not abandoning physical stores. In five years, 50-60% of business will be done via retail stores.
“The future is one that integrates humanity and technology,” Robb said. “Why? because human beings are human beings and they want connection and community and that’s simply not available online. The most successful brands today and the ones that do more physical and digital.”
He pointed to Target as an excellent integration example for modern shoppers. Shoppers can still go to the store, where Target is remodeling physical locations to enhance the in-store experience, but they can use the Target app to prepopulate a shopping list, check real-time stock and order at home for drive-up pickup.
“Data shows the customers likes to do both (online and in-store shopping),” Robb said. Brands who want a lifetime legacy need to be in both places. “The customer is clearly saying ‘Let me do what I want, when I want.’ And brands that don’t serve them in that way will not see the type of growth that they could if they would. The customer is in charge of the choices now.”
- Microbiome is the Future
The microbiome will “completely revolutionize the food industry” as the future of grocery retail is driven by customers who want to see authenticity with the brand they’re supporting.
Robb pointed t a New York Times article on personalized diets, “The A.I. Diet.” As more research publishes on the microbiome, personalized diets will play a huge role in shopping habits. Medicine and technology are converging with food.
- Create Purpose-Driven Brand
Brand leaders in the 21st Century must be authentic, vulnerable and humble. They must be purpose-driven to be successful, Robb said.
“The whole reason you’re in business is not to make money, money is a byproduct,” Robb said. “What you’re in business to do is to bring change to the world. That’s what purpose is. Purpose is the why, why do you exist as a company. You damn well better have a good answer to that question as to what you’re doing in business. You better be here for some great reason to make an impact on the world. And if you’re not playing on that level, either w your customer or your team members, you’re going to fall behind because the companies that are going to lead with some sense of purpose are going to be the companies that win in the next number of years.”
He advised brands to get fired-up about principles that support values. The company culture is a result of that principles and values, and culture is dependent on how team members feel working for the brand and customers feel buying from the brand.
“The winning formula today is road runners and roots,” Robb said. Roots ground a brand in purpose, but brands can’t cement themselves in the ground. They must be a road runner and change on a dime as the marketplace shifts.
- Solve Customer Confusion
The International Food Council found 80% of customers are confused on their food choices. There are dozens of food tribes dominating grocery shelves, like gluten-free, keto, paleo and Whole 30. With an overload of information, customers don’t know exactly what to buy for their desired health benefits.
Robb said one of the business opportunities for brands today is to figure out how to communicate more clearly with the consumer. Consumers want to make informed choices, but “that last mile of data has not been solved for.”
He pointed to solutions in connected homes devices like Amazon that will now populate a shopping list for the consumer based on past purchases. Consumers don’t even need to pick out what they want, their only roll will be to confirm the purchase.
- Natural Reigns
Organic has grown to a $65 billion industry, with a 7-8% growth rate; conventional food, meanwhile, is only growing at 1-2%. Major mainstream retailers are rushing to get into the natural food business today.
Robb said the best way for brands to get on the shelves at Whole Foods is to push the envelope. Whole Foods continues to lead the natural market, and the grocer wants to see edgy, new products with a new take.
Customers expect food brands today to be transparent, accountable and responsible. Robb said there are 2,000 natural flavors approved for use in food by the Food and Drug Administration. But Robb encouraged brands to solve that problem – use less processed ingredients and more natural ingredients, “let’s continue to lead by showing there’s a new edge in the food industry.”
Ask Lauren Mones for business advice and the founder of Fermenting Fairy will say “go grassroots.” In less than two years, Mones has grown her home-based business selling bottles of kefir outside a yoga studio to a USDA certified organic brand sold in dozens of Los Angeles health food stores and online.
Success, Mones says, did not come because she implemented scaling tactics or hired a sales manager. Instead, Mones did everything in the beginning – producing, packing, selling, inventory, money management – so she quickly learned how to troubleshoot.
“You as the founder should do everything for the business in the beginning,” She said. “When you start expanding and hiring on people, you know the pitfalls and blackholes. It’s harder. You’re going to put in a lot of work. But the payoff is big.”
In an increasingly corporate world where consumers want to support local brands, staying grassroots has been key to Fermenting Fairy’s success. Forming relationships with customers and retailers has been key for Mones to sell her coconut milk kefir, probiotic lemonade and unpasteurized sauerkraut. She still answers the company email, handles in-store demos and pitches retailers.
“What I see a lot of companies doing is they start hiring out really quickly and then they don’t see where things can go wrong, they don’t know where to create solutions,” she says. “Nowadays, customers want to support the little guys. They want artisans. They want to know who they’re buying from. And my customers know me because I answer their questions, I handle the social media account. And, if you do that, customers will go to bat for you.”
Read below for our Q&A with Mones, whose business tagline is: “A simple solution that works hard for your health.”
Q: You are open about your diagnosis with Crohn’s Disease. Tell me how that first got you interested in fermented foods.
About 5 years ago, I was actually the healthiest I’ve ever been in my life. Then, out of the blue, I was the sickest I had ever been. It was one extreme to the next. I was working full-time as an occupational therapist, racing 3-4 triathlons a year, training 20-30 hours a week plus, I was engaged to a man I loved at the time. Everything was seemingly great.
Then I started showing signs of really bad gut health. I was having bowel movements 20 times a day; I was afraid to leave the house because I never knew when I had to go. Then my bowel movements became super urgent. I was in my mid-30s and pretty much incontinent. I wasn’t absorbing any nutrients, I was losing so much weight, I could barely walk two stairs before felt like my heart was leaping out of my chest.
I finally had a colonoscopy and I was diagnosed with Chron’s. I didn’t even know what that was. The doctors told me food was irrelevant, that it had nothing to do with my disease. They said “Go eat ice cream and bread, gain your weight back.” I knew that wasn’t true. From years and years of taking part in natural, homeopathic medicine, I knew food had a lot to do with how I felt.
I went to Barnes and Noble in the cooking section and came across the book “Paleo approach.” It had a little paragraph that fermented foods might be a good idea for autoimmune diseases. I bought my first jar of good sauerkraut. I had never had good, raw sauerkraut before, just the sauerkraut you’d get at like a New York hot dog stand. I took my first bite, and it was magical. I felt this surge of energy. I felt something shift in me. I knew it was a good sign, so I started adding it 2-3 times a day to my diet. It changed my bowel movements; I was going less and less and finally had formed stools.
That really opened my eyes to fermented foods. I started making my own kefir, making my own kombucha. I was transforming my physical body. I got off all my medications after 4 months. Now fermented foods are my medicine, I don’t go a day without one of them at least.
Q: Why did you turn to live, raw fermented foods instead of a probiotic pill?
I was taking probiotic pills way before they were even a pill, starting about 25 years ago. I was getting colonics and taking probiotics before gut health was even something. I was really into natural forms of healing and optimal health. I was still taking probiotics everyday when I was diagnosed, but it occurred to me that they weren’t helping. If they were, I wouldn’t have had such a serious diagnosis. And Chrons is a serious disease.
I stopped taking the probiotic pills and turned to fermented foods because I realized, in food form, the body absorbs it better. I also really appreciated the diversity I was getting in the food, not in the pill. And it was just better for me. I loved the taste of fermented foods. Adding it to everything I ate was way easier than taking a pill. I was done with putting foreign things in my body.
Q: When did you first start Fermenting Fairy? And how?
I started in September 2017, so it’s been about 2 years. I started in this yoga studio in Santa Monica, Calif., Bhakti Yoga Shala. I had never intended to have a food company; it was never on my radar. I have always been in the health field, I’m a certified yoga teacher, but I’ve never been a foodie. When I started fermenting at home and creating these incredible recipes, I was giving food to friends, including the owner of the yoga studio. He would come back to me and say “I feel so good eating your food, why don’t you start a food company?” and I said “No way, I don’t even know how to do that.”
One day, I took a yoga class with him and I had given him this kefir. This was a big class, and he told me at the beginning in front of the class “You have to sell this, it’s so good.” About 50 people came up to me after class and asked where they could buy my food. And I thought “OK, I’ve got to start this company.”
My friend offered to have me setup a stand outside of these yoga classes. Back then, I was selling pickles and my almond kefir. I had really good responses, so I took a shot at getting into a farmers market. It happened to be one of the best farmers market — the Brentwood Farmers Market. It was serendipitous, it’s hard to get in there. And within a month I had a lot of return customers, I was selling out of products. It happened very quickly, we were doing very well off the start.
In December, I decided to fill out the Erewhon intake form online. I knew nothing about selling products in stores, I just thought “Let me try. I knew it took people 1-2 years to get into Erewhon. And then, a couple hours after I sent in the intake form, the buyer said “Wow, these look amazing — can you bring in a sample?” By February, we were in three Erehwhon stores. It was in record breaking time to get in the stores.
Eventually we pulled out of all the farmers markets and focused on wholesale. In September 2018, we started online sales so people could order from our website. And in June 2019, we received our USDA Organic certification
Q: Why do you think your products were so popular, so fast?
Because there was a major hole in the beverage sector that we fulfilled. And I honestly didn’t know that at the time. I was creating these products and these recipes for myself; it was a personal thing to heal my body. I love kefir and was playing around with non-dairy forms. I didn’t realize at the time that there was no vegan milk kefir on the market. Now the dairy industry is collapsing, more people want vegan alternatives. The other thing is our lemonade, it’s a probiotic health drink. It’s something that spans all generations that people love. We made it in a very healthy, healing way with no added sugar. I think that’s why Fermenting Fairy really took off — we fulfilled these holes that were left in the beverage industry.
Q: I love the name and logo. Tell me where the idea came from?
When I was really sick and started fermenting, I realized there was an unseen world that is working really hard in my benefit: the microorganisms, the probiotics. To me, it completely changed my life in a spiritual way. When I was really sick and in pain and constantly going to the bathroom and hating my life, those microorganisms gave me hope. It gave me hope that this reality right in front of me wasn’t it for me. There were these beings working on my behalf that brought safety and goodness to my life — like fairies. Fairies are mystical beings that bring joy and goodness to people’s lives, and I really feel that’s the energy we put into my products.
Q: Tell me about your future, where do you see Fermenting Fairy expanding?
Right now, we’re really local. We’re Los Angeles-based. we want to expand nationally and then internationally. Health stores, and then conventional stores. I would love for the entire world to get a hold of my products.
But my true, honest hope and for me the ultimate goal is to penetrate Western medicine. To get the Western doctors on board, to see my drinks on the food tray of patients at a hospital, that’s when I will really feel like I’ve done my part in shifting the world. I also see my products getting into clinical trials for cancer, autoimmune disease, researching how our products can help healing and preventing those diseases. I see a lot of research into mental health possibilities.
Q: Using fermented foods as a healing tool is very common in other countries. Why do you think the U.S. is behind in that science?
Our FDA considers fermented foods risky. Even when California passed the Cottage Food Law, which allows you to start a food company at home, the law still won’t allow you to start a fermented food company at home because they consider fermented foods a dangerous food. Things are not going to shift quickly until we realize eating fermented foods is safer than eating a salad. The U.S. is a ways behind in realizing how safe and healing fermented foods are. Europe is way ahead of us on that.
Q: What myths do you think the public believes about fermented foods?
One, that they’re dangerous. Eating raw vegetables are more dangerous than fermented foods. When done right, fermented foods actually prevent any kind of Listeria or E.coli infection.
Another myth people tell me is “I tried kombucha and didn’t like it, so I don’t like fermented foods.” To people that say that, I ask well do you like yogurt? The biome of the ocean is the same as the biome of the forest. It couldn’t be more different. If one fermented food didn’t work for you, then try some others because they’re all different.
Q: How can we as an industry do a better job educating the public about fermented foods?
Before fermented foods really exploded — because we’re right on that cusp of explosion — there needs to be a ton of education. I think having more organizations like The Fermentation Association is really amazing. You bring light to things that are happening, highlighting great companies where great things are happening.
I don’t see a lot of fermented food companies doing a lot of social media education. I’d like to see more of that, I’m diving into it myself, doing educational videos on Instagram. I’m all about education on social media.
I think it’s important for all these companies creating these ferments to try and talk to the people that are so closed off to it. I’m friends with a lot of doctors because of my job history. They have so much power and influence, but they are the most closed off people to fermented foods that I know. Penetrating that medical community will be huge for us. That education piece will unleash a whole new set of people that we can really help.
Q: Do you think consumer awareness of fermented foods is increasing?
Oh yeah, for sure. It’s definitely on the increase. I think, as gut health becomes more relevant to all health, I think fermented foods will just ride that opening. I think consumers are definitely getting more savvy in that awareness of fermented foods. But there’s still a lot of fear around it. All the time still, when I’m doing in store demos, and I say “Do you want to try a sip of kefir?” still there are people who respond “Oh my god, no.” I get that reaction all the time still and it’s so heartbreaking. Awareness is increasing, but fear is still a major factor.
Q: From your Cardamom Rose Coconut Milk Kefir to Apple Cinnamon Sauerkraut, tell me about your unique flavors. Where do you draw flavor inspiration?
Nowhere special. I love plants, I love flowers, I love herbs, I love studying the synergistic qualities of them. I know about the healing properties of plants. I’ve picked plants and herbs that not only have major healing qualities but they work well together. I don’t really get my inspiration from anyone else. It comes to me and I study what works.
I can’t think too much out of the box because it doesn’t work for people. If it’s too strange for people, it won’t sell. We had a cacao basil kefir and it was delicious, but it didn’t sell. It was an odd combination for people. They have to work together synergistically for people, and spin it so it’s right outside the box but not too far out. On July 4th, we’re launching our newest flavor kefir, a turmeric chai spice.
Q: Where do you see the future of the fermented food industry going?
I think it’s only going to go up from here. I see it really booming in a big way. I see a lot of activity happening in the future with new companies coming up on the horizon. I also am excited for the gut-brain connection, how ferments can really affect mental health disorders, like depression and bipolar and anxiety. I think that’s a field that were not even breaking into at all and it’s coming.
I think we’re pretty far from this but I think fermented foods can be incredibly potent in preventative medicine as well, like preventing certain diseases that are on the rise, like diabetes and cancer. I don’t want to make health claims, but i think that’s where we’re going with the industry.
Q: What challenges do fermented food producers face?
The No. 1 challenge is global warming. It’s harder and harder for farmers to produce the quality and quantity that we as small fermented food companies need because of the extreme weather patterns. So one day in California that’s 115 -120 degrees can completely fry all the fruit trees. Then what happens to us is we try to get this organic produce and either the prices are extremely high because of that heat or there’s no good quality produce anymore. I think it’s only going to get worse if we don’t do something about it. I see that as the No. 1 challenge for small — and even the big ones — fermented food companies in general. We have to be a part of that solution, we can’t let that go.
I am adamant about getting certified organic. And if you’re not getting organic, at least using it. A lot of fermented food companies are getting the cheap ingredients and they’re adding to the problem of global warming and poor soil health. I highly disagree with it. It’s only going to make it worse for them in the future. We’re part of the solution, if you’re not doing it for the life of your company, at least do it for the life of yourself and your customers.
Q: What unique strengths do fermented producers bring to the food industry?
I think most of us are probably nature-loving people. I think we see a connection between nature and human health, so we can be really passionate about that and passionate about elevating the quality of food that’s out there. Because now it’s poor quality food that’s out there, but artisanal, handcrafted fermented food companies can change that. Here’s really high-quality, fermented foods. The more people that catch on to that, the more people that will move away from the cheap food and to more boutique food that provide health benefits.
The strengths are loving and respecting nature, respecting the tie between human health and nature and also being super passionate about creating more quality in the food world.
Craft brewers are catering to a new beer drinker: healthy, active lifestyle drinkers. Though craft brewers are thriving, it’s a smart adaption to add low calorie beers to their products. A study found 52 percent of beer drinkers want to reduce their alcohol consumption this year, the top reason being: “opting for healthier lifestyle.” Beer brands have often ignored the development of watery, light beers. But as millennials – who drove craft brewery growth – enter their 30s and focus on health and wellness, lower calorie beers are becoming an important part of breweries flavor lineup.
Read more (New York Times)
Kombucha brands biggest competition are not other kombucha brands – it’s soda and functional beverages. Sales continue to hemorrhage in the soda category as consumers shun sugar-filled drinks. And kombucha companies have a great opportunity now to grab that market share.
A panel of leaders in the kombucha and beverage industry shared their insights on the future of kombucha at KombuchaKon, Kombucha Brewers International’s 6th annual conference. They agreed the fermented tea is not a fad, but brands “have to be nimble and creative” to thrive in an increasingly crowded market.
“The future is really, really bright,” said John Peirano, the vice president of marketing at Humm Kombucha. “It’s super exciting – and we’re just getting started.”
Local Brands Will Reign
As more and more kombucha brands enter the industry, the brand’s biggest strengths will be selling to their regional market.
“There are all these local brands retailers are going to want because they care about what’s happening locally,” Peirano said. “Local brands are going to be really, really important.”
John Craven, editor of beverage industry news site BevNET, has covered the beverage world for nearly two decades. He said marketing brands locally works in the kombucha category, but not in any other beverage space.
“Prior to (kombucha), if you said ‘I want to build a regional brand,’ I would have said ‘That’s not a thing,’” Craven said.
Educating Retailer & Consumer
Retailers want to give \consumer’s a variety of product choices, Craven added. They’re more likely to commit to selling kombucha if there are multiple brands and SKUs on their store shelf.
“With (kombucha), it’s OK to like a bunch of different brands,” Craven said. It’s normal for a kombucha consumer to switch between different brands and flavors. “That is one thing this category has going for it that’s really unique. … It definitely has defied traditional beverage logic in that regard.”
Litigation against kombucha brands continues to top headlines, as lawsuits claim alcohol content is misrepresented or sugar levels are understated in different brands. In the next few months, KBI will be releasing their own standards defining kombucha.
Truth in labeling will drive trust with the consumer and the retailer, Peirano said. “It’s important that what’s inside the bottle is on the label,” he added.
“As category leaders, we also have to be category captains. We have to go to the retailers with really strong selling stories. And those selling stories aren’t just about Humm. Those selling stories are about the category and what will drive the most profitability for that retailer category and that shelf set, so they can be successful.”
Refrigerated kombucha and the fermented beverage category has grown 31.4 percent year-over-year, according to data from SPINS market research. And household awareness continues to climb – it increased 20 percent in 2018.
Kombucha is sold in the refrigerated section, some of the most expensive space on a grocery shelf.
“I think it’s all our responsibilities, if we want to continue to grow this category, we’ve got to go out and education and tell people about the magical, beautiful benefits of what kombucha brings to the table from a functional health standpoint,” Peirano said.
Brands Need to Remain Fresh
The kombucha industry is already dominated by a handful of national brands – GT Kombucha, Kevita, Health Ade, Humm Kombucha and Brew Dr. control the majority of market share. The panel agreed smaller brands can still successfully enter the category, but the top sellers are locked.
“There’s not room for a dozen million dollar-plus brands,” Craven said. “But the reality…is that some of these (smaller) brands will be acquired and will probably be absorbed and evolved, ruined, whatever, which makes an opportunity for the next brand to come along.”
“There are a lot of functional products out there…the beverage history lesson is consumers are really fickle,” Craven added. He pointed to Vitamin Water as an example, a brand that rapidly grew popular in the beverage industry but then lost sales. “The consumer keeps moving on to the flavor or the function of the month, so to speak.”
Craven does not think kombucha will be a victim like Vitamin Water because kombucha includes value-added health benefits. The kombucha brands that survive the next decade, though, must be adept to change. They must evolve with new flavors and brewing styles, while maintaining affordability, consistency and health benefits.
Growing Kombucha Enhancement: CBD
One of those kombucha styles keeping the industry fresh: CBD. Conrad Ferrel, founder and CEO of True Büch, said combining the benefits of the cannabis plant with the functional compounds in kombucha makes sense.
“The evolution of cannabis used with kombucha, it’s a natural marriage,” Ferrel said. “If you want to have kombucha for sleep, there will be a specific kombucha for that. If you want it for pain management, it will be there. It will be functional and specific to the certain (medical aid) people want.”
There are 140 compounds in the cannabis plant, but so far only two – THC and CP – have been studied, added Ferrel. CP is a value-added compound, known to aid in improving medical ailments. But science is lagging.
“As the world gets used to the science … the struggle is to sell people something that for years was considered a drug, now we’re trying to sell people on the fact that it’s good for you,” Ferrel added.
Hard Kombucha Gaining Traction
Hard kombucha is another brewing style keeping the kombucha category competitive. It’s evidence of how many beverage categories kombucha bleeds into – like alcohol, tea, juice, flavored water and functional beverages.
Kyle Oliver, quality assurance scientist at Boochcraft, said regular kombucha has an ABV of .5 percent to 2 percent. Hard or high alcohol kombucha goes above that level. Boochcraft has 7 percent ABV. The ABV is higher because hard kombucha goes through a secondary fermentation process, where more yeast and sugar are added.
“Our organisms we want in our kombucha are spoilage organisms in other industries (like wine and beer),” Oliver said. “The higher ABV doesn’t kill probiotics, they’re able to still grow in that environment.”
Snacks are a huge $1.2 trillion category, and it’s continuing to grow. Seventy-five percent of the global population snacks every day, while millennials snack four times a day. But consumers are looking for nutritious snacks. They want snacks with functional ingredients, great taste and low sugar.
Fermentation brands looking to grow need to transform their product into snackable sizes. Research by Mondeléz International’s new venture, Snack Futures, found that fruit and vegetables are the most popular snack item, but consumers want more than just a fresh apple. Innovation is key.
“Consumer obsession is driving a new model of snacking,” said Laura Shulman, founder and president of Food Future Strategies, Inc. From beverages to bars and bags to bites, “We’ve become this culture of serial snackers.”
At Natural Products Expo West, Shulman encouraged brands to be “snack innovators,” converting ideas to business.
Snacking’s Staying Power
The snacking surge is attributed to busier lifestyles – commute times are longer, more mothers are working and fewer people eat traditional three meals a day at home.
“Snacking is different than food. Snacking is a behavior. That behavior around the world is growing rapidly, and it’s growing much faster than center store [grocery aisle] food,” said Tim Coffer, chief growth officer at Mondeléz International. “We’re very bullish on snacking, and I think all of you should be, too, as you look for opportunities for growth.”
Snacking is disrupting the food industry, evident on the Expo West show floor where brands are seeing big returns on convenient, healthy food and drink products.
“The movement is more nutrient-dense snacks,” said Rohan Oza, co-founder and managing partner of Cavu Venture Partners. “Every company out there needs to be focused on how they create greater nutritional value on snacks that allow people to feel better about themselves.”
Brands as Health Warriors
Snacking of yesteryear evokes images of bags of potato chips or cans of soda. Those items are a far cry from modern snacking trends. Snacking must be nutritious because consumers are snacking with intention. They want snacks to be natural, simple, authentic and functional.
Brigette Wolf, global head of Snack Futures at Mondeléz International, said brands need to be “health warriors.” She encouraged brands to use medical and scientific studies and consumer research to “actively be the snacks of tomorrow.”
Growing Preference: Prebiotics & Probiotics
Consumers are also focusing on gut health. Research by New Hope Network found that sales of food and beverage with functional ingredients grew 7.5% in 2018 to $68 billion in sales. Probiotics and prebiotics are one of the fastest growing functional ingredients.
Kara Landau, founder of Uplift Food, was an Australian nutrition expert before starting her food company. Known as the world’s first dietitian created functional food, Uplift Food products are gut healthy, prebiotic snacks. The food brand was her dram, as Landau specializes in gut health. The connection between gut health and mood is especially important to her.
“I feel like there was this gaping hole in the market for someone to take that stance,” Landau said.
“Ultimately, I think the science is going to continue to catch up and help in terms of the claims that are being made,” Landau said about food with prebiotics and probiotics. “There’s only going to be benefits to consumer’s diets to getting more of that nutrition into their diet.”
8 Tips to Growing a Snack Product
Food industry leaders stressed that the brands of yesterday will not be the brands of tomorrow. Major food corporations are struggling to maintain sales as modern consumers search for healthier food, sustainable brands and startups with purpose.
Tips from Expo West “How Consumer Obsession is Driving A New Model of Snacking Innovation” panelists:
- Be consumer obsessed. Coffer with Mondeléz declared: “We are very clear who our boss is. … If you take care of the consumer, the rest of the stuff will fall right into place.”
- Reinvent testing. “The old model of how to innovate, how to test with consumers, that’s yesterday’s news,” Coffer continued. “Get with consumers – not in controlled environments.” Prototyping and testing needs to be at a much more rapid pace.
- Build a brand with a mission. Successful brands create a lifestyle around their product. “Build a culture out of it,” said Oza with Cavu Venture Partners.
- Don’t be cheap. Brands that have good ideas but aren’t spending the right budget amount to execute their plans are going to fail, said Oza.
- Remember: taste is king. “It’s America, we will not sacrifice on taste. In Japan, they certainly will. [But in America], you have to make it taste good,” Oza said.
- Experiment with ancient ingredients. From ashwagandha to turmeric, the ingredients of our forefathers are coming back into our food. “I think there’s room particularly in the states for taste buds to expand,” said Janet Planet, head of ideas at Fahrenheit 212.
- Start super small. Wolf of Snack Futures suggested putting a new product in a local yoga studio and see how people react. Give it to family and friends to test for feedback. Start with a small attraction, then go bigger.
- Convenience stores are ready for a disruption. Convenience stores are arguably the worst places today in terms of health food, but they’re still a hot spot for snacks.
The kombucha industry is exploding – sales were up 21 percent to $728.8 million last year. Kombucha and non-alcoholic fermented beverages are now the third largest beverage category, representing 10 percent of total refreshment beverage sales.
Distribution is high at conventional, natural and convenience stores. But velocities (sales) are declining.
“A word of caution – there’s going to be a reckoning,” said Bobbi Leahy, director of sales at SPINS, a natural products market research group. “All these retailers are taking all these lovely kombuchas … they will be evaluating you, probably far soon than you think is warranted. There will be some slashing going on.”
Leahy spoke at KombuchaKon, the Kombucha Brewers International (KBI) annual trade conference in Long Beach. The year’s KombuchaKon was the industry’s largest since the first conference six years ago, with 424 attendees from 17 countries.
“I applaud you all on the growth. I think that’s wonderful,” Leahy said. But “I would be ready with some materials to go in and defend your spaces.”
In her presentation on the kombucha market analysis and future trends, Leahy emphasized that refrigerated beverage shelves are expensive retail space. She shared advice with kombucha brands on how to survive the current high distribution wave. The SPINS analysis is based off 52 weeks of sales ending in February 2019. Her tips:
- Prepare with Sales Materials. If kombucha sales can’t keep up with distribution, retailers will have to answer to their higher-ups. Why is there so much kombucha on the shelf that isn’t selling? Leahy warned brands to be the ones educating retailers, advising brands to share data points and score cards. She added: “I encourage you to go and get ahead of that, be the one talking that message. You tell them what the right set is, you tell them what they should do, you know this industry. If they’re overstocked on something, then let them know. They’re looking to you to be the experts.”
- Conventional supermarkets reign. The bulk of kombucha and fermented beverage sales are coming from conventional supermarkets. “If you succeed in the conventional channel, you’ll have success overall because they represent 70 percent of sales,” Leahy said.
- Don’t ignore convenience stores. Convenience store (like 7-11 and gas stations) sales of kombucha and fermented beverage sales are growing 55 percent. “You have to make it a task to go after convenience,” Leahy noted. “You probably wouldn’t have said ‘That’s my low-hanging fruit, I’m going to go in there.’ But they’re certainly getting the message now … It’s certainly worth having a plan to go after convenience.”
- Craft different sales messages for each channel. Don’t go in to retailers with the same message. Between conventional, convenience, natural and specialty stores, each channel will care about different things.
- Know region’s sales trends. The west coast – especially California – has high kombucha sales. The south central, mid-south and Great Lakes regions are under-indexing in kombucha sales. Leahy pointed out that the west is a ready audience and a great spot to experiment with new flavors. The south and Great Lakes regions, though, need an education focus. Demos are a great idea in the area.
- Highlight brand’s best attributes. Boast about characteristics beyond the label. Features like: clean label, sustainability, brand mission, wellness goals, social impact and great ingredient sources.
- Top selling flavors are solid. Ginger and berry are the two top flavors across all channels. The “fruit – other” is also a top selling flavor and growing (135 percent), which is defined as unique fruit flavors like watermelon, guava and melon. The past year, there has been the strongest growth in flavors: apple (172 percent), grapefruit (155 percent), pomegranate (104 percent) and orange (98 percent).
- Tread lightly with unique flavors. Leahy pointed out, if a unique flavor only appeals to a small audience, a conventional retailer will notice only a small number of customers are buying it. “That small and that low is going to be kind of a perfect storm,” she said. “You really want to be careful.”
- Smaller size bottles sell best. The 14- to 17-ounce size kombucha make up the majority of sales.
- Start sales promotions. Coupons, mailers and sales are great options to get products off shelves.
- Use your social network. Let people know which stores you’re at.
- Maintain a good store locator. Brand’s websites should feature a good store locator detailing which stores carry which flavors of kombucha.
- Top kombucha brands dominate the market. GT Kombucha, Kevita, Health Ade, Humm Kombucha and Brew Dr. account for 88 percent of kombucha sales at conventional retailers and 89 percent of kombucha sales at convenience stores. GT Kombucha, Kevita, Health Ade and Brew Dr. account for 77 percent of kombucha sales at natural stores and 82 percent of kombucha sales at specialty gourmet stores. Those same top brands likely will not change, Leahy noted.
- Know beverage trends. “The trends you are seeing in kombucha are special and unique,” Leahy said. “…as you’re sitting across a buyer or a category manager or retailer, you want to be well-versed in what other beverages are on the shelf and which ones they’re probably going to protect.”
- Natural beverages are contributing more to the growth of the refreshment beverage category than non-natural. The conventional, shelf-stable beverages (like Coke and Pepsi products) account for 63 percent of the refreshment beverage industry, but only 53 percent of growth. Diet soda is especially losing favor among consumers. Specialty and wellness beverages (like energy drinks and Gatorade) make up 29 percent of sales and 35 percent of growth, especially driven by energy drinks. Natural drinks (like kombucha and La Croix) make up 8 percent of sales, but natural is driving 13 percent of growth.
- Of the natural beverage subcategories, shelf-stable performance beverages (like Body Armor) are experiencing the biggest growth at 87 percent. Declining categories include shelf-stable coconut water (-12 percent) and juices (-3 percent).
- Emphasize growth of natural products industry. Natural products are no longer a niche market. The natural products industry is estimated to reach $140 billion in sales in 2019. In 2003, natural products were a $52 billion industry.
When SPINS began tracking kombucha sales years ago, Leahy noted kombucha was “barely a blip on the map.” Current Kombucha sales numbers are also likely higher than noted – major retailers Costco and Whole Foods do not share sales data with SPINS.
“In a way, it’s a good problem to have – you can’t sell if you’re not on the shelf,” Leahy said. “ou’re on the shelf – now it’s time to sell.”
Fermented foods are making a comeback, but an education gap needs addressing for fermentation to move “from fashionable buzzword to become a sustainable long-term trend.” A group of panelists spoke at the UK The Ingredients Show on what’s driving and developing the fermentation market. The panel agreed there is a disconnect — people want fermented foods, but few understand what they are. Tom Lee, editor of Food Spark, said fermented food producers should look at supermarkets as part of the solution. Supermarkets are “keen to explore fermented products.” Lee said: “A lot of developers and buyers we speak to at the supermarkets are looking for products around things like plant-based fermentation. They are constantly on the look out for exciting products in this area because they are emerging trends and therefore maybe less affected than more traditional items by range trimmings.”
The fermentation industry is on the cusp of a renaissance. Engaged consumers are seeking functional food and drink with health benefits. And fermented products provide the nutritional value and unique flavors today’s consumers crave.
Staff at The Fermentation Association attended Natural Products Expo West in Anaheim, Calif. this month. Expo West is the world’s largest organic and natural healthy products event, and we spent four days with 88,000 other attendees listening to industry experts in education sessions and meeting fermented food and beverage brands on the show floor.
Here are six takeaways from Expo West for the fermentation industry:
- Natural Products are King. Natural food and beverages grew 6.6 percent in 2018, for a total of $152 billion in sales, according to info from the Nutrition Business Journal. The category is growing so much that organic supply is lagging behind consumer demand. Meanwhile, for the first time in history, the conventional food and beverage category began to shrink last year.
- Major Focus on Gut and Microbiome Health. Once terms only used by scientists, prebiotics and probiotics are at the forefront of consumer’s grocery list. Digestive health is critical for modern consumers, as more nutritionists focus on the gastrointestinal tract’s critical immune system support. Consumers want food and drinks that nourish their microbiome. Sales numbers show people are moving away from purchasing pills and supplements to aid their gut; they’re instead looking for prebiotics and probiotics in actual food.
- Ancient Foods are Experiencing a Revival. The future of food is in practices of the past. From turmeric, ashwagandha, ghee and fermentation, the foods of our ancestors are back on our plates. These old-world cooking styles and ingredients are standing the test of time and coming back in modern cuisine.
- Industry is Selling to Educated Consumers. Today’s consumers know more about the food they eat than ever before. Consumers are studying ingredient lists, seeking product sources and researching brands. Clean food and clean labels are not a trend; they’re a movement. People are becoming more aware of the dangers of eating processed food. They want nutritious ingredients from ethical brands. The functional health benefits of fermented products are piquing consumer interest.
- Snacking Trumps Mealtime. Snacking today is a $1.2 trillion-dollar industry. The modern consumer is busy, and convenience food readily accessible in a grab-and-go format is a grocery store staple. Snacking in 2019 is not filling up on a soda and a bag of fried chips. Consumers want healthy, fresh snacks, especially refrigerated snacks in the produce aisle. This is great news for fermented brands. Grabbing a bottle of kombucha or kefir and a bag of snacking pickles or miso soup fits into the convenient dining lifestyle.
- Brands Need More Plant-Based Products. A major shift in food philosophy, more consumers are buying plant-based products – whether or not they’re vegetarian or vegan. Plant-based options are becoming tastier and readily available. Brands are experimenting with fermenting vegetables for plant-based cheeses, spreads, sauces and drinks.
It’s an exciting time for fermented food and beverage producers. The aromatic, tangy flavors and healthy, live bacteria in fermented products are qualities propelling fermentation to become one of the most popular food categories.