M&A Strategies are Evolving in Small Brand Acquisitions

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Big CPG companies have been focusing on growth through acquisitions the past few years. They see small brands as an opportunity to tap into a growing customer segment that they currently have little access to. However, the transition from a small brand into the big company structure can lose the “craft,” and “authentic” feel that makes those brands so successful. 2018 is the year when mergers and acquisitions teams will evolve and apply tactics that ensure the small brand keeps its quality and authentic feel.

How are Mergers & Acquisitions Tactics Evolving?

 

M&A teams are finally noticing that some of the small brand’s most loyal consumers see these deals as the brand “selling out to the man.” These loyal customers matter, because are typically the people that helped the company grow so fast. It is important for big CPG companies to keep brands “local” and maintain the product’s integrity after an acquisition. M&A Teams are focused on the following to keep small brands authentic feel:

  • Keep the founder and initial innovator to maintain the appearance of a healthy marriage. This is important to building continued trust with loyal customers.
  • Basing the purchase price on post-sale performance as well as making small investments in multiple small brands.
  • Allow small brands to continue to operate independently by not buying them outright. Look at Mars’ recent investment in KIND.
  • As soon as the sale is complete, both companies should be working together to tell the future plans for the brand. Look at how General Mills and Annie’s accomplished this over the years.

These Relationships are About Maintaining the Look and Feel

Risks in M&A exist for both the buyers and sellers. The small brands fear that the large company will ignore their mission and vision in pursuit of profits, and big companies fear they will never recoup a return on their investment. The M&A teams are telling both parties to focus on maintaining the look and feel of the brand. Keep the price the same, keep the packaging the same, keep the ingredients the same, at least for a little while. The bottom line here is if it ain’t broke, don’t fix it.

Inspired by www.fooddive.com

CFI Finds Only 33% of Consumers Trust The Food System

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The Center for Food Integrity (CFI) released a new study, A Dangerous Food Disconnect: When Consumers Hold You Responsible  But Don’t Trust You, that looks at some damaging statistics on the food system. First and foremost, the study revealed that 33% of consumers do not trust the food system, which is down from 47% in 2017. This is alarming and further supports the movement by food companies to be more transparent and create products with simple ingredients.

Food Companies Placed Last on List of Most Trusted Information in the Food System

The new CFI study is important because it showcases the disconnect between what consumers think and what food companies across the industry are actively doing to ease their concerns. On the list of most trusted sources for food safety information, food companies ranked dead last with food regulators taking 8th on the list, and farmers ranking 3rd on the list. Surprisingly, family and physicians ranked as the most trusted sources of food safety information.

 

Roxi Beck, Director of the CFI, believes food companies have to further their mission of product transparency. She suggests inviting consumers to the farms and manufacturing facilities to build more trust. She also suggests large CPG companies be wary of touting their large size and global scale as it often viewed as a warning sign to consumers today. The small brands are taking advantage of this and winning big time.

Investing in Transparency Efforts and Technology

Multiple food companies and suppliers in the food system are looking at new blockchain technology to lead the transparency effort. Companies like Cargill have tested blockchain to allow consumers to trace their Thanksgiving Turkey back to the farm it was raised on. This is a step in the right direction.

Other companies are looking for ways to better tell their brand stories to lead transparency efforts. Marketing teams across food brands are selling this hard up the ladder because they know how important trust is to purchase decisions and long-term brand loyalty. The bottom line will grow as food companies and their brand focus on building more trust with consumers.

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Tactile and Multisensory Foods Could Be Top Trend For Brands in 2018

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Tactile and multisensory experiences are all about feeling and hearing the connection. Phil Lempert, The Supermarket Guru, believes we have evolved, and 2018 is a particular year for brands to take advantage of the tactile approach. A multisensory food will appeal to more than consumer’s taste buds. Brands will look to add features and experiences that appeal to the hearing and visual senses.

Tactile Brands Will Be More Memorable

The clean label trend is here to stay, but Phil believes consumers are at peak food information overload. It’s time that foods move to a more intellectual connection with visual and auditory cues. Foods that enable sounds like chopping, stirring, chewing and crunching will give consumers a food euphoria every time.

Brands Already Implementing the Tactile Approach

The crunch of a crisp snack echoes in our brain, and we subconsciously resonate with it in the future. Also, think about the crisp taste of a beer, but enhancing that with virtual reality as Guinness recently did.

Sensory marketing is nothing new, but Phil makes an excellent point that this trend will gain steam after the focus on ingredients, clean labels, and more over the past few years. Sampling is one of the critical ways to implement a multisensory marketing approach at retail and food events. Costco has been using this technique for years to drive sales in specific products and categories.

Tactile and multisensory approaches will be food and beverage brands secret weapon in 2018. Watch and listen for more!

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1/3 of Protein Bars Have as Much Fat as a Krispy Kreme Donut

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Has the New Year, New You health and wellness trend hit you this year? How many protein shakes, protein bars and workouts are you taking in? Well, if you love the taste of your favorite protein bar, you might want to look at the label a little closer. Protectivity, a U.K. based health, sports, and travel specialists revealed in new research that more than 33% of all protein bars have more saturated fat than a Krispy Kreme donut.

How Protectivity Analyzed 56 Protein Bars

Protectivity created a fitness food index to help people look at the protein, carbohydrate, sugar, and fat content to look at a variety of products including protein bards. The index shows that protein bars often contain large amounts of sugar and fat. They found that 10 of the 56 bars analyzed contained more sugar than a Krispy Kreme donut.

Nutritional shakes and bars have been one of the most active markets over the past five years. From 2010 to 2015, the category grew at 10% year over year. In 2016, the market reached over $9 billion in sales around the world. It’s safe to say that these formulas of high fat and sugar content will not last long as protein bars have typically been seen as part of the clean eating trend.

Large CPG Companies Acquiring the Nimbler Bar Brands

It’s evident that the smaller brands are catching the eye of the giant CPG companies. These brands have already created formulas that meet consumer needs with low sugar, low fat, and great taste. Big CPG sees no reason to reinvent the wheel and instead believes the acquisition is the best way to gain market share. Last November, Mars took a minority stake in KIND bar. Kellogg acquired RXBAR to grow its clean label protein bar offerings for over $600 million in 2017. The nutritional bar market is hot, and we expect more acquisitions in this area in 2018.

Consumers Must Recognize Protein Bars as a Meal Replacement, Not a Snack

Brands must educate consumers on protein bars and nutritional products. Many of these products are not formulated to be eaten as a casual snack but as a meal replacement or a post-workout fuel. Brands should be concerned about the high levels of fat and sugar because if consumers don’t see results, they will switch to another favorite food solution. 2018 and 2019 should be the years that these brand focus on adding healthier ingredients and formulating these bars to be more reliable nutritional products for consumers.

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Personalized Nutrition Is Trying to Reach The Masses

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Personalized nutrition is one of the newest ideas catching the eyes of consumers and the big food companies. In theory, it seems like the next big thing to overtake the healthy eating marketplace. However, there are a few hurdles that innovators are battling for this concept to reach the mainstream. Consumer knowledge about their personalized nutrition needs, food manufacturing, and distribution are going to need to change to make this a reality.

Habit: The Startup Company Leading Personalized Nutrition

Habit, a San Francisco-based company, is offering personalized nutrition through genetic testing. The big food company, Campbell’s Soup, has been following closely and recently invested in the startup.

Habit is structuring itself as a personalized nutrition meal delivery startup. They take information gathered from an at-home test kit to create specific meals to meet customers’ needs. At the moment, Habit’s business model is a little expensive for the average consumer. It costs $249 to receive the personalized test kit, results, and advice from nutrition coaches. On top of the $249, each meal will cost you $8.99 for breakfast and $13.50 for lunch and dinner meals. Without a significant technological change to food development and distribution, personalized nutrition appears to be a luxury in the short term.

3-D Food Printing Could Be The Solution

As mentioned earlier, consumer knowledge on food development and distribution would need to change in a significant way for personalized nutrition to reach the masses. 3-D food printing could be the groundbreaking technology to make it possible. If 3-D printers could become as regular as microwaves, they could completely change the way consumers prepare food at home.

Big food companies like PepsiCo are already testing 3D printing to create prototypes of different shaped and colored chips. Other firms like Barilla have used 3-D food printing to make pasta that is shaped like a rose. The number of obstacles facing the industry are still there, but the future looks bright for personalized nutrition.

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Functional Ingredients and Label Claims Continue to Lure Consumers

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According to the latest numbers from Packaged Facts market research, 49% of all U.S. consumers buy nutritional bars, beverages, or both. Food and beverage products using functional ingredients with functions like nutritional support, weight loss, increased energy, and meal replacement were included in their analysis. However, energy drinks, sports drinks, milkshakes, granola bars, and snack bars with no nutritional purpose were excluded from their analysis. The Packaged Facts’ National Online Survey consisted of 2,000 U.S. consumers aged 18 and over.

Convenience is Key to Category Growth

Brands have been positioning their nutritional drinks and bars as convenient, healthy, on-the-go options for the busy American. As a result, sales have skyrocketed over the past five years. The market has hit $8.8 billion in 2016 with an annual growth rate of 9.5% over the past five years. Packaged Facts predicts a bullish future for the two categories with combined sales reaching $13.1 billion by 2021.

Younger generations are key purchasers with highest use rates. Many of the Millennials and Gen-Xers see being busy as a “badge of honor” so these products are essential to maintaining a healthy lifestyle. Packaged Facts found that 57% of all U.S. consumers are drinking nutritional beverages as a meal replacement.

Functional Ingredients: Superfoods and Protein

 

Functional ingredients are booming, and nutritional drinks and bars are using them to enter the market with a unique value proposition. The barriers to entry are low, but gaining significant market share is a different story. High protein content is expected from consumers at this point with 72% saying they look for that feature when purchasing nutritional drinks.

Some nutritional bars and drinks are turning to innovative superfood solutions to increase nutrient support claims. Brands are using products like GrandFusion to enhance their bars and drinks with natural vitamins from up to twelve fruits and vegetables without impacting flavor or texture. Interested in learning more? Click your industry in the navigation and learn more about how GrandFusion could benefit your products.

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Food Scientists Say Clean Labels Have Trade-Offs in Food Safety

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To no surprise, two food safety and nutrition professors at Iowa State University believe there are significant trade-offs in cost and food safety for clean labels. The clean label is one of the most significant trends hitting the food and beverage industry. While there is no clear-cut definition, it is understood that clean label products do not contain additives or preservatives and typically have easy to read ingredients.

Why do Clean Labels Present Issues in Food Safety?

The two food scientists believe that not all food additives and preservatives are bad. Many of those hard-to-pronounce names are used to guard against pathogens and spoiling. While market demand is driving food companies to get rid of these additives, the scientists believe there should be a measured consideration for keeping some of these ingredients. The professors mentioned taking nitrates out of Hotdogs and deli meat as an example since their presence can help prevent clostridium botulinum bacteria.

Professors Ruth MacDonald, Ph.D. and Ruth Litchfield, Ph.D. believes that social media can take a lot of the blame for this hysteria around additives and preservatives. They insist consumers not to believe everything they read on social media and to take a deep dive into any research mentioned in posts.

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How are Clean Labels Costing us More?

Label-readers have become fascinated with the “no high fructose corn syrup”  claim, but they are not looking closely at one is being replaced to sweeten the product. Many times companies are using tapioca syrup which is made from cassava, and typically more expensive. The professors say that the industry is developing all of these “cleaner” syrups like beet syrup, etc. and they are all sugar. They are no better than high-fructose corn syrup.

There seems to be a clear issue with what consumers expect and the reality of ingredients. Consumers want ingredients they understand, they want them cheap, they want them nutritious, they want them safe, and they want them to be beneficial. However, it is almost an impossible feat for food scientists. Consumers are more willing to accept technology in other aspects of their life but have now wholly shifted when it comes to food. It will be interesting to see how this all plays out as consumers become more educated about the science of food.

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Whole Foods Releases Top 10 Trends to Watch in 2018

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Whole Foods Market, one of leading natural grocery retailers, teamed up with experts to forecast what they believe will be the top 10 trends food in 2018. The seasoned-trend spotters were purchased by Amazon earlier this year, and now have over 100 years of combined experience in product sourcing and studying consumer preferences.

Whole Foods Top Ten Trends in 2018

1. Super Powders

The superfood powders have been gaining traction and will reach new heights next year. They gained market share because they are easy to incorporate into smoothies, nutrition bars, soups, and baked goods. Popular superfood powders include maca root, cacao, ground turmeric, kale, herbs, collagen, and more. Even nutritionally dense powders like GrandFusion are being used to add natural vitamins and minerals to new products.

2. Floral Flavors

Infusing botanical flavors into drinks and snacks will be a huge trend to watch this year. Look for things like lavender lattes and rose-flavored everything. Teas will continue to be huge category using botanicals but be on the lookout for granolas, cocktails, frozen pops, and mineral water.

3. Functional Mushrooms

This could be the hottest trend in 2018, but only time will tell with shoppers. Typically found in dietary supplements, mushrooms use is growing amongst a variety of food and beverage categories. Bottled drinks, coffees, smoothies, teas, and broths will lead the way in 2018.

4. Transparency 2.0

Product transparency is not going anywhere anytime soon. In fact, in 2018, consumers only expect more. They want to know the story of their food from the source to the store. Responsible production and animal welfare will continue to drive a lot of purchases with GMO transparency being important as well.

5. All Plant-Based Everything

The tech world has now met the plant-based world and they have some cool ideas brewing. They are using science to manipulate ingredients and proteins to create crazy dishes like “bleeding” vegan burgers and sushi-grade “not-tuna” from tomatoes. Dairy-free desserts will be a huge trend in 2018 with vegan frosting, brownies, and ice cream making their way to the shelf.

6. Puffed and Popped Snacks

New extrusion methods are paving the way for unique crunch and popped snacks like popped cassava chips and puffed pasta bow ties. Better-for-you snacks will get an upgrade with snacks like lentil crisps, unique veggie straws, and rice crisps joining the snack aisle.

7. Middle East Feast

It’s interesting to see Middle Eastern culinary influences start to catch fire in 2018. Hummus and Pita were taste entry points, but consumers are hungry for more like shakshuka, grilled halloumi, and lamb. Pomegranate, eggplant, chickpeas, and tomato jam will start to pick up more steam in 2018 as well.

8. Tacos Leave Their Shell

Tacos are not only meant for lunch and dinner. In 2018, you will start to see them more at breakfast and in desserts. New kinds of wrappers are showing up like seaweed and grain free options. But don’t worry, classic tacos aren’t going anywhere.

9. Root-to-Stem

Root-to-stem cooking will be one of the leading trends in 2018 as reducing food waste drives the style. The cooking style uses the entire fruit or vegetable including the steams and leaves which are less commonly eating. Recipes including beet-green pesto, broccoli-stem slaw, and pickled watermelon rinds.

10. Cheers to the Other Bubbly

Sparkling beverages are the hot drinks on the block with LaCroix leading the way. But, please don’t call them SODA! New sparkling waters are going plant-based with maple and birch as well as mocktail flavors of grapefruit, lemon, lime, and orange.

Check out Whole Foods in 2018 to try a variety of products hitting on these trends in 2018!

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