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Recipe for change

Recipe for change

Recipe for change

A revolution is cooking. What are we going to do about it?”

This is the call to action that Emmanuel Faber, CEO of Danone, made at the annual global summit of the Consumer Goods Forum (CGF) last year in Berlin. “We are losing them,” he said of the world’s consumers. “They are getting out of our shops, out of our brands. They are going for food without the food industry. Not only without us, but maybe against us.”

In his keynote speech, Faber outlined the approach of the world’s biggest yogurt maker to the boom in consumer health and wellness. Touching on modern global issues such as obesity, malnutrition and climate change, Faber unveiled Danone’s ‘One Planet. One Health’ manifesto, which calls on companies and consumers to adopt healthier and more sustainable eating and drinking habits. To underline its commitment, Danone bought US organic food producer WhiteWave in a US$12.5bn deal in 2017, making the company the world’s largest producer of organic food.

“Emmanuel Faber says that adopting healthier habits is a matter of life and death for our industry,” says Emmanuel Hembert, Advisory Lead, Consumer & Retail, KPMG in France. “When you push natural and organic products, you can position yourself to be ahead of the game. You really need to renew your consumer base and talk to the new generation.”

According to Euromonitor International, the global market for health and wellness reached US$686bn in 2016 and is expected to grow to US$815bn by 20211. Companies from the very large (PepsiCo, KFC, Unilever, Coca-Cola) to the very small are using the principles of health and wellness to appeal to consumers who are examining what they put into their bodies, its environmental impact and how it can contribute to a better version of themselves. Combined with government efforts to reduce the amounts of sugar and saturated fat in food and drink, and an increasing lack of trust in big business, established brands have to work hard to defend their market share.

The 2018 Edelman Trust Barometer2 found that in 16 out of 28 countries people were more likely to distrust business than trust it. In the food and drink sector, trust fell by 4 percent to 62 percent and trust in consumer packaged goods fell by 3 percent to 60 percent.

Campaigners and governments across the globe have expressed concern about the sugar content in soft drinks, and consumption of carbonated soft drinks has fallen slightly in the UK largely as a result of the sugar tax.

As well as considering the impact on their health, consumers want a clear sense of purpose as a reason for purchase. According to a recent report by Kantar Consulting3, purpose-led brands have seen their valuation surge by 175 percent over the past 12 years, while brands uncertain of their role have seen a more modest growth of 70 percent.

“Between revenue and social footprint, many brands now have more power than elected leaders,” said Robert Jan d’Hond, Global Lead, Brand Practice at Kantar Consulting, “and there is a clear expectation from consumers that this power is used for positive change.”

The industry is taking the issue seriously. The CGF, the largest global association of retailers and CPGs, has a health and wellness program. Mobilizing multiple stakeholders such as manufacturers, retailers, NGOs and government agencies, this initiative is already making a difference: in 2016, CGF members reformulated 160,000 products. Peter Freedman, Managing Director of the CGF, says the industry is investing more time and money in healthier products than ever before.

When you push natural and organic products, you can position yourself to be ahead of the game.

New status symbols

It should come as no surprise that health and wellness is a huge global trend. The basic human desire to be physically fit and aware of exactly what we’re eating and drinking is a fundamental survival technique. Yet over the past decade, the rise of social media has increased the visibility of people who take it to the next level, which has driven the industry to grow exponentially.

David Mattin, Global Head of Trends and Insights at TrendWatching.com, says: “In the past 10 years, we’ve been in the situation where health and wellness has become a bigger part of people’s mindset when it comes to asking themselves, ‘What is my version of the good life?’, ‘How should I be living?’ and ‘Who do I want to be?’.”

These fundamental questions are ones that, on some level, we ask ourselves daily. The traditional answers revolved around material possessions, such as a large house or nice car. Yet the nature of consumer status is shifting from the external to the internal, from what we own to who we are.

“Many people in the developed world are so affluent that those traditional status markers don’t carry the power they once did,” says Mattin. “So status display among consumers is far more about who you are as a person. You aspire to be healthier, smarter, more connected, but also more emotionally and mentally balanced. Status is one of the biggest drivers of human behavior in affluent societies once material needs are met, and health and wellness is a massive part of that picture.”

That picture is one that, increasingly inevitably, is going to be shared on social media. While your yoga session would once have gone unnoticed by anyone outside the room, now every detail can be logged on Twitter. “Social media has become a platform for consumer display,” says Mattin. “This is why all these people are on Instagram doing their yoga poses, taking pictures of their very healthy food, running then posting the details of their run on Facebook direct from their wearable device.”

The health and wellness trend is being led by the young. Those aged between 18 and 30 have the time and enthusiasm to dedicate a significant chunk of their lives to pursuing a vision of the ideal self – and telling everyone about it. “The trend of health and wellness spreads across all ages, but there’s a clear concentration in the Millennials,” says Brian Hegarty, KPMG in the US Audit Partner in the Consumer & Retail Practice. “Social media and technology plays very strongly in that age group, but they are also the people that are creating the apps and businesses that are defining the trend.”

Changing lanes

Start-ups’ agility and lack of legacy products make it relatively simple for them to bring healthy products to market, whereas large multinationals have a tougher time altering an established product range and convincing customers of their health credentials.

“It’s definitely a challenge for the large multinationals,” says Hegarty. “Their legacy products are big scale and highly profitable, and healthy, nutritional products are often more expensive to produce. They are, by nature, going to have higher input costs and you can’t always have that price differential to maintain that same margin. It’s a tough needle to thread, to maintain your highly profitable base and, at the same time, find that innovation that keeps moving your overall portfolio to have a health and wellness focus.”

Nestlé has renovated 8,856 products to make them healthier and has pledged, by 2020, to add 750 million portions of vegetables and 300 million portions of nutrient-rich grains, pulses and bran to its products and remove all artificial coloring.

“Most of the multinationals have put out very ambitious health and wellness goals for their product portfolios,” says Hegarty. “But not every consumer is ready to take that journey. It’s about maintaining that balance of providing those legacy products while being responsive to emerging trends and being innovative.”

Not every big brand foray into the healthy eating trend is a success. Companies can suffer poor sales and ridicule if they get it wrong.

Agile start-ups

For every big brand misstep, there are plenty of start-ups finding success using healthy foods and large social media followings. The Avocado Show in Amsterdam is the world’s first all-avocado restaurant, serving an entire menu’s worth of the trendy superfood. Since it opened its doors in March 2017, the owners have received more than 150 franchise requests. They plan to open in at least two new European locations this year.

French start-up Feed has recently raised $17.4m from investors for their ‘meal in a bottle’ range of drinks and bars. To appeal to their Millennial customer base, all of Feed’s products are gluten-free, lactose-free, vegan and non-GMO, and they contain enough fats, fiber, proteins and other nutrients to serve as a stand-alone meal. Feed’s products are available in many French supermarkets and online, and it ships to more than 30 countries.

“To be successful, you have to bring the whole package to the consumer,” says Hegarty. “Innovation is vital and it’s got to include the health and wellness objectives you want to achieve, as well as elements such as sustainability, non-GMO and locally sourced ingredients, recycled packaging and other things that really drive the social media conversation.”

Hembert of KPMG in France says that manufacturers need to put their energies into getting the products right. “If you look at history, manufacturers’ marketing teams used to be made up of product managers, but they became brand managers. Big difference. You need to come back to the products.”

Innovation, healthy products and building connections with the consumer are all important, but it is critical not to ignore another vital ingredient: the taste. “The pleasure of tasting and eating food is still very important,” says Hembert. “Danone included this in its manifesto, that an important dimension of health and wellness is the pleasure and social aspect of food. If you forget the pleasure, then food just becomes a commodity.”

The health and wellness trend has given many start-ups a way into the food and drink sector. With Americans spending over $600bn on groceries last year, the rewards for disruptive young companies, focused on Millennials, can be immense.

Founded in 2012, Brandless offers a simple pricing model: everything from soup to shampoo costs $3. Organic and non- GMO, their products tick the various health and wellness boxes, while their lack of branding minimizes costs. The company, which is based in San Francisco and Minneapolis, uses data and analytics to understand and predict which products consumers use, and they have donated nearly 200,000 meals via their partnership with the charity Feeding America.

“Ethics and the provenance of food is a hot trend,” says TrendWatching.com’s Mattin. “When you have a vision of your personal status that’s all about who you are as a person, what you want to say is ‘I am more ethical. I am more enlightened. I am more socially conscious than the next person.’ The questions of ‘Where does this food come from, is it ethical, is it sustainable, is it good for the planet?’ are increasingly potent.”

The trends pushing wellness such as social media and e-commerce are only going to accelerate.

Transparency through technology

It’s not just start-ups that are using technology to be more transparent with consumers. The French supermarket chain Super U uses social media platform Snapchat Stories to inform customers, via QR codes on labels, of the provenance of its fish and whether they were caught ethically.

As digital technology is central to the whole health and wellness boom, this trend is not going to go away anytime soon.

It’s highly likely that consumers, governments and campaigners will increase the pressure on companies to provide healthier products. Many countries are fighting the obesity epidemic. In 2008, Japan introduced the ‘Metabo Law’, which stipulated that adults over 40 should have their waists measured once a year. Men with waistlines larger than 33.5 inches and women with waistlines larger than 35.4 inches can be advised to seek counseling or dietary advice. Their employers can even be fined if staff do not meet these standards.

Most countries are focusing on sugar and processed foods as targets for higher taxation. With 75 percent of Chileans either overweight or obese, according to the country’s health ministry, the government has brought in a series of restrictions to help citizens lose weight. Over the past two years, it has put an 18 percent tax on sugary drinks, required black warning labels to be put on all foods high in sugar, salt, calories or saturated fat and, from 2019, will ban all junk food adverts aimed at children.

Experts are warning of the dangers of eating ‘ultra-processed’ foods, which now make up about half the food bought by families in the UK (50.7 percent), Germany (46.2 percent), Ireland (45.9 percent) and Belgium (44.6 percent)4. More than half of Americans’ calories come from ultra-processed foods, a diet which has been linked to cancer. Countries such as France and Brazil specifically warn their citizens against eating high levels of ultra-processed foods.

“The health and wellness trend will keep gaining momentum,” says KPMG in the US’s Hegarty. “If you look at Generation D, which is our first generation born into the digital age, the trends that are pushing health and wellness such as social media and e-commerce are only going to accelerate.”

In short, health and wellness is no passing fad. Looking closely at your products and their ingredients, as well as your relationship with your customers, will help your business stay fit for the future.

“The thing with real trends that are meaningful is that they are founded in basic human needs that never change,” says Mattin. “Health and wellness is a fundamental part of human nature.”

A manifesto for health

Danone thinks a commitment to healthy food is essential for the planet, as well as future profits “We believe a healthy body needs healthy food. And healthy food needs a healthy planet. All with healthy ecosystems and strong, resilient social structures. We simply can’t have one without the others.” That, in a nutshell, is the philosophy at the heart of Danone’s ‘One Planet. One Health’ manifesto, launched last December.

The food and beverage group, which sells its products to more than 900 million people across the globe, is not the first CPG business to make such public commitments. Nor will it be the last. Yet the manifesto reflects the deeply held conviction of CEO Emmanuel Faber that change is no longer an option, it’s a necessity – for Danone, its suppliers and the people who buy its brands.

So what does this manifesto mean in practice? It provided the rationale for the acquisition of US organic food business WhiteWave. The concern that the industry wasn’t changing fast enough prompted Danone to join forces with Nestlé, Unilever and Mars to launch a new lobbying group, the Sustainable Food Policy Alliance, in July.

Through the Danone Institute, the company has worked with partners to explore a range of health and wellness topics, including whether a long-term decline in family meals in developed economies – only one-third of British families eat at least five meals together every week – is adversely affecting children’s eating habits.

Danone’s commitment is reflected in its day-to-day activities. Each year, the group improves the nutritional value of 30 percent of its products.

Another priority is to make healthier options more attractive to children. Superhero-shaped water bottles have proved successful, as have smaller bottles and designs for wider mouths.

After discovering that, in 2006, water accounted for only 12 percent of Polish children’s fluid intake, Danone launched a ‘Mum, Dad: I prefer water!’ educational program that has reached 700,000 children and 800,000 parents. A similar program, to encourage healthy eating, has been rolled out to at least 30,000 children, aged 9 and 10, in the UK.

In August, the group’s investment arm led a US$10.6m funding round for German start-up Mitte, the inventor of a countertop water system for the home, which will enable consumers to select what minerals they want in their water. More such deals in the health and wellness space are likely: the group has indicated it wants to buy 20-25 start-ups by 2020.

The commitment is also reflected in the company’s procurement. Cécile Cabanis, Danone CFO, says: “‘One Planet. One Health’ is all about the way we use resources. We have a responsibility to ensure we create more value from fewer natural resources. It is also about making sure we acknowledge the necessary changes in what we do to play our part in the food revolution and to connect this vision through our brands. In other words, we must do business with purpose.”

In accordance with Danone’s manifesto, in 2017, 88 percent of its revenues came from healthy product categories. If you’re going to satisfy consumers’ desire for a purpose to purchase, it helps to have a purpose yourself.

Five key learnings

  1. Healthier habits are key to corporate survival. Developing and promoting healthier products keeps businesses ahead of the game and customer centric.
  2. Industry-wide initiatives can impact the whole diet and habits of consumers. Collaboration among companies is a very powerful way to promote new behavior.
  3. Focus on your products. If your products aren’t right then consumers will not be interested in them, whatever leverage your brand gives you.
  4. Millennials are driving change. They are creating businesses leading the trend, and have helped health and wellness become mainstream over the past two years.
  5. The pleasure principle is still paramount. The social and pleasurable aspects of food must be at the heart of health and wellness strategies.

 

Footnotes:

1. Health and Wellness in the US, Euromonitor International, June 2018

2. 2018 Edelman Trust Barometer, The State of Trust in Business, Edelman

3. The Purpose 2020, Kantar Consulting, April 2018

4. Public Health Nutrition, January 2018. 5BMJ Open, volume 6, issue 3, March 2016

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