Friday, November 18, 2016

Dairy Foods Forecast 2017: Functional Dairy Foods—It’s All About Transparency

Photo source: Milk Unleashed/Tetra Pak Inc.

This is the second in a series of reports predicting dairy innovation rollouts in 2017.
As the year starts to wind down, food and beverage market analysts issue forecasts for macro trends that will drive innovation. I take those trends and combine them with the knowledge gained throughout the year from attending international trade shows and talking with suppliers and dairy foods marketers. This year the entire dairy foods supply chain is pumped up about the future. And this is thanks to all the dedicated people who work in every link, from farm to table.

But wait…is everything about to change? This week there have been numerous perspectives published on the future of food under the president-elect’s administration. Later in this blog you can read insights from Mark Mansour, partner, Mayer Brown LLP, an expert in food industry regulations and someone I have relied on for insight over my 20-plus years in food industry journalism.

Milk: The original functional food
So let’s talk the future of functional foods, specifically functional dairy foods, which are those foods that provide benefits beyond basic nutrition. Dairy foods are one of the original functional foods, with milk still being one of the biggest players in the category as a result of vitamin D fortification.

Voluntary addition of vitamin D to fluid milk started back in the 1930s when rickets, a bone-debilitating disease, was prevalent. Incidence was linked to a deficiency in this fat-soluble vitamin. Because milk was a highly consumed food, the medical community encouraged fortification. To date, vitamin D fortification of milk remains voluntary, yet the norm, in U.S. and most developed countries.

Not all functional foods mitigate disease. They can deliver a myriad of purported benefits ranging from anti-aging to inducing satiety. Some provide energy while others promote relaxation. Some such foods are inherently functional, for example, a cup of brewed green tea is loaded with antioxidants, while other rely on the addition of functional ingredients.

Vitamin D fortification of ALL dairy products is one of the greatest opportunities for dairy foods in the functional foods sector, which consumers continue to embrace, but some are starting to question. That’s because of the transparency issue.

Source: The 2016 Label Insight Food Transparency ROI Study

Dairy’s inherently clean and simple reputation makes it an ideal delivery vehicle for functional ingredients. This includes everything from vitamins and minerals to probiotics and prebiotic fibers to omega-3 fatty acids and plant extracts, such as those from green tea or red wine. What is paramount is that marketers communicate to consumers why these ingredients are being added and where they come from.

I promise you, the next few years will be all about complete transparency. This is particularly true if the new Washington, D.C., regime makes changes in regulations that take us back to the ice milk ages.

The fact is, Baby Boomers, in particular, are very open to functional foods. According to the National Marketing Institute, 61% of Baby Boomers use functional foods and beverages, and 54% consume fortified products. Adding vitamins, minerals and other key nutrients to dairy foods will keep Baby Boomers in the category.

According to Packaged Facts, two of the most appealing “functional ingredients” to Baby Boomers are vitamin D (for bone health) and omega-3 fatty acids (for cognitive function).

This week I attended the 2016 Food Tank Summit in Chicago. The non-profit’s vision is to build a global community for safe, healthy, nourished eaters. This is a beautiful vision.
Its values are to: Educate. Inspire. Advocate. Change.

I’m all for it, as I am sure many dairy foods industry members are, too. But let me tell you, there are some extremists in this space. Many are vegans. Some believe pasta is an overly processed food. (I do think I saw the same person who said pasta was an overly processed food enjoying a brownie after lunch, which did not come with any disclaimers or ingredient sourcing statements.)

The point is consumers are fickle. They will make compromises to suit their desires, their needs, their opinions, their beliefs. To keep consumers in dairy, in milk—the original functional food—talk about your product. This is the functional dairy foods trend for 2017. Add it. Tell them why. Explain it.

Source: The 2016 Label Insight Food Transparency ROI Study

The 2016 Label Insight Food Transparency ROI Study from Label Insight Inc., Chicago, was released in June 2016. Findings from the study showed that consumers want brands to be completely transparent when it comes to food, but they largely do not trust them to accurately provide complete product information. Let’s prove this study wrong when it comes to dairy foods.

The study surveyed more than 2,000 consumers about their preferences for transparency and how it affects their trust for and loyalty toward brands. The results showed that consumers want more than just the required product information on a product’s label and will purchase from and be loyal to brands that provide more detailed insights. They want to see everything from a complete ingredient breakdown to sourcing information. What’s more, if a brand doesn’t provide them with this information consumers will look elsewhere for it. This puts brands in a vulnerable position, one that involves shoppers consuming (and likely believing) third-party information about their products. Trust me, this is not a place you want your customers to go.

According to research by Label Insight, millennial moms are leading this move toward digital transparency. Millennial moms--mothers between the ages of 18 and 34—value transparency more than any other demographic, are significantly more interested in seeking product information through digital channels and are willing to pay more for it. This demographic represents nearly $200 billion in spending power. Millennials also love dairy.

So between Baby Boomers trying to defy aging and millennials doing what millennials do, there’s a huge opportunity for functional dairy foods, if they are clean, simple and transparent. 

Label Insight survey research showed that product transparency influences purchasing behavior, plays a significant role in customer loyalty to a product and opens the door to the brand’s entire portfolio of products. The survey revealed that nearly all consumers (94%) are likely to be loyal to a brand that offers complete transparency. What’s more, transparency ranked highest in a list of factors that motivate consumers to be loyal to a brand, with 25% listing it as their top factor.

The survey found that 39% of consumers would switch from their current preferred brand to one that offers more product transparency. Furthermore, once a consumer has switched to a brand in favor of increased transparency, he or she is likely to remain loyal long term. Fifty-six percent say they would be very likely to remain loyal to a brand for life if it offered complete transparency.

Transparency is so important to consumers that they are actually willing to pay more for it. Almost three in four consumers (73%) say they would be willing to pay more for a product that offers complete transparency in all attributes (ingredients, nutrition, sourcing, etc.).

Source: The 2016 Label Insight Food Transparency ROI Study
When asked to indicate the importance of transparency for each product category, consumers proved transparency is important across the board. However, dairy ranked highest, with 97% of respondents indicating it is very important or somewhat important for dairy brands to be transparent, followed by produce, meat and frozen food products.

Most consumers (77%) believe a food brand is transparent when it provides a complete list of ingredients in its products, followed by in-depth nutritional information about the ingredients (54%) and certifications such as USDA Organic or “low sodium,” an FDA nutrient content claim.

Consumers also say they want more information than brands are required to include on the physical product label. More than half (56%) say additional information on how food is produced, handled or sourced would make them trust a brand more, and this information ranked more than twice as high as brand packaging claims such as “low fat” or “low sugar.”  Sixty-two percent say missing information on labels causes them to be skeptical about a brand. This distrust may increase with new governing bodies.

Source: The 2016 Label Insight Food Transparency ROI Study

In summary, transparency has positive implications for brands. It fosters product loyalty, brand loyalty and increases the product’s worth in a consumer’s mind. In an age where consumers are more concerned about what’s in the products they use and consume than ever before, brands that provide shoppers with the information they seek through their preferred channels will reap the benefits. This is very important in the functional foods sector, where ingredients are added for specific health and wellness benefits. For 2017: Add it. Tell them why. Explain it.

Insight from Mark Mansour, partner, Mayer Brown LLP, Washington. D.C., as stated on November 17, 2016: 
The Trump transition team has stalled in its effort to vet and announce appointments, while potential appointee names continue to surface. Several high profile departures have slowed the transition to a crawl. With the removal from the HHS transition team of NJ governor Chris Christie, Rich Bagger and a number of lobbyists close to Christie.
Wisconsin Gov. Scott Walker aide Andrew Bremberg becomes the transition head for HHS. It is looking likely that U.S. Rep. Dr. Tom Price of Georgia will be HHS Secretary. Dr. Ben Carson has removed his name from consideration for any position in the Trump administration.

As you may have heard, the Trump transition team is asking all potential appointees to relinquish their lobbying privileges and pledge not to lobby for five years after they leave the administration, although the ban has numerous qualifiers. Based on what we are hearing, other cabinet appointments will be announced soon. The announcements will not be made in the order of importance, but rather based on the achievement of consensus regarding a particular candidate. We have had many requests for information about FTC. Our sources indicate that the key agencies will be addressed as soon as cabinet is chosen, unless there is consensus on a given agency head candidate. No names have yet emerged for FTC head, and FDA will almost certainly await an appointment of an HHS secretary. Assuming that Tom Price is chosen for HHS, look for an effort to re-evaluate numerous HHS and FDA regulations, something Donald Trump promised would happen at most departments and agencies. Our colleagues here at Mayer Brown have ongoing relationships with Rep. Price, which certainly will be helpful as the changeover at HHS takes effect.

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