Less is More. Free-from Report. Free-from products are the next big opportunity for retailers in better-for-you foods.

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1 Free-from Report Less is More Free-from products are the next big opportunity for retailers in better-for-you foods. By Jim Dudlicek has specifc standards, but many consumers don t know what they are. Natural is a vast designation open to much interpretation. As shoppers scratch Organic their heads, looking for honest food-product labeling, freefrom may be the solution that both retailers and CPG companies are looking for to end the confusion. Research shows that many consumers are skeptical of label claims, especially around the term natural, and they often believe that organic equates to expensive, says David Young, VP of private brands at Minneapolis-based Supervalu Inc. Tat s why, as part of a newly announced brand refresh, Supervalu is shifting to new free-from messaging for its Wild Harvest brand that addresses consumers desire for clearer ingredient statements. All products in the Wild Harvest line, launched in 2008, are free from more than 100 undesirable ingredients, including artifcial favors and synthetic ingredients, and nearly 70 percent of its products are certifed organic by the U.S. Department of Agriculture (USDA). Wild Harvest, which currently features more than 300 products in 60 categories ranging from fresh produce, dairy and meat to cereals, pastas, snacks and baby foods, is expanding its product lineup this year with nearly 200 new items. While the Wild Harvest brand has always been about delivering great-quality, afordable, better-for-you food choices, Young says, this refresh will make it easier for shoppers to fnd Wild Harvest products at their neighborhood grocery store that help them live a healthy lifestyle. Tis is a strategy that other grocers are adopting as well, among them Te Kroger Co. Cincinnati-based Kroger s Simple Truth brand proclaims that it s Free From 101, meaning that products don t contain 101 specifc artifcial preservatives and ingredients that an increasing number of consumers consider detrimental (visit Progressivegrocer. com/freefrom to see the full list). Creating a New Category Consumer demand for free-from products is defnitely on the rise. What s In Store 2015, by the Madison, Wis.-based International Dairy-Deli-Bakery Association (IDDBA), notes that of all of the global food and beverage introductions in 2013, almost 13 percent included a freefrom claim, up 3 percent over the previous fve years. Confrming these trends are fndings in IDDBA s original research, Engaging the Evolving Shopper: Serving the New American Appetite, which shows that consumers view foods found in the fresh perimeter categories as antidotes to unhealthy, processed foods. For example, the dairy department represents a real-food source of protein in the form of yogurt, milk, cheese, eggs and tofu, while the bakery department has an increasing opportunity to deliver on key wellness priorities, with more focus on a wider variety of fresh, whole grain and gluten-free products. In-store bakeries, delis and dairies can engage consumers by presenting them with a variety of fresh, real and minimally processed foods, 46 Progressive Grocer Ahead of What s Next March 2015

2 says Eric Richard, IDDBA s education coordinator. By doing so, they become part of shoppers conversations about what is healthy and delicious to eat, and where they can easily fnd these foods to purchase. Manufacturers of free-from products are defnitely taking the trend seriously, most recently evidenced by the announcement at press time that Deerfeld, Ill.-based Mondelēz International is acquiring category pioneer Enjoy Life Foods, maker of allergen-free cereals, cookies, bars and other snacks. When Enjoy Life Foods was founded 13 years ago, we joked that we were No. 1 in a category that didn t exist, says Joel Warady, chief sales and marketing ofcer for the Schiller Park, Ill.-based company. With consumers becoming more conscious than ever of what they are eating, paired with the increased diagnosis of food allergies, the demand for free-from foods has increased dramatically. Today, more brands are entering into the market, providing innovative products to satisfy consumers growing demand for products. Tat s also the assessment of the folks at Better For You Foods. Only a handful of years ago, there were very few options in free-from products, and consumers were delighted at the prospect of any free-from products. So all someone had to do was care enough to create a product that omitted particular allergens or unwanted ingredients, and that product was well received, says Amy Lotker, owner/evp of the Delray Beach, Fla.-based manufacturer of all-natural, gluten-free and dairy-free frozen pizzas. Fortunately, free-from products have become more popular, even mainstream in certain instances and now consumers of free-from products are more demanding about the ingredients contained within, continues Lotker. In the realm of natural free-from oferings, health-oriented consumers now seek products that contain non-gmo ingredients and whole grains, combined with lower amounts of sodium, unhealthy fats and unnecessary calories. Certainly, interest in non-gmo products is growing. Te latest research from Te NPD Group, based in Port Washington, N.Y., fnds that more than half of Americans are concerned that modifed foods pose a health hazard (see sidebar on page 52). Total sales of food and beverage products labeled non-gmo topped $10 billion during 2014, according to data from Schaumburg, Ill.-based Nielsen, a 15 percent increase over the previous year and more than 50 percent since As reported last month in Te Washington Post, a survey conducted by the Pew Research Center in Indicate how well each statement describes your own behavior regarding shopping for food and beverages: I LOOK for food and beverages... Health & Wellness Shopping Behavior association with the American Association for the Advancement of Science revealed that 88 percent of scientists believe genetically modifed foods are safe to eat, compared with only 37 percent of the public. Tat gap is driving more food makers to reformulate their products, many seeking verifcation from the Non-GMO Project, based in Bellingham, Wash. One of the latest is Vintage Italia Pasta Chips, which debuted at the Winter Fancy Food Show new packaging sporting the Non-GMO Project Seal of Approval. We felt it was important to respond to our consumers desire for a non-gmo product, says Jerry Bello, founder and CEO of Windemere, Fla.-based Vintage Italia. Our verifed products are produced I m most likely to GET the ones... 30% That are good for my heart 30% 28 That are minimally processed That contain only ingredients I recognize That are locally grown or produced With the shortest list of ingredients With added vitamins and minerals That help lower my cholesterol Endorsed by health organizations I recognize That are non-gmo certified That are labeled organic That are Fair Trade Certified 6 16 That are cooperatively produced 5 Source: A Culture of Wellness 2013 report, The Hartman Group When trying to decide which foods and beverages to put into my shopping cart/basket: March 2015 progressivegrocer.com 47

3 Free-from Report Wellness Track Claims are not Additive Dollar Sales in Millions GMO-free $6,356 $7,413 $8,694 $10,026 Grocery 2,490 3,102 3,962 5,028 Dairy 1,562 1,761 1,909 2,005 Produce 1,374 1,457 1, ,533 Frozen Foods Health Care Bakery , Deli Meat Pet Care Personal Care General Merchandise Beauty Care 0.000, , Gluten-free $24,063 $28,859 $33,446 $38,206 Grocery 12,205 14,614 16,540 18,801 Dairy 4,864 5,534 6,106 7,097 Health Care 3,481 4,240 4,764 5,071 Meat 1,234 1,735 2,169 2,647 Frozen Foods 1,680 1,877 2,136 2,402 Deli Pet Care Alcohol Bakery Personal Care Produce Beauty Care Tobacco and Tobacco Alternatives General Merchandise Household Care Hormone-, Antibiotic-free $6,115 $7,140 $8,100 $8,831 Dairy 4,121 4,803 5,338 5,557 Frozen Foods 1,106 1,210 1,391 1,648 Meat ,159 Deli Grocery Pet Care Health Care General Merchandise Produce Personal Care Bakery Source: Nielsen in compliance with the Non-GMO Project Standard, including ongoing testing of risk ingredients. Te snack chips, made with a blend of semolina four and ancient grains, are sold nationwide at major retailers, including Safeway, ShopRite and Walmart. Other new products are starting small but gaining traction by tapping free-from trends, like Paleo Scavenger s granola, which is free of grains, dairy, soy and refned sugars. I think consumers are becoming more educated about the food industry with respect to its sourcing and manufacturing practices, because of documentaries such as Food Inc. and Fed Up, and are therefore more conscious about what foods they re putting into their bodies, says Brittany Chibe, founder and owner of Chicago-based Paleo Scavenger, who started the company last June after adopting a paleolithic diet, based on what cavemen were believed to have eaten. I think the awareness will continue to grow, and claims like non-gmo and gluten-free are going to be more important to consumers, and therefore retailers. Dedicated to Gluten-free Meanwhile, gluten-free shows no signs of slowing down. Sales of products carrying the gluten-free claim including food, beauty and personal care, and general merchandise totaled $38.2 billion during 2014, Nielsen reports, up 14 percent over the previous year and nearly 60 percent since Grocery retailers are taking full advantage of this trend, highlighting gluten-free products prominently in their weekly circulars, with Kings Food Markets, Foodtown, Giant Eagle, Big Y Foods and ShopRite leading the pack during the year ending Jan. 24, 2015, according to data from Solon, Ohio-based ECRM. Te snack category enjoys the lion s share of ad support for gluten-free products, at more than 30 percent, followed by deli and frozen, also in double digits, ECRM research shows. Consumers are becoming more and more educated about allergens in their food, says Mike Ganey, director of marketing at Four Oaks, N.C.- based House-Autry Mills, manufacturer of the Our House line of gluten-free baking mixes. Tis is a market that cannot be ignored by retailers. 48 Progressive Grocer Ahead of What s Next March 2015

4 To support his point, Ganey cites a Mintel report showing a 43 percent increase in the sale of glutenfree bread last year. Gluten-free consumers are becoming more sophisticated in the way that they learn about the products they eat and in their demand for more favorful products. We witnessed that during our national survey of gluten-free customers and in interviews during sensory taste tests of our new bak- ing mixes against established competitors, he says. Te survey found that taste is the No. 1 factor leading to the consumer s choice of one gluten-free brand over another. As with so many other aspects of retailing today, digital marketing will be crucial in reaching out to those interested in gluten-free products, Ganey asserts. Retailers should enhance their online discussions with gluten-free customers, making the section of their website devoted to gluten-free information easy to fnd. It s also important to ofer gluten-free recipes, especially those that clearly identify the right brand, for the best results, he advises. Enjoy Life s Warady says his company has been on the cutting edge when it comes to utilizing digital and mobile technology, and how it is best used in shopper marketing. Tere is no better marketing spend than being able to dialogue with the consumer while she is making decisions in the retail aisle. Enjoy Life uses technology to provide product information, recipes and coupons to help drive additional sales. Additionally, Ganey says, retailers should more clearly identify their gluten-free section in the center aisle to make products easier to fnd and identifable for current and future gluten-free consumers. prefer to shop for products in a dedicated set, which provides both ease and an element of safety. According to Warady, test stores that created dedicated free-from sets saw a 48 percent increase in velocity over the same time period from the year prior, when products co-existed in the natural aisle. Consumers looking for free-from products are known Continued on page 52 Wake up to the good stuff. Category Management To be sure, the free-from category is evolving from a scattered selection to a dedicated shelf set, and companies like Enjoy Life have been at the forefront of this development. With the help of some of our major distributors, Enjoy Life is educating retailers on how best to merchandise free-from products to maximize consumer acceptance, Warady says. Based on our signifcant consumer research, we know that consumers We re committed to making the best tasting organic baked goods with wholesome and nutritious ingredients the whole family will enjoy. No GMOs No Preservatives No Junk rudisbakery.com March 2015 progressivegrocer.com 49

5 General Mills

6 Driving Growth with New Products that meet Evolving Food Trends DELIVERING INNOVATION ACROSS THE STORE

7 Free-from Report Free-from consumers are loyal and appreciative, so there is an abundance of opportunities for retailers to create and enhance lasting relationships. Amy Lotker, Better For You Foods Continued from page 49 to become more loyal shoppers to retailers who get free-from merchandising and product mix right, with an overall increase in basket value, he says. Better For You s Lotker adds: Retailers should take full advantage of promoting free-from products, realizing that it s not just a fringe consumer, it s a now a mainstream consumer, that buys these products. Family members and friends, even if they re not personally in need of free-from products, purchase them for loved ones, because they care about their well-being and their satisfaction. Free-from consumers are loyal and appreciative, so there is an abundance of opportunities for retailers to create and enhance lasting relationships. Paleo Scavenger s Chibe endorses merchandising free-from products with shelf tags to call out their benefts. Gluten-free, dairy-free, non-gmo and even local producer colorcoordinated tags have been popping up on store shelves, she observes. In terms of promotion, I think demoing is efective as well as trials or couponing, but I think the best way to promote these products is to educate consumers on the benefts. Te best way to do this is to get in front of the consumer, meaning having a store nutritionist or dietitian talk directly with them. It could be an e-newsletter, or an in-store meeting or demo to allow shoppers to speak directly to the nutritionist and discuss the benefts of these products. Few retailers do this well. Free-from Foodie-ism How can retailers further leverage the trend in free-from products? People are snacking more times throughout the day, and are using these snacking opportunities to replace a standard meal, Warady notes. Consumers are looking for even more functionality out of free-from foods, specifcally protein and other better-for-you attributes. Warady sees free-from evolving from a category to more of an attribute. More CPG brands realize that the way people are eating has changed, and for the brands to change with them, they will need to create better-for-you products with clean-ingredient decks, he says. Products that are able to boast freefrom claims will see their sales grow exponentially. Chibe, Ganey and Lotker say they anticipate growth in other allergen-free foods, in particular dairy- or lactose-free. Further, Lotker envisions a free-from foodie-ism movement, with more exotic ingredients and international favors rising to the forefront. It just seems like the next logical step in the evolution of free-from, she says. A growing number of free-from consumers are discriminating food lovers who seek more interesting options that also happen to meet their specifc dietary needs. PG Read more about free-from products, their creators and retailers strategies to sell them at Progressivegrocer.com/freefrom. Interest in Better For You Falling, GMOs Rising Consumers want their food to be natural and not altered to the latest dieting patterns, according to a new study by The NPD Group, its 29 th annual Eating Patterns in America report. Consumers are cutting back on their consumption of food with 12 labels that are considered better for you : reduced-fat, low-calorie, diet, light, reduced-cholesterol, reducedsodium, caffeine-free, sugar-free, fortified, organic, low-carb and whole grain. The report finds that Americans cut back on products with these labels for the sixth straight year to the lowest level in a decade down 27 percent between 2008 and It seems we have entered a new phase of marketing health to the American consumer, says Harry Balzer, SVP and chief food industry analyst at Port Washington, N.Y.- based NPD and author of the report. The first phase, back in the 80s and 90s, focused on avoiding harmful substances in our food, such as fat, cholesterol and sodium. The second phase, from the mid- 90s to just a few years ago, was a move to add more beneficial substances in our diet, such as whole grains, dietary fiber and probiotics. It appears we are in the third phase of the healthy food revolution, Balzer continues. In this latest evolution, consumers appear to be avoiding foods and beverages that were made to be better for them and instead consumers are going for products that are real and not altered. Coinciding with this is the increasing concern about genetically altered foods, Balzer notes. NPD s latest research finds that more than half 57 percent of Americans are concerned that modified foods pose a health hazard, up from 46 percent a decade ago. Have we altered the food supply so much, to make it better for us, that there is now a backlash against those products? It is looking like we want more of our foods and beverages to be natural, Balzer says. I think we re looking for foods and beverages to be as they were meant to be. It is part of the new healthy food revolution happening in this country Progressive Grocer Ahead of What s Next March 2015

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