It is safe to say that most shoppers walking down the supermarket aisles show great interest in the word “natural” on product packaging, and they already have their own understanding of what “natural” may mean in their mind. However, our latest research findings show that the description of “natural” thus far is very much a self-governed practice from the manufacturer’s perspective; there is no conclusive and scientific definition for the term “natural”. The lack of clear definition is causing confusion and harming the believability of natural claims sometimes. In view of the mindful eating trend, manufacturers are compelled to explore various new ingredients for NPD and nurture the next big thing following the great success of coconut water. Our newly released global briefing, titled: Ancient Wisdom and Botanical Acquisitions: the Rise of Naturals, has two parts, with each part exploring different issues in the naturally healthy foods and beverages industry. Some specific examples are referenced from soft drinks, hot drinks and packaged food systems, making it a comprehensive analytical report.
In part one, we discuss the market overview, popular botanicals and their applications. Our key findings include:
- Botanicals are a natural fit for NH products and proved a new avenue for growth. Mainstream players are speeding up their movements into the “natural world” either by extending or reformulating their existing products, or investing in or acquiring brands. This situation has created a good selling opportunity for well-performing small or medium-sized brands. The growing interest in ancient wisdom and formulations, and an influx of funding is positive for raising the NH profile and overall market development. Supported by financial strength, some ingredients/brands may have a better chance to be nurtured to be part of a daily regime than those with limited investment.
- Newly-found botanical ingredients are constantly hitting the shelves in health food stores, which makes for a highly competitive landscape for start-ups. It is a huge challenge to retain long-term consumer interest, with few companies seeing success. While ancient herbs and grains may appeal for their long history, it is hard to make official claims given the strict regulations in the EU and FDA. Faced with an influx of fashion-driven, new or ancient ingredients and flavourful marketing messages, there is a danger that consumers may feel overwhelmed and confused, and become fickle or sceptical towards new releases.
- Multinationals with balanced NH food and beverages portfolios are placed highly in the globalrankings. Despite trailing behind TCCC in soft drinks, PepsiCo’s NH position is comparable to TCCC’s thanks to its presence in NH food. That said, TCCC’s recent botanical acquisition is positive to its overall NH profile. Chinese JDB’s prominent position in the NH world means the sheer size of China’s herbal RTD tea market can support a giant with massive revenue comparable to a global company and through unmet potential in the country.
- In human food history, the word “super” has never been so exploited and widely used. It is noted that superfruits, super trees, supergrains, super herbs and super plants are the elements that form a “super natural” market. This means consumers are increasingly sceptical about artificial ingredients and desire less processed, simple formulations with healthy attributes. This represents a challenge particularly for ingredients suppliers and agriculture investors. Given the trend is likely to continue, sustainability of supply of super foods is increasingly important.
In part two, we highlight some brands such as Planters and Naked and how specific NH categories are developing, the competitive landscape and major acquisitions.
- Ancient wisdom such as traditional Chinese medicines (TCM) offers a window of opportunity for manufacturers given botanicals fit perfectly well with the word “natural”. The popularity of coconut water will continue as major companies are investing heavily in the product. Organic juice is expanding rapidly, however growth is likely to be limited by costly certification and conversion to organic farming.
- NH natural mineral water is a regulated category in most countries, and the process of application for such labels can be long and approval difficult to come by. Some TCM herbs may not be palatable to a Western audience and it takes resources to nurture a consumer base. Organic certification and farming is desirable; but to make it scalable and economically sustainable remains a challenge.
- Protein, high fibre and “good” fat are the desirable attributes at the top of the list for NH food. Nuts, oats and olive oil are hotly pursued and they are increasingly used as ingredients for NH food.
- NH food is generally more expensive than regular variants as the sourcing, authenticity and the amount of natural ingredients used can be more expensive. While NH is a good way to cushion the value slowdown in packaged food, high prices could deter volume consumption. Fluctuation in harvests of some ingredients such as olive oil may also affect the sustainability of certain formulations.