As consumer rejection of artificial ingredients becomes more widespread, food and beverage manufacturers are searching for efficient, inexpensive ways to clean up their labels.
But making the switch is easier said than done, especially since manufacturers don’t want to compromise on the taste, appearance and mouthfeel of a brand’s original product.
This challenge is compounded by the fact that many shoppers who demand clean labels don’t have a good understanding of what that entails.
In 2017, a growing number of Western retailers decided to go where they can grow. Toys “R” Us, Starbucks and now Walgreens are among retailers expanding their brick-and-mortar and e-commerce presence in China’s booming retail market.
As Western retail markets contract due to bankruptcies, store closures and acquisitions, retailers are increasingly looking beyond their domestic markets for sustainable growth, and for many the large, lucrative China market is tantalizingly rich with possibility.
Consumers in the UAE can look forward to a greater variety of foodstuffs and ingredients, as international players such as the EU increasingly look to the UAE for exporting their products, experts have said.
Speaking to Khaleej Times at the Sial Middle East exhibition in an exclusive interview, Ambassador Patrizio Fondi, head of the EU Delegation to the UAE, said that more EU products will make their way to UAE as consumers become conscious of safety and environmental issues. “As the EU has a variety of food produced in its 28 member states, it is for sure that there are still many products which are not yet known. We therefore firmly believe that the variety of EU food products to become available will grow in all sectors.”
China announced tariff cuts Friday on consumer goods including avocados, mineral water and baby carriages in a new effort to spur economic growth driven by domestic consumption and reduce reliance on trade and investment.
Beijing faces pressure from the United States, Europe and other trading partners for better access to its growing market. But the range of 187 products affected by the latest cuts was relatively small and it was unclear how China’s trade balance might be affected.
Chinese leaders are in the midst of a marathon effort to nurture self-sustaining economic growth based on consumer spending instead of trade and investment. Foreign products often are seen as higher quality, safer or cheaper, which has fueled a spending boom by Chinese tourists on basic goods including shoes, cosmetics and infant formula.
The ANUGA food and beverage show in Germany this month highlighted several emerging trends in the global food and beverage industry. Some of the same trends which appeared recently in the U.S. are now beginning to flourish in Western Europe. Others have originated in Europe, Asia or the Middle East and are making their way to the U.S. market. Having recently travelled extensively in the Middle East, these same trends are accelerating and consumers are demanding healthy, low-sugar, low-calorie products. It is important, therefore, to understand the direction global consumers are moving toward to develop successful new products in home markets. In addition, understanding consumer demographics in foreign markets assists in determining strategies for export sales growth.
Plant ingredients used as alternative protein sources
- Dairy alternatives growing at +20% CAGR from 2012-2016, a $16.3B category by 2018
- 27% of Germans consider dairy alternative drinks a “good source of protein”
- Meat substitutes growing at +14% CAGR
- Product launches with a vegan positioning grew 25% last year
Sports nutrition ingredients entering mainstream F&B
- “Sports & Recovery” claims growing at +19% CAGR (2012-2016)
- +14% growth in “Energy/alertness” claims in F&B launches
- “High/source of protein” claims up +27% in the same period
Superfood ingredients attract the attention of healthy lifestyle consumers
- 20%+ Germans interested in hemp milk
- New F&B products with a “superfood” claim up +47%
- “Super fruit” claims up only +15%
“Gut health” and “free from” movement provides opportunities for F&B products
- Digestive health claim launches up +25%
- 1/3 of consumers “very interested” in digestive health
Botanical ingredients such as herbs and berries meet consumer demand for healthy beverages
- +88% increase in soft drinks with a “craft” claim
- Soft drink launches container ginger up +47%
Indulgent, premium dairy products are thriving
- U.S. consumers increased dairy consumption by 25% vs. LY
- 27% of Germans think of yogurt as their typical “morning snack”
- Healthy, convenient snacks gaining shelf space
- 31% increase in new snack launches with high/source of fiber claim
- Energy/alertness claims up +31% vs. LY
- Mexican consumers have increased their consumption of snack foods by 35% because of health, variety and novelty
Premiumization & indulgence are key strategies for confectionery launches
- The Western European confectionery category will exceed Euro 50B in 2018 (US$58B)
- 60% of European consumers buy confectionery/sugar on every grocery trip
- Single origin/estate claims within chocolate category increased 48% (2012-2016)
Ready meals now defined by “flexitarians” – legumes, pulses & pea proteins
- 21% of Russian consumers demand “made with real ingredients”
- High/source of fiber contributed +22% growth LY to new global ready meal category launches
Gluten-free growing in the United Kingdom
- 15% of UK consumers buy gluten-free products because they are “better for me”
- In Europe, new products with a gluten-free claim grew from 7% in 2012 to 15% in 2016
Low Sugar Claims are in Demand
- Growth in global F&B launches with a “low sugar” claim enjoyed a CAGR of +28% from 2012 to 2016
U.S. food and beverage brands enjoy a competitive advantage worldwide due to their economies of scale, being at the forefront of new taste and packaging trends, and having a wide variety of ingredients available to them. While there are also disadvantages such as distance to foreign markets and high freight costs, U.S. companies can compete effectively in foreign markets. There are low-cost means of gaining market share in export markets such as cross-border e-commerce sales channels. U.S. brands may do well by selling against foreign competitors in their markets rather than in your own backyard.
By notice dated July 11, 2017, the Department of Homeland Security (DHS) has delayed the effective date of the International Entrepreneur Rule to March 14, 2018, and will seek comments on whether or not to rescind the rule altogether. The International Entrepreneur Rule (IER), which was issued in the waning days of the Obama Presidency and was to go into effect on July 17, 2017, would have granted foreign entrepreneurs with parole (i.e., the ability to enter the United States) for the purpose of operating and growing his or her start-up entity in the United States. The IER was praised by many as a critical step to revising an antiquated U.S. immigration system that provides few options for immigrant entrepreneurs.
Companies we partner with are highly aware of the fact that international markets can provide their food brands with steady growth potential. However, the challenge is, how do companies unlock that growth potential without experiencing problems that can cost a lot of time and money? Often times we see food businesses begin exporting by accident. Exciting opportunities will present themselves through inbound website leads or at large domestic trade shows, and naturally sales staff and owners alike become energized about the opportunity to make it big overseas! Within weeks, sales staff start responding to every international order and your operations team begins the cycle of chaotically trying to keep up.
Sound familiar? If so, you are not alone – numerous food businesses have walked that same painful path of going global. The good news is your company can begin to unlock new market growth potential and avoid such international woes by developing and implementing an International Strategic Plan. Below is Athena Marketing International’s 5 step process to developing just that:
- Step 1: Find Your HS Code & Begin Active Research Conducting thorough market research is the foundation of your international strategic plan. Start off by researching your food product’s 6 or 10 digit (if available) HS number. The HS number, known as the Harmonized System classification, is a six-digit standard that uniformly classifies traded products across the globe. Once your product HS code has been identified, you can then begin to search for annual exports to specific countries under that product heading category.
- Step 2: Choose 2 or 3 Priority International Markets (go ahead, pick the low hanging fruit) After you have researched numerous markets by your HS product category, pick out the top markets that indicate the largest volume potential for your products. Analyze each market and determine the competitive landscape, product demand, market size, growth rates, consumer demographics, and barriers to entry. Through this search and learn process, you will discover that some markets will have fewer barriers to entry. These will be the markets you’ll want to focus on and prioritize as they will provide large, quick sales opportunities without spending large amounts of resources or time on. Keep in mind too that your priority markets will possess a good infrastructure for distribution.
- Step 3: Develop Profile of Ideal Customer in Priority Markets Now that you have your top two or three markets to focus on, it is important to understand the type of importer and/or distributor you want to work with. Prior to choosing the right one to work with, you’ll want to ask such questions as- What sales channels are they strongest in? Who are their main customers? How many sales representatives do they have? What other food products do they sell? All of these questions and many more should be asked prior to choosing a master importer/distributor.
- Step 4: Establish Pricing for Product(s) Just like your domestic business, pricing is a critical component of your strategic plan. Export pricing should be the same or slightly lower than the discounted price available domestically. The reason for this is to avoid situations where international customers can bypass your importer and buy from a U.S. distributor at pricing that is lower than your pricing. Pricing should be developed in a systematic way so that your importer will have no difficulty in selling.
- Step 5: Develop a Platinum Product Launch Plan When launching a new product overseas, it is important to approach with the same strategic care as you would in the domestic market. Plan and budget for tasting samples, trade shows, point of sales materials for importer and other sound marketing activities that are both a good fit for your brand and the new market.
Now that you have gone through all 5 steps of the International Strategic Plan, it is imperative that your management team and key employees possess a clear understanding of the plan and their role in it. Revisit the plan every time a new international inquiry presents itself and be sure to review it before attending any domestic trade show, such as Fancy Food or Natural Products Expo West.
Athena Marketing International is passionate about seeing agricultural products thrive in foreign markets. If you want to implement a strategic plan for your business and would like more hands on strategic assistance, please be sure to reach out.