Consumers have spoken. They want their products to be “all natural.” And food manufacturers are responding with cleaner labels promoting more natural, healthier and nutritionally superior ingredients. Still, there continues to be a multitude of opinions as to what constitutes “natural.” A bag of potato chips made from all-natural potatoes, salt and oil might not qualify as a health food. But do consumers or manufacturers really know or agree about what does? Are manufacturers producing natural foods that meet their customers’ demands for healthy and nutritious products?
“Confusion reigns when it comes to consumer understanding of ‘natural’ foods,” said Karen Howard, CEO and executive director of the Organic & Natural Health Association (O&N). “Surveys indicate that consumers often believe natural is the same as organic only without the certification. Consumers also assume that natural products contain no artificial colors, dyes or ingredients. Few, it appears, are aware that natural is not regulated by the federal government.”
The O&N was organized in 2014 to create standards, facilitate research and be an industry advocate through a partnership between companies and consumers. The trade group is dedicated to creating and promoting transparent business practices that safeguard access to organic and natural food, products and services. It also supports the development of rational standards for claims substantiation, promotes the communication of truthful and non-misleading information, and encourages research in the natural products industry.
Since the O&N represents both corporate and consumer viewpoints, Howard says it is uniquely positioned to create a meaningful definition of “natural” and an accompanying seal that articulates the definition of the word. She further articulates that the definition should incorporate the following elements:
• Organic, the industry’s standard-bearer and federally regulated program, will serve as a fundamental set of criteria for defining natural foods.
• Transparency in manufacturing and marketing, including the exclusion of ingredients that fail the test of natural, (artificial colors, dyes or specific ingredients), the use of natural extraction and processing techniques and documentation of adherence to cGMP standards.
• Traceability and the ability to document the origin of the ingredients in food and supplements. Consumers want to know where their food is from, and that includes internationally sourced ingredients for products manufactured in the U.S.
• Sustainability, meaning that the company adheres to a set of corporate responsibility practices, and that the production practices and ingredients themselves are sustainable. For example, supplements and many fortified foods contain synthetic vitamins. “The question we are asking now is whether requiring these products to use natural vitamins is a sustainable option when defining natural. Is there enough natural vitamin C to meet consumer needs? Grass-fed beef represents farming practices that are highly sustainable for the environment. Will our definition of natural beef require it be grass fed and organic? These are the questions we are working through now. In fact, we have commissioned a consumer survey to guide us through this decision process,” Howard said.
Super natural foods
Another prominent keyword emerging in the natural food discussion is “functional.” The Mayo Clinic defines functional foods as those that have a potentially positive effect on health beyond basic nutrition. Mayo says oatmeal is a familiar example of a functional food because it naturally contains soluble fiber that can help lower cholesterol levels. There are some functional foods that are modified to have increased health benefits, and this may call into question as to whether those foods might still be defined as “natural.”
Nonetheless, with proactive wellness and proper nutrition among leading consumer dietary trends, functional foods are emerging as an increasingly important part of the U.S. food retail landscape. This, according to a December 2014 Packaged Facts report, “Functional Foods, Key Trends and Developments,” is driving growth in the functional food segment amongst three important consumer demographic segments: Millennials, Baby Boomers, and health-engaged and exercise-conscientious consumers.
“Increased consumer awareness of health and wellness across the age spectrum and among those seeking to combat obesity will continue to fuel interest in functional foods for the foreseeable future, and therefore the ingredients selected for use and potential claims to be made by food processors and marketers,” said Packaged Facts research director David Sprinkle.
A division of MarketResearch.com, Packaged Facts publishes market intelligence on a wide range of consumer market topics, including consumer demographics and shopper insights, consumer financial products and services, consumer goods and retailing, consumer packaged goods, and pet products and services.
The report further explains how the three demographic groups are pushing the demand for functional foods:
• Millennials are interested in optimizing current health and preventing declining health in the future. They are more likely to seek out food products fortified with calcium, fiber and vitamins and minerals, according to the report. In addition, Millennials are driving the trend toward more frequent and healthier snacking. Desirable, healthier snack foods are those that Millennials are comfortable selecting both in addition to and instead of traditional meals, offering flexibility to be consumed in either fashion. These include everything from yogurt to fresh fruit to nutrition bars.
• Baby Boomers reportedly control 70 percent of U.S. disposable income and drive, to a large extent, demand for healthy food products. A majority of consumers in this demographic group want more of the ingredients that have been identified to help prevent or mitigate conditions that relate to aging and tend to afflict older consumers including fiber, antioxidants, heart-healthy ingredients, vitamins and minerals, omega-3 fatty acids, vitamin D, calcium and whole grains.
• On a grander scale, well-accepted understanding of enhanced nutritional needs associated with athletic activity and performance and persistent high obesity rates, which are associated with chronic diseases and highlight the importance of weight loss and maintenance, also contribute to a robust market for functional foods and beverages. As a result, food processors are taking notice of the increased number of consumers embracing the concept of living a higher quality of life through an approach to health and wellness centered on nutritious food consumption and being active. According to the report, most food processors expect weight management and cardiovascular health to be the top issues for consideration over the next two years while developing foods, beverages and dietary supplements.
In a previous study, the market researcher also factored another demographic in the decision-making process; particularly in Millennial households. The report says that any American home with a child present also is likely a household in which a child wields substantial influence over retail products purchased. It went on to say that, like generations before them, Millennial moms’ consumer behaviors are greatly influenced by their own mothers and the parenting style they experienced growing up. The Millennial mom today was raised by the Boomer mom of yesterday. This means that the affluence that was garnered by the Boomers was lavished on their Millennial kids.
A 2014 IFT report on Functional Food Trends further stipulates that specialty nutritional ingredients, the emergence of a health-oriented Hispanic market segment, and consumers’ ongoing interest in protein consumption are driving new opportunities for functional foods and drinks in the U.S., based on the following criteria:
• The U.S. is the world’s largest functional food market with sales of $43.9 billion in 2012, up 6.9 percent over 2011.
• Six in 10 U.S. adults consume specially formulated functional foods/beverages at least occasionally. Yogurt for digestive health and cereal for heart health are the most-consumed items, followed by cholesterol-lowering butter/margarine, cholesterol-lowering orange juice, shakes/bars to reduce hunger, orange juice for joint health, immune-boosting dairy beverages and medicinal teas.
• America’s 52 million Hispanics represent an enormous and virtually untapped healthy food and beverage opportunity. In 2012, U.S. Hispanics spent $6.9 billion on functional foods, up 7.7 percent vs. 2011. They also spent $9.4 billion on natural/organic foods/drinks, up 12.9 percent, and $2.4 billion on supplements, up 7.6 percent.
• With 41 percent of America’s 32 million moms saying they always buy healthy foods/drinks for their kids and 88 percent claiming to do so at least sometimes, a wider range of healthy, convenient, kid-friendly foods/drinks—with nutrient and calorie levels specific to kids—will find a welcome market.
The IFT report also projects that with a fast-emerging middle class, more disposable income and a greater number of working/more educated women in emerging markets, the worldwide potential for functional foods/beverages is unprecedented.
Locally sourced food surges ahead
Like organic products before them, locally produced foods are stepping out of the shadow of their once “quirky niche” designation to claim a much more prominent—and permanent—place in the U.S. food and beverage retail-scape. According to findings in a January 2015 Packaged Facts report, “Shopping for Local Foods in the U.S.,” it is estimated that local foods generated $12 billion in sales in 2014, accounting for 2 percent of total U.S. retail sales of foods and beverages. Looking ahead, Packaged Facts anticipates that, over the next five years, local foods will grow faster than the annual pace of total food and beverage sales to approach $20 billion in 2019.
“We’ve reached a tipping point for local foods. Over the past 10 years, there has been a surge in consumer demand for locally produced foods, along with widening availability,” Sprinkle said. “And it’s not just farmers’ markets or natural food retailers lending credence to this trend. An increasing number of larger grocers are carrying and promoting local products. Even Walmart has been promoting local farmers in its bid to tailor its store selections more toward local communities.”
A proprietary Packaged Facts National Consumer Survey conducted in November 2014 among U.S. adults found that 53 percent of respondents specially seek out locally grown or locally produced foods, with 19 percent “strongly” agreeing and 34 percent “somewhat” agreeing. Even more interestingly, nearly half the respondents agree they are willing to pay up to 10 percent more for locally grown or produced foods, and almost one in three said they are willing to pay up to 25 percent more. A third of consumers also claim to consciously purchase locally grown or locally produced foods at least once a week.
The Packaged Facts report concludes that, among the primary reasons for purchasing locally grown or locally produced foods, the majority of consumers claim they do so because the products are fresher. In addition, more than half of consumers say they buy local products to support local businesses, and more than 40 percent of consumers say the products taste better. In addition, roughly a third believes that local products are healthier, and that they like to know where their food is coming from.
This demand for local food has given rise to a surge in urban cooperative gardens and farmer’s markets popping up in large urban areas. This movement is starting to put a dent in the food desert landscape, but large grocers have also heard the call to bring farm-to-table food to the tables of their customers.
“Kroger is dedicated to supporting locally grown produce to provide our customers with the freshest, most nutritious fruits and vegetables in the Southeast,” said George Harter, produce merchandiser with Kroger’s Atlanta Division. “Consumers also recognize that purchasing vegetables and fruits grown by local farmers has significant advantages, including helping the economy in the communities we serve, and delivering produce to our stores much more quickly.”
“Natural foods are the fastest growing department in our stores on a percentage basis, and we expect it to double in size company-wide in the next five years,” added Felix Turner, natural foods merchandiser with Kroger’s Atlanta Division. “Kroger is committed to offering customers a wide variety of items that are excellent in quality and affordable for consumers. Kroger is always listening to our customers for ways to provide the best shopping experience. As part of that ongoing evaluation, we learned customers wanted a straightforward solution to shopping organic food. This is why we introduced Simple Truth and Simple Truth Organic.”
Kroger’s two private-label brands—Simple Truth and Simple Truth Organic—were introduced in September 2012. Simple Truth’s green circular logo identifies organic options free from more than 100 artificial ingredients.
While the natural foods rulebook may be far from being finished, and that may, in itself, be an obstacle in changing consumer attitudes about natural foods, what can manufacturers do to ensure their customers are receiving reliable, understandable and useful information about the foods they choose today?
“Consumers are definitely seeking what they perceive to be healthier products,” said Howard. “Events like recalls of food, for both people and pets, high-profile lawsuits on what constitutes natural, announcements by retail chains, restaurants and manufacturers on their commitment to organic, or their sourcing of humanely raised meats, and even the diet trending we see towards healthy school lunches and the slow food movement, represent just a few of the drivers moving people away from artificial, heavily processed foods. Industry now needs to support these changes through transparent and accurate business and marketing practices.”
Meanwhile, consumers are still flipping product packages around to search labels for words they recognize, watching television cooking shows for recipes, wondering about Paleo diets and reading news reports filled with industry buzz terms.
“As increasing numbers of consumers seek healthier choices for their families, the biggest obstacle I see is the labeling of products,” Howard pointed out. “While the use of natural remains prolific, some manufacturers are moving to other terms, like simply, to avoid potential litigation. Other companies are using terminology as pure marketing gimmicks, like GMO free or even gluten free on products that would never meet the definition. Gluten-free (unprocessed) fish, GMO-free wheat (there is no GMO wheat) and organic dry cleaning—none of these are valid claims or provide important information for consumer choice.”
It all comes down to this: What are consumers hoping to find as they push their carts down the grocery store aisles?
“We are acutely aware that the consumer wants reliable, understandable and useful information,” Howard concluded. “Our process will incorporate quality standards and programs currently being utilized in the industry and role them up into a concise program for defining ‘natural.’”
*Editor’s note: This story by The Shelby Report contributing writer Carmel G. Hearn originally appeared in the March 2015 print edition of The Shelby Report.