Two recessionary trends â€” fewer new product introductions and consumers’ thinner wallets â€” are affecting beverage formulation overall, and the organic and natural beverage market in particular.
From 2007 to 2008, the number of new beverage launches that were organic, all natural, or contained organic and natural ingredients increased almost 28 percent, according to Chicago-based Mintel International’s New Products Database. For the first three months of 2009 compared to the same time period for 2008 and 2007, new organic and natural beverage launches were down 60.6 percent and 22.8 percent, respectively.
At a time when many beverage-makers are focusing on ingredient cost optimization, organic ingredients might be the riskier option for a new product rollout.
“Organic is anywhere from 15 to 30 to 40 percent higher in cost and price point, so it’s definitely affecting the number of rollouts and development that is going on in that sector,” says Walter Postelwait, vice president of marketing and sales at BI Nutraceuticals, Long Beach, Calif.
“Organic growth is really a function of what consumers can afford and what also the ingredient sector can make realistically, meaning if the majority of a certain crop is not grown organically, then obviously there is a very limited supply for that particular crop. The organic industry has always been chicken-and-egg: ‘I want to roll this type of new product out with these types of ingredients, but because it is new, the supply chain hasn’t been put in place yet because there isn’t a market for it yet.’”
Organic ingredients and their use in processed products will be impacted by the recession, as those materials continue to be more expensive to source and produce, adds Suzanne Niekrasz, Robertet USA’s director of marketing communications. “It can also be difficult to maintain consistency from lot to lot,” she says.
Setting the scene for trends at retail, Whole Foods Market reported that its first-quarter profits fell 29 percent, compared with the same period in 2008. Legal costs accounted for part of the drop, but so did cost-saving consumers, analysts say.
In the natural supermarket channel, for the 12 weeks ending March 21, 2009, organic and natural beverage sales are still up 1.4 percent compared to the same period in 2008, according to SPINSscan Natural, a part of Chicago-based Nielsen Scantrack. Through conventional food, drug and mass merchandise channels, SPINSscan Conventional reports that sales of natural and organic beverages are down 3.8 percent for the first 12 weeks of the year compared to the same period in 2008. Last year, natural and organic beverage sales increased 12.1 percent compared to 2007 to approximately $227.4 billion in natural supermarkets. The conventional channel showed natural and organic beverage increases of 7.5 percent in 2008 to $905.3 million, SPINSscan reports.
The Nielsen Co. predicted in its “2009 Industry Outlook” by Tom Pirovano, director of industry insights, that the growth of UPC-coded organics will decline around 10 percent. For each of the past five years, products labeled “organic” earned year-over-year growth of more than 20 percent, the report said.
Although the economy may make growth more difficult, some organic and natural ingredient suppliers aren’t yet seeing a decline in interest for organic and natural product development.
“Organic and natural products have grown gradually over the past few years, as consumer interest in these products has also grown,” says Erin O’Donnell, marketing manager at David Michael & Co., Philadelphia. “While the current economy may slow sales and interest somewhat in this area, there are still active users of organic and natural products.”
“Customers may be taking longer to launch a new product, but the requests for organic and natural products are not declining,” adds Stephanie Weil, beverage scientist at Wild Flavors Inc., Erlanger, Ky.
Healthy by association
The saving grace for organic and natural beverages may be their association with health and wellness.
“Beverages that focus on health and wellness values are leading the drive to obtain organic ingredients,” says Gary Vorsheim, director of extract sales at Martin Bauer Inc., Secaucus, N.J. “As the ready-to-drink market has matured, the focus has shifted to the goodness of the ingredients, and in many cases, this goodness is partially defined by using the words ‘natural’ and ‘organic.’”
At retail, organic and natural beverage claims still provide beverage-makers with a way to differentiate their products.
“The beverage industry has been a key consumer of natural flavors for many years now â€” what has changed is not necessarily their ongoing use, but marketing that gives natural flavors and other natural ingredients more prominence,” Robertet USA’s Niekrasz says.
A growing number of consumers increasingly are aware of and want to avoid artificial colors, preservatives and ingredients that they cannot pronounce or recognize, she says.
“A corollary to the use of natural ingredients is a move toward shorter ingredient statements with items that consumers can recognize,” Niekrasz says. “These are perceived as being more natural because people understand what the ingredients are, while at the same time, there are few or no ‘chemically processed’ ingredients in the formulation. Food technologists understand that chemistry is not inherently ‘artificial,’ but consumer perception is what drives sales.”
“We’re getting a lot of discussions from companies about ‘How do I move from an artificial color, an artificial flavor into something that’s a little bit more natural so I could have a bit cleaner label,’” adds Charles Dodson, director of consumer insights and marketing at A.M. Todd Botanical Therapeutics, Kalamazoo, Mich. “Or, if I’m natural, some companies are really moving into organic, particularly as we’re talking about beverages. You can see that trend across the board in the non-carbonated, non-alcohol beverages. Even alcohol beverages are interested in that.”
Dairy-based beverages, soy and tea are three beverage categories that generate a lot of activity for organic ingredients, Postelwait says. At BI Nutraceuticals, natural and organic “superfruits” and green tea extracts continue to lead natural and organic ingredients based on the strength of health and wellness trends. Yerba mate also continues to grow, he says.
“Beverage-makers trying to come up with a beverage that has a specific need, whether it be for relaxation or some type of joint health or some type of health functionality to the beverage, is what is helping to drive the overall need for these types of ingredients,” he says.
A.M. Todd Botanical Therapeutics also sees natural and organic superfruit flavors benefiting from their association with health. Natural and organic superfruit flavors are growing in the energy drink, enhanced and functional bottled waters and ready-to-drink tea categories, says Dave Wolfenberger, a flavorist at A.M. Todd.
Beverage-makers continue to increase the complexity of their natural and organic flavor formulations, he says. As such, A.M. Todd Ingredients produces flavor systems with functional benefits that can be declared on package labels. For example, A.M. Todd’s tea extracts have polyphenols that can be stated on the label.
Among the beverages benefiting from their association with health and wellness are organic juice beverages. “We are seeing more requests from tea and juice manufacturers for organic flavors,” David Michael’s O’Donnell says. The company recently introduced an organic natural orange flavor as well as an organic coffee extract and an organic natural peppermint flavor.
Enhanced waters are the largest growth driver for Wild Flavors’ organic business. “We are seeing numerous requests for lightly sweetened flavored waters, mostly with a functional value using organic extracts,” Weil says.
Organic extracts also are popular in energy drinks. “Many of our customers are requesting standardized organic extracts for energy-boosting beverages as well as other health platforms,” Weil says. “They are differentiating their energy drinks not only from the artificial area, but using organic extracts to differentiate from natural energy drinks as well.”
Organic herbal and tea ingredients are an area in which Martin Bauer sees increased demand in North America. From waters to teas to juices and energy drinks, the company has seen organic herbal extracts and flavors grow.
Natural and organic ingredients receiving attention from Martin Bauer’s customers include hibiscus, fruit tea blends, rooibos, yerba mate and green teas. Recently, Martin Bauer has launched natural and some organic herbal and tea liquid extracts, natural herbal extracts with coloring properties for beverages and foods, and natural flavoring technology for loose tea and herbal products.
“The key interest points for products like these are based on taste and functionality,” Vorsheim says. “The interesting part of many botanical products is that you can get both good taste and functionality in one ingredient, which adds to their popularity.”
Natural and organic sweeteners
Beverage-makers continue to address the consumer need to manage weight. This year, beverage companies began to use stevia extract rebaudioside A as a zero-calorie natural sweetener. Truvia from Cargill and PureVia from the Whole Earth Sweetener Co. were the first reb A products to hit the market.
“Cargill has worked for years to develop Truvia natural sweetener in response to consumer demand for a natural, zero-calorie way to sweeten foods and beverages,” says Pam Stauffer, global marketing and communications manager at Cargill Health & Nutrition. “Unlike stevia use in dietary supplements, which typically use a mixture of many components from the stevia leaf, rebiana comes only from the best-tasting components and is a high-purity sweetener that is consistent in quality.”
In addition to Truvia, Cargill offers Zerose erythritol, a natural and organic bulk sweetener that contains no calories. Zerose erythritol is available as a USDA-certified organic product. The sweetener tast es about 60 to 70 percent as sweet as sugar, provides bulk and masks the aftertaste of high-intensity sweeteners, the company says.
Ciranda, Hudson, Wis., also offers organic sweeteners, such as agave, honey and tapioca syrups. In its international markets, the company is receiving much interest from beverage-makers in its non-GMO, natural tapioca syrups to replace corn syrups, says Prescott Bergh, Ciranda’s director of marketing and sales. The company offers a line of organic Clarified Tapioca Syrups. The syrups add no color to beverages, and are targeted for use in clear juices and sodas. The tapioca syrups can be formulated in beverages for sweetness or for increased body and mouthfeel.
Agave syrup also continues to grow in popularity due to its low-glycemic response, Bergh says. In addition, the company recently launched an agave inulin prebiotic, which could be used in functional beverages targeting digestive health. BI