Beverage R&D: Natural and organic show signs of growth
After rapid sales growth of more than 24 percent from 2006 to 2008, the natural and organic food and beverage category saw only slight growth in 2009 (1.8 percent) as the recession took a toll on nearly every sector of the consumer goods marketplace, Mintel says. Despite this slowdown, natural and organic food and beverage sales are expected to grow nearly 20 percent from 2010 to 2012, it says.
The mass market channel had the majority of organic food sales in 2009, with 54 percent of organics sold through mainstream grocers, club stores and retailers, the OTA reports. Natural retailers were next, with 38 percent of total organic food sales, it says.
More organic and natural beverage categories grew in the natural channel than in conventional retail counterparts for the year ending Feb. 20, according to SPINS, a Schaumburg, Ill.-based market research and consulting firm for the natural products industry. SPINS also reports the conventional channel holds a greater number of organic and natural beverage sales, but it also saw bigger declines and smaller gains than the natural channel from the year before.
In the combined natural and conventional channels, carbonated beverages, refrigerated juices and functional beverages, and shelf-stable functional beverages all posted sales gains, according to SPINSscan Natural and SPINSscan Conventional (powered by Nielsen Scantrack). Refrigerated juices and functional beverages are part of the largest category SPINS tracks, and grew the fastest during the time period as well. The category grew 18.6 percent to more than $636.1 million in the combined natural and conventional channels for the year ending Feb. 20, SPINS reports.
Driven by health
Like many other beverage categories, functional drinks are leading the growth of natural and organic beverages driven by consumers’ interest in products with health benefits.
“Consumers really want more control over their health and their life,” says George Pontiakos, president and chief executive officer of BI Nutraceuticals, Long Beach, Calif. “…They specifically view the organic product as much healthier because it is lacking in pesticides and unhealthy chemicals that they don’t really want to ingest into their bodies.”
The continuing growth of functional beverage products that feature organic label claims also is fueling the use of organic fruit, vegetable and plant extracts, says Chuck Dodson, director of consumer insights and marketing at A.M. Todd Ingredients and Flavors, Kalamazoo, Mich. Beverage-formulators also are interested in natural and organic ingredients from rich sources of antioxidants, like superfruits, along with grain extracts that are naturally high in fiber.
New natural and organic beverages also are using herbal and floral ingredients and continue to place emphasis on the use of unique fruity flavor combinations, Dodson says. In addition, this year natural and organic products are featuring fewer new specific health claims and more claims on ingredient deliverables, Dodson says.
Trends for organic and natural beverages are the same as conventional beverages, says Elaine Kellman-Grosinger, chief flavor chemist and director of research and development at Citromax Flavors, Carlstadt, N.J. “People are tying to develop products that are really all natural and supposedly good for you,” she says. “Organic obviously goes along that path. It’s natural. It’s green, so it’s better for you and better for the environment.”
Beverage-makers also are trying to use as many organic ingredients as they can in their products. “People are trying to get organic as much as possible, even with flavors,” Kellman-Grosinger says. “There is some gray area with what flavors are organic, what are NOP (National Organic Program) compliant, and there is such discrepancy between what people think is, but they are trying to get as many of their ingredients as possible to be fully organic.”
Consumers also are paying more attention to product labels and checking ingredient statements.
“The trends that are driving natural and organic ingredient development in beverages are the desire by the consumers for ‘clean’ labels and the wish for ingredients they can understand on the back panels of beverages,” says Mark Goldschmidt, director of technical services at Sensient Food Color, St. Louis.
Sensient also is seeing additional scrutiny of natural ingredients, including processing aids, methods of preservation and natural ingredient suppliers, Goldschmidt says.
Natural sweeteners may be the most interesting ingredients this year for beverage formulators, natural and organic ingredient suppliers say. Cargill, Minneapolis, offers Truvia rebiana, a stevia-based, zero calorie, natural sweetener available for use in beverages. More than 100 food and beverage companies are actively partnering with Cargill to develop new products with Truvia rebiana with multiple launch timelines this year, the company says. Truvia rebiana is included in Vitaminwater Zero and Vitaminwater10 beverages, Sprite Green, Odwalla Reduced-Calorie Quencher, All Sport Naturally Zero sports drink, Hansen’s Natural Lo-Cal juices, Blue Sky Free soda, True Lemon Naturally Sweet powdered beverage and Minute Maid Premium Pomegranate Tea.
In addition to stevia, agave’s use as a natural sweetener in beverages is growing, Kellman-Grosinger says.
New product introductions have slowed across beverage categories, and last year was no different for new introductions of natural and organic beverages. In 2008, 970 new beverages making natural and organic ingredient claims launched, while less than 660 launched in 2009, according to Mintel’s Global New Products Database. For the first three months of 2010, more than 120 new beverages with natural and organic claims launched, it says.
Sensient Food Colors is seeing much more innovation around natural ingredients in the first three months of 2010 vs. 2009. “It’s not back to historical levels, but definitely greater than last year,” Goldschmidt says. “We are seeing the most interest in natural ingredients in the beverage and dairy segments.”
Whether or not the economy is affecting organic and natural product development is a bifurcated question, BI Nutraceuticals’ Pontiakos says. “Organics are really getting hurt because of the pricing dynamics that we’re seeing out there right now,” he says. “…You take a look at what natural products are selling for versus organic and it’s a four to one difference.”
BI Nutraceuticals is seeing more interest in developing natural products this year, but Pontiakos also says, “There is always going to be this core consumer group that really wants organic. They are the evangelical believers in the organic market and that market continues to stay stable.”
While some consumers may be leery of organic products because they think organic means more expensive, beverage-formulators can play to consumers’ loyalty to healthy products, companies say.
“If consumers are going to pay a premium for a good-for-you nutraceutical, they want it to be very premium and really fit everything: it should be organic, nutraceutical, healthy, good for everybody,” Kellman-Grosinger says. “If you are already going to pay, you want to get more bang for your buck.”
The growth of the organic ingredient market also is driven by supply. “Trends in organic ingredient product development are primarily around securing wider availability of unique raw materials at cost competitive rates,” says Jessica Jones-Dille, senior manager of industry trends and market research at Wild Flavors Inc., Erlanger, Ky. “Organic beverage product development strives to meet trends in traditional beverages and even all-natural beverages, but can sometimes fall short due to the unavailability of ingredients that can be used profitably in the product due to organic sourcing difficulties.”
Natural product development is not being driven only by consumer demands, but by marketers’ costs analysis.
“[Marketers] want natural ingredients because the consumers will spend for that and they are checking the labels,” Pontiakos says.
While there has been a slowdown in the development of new natural and organic beverages, the category continues to innovate in ways comfortable to spending-cautious consumers.
“There has been more emphasis on using existing organic ingredients, whose claims are known to the consumer, than on using new unknown or just emerging new ingredients,” Dodson says. “Beverage companies seem more interested in promoting existing claims than on educating consumers on new ingredients and benefits, which seems to be a result of caution based on the condition of the economy.”
The beverage industry continues to innovate in the natural and organic segment at a faster rate than the rest of the food industry.
“We still see the beverage side as being far more innovative, quicker to market and far more adaptive to the trend changes than the food guys are,” Pontiakos says. BI
Category Focus: Health trends dominate juice innovations