Strategic advice for the food and beverage industry

Nutella defies the conventional wisdom

Posted on:
March 8, 2019
Author:
Julian Mellentin

Sugar reduction is one of the most powerful trends, so you would imagine that a brand that’s 56% sugar and comes from a ‘Big Food’ company – and includes palm oil as an ingredient – would be in trouble. But if you did, you’d be wrong. In fact, people can’t get enough of it.

Nutella is a great example of how often consumers tell researchers one thing – and then do something quite different once they are in the supermarket.

Italian giant Ferrero Rocher’s Nutella (56% sugar) is more popular than ever. In the UK, for example, retail sales were up by 42% over the period 2013-18 (Nielsen data) to £50 million ($65 million). And that’s because Nutella is ‘honestly indulgent’.

In 2018 Ferrero Rocher successfully harnessed it to the ‘permission to indulge’ and snackification trends, with the launch of Nutella B-ready – a finger of biscuit filled with Nutella, sold in single-serve packs and a permissible indulgence at only 115 calories per bar.

Nutella B-ready – a product already a big success in Italy and France – was the second most-successful new brand in the UK in 2018.

Consumers tell market researchers they want less sugar, but what they mean is they want less sugar in ‘healthy’ products, such as yoghurt. When it comes to life’s delicious little pleasures, it’s a different story.

 

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Start-ups are more successful than “Big Food”, but only just

Posted on:
February 8, 2019
Author:
Julian Mellentin

Investors and consultants alike are full of excitement about the success potential of start-ups. Phrases like “there’s never been a better time to launch a start-up” pop up frequently.

“But the reality is that although start-ups are doing better than established companies, they are only doing a little bit better,” says food industry analyst Julian Mellentin, director of New Nutrition Business.

“The success rate among start-up brands is only slightly higher than that of brands from established businesses.”

To address the absence of data on rates of success or failure for start-ups, New Nutrition Business analysed its database of start-up brands, going back to 2002, to shed light on their performance.

The sample comprises 267 US, UK and Australian food and beverage start-ups who launched products in the years 2002-2016.  The sample focuses on snacking, beverages and dairy (all strongly over-represented among start-ups) as well as kids’ products.

The recent analysis found:

  • An overall start-up success rate of 67% (almost the same result as 2016)
  • An overall failure rate of 33%

“But if you define “real” success as distribution in mass-market retailers, as opposed to being in niche or regional distribution – which is what most shareholders want – then the success rate falls to 41%,” notes Mellentin.

For comparison, New Nutrition Business also analysed a sample of 288 brands from established companies – not start-ups – that were launched in 2013 and listed that year in Mintel’s GNPD new product database. They came from the same countries and categories as the start-up sample.

Their overall success rate (whether a brand was in mass distribution or niche) was 54%. “That’s less impressive than the start-ups, but not so far behind,” says Mellentin.

Snacking the clear winner

Mellentin says that if you want to maximise your chances of success and reduce your risk of failure, make your product a snack. “If you had launched a start-up food or beverage business during the years 2002-2016, you would have been most likely to succeed if your launch was a snack or a mini-meal,” he says.

The success rate for snacking start-ups is an impressive 72.5%, compared to 53% for established companies.

That makes sense to Mellentin: “Snacking makes good sense as a place for a start-up – the products are usually shelf-stable and have a long shelf-life, eliminating the supply chain and wastage problems that kills many start-ups in chilled products.”

ENDS

* A cut-off date of 2016 was used is because for anything more recent, it’s too soon to say whether a business or brand is doing well or struggling.

Download the press release and related material here.

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Wellness in one aisle

Posted on:
January 15, 2019
Author:
Julian Mellentin

In an attempt to capitalise on the wellness trend, major UK retailer Sainsbury’s announced that it is introducing what they call ‘wellness hubs’ in stores this winter. The supermarket chain will double its range of wellness-oriented products, while bringing in new specialist brands. The aim is to help health-conscious customers fuel their healthy lifestyle quickly and easily, without having to run between different aisles or retailers.

The concept was trialled in five stores across England in November, and an additional two stores were added at the start of January. If successful, the retailer will bring the concept to more stores during 2019.

So what will a so-called wellness hub entail? According to Sainsbury’s the aisle will include “specialist products” such as activated nuts, hemp water, superfood powders, bone broths and drinking vinegar. And the supermarket will become the only one in the UK to offer exclusive wellness brands such as No 1 Kombucha. Sainsbury’s hopes to offer a wellness portfolio so extensive that customers won’t have to shop anywhere else – not even in specialist health food stores such as Planet Organic or Holland & Barrett.

Consumer response to the initiative has been lukewarm. Shoppers in Cambridge were surprised to find sugary brands like Belvita in the wellness aisle, but Sainsbury’s has responded by saying that these products were never intended to be seen as part of the wellness hubs. The retailer did however agree that additional signs clarifying this were necessary.

Others have complained that the idea is “gimmicky”, that it makes wellness appear too detached from “regular” food and that it promotes quick fixes while failing to tackle the underlying problem of a bad diet. Some of the brands included in the wellness aisles have been criticised for being over-processed and too specialist – intended for the hardcore athlete and not the average consumer.

But consumer reactions are not all negative, and some welcome the idea as a positive addition to their local supermarket.

By Mikaela Lindén

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