March 1, 2011
by Keith Nunes
What was once a small market segment has quickly transformed into a major category, with one executive estimating the size of the market will reach $30 billion by 2014, as food and beverage manufacturers develop and reformulate products that may be labeled as natural.
Once the purview of natural food stores and small sections within mainstream supermarkets, natural products have become ubiquitous throughout the grocery marketplace. Perhaps the most aggressive company focused on developing natural products is PepsiCo, Inc., Purchase, N.Y. In December the company announced plans, through its Frito-Lay North America division in Plano, Texas, to reformulate its product portfolio that will result in approximately 50% of its products being made with natural ingredients by the end of 2011.
The initiative will include three of Frito-Lay’s biggest brands — Lay’s potato chips, Tostitos tortilla chips and SunChips multigrain snacks — and will be identifiable in stores through a stamp on product packages calling out that the product is made with all natural ingredients, no monosodium glutamate (MSG), artificial preservatives or artificial flavors.
“As the snack food category leader, we have insights that show consumers are seeking a wider range of products made with all natural ingredients,” said Ann Mukherjee, senior vice-president and chief marketing officer of Frito-Lay. “At Frito-Lay North America we want to provide our customers with a broad portfolio of snack options that taste great and are made with real food ingredients. Many of the unflavored snacks in our portfolio are already made with all natural ingredients, and we’ve focused on expanding our portfolio of products with all natural ingredients to include more of consumers’ favorite flavored products.”
In September, Pepsi-Cola North America Beverages, also a division of PepsiCo, changed the name, formula, logo and package design of its Sierra Mist lemon-lime soda. The company touts Sierra Mist Natural as the “reinvention of lemon-lime soda made with only five simple and natural ingredients,” including sugar.
And there is plenty of evidence the new product development efforts such as those recently introduced by PepsiCo produce results. During the Consumer Analyst Group of New York annual conference, held this past week in Boca Raton, Fla., several companies cited the introduction of natural products as adding to sales volumes.
“As the leader in the peanut butter category, our market share remains strong at 45%,” said Richard Smucker, executive chairman and co-chief executive officer, during the J.M. Smucker Co. presentation. “Volume grew in excess of 4% this year aided by the strong contributions from new products, including Jif Natural. With an ACV of 78%, Jif Natural has more than doubled its market share over the past year and has also helped drive category growth.”
Jeff Ettinger, the chairman, president and c.e.o. of Hormel Foods Corp., Austin, Minn., cited the growth of the company’s Natural Choice line in his presentation at CAGNY and added the company has plans to continue growing the brand.
The Natural Choice line features processed meats that have been sliced, packaged and then subjected to a high pressure processing system. The high pressure alters the environment inside the package and prevents the survival of many spoilage organisms that may be present.
“… High-pressure pasteurization got us into this business,” Mr. Ettinger said. “It allowed us to be able to deliver sliced meat products without any lactates, without any diacetates, an all-natural product.
“Sliced luncheon meat is a category that’s been out there a long time. Hormel did not want to enter the category with just a me-too item. But when we have this breakthrough innovation, we felt, okay, this is our time to make a splash within this area. And we’ve had very nice success in terms of the sliced lunchmeat component of Hormel Natural Choice.
“In addition to retail sliced lunchmeat, there’s a food service component to Natural Choice as well. We’ve had very good luck bringing it into institutions such as health care establishments and colleges and universities.
“Our sales growth has been very strong for this franchise, a compound of 16%, and we see lots of room left for continued growth. And in particular, the reason we feel that there’s a lot of room left is that the natural segment in general is a booming segment in the overall U.S., and this is our entry to play in that segment, a $30 billion estimate by 2014 for total natural products.”
Mr. Ettinger said household penetration of Hormel’s sliced products is at 8% and that he believes there is room for growth. The company plans to augment the Natural Choice brand with the introduction of several new products, including mesquite turkey, a brown sugar ham and a black pepper turkey.