© 2011 Mintel Group Ltd. All Rights Reserved. Confidential to Mintel Free From Foods FDIN seminar, 22 nd September 2011.

© 2011 Mintel Group Ltd. All Rights Reserved. Confidential to Mintel

Free From FoodsFDIN seminar, 22nd September 2011

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Every day at Mintel…

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Contact details

• The presentation will be uploaded to the FDIN site, but if you really need something sooner:

Email: [email protected]

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Today’s presentation

• Brief market perspective

• Some topline points on the consumer

• Look at two main segments:

•Wheat-/gluten-free

•Lactose-free/-reduced

• Focus on new product development

•Leading categories, growth areas

•The UK versus other markets

•Positioning of Free From foods

• Some thoughts for the future

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Why is “free from” important?

• Up to 45% of the UK population now have a food allergy or intolerance (Allergy UK report, October 2009)•Women, children and the ethnic population are most affected

• According to the British Nutrition Foundation (BNF) and Allergy UK, 1-2% of adults suffer from an allergy, compared to 5-8% of children•Estimated 1% of the population have coeliac disease•But a further 10% follow a gluten-free diet as a lifestyle choice,

according to Coeliac UK

• BNF estimates that 5% of the British white population are lactose-intolerant, with higher incidence among the ethnic population

• One in ten consumers will avoid certain foods just ‘to be on the safe side’, according to Mintel’s consumer research…

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It’s a growing market

Gluten-free, dairy-free and other free-from foods, estimated UK retail sales value

6 Source: Mintel, based on Symphony IRI Group InfoScan

32% growth 2009-2011

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A market dominated by two main segments

Gluten-free, dairy-free and other free-from foods, estimated UK retail sales value

7 Source: Mintel

£m

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Alpro (Dean Foods)23%

Dietary Specials/Trufree (Dr Schär)

11%

So Good (Kallo)7%

Lactofree (Arla Foods)4%

Genius4%

Livwell (Finsbury Food Group)

4%

Bakers Delight1%

Other inc. own-brand46%

A handful of leading brands

• Estimated value of UK brands in the gluten-free, dairy-free and other free-from foods sector, 2010

8 Source: Mintel

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Consumer: High levels of avoidance for dairy/lactose and wheat/gluten

• Types of food/ingredients avoided, July 2011

9

4

7

9

12

12

13

14

15

15

15

24

25

27

0 5 10 15 20 25 30

Celery

Soya

Eggs

Lactose

Wheat

Gluten

Dairy

Poultry

Cow's milk/cow's milk dairy products

Nuts

Fish or shellfish

Other

Red meat

%

Source: Toluna/Mintel

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Consumer motivation: more than a “need to” basis

• Food sensitivity and dietary limitations in households, July 2011

10

54

3

7

11

11

15

17

75

0

2

6

6

11

14

0 10 20 30 40 50 60 70 80

None of the above

Am/Is vegan (do not eat any products coming fromanimals,eg no meat, milk, eggs)

Am/Is vegetarian (do not eat any meat, poultry, game,fish, shellfish)

Allergic to certain foods (eg nuts, fish, egg)

Intolerant/sensitive to certain foods (eg gluten, dairy,wheat)

Avoid certain foods to be 'on the safe side'

Avoid certain foods because I/they think it's healthier/aspart of a healthy lifestyle (eg red meat, gluten)

%

My self Myself / Someone else in the household

Source: Toluna/Mintel

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Consumer attitudes to “free from” foods

• Attitudes towards specialist dietary food, July 2011

11

28

32

33

35

35

28

40

34

29

41

44

28

33

37

24

0 10 20 30 40 50 60 70 80 90 100

I follow a special diet as part of a healthy lifestyle (eg avoid gluten)

I trust specialist brands more than mainstream brands (eg Hovis, Warburtons in bread) for such foods.

I have cut back on my use of such foods during the recession.

Many family members sometimes eat such foods because one member follows a special diet

I trust specialist brands more than supermarket own-label for such foods

%

Any agree Neither agree nor disagree Any disagree

Source: Toluna/Mintel

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Gluten-/wheat-free foods

• Traditionally the largest market segment• Estimated retail value of £135 million in 2011, with 10% growth year

on year

• Factors for growth:•Increased distribution•Entry of new brands and high levels of new product activity•Private label range expansion•And the “Djokovic factor”…!

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In NPD, UK leads in gluten-free…

• European new product introductions of gluten-free bakery, pasta and breakfast cereals, January 2009 to June 2011

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NPD in gluten-free foods is generally strong in Europe

• European new product introductions of gluten-free bakery, pasta and breakfast cereals

• Growth in all segments except pasta

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NPD in gluten-free foods is more sporadic in the UK

• UK new product introductions of gluten-free bakery, pasta and breakfast cereals

• Significant growth in cereals, cakes and baking mixes

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Private label takes an important share of gluten-free NPD

• UK new product introductions of gluten-free bakery, pasta and breakfast cereals

• Note c. 30% share of gluten-free NPD taken by private label, versus 50% in total categories

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Gluten-free bread: focus on quality, freshness

Warburtons Gluten- and Wheat-Free range

Genius Gluten-Free Fresh Bread

10% of consumers ate/bought specialist free-from bread in 2010; on a par with functional/enriched bread (11%)

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Gluten-free cereals: polarisation of positioning

Focus on natural/organic Focus on the familiar

Kallo Foods’ Free To Enjoy Honey Nut Flakes

Doves Farm Organic Gluten-Free Cocoa Rice

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Gluten-free home-baking: covering all the angles

Everyday favourites Speciality bread mixes

Isabel's Naturally Free From Cheese Bread Mix

Mrs Crimble's Home Bake range including this Pancake Mix

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Wider potential in gluten-free meal solutions?

Frozen convenience foods Sauces

Seitz gluten-free pasta sauces, Germany

Bofrost Free pizza and pasta range, Germany

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Dairy-/lactose-free foods

• Estimated £143 million retail sales in 2011, overtaking the gluten-/wheat-free segment

• 8% growth in the last year, but nearly 40% growth since 2009

• Soy-based products a key driver:•Initially sought by lactose-intolerant consumers, now appeal to a

broader market as part of a healthy balanced diet•Command increasing shelf space in multiple retailers•Soy milk is now consumed by as many adults as organic milk (3%),

and a higher number than enriched or functional milk (1%)• Soy dominates in dairy-free, but the choice of alternatives is ever

expanding: rice, oats, coconut, almonds, hazelnuts, hemp and more…

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UK only a small player in lactose-free NPD

• European new product introductions of lactose-free and lactose-reduced foods, January 2009 to June 2011

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NPD in lactose-free recovers in Europe

• European new product introductions of lactose-free and lactose-reduced foods• Dairy category accounts for 40% of total

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NPD in lactose-free in the UK appears to grow, but limited activity

• UK new product introductions of lactose-free and lactose-reduced foods• Dairy accounts for more than half of all NPD

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Private label NPD in lactose-free is low…

• UK new product introductions of lactose-free and lactose-reduced foods• Private label activity is low, and shrinking

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Lactose-free dairy – not just soy

Purity, health Firmly health positioned

Braham & Murray’s Good Hemp dairy-free alternative, a natural

source of omega-3

Oatly Healthy Oat Dairy-Free Alternative to Cream, UK

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Positioning of lactose-free dairy products

Soy, organic, BFY Easily digestible

Arla’s Lactofree yogurtsProvamel Bio organic soy yogurts

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Recent activity noted in cheese segment

Dairy-based Soy-based Dairy-based

Lactofree semi-hard cheese, UK

Life Free From Parmazano, UK

Milram Burlander cheese slices, Germany

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Strong development in German desserts market

Specialist supplier RetailerMainstream

supplier

Lupinesse “ice cream”, dairy-free and entirely

plant-based

Bofrost Free lactose-free frozen tart

Coppenrath & Wiese Cafeteria frozen

desserts

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• Strengths • Weaknesses

Conclusions and points for the future

• Free from foods can capitalise on healthy eating trends

• Free from fits with rise in “natural” healthy eating, and greater transparency over ingredients and formulation

• Growing interest from mainstream brands that invest in the market

• Limited consumer resistance to new brands and private label – good news for evolution of the category

• Recessionary impact affects a third of consumers

• Negative taste perceptions persist in some segments

• High pricing is an obstacle to trial for consumers buying in to the “healthy lifestyle”

• “Field support” works for the dedicated core market, but lack of promotional activity restricts wider potential

• Separate fixtures similarly a potential weakness

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Where next?

• Future potential depends largely on the ability to tap into the “healthy lifestyle” mindset•Which is controversial, for some

• Free from foods, like all other foods in the mainstream, need to adopt additional values:•Health attributes•Environmental benefits•Convenience •As well as taste and texture

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David JagoDirector of Innovation & Insight