Spreads with added benefits continue to be negatively impacted by consumer confusion and scepticism, argues market researcher Mintel. New product development (NPD) in yellow fats has, therefore, shifted from functional spreads with added benefits towards premium butters, particularly spreadable butters, it says in its Yellow Fats Report 2009.
It found that margarine-type products, with health claims are used by only one in four over-55s, "these consumers being the least likely to see these spreads as tasty and the most likely to view them as processed", it says. "This is the case, despite a number of products actively targeting older users with benefits for heart health through lowered cholesterol. Price may also be a barrier to greater take-up amongst older consumers, particularly those who are reliant on a state pension."
In addition it says, over half of over-55s would pay more for foods without artificial additives. "Consumers are moving away from active health spreads to more balanced diet management and natural ingredients."
For functional spreads with added benefits to be successful, the report says, "they must offer benefits that are easy to understand and credible, in order to spark consumer interest and justify the higher price."
Over the last year, the total functional spreads category in the UK remained flat and was worth £65M for the 52 weeks ending October 3, 2009, says functional spreads manufacturer Benecol. In contrast, its spreads, have been significantly outperforming the category and were up around 9% during the same period, according to IRI Grocery Outlets data.
Benecol's branded spreads were recently boosted by the new EU health claim ruling, which confirmed that plant stanol esters have been shown to lower blood cholesterol, which is a risk factor in the development of coronary heart disease. Parent company McNeil says that the approval of the new disease risk reduction claim will help to reduce some of the confusion consumers have about benefits associated with specific products.
"The health claim ruling successfully empowers consumers to make informed decisions about which products they purchase and also drives brand credibility," says Esther Van Onselen, marketing manager, for Benecol Europe.
But despite Benecol's recent victory, many in the industry believe that NPD is being severely restricted by the health claims legislation. "It is a tough time to be in the functional foods business," says market research company, Innova Market Insights. It says that not only are strict European Food Safety Authority (EFSA) policies demanding new dossiers on scientific support for well-established ingredients such as probiotics, but it is also encouraging consumers to become increasingly sceptical of foods that fail to provide an immediate benefit.
"The relatively few healthy ingredients lucky enough to have survived EFSA's early rulings will move to the fore in functional foods and others will be forced, for the moment, to rely on softer claims.
"With the pattern of EFSA decisions expressed thus far, it is difficult to predict exactly which ingredients will triumph, but tough times are definitely ahead for radical and obscure ingredients making outlandish claims," says Innova.
A functional ingredients supplier source says that manufacturers have been putting NPD projects on hold while they wait to see what happens with each round of health claim rulings. "These regulations are acting as a stranglehold on the industry," she says. "They are threatening the future of the industry and a raft of very good, beneficial products are disappearing from the market."
She says that instead of investing in 'blue sky' NPD, this year manufacturers have been concerned with reformulation and making products "healthier, natural and more convenient". "That's possibly why, in this sector, there has been an increasing interest in spreadable butter because it's perceived as a more natural product than functional spreads," she says.
Current market trends
Sales of yellow fats in 2009 increased by an around 16% over 2008 in value, to reach £1.1bn. With only marginal growth in volume, the leap ahead was almost entirely driven by high price inflation fuelled by dairy and energy price rises, says Mintel. One of the fastest growing categories in the sector was spreadable butter, as consumers want convenience and perceive butter to be a "natural and tasty product". Butter sales are also expected to see a boost in the future due to an ageing population.
Kerrygold's Softer Butter was recently reformulated. The new product is produced using a new gentle cooling and crystallisation process during manufacturing, which increases its spreadability. Sales of the product were up 14.21% by volume, according to IRI data for the 52 weeks to October 3, 2009. The same data company says that it is out performing the overall spreadable butter market, which was up 3.85% by volume over the same time period.
According to Kerrygold, its Softer Butter product has experienced high levels of growth, partly because it does not add vegetable oil to the product, unlike competing brands. The butter is made soft through the careful selection of milk,
as well as the gentle processing technique.
"Competing spreadable brands use blends of butter with up to 33% vegetable oil," says a spokesman for Kerrygold. "Vegetable oil is an inexpensive ingredient by comparison to pure butter fat and the type of vegetable oil added in these products is usually not declared, with the result that consumers do not know the source or origin or the extent of industrial processing to which the product has been subject to ... In stark contrast, Kerrygold Softer Butter is 100% pure tasty Irish butter."
The Kerrygold spokesman says that butter, and spreadable butter, are becoming popular because consumers perceive them to be tastier and more natural than other spreads and margarines. Its marketing of the Softer Butter product has, therefore, focused on the claim that it offers the same taste as its original butter variant.
Taste has become a key marketing theme in the yellow fats market. "Whether functional or 'natural', products must be tasty. It seems that in today's market consumers will not buy a product unless this is the case. Ultimately consumers are buying food not medicine and manufacturers should remember that," says a leading scientist from the Max Planck Institute.
To prevent the loss of sales to butter, for example, Unilever has been actively promoting its Flora Buttery Taste spread recently, with advertisements featuring TV chef Gary Rhodes. Taste has also become a key theme for Lurpak and Country Life's advertising campaigns.
Butter, and spreadable butter, have been continuing to gain ground from spreads and margarines, posting sales growth of 19% to £525M, and spreads growing by 13% to £576M in 2008, adds Mintel.
"Butter has benefited from consumer preference moving in favour of balanced diets and natural foods, as well as strong performance of some of the leading brands." FM