Free From Foods

1. Free From Foods FDIN seminar, 22nd September 2011

3. Contact details • The presentation will be uploaded to the FDIN site, but if you really need something sooner: Email: djago@mintel.com

4. 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

5. 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…

6. It’s a growing market Gluten-free, dairy-free and other free-from foods, estimated UK retail sales value 32% growth 2009-2011 Source: Mintel, based on Symphony IRI Group InfoScan

7. A market dominated by two main segments Gluten-free, dairy-free and other free-from foods, estimated UK retail sales value £m Source: Mintel

8. A handful of leading brands • Estimated value of UK brands in the gluten-free, dairy-free and other free-from foods sector, 2010 Source: Mintel

9. Consumer: High levels of avoidance for dairy/lactose and wheat/gluten • Types of food/ingredients avoided, July 2011 Source: Toluna/Mintel

10. Consumer motivation: more than a “need to” basis • Food sensitivity and dietary limitations in households, July 2011 Source: Toluna/Mintel

11. Consumer attitudes to “free from” foods • Attitudes towards specialist dietary food, July 2011 Source: Toluna/Mintel

12. 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”…!

13. In NPD, UK leads in gluten-free… • European new product introductions of gluten-free bakery, pasta and breakfast cereals, January 2009 to June 2011

14. 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

15. 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

16. 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

17. Gluten-free bread: focus on quality, freshness • 10% of consumers ate/bought specialist free-from bread in 2010; on a par with functional/enriched bread (11%) Warburtons Gluten- and Wheat-Free range Genius Gluten-Free Fresh Bread

18. 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

19. 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

20. Wider potential in gluten-free meal solutions? Frozen convenience foods Sauces Seitz gluten-free pasta sauces, Germany Bofrost Free pizza and pasta range, Germany

21. 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…

22. 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

23. 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

24. 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

25. 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

26. 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

27. Positioning of lactose-free dairy products Soy, organic, BFY Easily digestible Arla’s Lactofree yogurts Provamel Bio organic soy yogurts

28. 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

29. Strong development in German desserts market Specialist supplier Retailer Mainstream supplier Lupinesse “ice cream”, dairy-free and entirely plant-based Bofrost Free lactose-free frozen tart Coppenrath & Wiese Cafeteria frozen desserts

30. Conclusions and points for the future • Strengths • Weaknesses • 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

31. 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

32. David Jago Director of Innovation & Insight 0207-606-4533 djago@mintel.com