Where To For Free-from?
Sales of free-from food and drink are flying. Brits have forked out an extra £96.5m on the sector in the past year [Kantar Worldwide 52 w/e 29 March 2015], a staggering rise of 26.9%; volumes are up 21.9%.
Sixty per cent of households now buy into free-from, through far fewer actually suffer from a food intolerance. Brands say there are 27,000 internet searches for gluten-free diets every month in the UK, even though just 1% of Brits suffer from coeliac disease.
The movement is no longer strictly about medical need. It’s become a lifestyle choice and is leaving its niche and going mainstream. Which raises the question: where should free-from go in store: in its own fixture or among conventional products? And what other challenges lie ahead for the sector?
The impressive growth is being driven by two key factors: as consumer interest in diets free-from, gluten, lactose and other ingredients rises, the giants of grocery are ramping up products development to meet demand; at the same time, retailers are increasing the amount of space devoted to such products.
Both Kellogg’s and Nestle have entered the market with gluten-free breakfast cereals in the past year and Britain’s purely free-from brand, Alpro, has also been busy on the NPD front, with launches including two Big Pot yoghurt alternatives, a coconut & almond drink and cream alternative Coconut Cuisine.
“Choice and variety are key drivers for the brand and the category as a whole,” says Marketing Controller Vicky Upton, adding that Alpro Almond has racked up sales of £29.6m in the past year [Neilsen 52 w/e 25 April 2015]. “Introducing flavours like almond and coconut to our soya heartland provides an accessible route into the plant-based arena.”
The retailers are investing, too. Own-label now accounts for nearly a quarter of the market and has grown 26.1% on volume up 19.8% [Kantar]. Tesco’s own-label free-from range is up a staggering 51.3%, after a range extension, a programme of Free-From Fairs in store and a trial of more than 300 products throughout the summer.
Waitrose has the greatest slice of the market relative to its overall share of grocery and is also growing at a fair clip; own-label sales have surged 20.2%. “In order to keep up with demand we have already vastly expanded our free-from range and are set to widen it further later on this year,” says Waitrose Buyer Chlos Graves.
Asda, Morrisons, The Co-operative and the discounters still significantly under-trade in this sector and have had mixed performances in terms of sales growth. But they’re catching up, Morrison’s free-from sales have grown 4.7% and it has recently tripled free-from’s standard space allocation. Asda, which has had the second-strongest sales growth of the year, is using a similar tactic. “Asda has led the change recently, expanding from one to three bays in some stores,” says Warburtons free-from Business Director Chris Hook.
Approaches to how the sector should be merchandised vary from retailer to retailer and sector to sector. Chilled products such as dairy alternatives, for example, are generally stocked alongside conventional products, partly because of practical implications surrounding the location of chillers in store.
This approach also aids the perception that these products are not just people with specific medical needs. “Our products are now firmly established in the mainstream, attracting both needs-based and health-conscious consumers,” says Upton at Alpro, which had the greatest rise up The Grocer’s ranking of Britain’s 100 Biggest Grocery Brands in March. “It’s vital that our marketing doesn’t exclude core consumer groups.”
Products with a wide appeal and marketing that doesn’t solely focus on the health needs of a minority of consumers are crucial if a brand wants to be stocked outside the free-from fixture, say many. One example is Mrs Crimble’s Choc Macaroon, the top-selling cake product in the UK total impulse category according to Neilsen [52 w/e 18 April 2015]. “The secret of this product’s success is that it is never marketed solely as a gluten-free option,” says Director of Marketing Claire Ramsey. “And it appeals to all types of store – convenience, multiple, cash & carry and lots of other outlets.”
Big brands with big budgets can always just buy the shelf space they want, of course. “When Nestle and Kellogg’s launched their gluten-free cereals they went into the main fixture,” says Hamish Renton, MD of free-from consultancy HRA. “They want the distribution so they are doing everything you would expect of someone with deep pockets. They want to be in the mainstream cereal aisle because there’s more footfall.”
Some say they are giving mainstream brands a run for their money outside the free-from fixture. “We’re proof that a free-from product can disrupt a market, sell side by side with the conventional product and out perform it,” says Stephen Argent, Founder of dairy and gluten-free fresh soup brand Soupologie. “The learning curve for larger retailers has been accepting that the free-from market has now become mainstream.”
The Free-From Fixture
Indeed, there are still conflicting views on where certain products should be stocked; within a dedicated free-from fixture or not. For example, Tony McLoughlin, MD of free-from home baking brand Delicious Alchemy, says a bespoke free-from area is still vital. “Having to walk down aisles full of food you cannot eat is frustrating.”
There is evidence that brands and retailers are to an extent still feeling their way when it comes to sitting products within store. Vegetarian and gluten-free brand Amy’s Kitchen recently had its ambient soups moved from the mainstream fixture back in to the free-from aisle.
“This is certainly where free-from brands should be in store,” says International Sales Director Damien Threadgold. “Having a free-from aisle in big supermarkets allows customers who need free-from foods for medical reasons to shop easily for safe products without having to check labels across foods in every category. However, as more and more people purchase free-from without medical reasons, making the free-from aisle more approachable is key. This can be achieved with brighter packaging, POS marketing material and more education from the brands.”
Gluten-free bread and baked goods brand Udi’s has a trick up its sleeve for making the sector more approachable: dedicated gluten-free in-store bakeries, which the brand plans to introduce in selected Asda stores in partnership with the retailer by the end of the summer. These will offer a combination of Udi’s and own-label products.
“In-store bakery is set to be a key growth driver with Udi’s looking to pioneer this movement with the launch of up to 20 new lines,” explains Product Development Director Holly Wales. “Offering freshly baked free-from food in store will revolutionise consumer shopping behaviour in this category.”
Indeed, free-from bakery is the category’s second-fastest growing sector after dairy-free and commentators say schemes like this and the sheer volume of NPD going on at present suggest sales will continue to rise. Warburtons recently brought out sandwich thins and wraps under its free-from label Newburn Bakehouse. Its products became dairy free as well as gluten free last year too.
“We see a big opportunity to widen our alternative ranges,” says Warburtons’ Hook. “In the US, one in four new products that are launched carry a gluten-free claim but here in the UK it is just 10%, so clearly we have a long way to go in terms of NPD.”
Genuis reports 48.5% year-on-year value growth [IRI year to 23 May 2015], aided by last year’s launch of a morning goods range and its move into the frozen sector with a seven-strong range of pies and pastry. It is also extending into food to go with individual muffins and cupcakes.
Other initiatives are starting to bear fruit, suggesting more growth is on the cards. In April, Holland & Barrett’s first free-from concept store opened in Chester under the More fascia, the first of 50 planned for the next two years. The flagship store stocks over 700 free-from branded products alongside 1,000 online, rising to 3,000 by the end of this year.
“We did it to tap growth in this market – now one in five people ‘think’ they have a food intolerance or allergy,” says Emma Cockerill, Director of Sales & Procurement at parent company NBTY. “Free-from is our number one priority at the moment and it will change how we operate as a business. We will launch an own-label range as well.”
Expanding its frozen and chilled free-from ranges will be a priority for the retailers, says Cockerill, who adds that deserts is an area in free-from that needs attention. “One of our bestsellers is an allergen-free cacao powder ingredient, which is used to make deserts, such as dairy-free chocolate mousses or cakes,” she says. “There is a lack of deserts out there and we are on a hunt for those products.”
Chilled & Frozen
Some brands claim retailers have lagged behind the pace of development on the supply side of the sector. “Manufacturers are ahead of the game versus retailers,” explains Jane Rayner, CEO of Great Food, which produces a range of chilled, world food-inspired snacks and meals. “We have the solution to free-from, tasty, healthy, convenient snacking, but there is no free-from sector in the chiller yet. The focus so far has been around bread and bakery products.”
The pace of change in chillers and freezer is gathering. Currently, the frozen sector, which is considered to be a ‘newer’ free-from sector, is growing ahead of the market at 38% year on year [IRI 52 w/e 25 April 2015]. Amy’s Kitchen reports strong growth in its frozen ready meals and Schar will launch a free-from range into the UK in September. The eight products, which will include frozen lines such as gluten and lactose-free pizzas, will sit alongside 26 existing products following a re-brand, such as gluten-free frozen apple crumble and Yorkshire pudding.
Despite Cockerill’s complaint of a dearth of free-from dessert products, there are a number of brands out there looking to liven up and premiumise the free-from chilled sector. The Booja-Booja Company reports strong sales for its dairy, gluten and soya-free Chilled Chocolate Truffles and its Ice Cream Alternative range (made from cashew nuts, agave, water and cocoa powder), for example.
“As the free-from market grows, consumers are looking for products that offer ‘the whole package’, in other words lines that are organic, natural, ‘clean’, as well as vegetarian or vegan,” says Marketing Communications Manager Louise Truswell.
The gap in the market for free-from chilled desserts has also helped propel the fortunes of coconut milk yoghurt brand CoYo. It clocked up a turnover of £600,000 in its first year (2012), rising to £4m this year. Sales in Waitrose are booming, says the brand, and Tesco has increased its listings substantially. “When we first moved into our own factory in June 2014 we were packing 14,000 pots of yoghurt per week,” says founder Bethany Eaton. “Now we pack up to 70,000 per week, just 12 months on.”
Another opportunity lies in impulse and on-the-go. “I feel passionately that the free-from range should cover an entire weekly shop,” says Holland & Barrett’s Cockerill. “There are many gaps in the market at the moment; on-the-go snacks is one of them.”
Data shows clear demand for on-the-go snacks. Sales of free-from cereal bars, for example, are up 30.5% compared with total cereal bars, which declined 1.5% [Kantar 52 w/e 4 January 2015]. Brands such as Nakd and 9Bar are driving much of this growth as they take up growing space in c-stores and forecourts at the expense of confectionery.
“Nakd’s huge sales boost has been helped by new listings through convenience stores and forecourts such as Spar, BP and Martin McColl’s Retail Group and Nisa outlets,” says Marina Love, Marketing Director at Nakd brand owner Natural Balance Foods, which also reports strong sales of its gluten-free protein snack bar brand Trek.
Others tapping the on-the-go trend include Soupologie, which has recently launched 400g Soup to Go pots in flavours including Beetroot and Pomegranate with Chia Seed Sprinkles. Bircher muesli brand Moma has brought out single-serve sachets of on-the-go gluten-free porridge (rsp: 70p) and Eat Natural claims 65g single-serve sachets of its Toasted Muesli with Buckwheat is selling well in Tesco. A gluten-free granola is next.
There are potentially a number of clouds on the horizon for the free-from sector, however. Mark Gould, CEO at Wholebake, which produces 9Bar, claims some gluten-free products have high levels of sugar and fat in them, a fact consumers are getting used to.
Expect brands to adapt their offering to address concerns, says Gould, adding that Wholebake has recently cut satfat and refined sugar levels in its 9Bar recipe. “With consumers becoming increasingly savvy about the health benefits of foods, a gap is appearing in the market for naturally nutritious and naturally free-from options,” he says.
Mrs Crimble’s is also tapping this. In May it launched calorie-counted gluten-free pasta and sauce products and cereal bars boasting just 150 calories under new sub-brand Gluten Free and Good For Me!
Another challenge came this week with a report from Australia’s George Institute for Global Health which analysed the nutritional value of more than 3,200 gluten-free products across 10 categories. The study found there was little or no nutritional benefit in eating such foods, pouring cold water on the idea that going gluten-free can aid general health.
“There’s been a tidal wave of gluten-free products coming on to the market in recent years and many people have been caught in the wash as they search for a healthier diet,” says the report’s author Dr Jason Wu. “The foods can be significantly more expensive and are very trendy to eat, but we discovered a negligible difference when looking at their overall nutrition. Gluten-free products are necessary for people with coeliac disease, but this information is important because of their broader use in the community.”
The point about how vital gluten-free products are to those with a genuine medical need is crucial, particularly in the light of the Genius contamination scandal that broke in June. This isn’t the first time Genius has found itself in controversy; in December it recalled a batch of its gluten-fee frozen steak pies after the boxes were mistakenly packed with chilli bean pies that contain gluten.
“We have upset a lot of consumers and it is our job to rebuild that trust and confidence,” said CEO Roz Cuschieri following the June recall. “I’d like to start by expressing my sincere apologies to all of your readers, and consumers and our customers who have been impacted by the events of last week; it’s not what Genuis is about, we are in the business of making lives better and easier.”
Although the company has been praised for the speed at which it dealt with the issue, its gravity shouldn’t be underestimated. “If you bought a product labelled Fairtrade, you wouldn’t know about it,” says Renton. “This is different. If someone who is coeliac eats gluten they get really ill.”
And so this is perhaps the greatest risk to the future health of the category, too. Even so, the category and Genius are expecting another year of strong growth in 2015.