Peter Wennström is a leading brand consultant with more than 25 years experience at such outlets as Wennström Integrated, Health-Focus Europe and the Healthy Marketing Team, where he now serves as president. His FourFactors program is highly regarded by nutrition companies as a way to decipher the near-instant decisions made by today’s consumer at the point of purchase. We spoke to Wennström from his offices in Sweden.
NBJ: We’ve recently tracked a sales shift in the U.S. toward organic food, with that category growing at twice the rate of functional food and supplements. Is this a global trend?
Peter Wennström: By understanding the United States, you actually understand the world. I visited Estonia—one of the smallest countries in the world—a few weeks ago to do a quick trend exercise with food industry representatives. What did we find? Natural, unprocessed, “like we did it in the good ol’ days,” handmade, local, artisan, products with a real history, with provenance—these are the trends in Estonia. We’ve asked the same questions globally, and we get the same answers.
Healthy food started out as a motivation, a want, so companies added to products to make them healthier for me. That’s how health started out, as a motivation to buy. What we now see is that health products depend more on a permission to buy. Consumers now want convenient products that taste great, but they want them free from anything perceived as artificial. This is a huge rejection of the idea of processed foods and the conventional food industry. Many of our clients now talk about permissibility. The devil is in the details now. Consumers look at the ingredients in products and where those ingredients come from. They want to choose the products that sound the best.
NBJ: This sounds like a shift in the consumer psyche away from the bells and whistles of food science toward real fears of food villains like BPA, rBST, perhaps GMOs.
PW: We’ve talked for some time now about the importance of “the permission to buy” and “a reason to believe” in our clients’ approach to product development. What companies need to look at very carefully is a consumer’s reason to reject a product. That is actually what is happening out there now. Consumers are getting more and more reasons to reject a product. As companies open up their value chains, that chain is actively opened up even more by consumers and consumer organizations. As soon as someone improves their value chain—now we have organic farming, for example—then you don’t want something that is worse than organic farming. If you have a choice, you don’t want industrial farming if you can have organic farming. I see the value chain almost like a corridor with rooms, and that whole corridor is now starting to light up.
NBJ: How serious is this threat to the industrial food system?
PW: The consequence of these trends is not easy to digest for different parts of the food industry. We saw a global shift in roughly 2005 when the greatest health concerns for consumers globally began to cluster around nasties in your food, impurities in your food products. Instead of cancer or heart health, the biggest health concern across the world subtly shifted toward fear of things that shouldn’t be in the food products. Basically we are talking about perceived poisons, bad things coming out of the processed food system. This became even more evident with the melamine scandal in China and the growing aversion to pesticides in the U.S. and Europe.
This was a more subtle shift, but the implications are quite large. From that new point of view, consumers began to say, ‘We do not want industrial farming,’ and this is a trend that dovetails well with natural and continues to grow stronger and stronger. The truth for the food industry is that this is not a quick fix and it is not a trend that will just go away. We are in the middle of a large European survey about these challenges, and global companies realize today that they are stuck in business models that make things better, faster, cheaper, more efficiently. Those business models are coming to an end, in a way, because they have greater and greater problems in following the consumer. The consumer is heading in a different direction. ‘I want it organic. I want it local. I want it full of nutrition. I want variety. I don’t just want this one-size-fits-all. I want lots of different vegetables, I want lots of different grains’—this is a totally different paradigm to the present model.
Conventional food players respond to consumer demands
NBJ: What sort of responses are surfacing from the major conventional food players?
PW: If you look at the global organizations for consumer goods, the key working groups they have assembled focus on sustainability and health. Look at the healthy messaging coming out of PepsiCo, or Unilever placing demands on its dairy suppliers to reduce their carbon footprint. Major companies are now starting to commission organic products, so they are finding ways to better swing with the consumer demand.
NBJ: Do you think this will work? Will consumers ever be able to think of Pepsi as a health company?
PW: It’s not just Pepsi, of course. It’s Quaker Oats, Tropicana. Companies broaden their scope to work with healthier brands. These are the brands that may be sourced from other kinds of production in the future.
NBJ: The track record here is mixed, but it does seem like large companies acquire the tiny organic company now and just leave it alone.
PW: The large companies are trying to be very careful in not destroying the corporate culture of the smaller companies they buy. There is a consequence here that we see in Europe and also in the United States—interest in innovation and added ingredients is going down. Consumer interest is not so much in getting another added ingredient, it is actually more in changes to production. The old model was to develop a processed food product and then, in the final stage, add functional ingredients to make it better for you and justify a price premium. Now consumers are saying—‘Well, I don’t want the processed food product to start with’—and they shift their focus over to innovations in production and processing. The new way to make a nutrition product is not to add a vitamin to a processed food, it is actually to start with health when sourcing at the farm.
NBJ: Sounds like the outlook for functional foods is not as promising as many would suggest.
PW: When I first started to work with functional foods, the category was based on this idea that you add functional ingredients to processed food products. The forecast for that part of the industry was quite huge, quite positive. The category is increasing, but it is also specializing into convenience foods, sports and energy, medicalized food products where it is more relevant to have quite specific benefits. But the standard food products, they should be healthy from the start. To think about the mass market, the future aim there is actually to make them healthy from the start.
NBJ: How realistic are organic advocates being in imagining some ‘defeat’ of the conventional food system?
PW: I think of the paradigms shifting over time. This is bound to happen. You see it happening already, and then if you get a little futuristic with some innovations in production, you start to see things like city farming. You see people growing food on balconies, on the rooftops. These start out as quirky trends, but can certainly grow into urban planning schemes. We are really starting to see companies trying to invest in change. When Unilever asks their suppliers to try to produce in a more sustainable way what their customers would actually like to buy, that’s a good sign. Society can then start to stimulate this development, supporting the transition from the old business models to the new. That’s how the change will happen, but it will probably mean that society needs to involve itself more as well to better shape the public debate around regulations, incentives and the like.
NBJ: This brings to mind Occupy Wall Street, and the mobilization efforts in the United States around labeling GMOs.
PW: My interpretation is that these are not hype or small trends. They are part of the same shift. We are actually in the latter stages of what you could call the production-driven world, and in the early stages of a consumption-driven world. The consumer is now in focus, not the product. Knowledge about how to produce food and what food should do for your body is now coming back to people. We have been neglecting that in a way, and now we are sort of taking back the power, taking back that knowledge.
NBJ: Have consumers truly moved beyond price as their primary purchasing filter?
PW: This is exactly the argument you hear from defenders of the current model. They say that consumers really just want cheap food. With this new consumer knowledge comes the ability to add all sorts of factors into that purchasing equation, whether it’s local, organic, non-GMO or unprocessed.
NBJ: Can we feed the world without an industrialized food system?
PW: It’s similar to energy. If you think about large-scale energy production, then you need power plants. If you think about energy the other way around, you begin to think about decentralizing the need. Think about every house, every car producing it’s own energy. If every farm becomes self-sufficient and even productive of energy, then the need for power plants suddenly evaporates. It’s the same with food production. Why do we need the big system? Well, we needed it in the old society, old models based on mass production, mass consumption and mass distribution. We are in a totally different society now. It’s individualized. It’s customized. It’s driven by my need.
NBJ: It’s an exciting time.
PW: It is. The interviews that we are doing now in the different sectors of the global food industry are telling us such interesting things. Europe says that innovation has come to a standstill—it’s all about new flavors or simple line extensions. Same thing in the United States. We don’t see any real innovation happening there. The focus is on delivering results to shareholders, meaning that companies continue to cut back on housekeeping and long-term investments in product development. All of the focus is now on producing for the emerging markets. That’s where we still see growth, and we can still see growth for the old business model of processed, fortified and functional foods. But—and here comes the big but—what we then see in these markets is a fast-forward of trends. Those markets quickly pick up demand for organic and natural. Take Brazil, where we see functional food as more of a short-term bridge to nutrition. Consumers are going straight to natural in Brazil.
NBJ: We’ve talked about ‘leapfrogging 50 years of conventional wisdom’ in the BRIC markets. Apt?
PW: Exactly. Leapfrogging, that’s what they are doing. If they can leapfrog, of course they will. There remains a little window of opportunity for selling the old stuff for a little while, and then consumers will leapfrog again. It’s certainly a challenging time for this industry.