By Len Monheit
After four days of Expo, there are a lot of general observations running through my mind, and so many opinions offered that I'll try to convey in the next few paragraphs. It's my intention to write an event review for Expo East, so while I won't go into many specific show observations in this column, I will touch on those observations that may indicate where current thinking, issues or priorities in the industry may be.
Healthy Foods - a Convergence Point
This past Thursday, in a totally new offering, and in collaboration with Stagnito Publications, New Hope Natural Media presented a pre-conference Healthy Foods Symposium, attended by approximately 100 representatives from the food industry and nutritional products sector. This session was intended to address an important sector convergence point, the impact of food choices on health and nutrition and strategies and approaches for creating and presenting Healthy Food options, and was attended by numerous food industry people who otherwise would not have attended Expo East. Presentations dealt with Corporate Strategy (Kraft), the impact of mandatory trans-fat labeling, the evolution of the 'carb' agenda and the role of 'bioactives' and ingredient companies.
Among the take-home messages was a serious and strategic interest on the part of the major food companies in the healthy foods concept, and one that has been part of boardroom and backroom discussions for many years. Speakers and participants generally agreed that low-carb was both past its prime and not a sustainable message, and that whatever messaging reaches consumers had better be simple and straightforward, while products must taste equal to if not actually superior to conventional alternatives. The outcome of media and other attention on nutrition, obesity and dieting has raised consumer awareness not only of food impact, but also for many aspects of nutrient composition and it appears as though consumers are ready for the next message. Whether this is 'slow carbs', 'smart carbs', 'glycemic impact', 'glycemic load', 'energy', 'fiber', or just plain 'nutritional responsibility', a new message is required. And the vehicles for this message are becoming portion control, additional labeling and product information above and beyond that required by regulations, and the inclusion of value-adding ingredients with simple, non-confusing and repeated benefit statements.
I was especially interested to hear a request for ingredient suppliers to make themselves and their competencies known, with the expectation that expertise in product formulation, and understanding of flavor and texture would add recognized value to finished food products. Food companies are actively seeking ingredient vendors. But at the same time, they expect them to bear the responsibility for both for opportunity identification as well as product development and formulation.
I was also pleased to hear product development experts from food companies animatedly discussing new potential functional ingredients. And taking this observation to the general Expo East show floor, I found that even on the natural foods side of the hall, vendors were pitching products as much based on nutritional ingredients and health effects as on finished products and product positioning. This meant that Acai, yerba mate, hemp, flax, natural fruit juices and suppliers of products with this type of ingredient were presenting a similar message to the vendors of vitamins and minerals on other parts of the floor. It was also interesting to note that the big brand companies from the food industry extended their interest to active show participation and interest.
According to show hosts New Hope, dominant trends included ‘The New Lesser Evil’, Diversification - where organic and natural ingredients and products are entering broader market channels, and ‘More health for families’.
Although I was unable to spend too much time on the floor itself, it appears as though show floor traffic, had its Saturday peak with slower Friday and much slower Sunday. Overall, traffic on the floor was adequate at best. Big buyers were active, booking business with show floor vendors, and some vendors noted high quality, but lower than average quantity for a typical Expo East. And examining the composition of the floor traffic would suggest a lack of smaller retailers and international attendees.
A Disconnect in the Value Chain?
Several possible explanations for both observations come to mind - Washington is an expensive destination, Expo West is so much more of an impact event, and as the National NNFA event in Las Vegas has become a bit stronger in recent years, it may have contributed to a decline in retailer interest in a Washington event. Or perhaps there is something more pervasive at work. One theory is that retailers are fearful of encroachment by bigger chains such as Whole Foods and Wild Oats, as well as box stores and groceries, with many in fact facing deteriorating relationships with manufacturers and distributors whose primary channel strategies seem to involve the larger players, leaving the smaller retail stores as an almost afterthought.
Perhaps, as some have suggested, there is a value chain disconnect which would certainly account for missed messaging and poor communication or relationships between manufacturers and their retailer 'partners'. This also may be a reason for some of the frustration felt by ingredient companies trying to build categories through education and branding, and either not achieving penetration, or by observing the message distort along the value chain. Based on my observations at Expo, I think this value chain disconnect is real, I think it demands new pathways of communication and new business practices, and a new style of relationship.
As far as international participation is concerned, show organizers noted attendees from over 70 countries, and in fact, several 'country features' were offered as part of the show program. Perhaps the relative lack of international participation is due to Bioterror regulations which do make it more difficult for companies around the world to present their products to the marketplace.
Interestingly, the business climate seems extremely optimistic. Most sub-sectors are showing solid growth, the newly identified Healthy Product, Healthy Planet market (US-$440 Billion in 2003) seems to be firing on all cylinders, with strong organic, natural and nutritional industry growth included.
NDI Process on the Radar Screen
Industry seems to have strategies in place for dealing with current regulatory and legislative challenges. The worst or most obvious crises, including AER's, ephedra, GMP's, dialogue with media and Capitol Hill, seem to be better understood and managed. Industry's radar, supported by trade association's ongoing activities, seems to be allowing more proactive steps. We see this quite clearly as FDA's Susan Walker participated in presentations where she spoke about the processes and requirements for New Dietary Ingredient (NDI) submissions. Among the key messages from Ms. Walker is FDA's interest in engaging in a dialogue with industry about the process and improving it, and about pending challenges including how to deal with ingredients with enhanced or different potency or behavior that may affect product safety. More comments about the NDI process have been offered by the American Botanical Council and today, FDA announced that it will hold a public meeting on November 15, 2004 and that it is soliciting comments on the premarket notification program for new dietary ingredients (NDIs).
The chance for industry to engage in a dialogue that will help set future rules is a good sign. So too is the chance for industry to clean up past misinterpretations of the dietary ingredients rule, even if this means temporarily slowing the sale of products that obviously should have been the subject of NDI submissions, but never were.
Many of these observations confirm that we are part of a maturing industry, experiencing growth pains; one that seeks to get control over its destiny, as it asks "what it wants to be when it grows up". We will continue to have false starts, but we will also be better able to manage emerging opportunities through stronger media relationships, economic benefit substantiation, and most importantly, proactivity and a lack of complacency.