With bars? sales slowing in Europe, and outright slipping in the US, formulators are planning new tactics to regain market share in ?06. Joysa Winter talks to leading ingredients suppliers to learn what is on the horizon
For the first time in many years, 2004 witnessed a decline in sales of nutrition and meal-replacement bars in the United States.
From the years 1997-2002, sales increased 20-30 per cent, according to Nutrition Business Journal (NBJ), with a 13 percent gain alone in 2003. Then, in 2004, sales slipped by -0.2 per cent to $2.03 billion.
?This was quite a shock to bar companies used to high growth,? says Grant Ferrier, editor of NBJ. ?The fall of low carb was principally to blame, but there were some inklings of consumer saturation or consumer fatigue in bars. Also, some ?critical mass? in distribution was achieved in the last couple of years, meaning there are no new channels to exploit.?
In Europe, it is a different picture. According to Euromonitor International, Western Europe increased its share of global snack bars volume sales from 16 per cent in 1999 to 20 per cent in 2004. Sales rose from $959 million in 2003 to $1.2 billion in 2004.
Fortified/functional bars were the leading subsector, totaling $170 million of 2004 sales, with ?naturally healthy? bars coming in second at $147 million.
The Western Europe market is dominated by the UK and Germany, which together accounted for some 60 per cent of regional value in 2004. However, while the UK witnessed healthy growth in 2004, spurred by new product launches, the German market for snack bars witnessed stagnation, with a decline in volume.
According to Euromonitor?s report The World Market For Packaged Foods 2005, this followed a slowdown in 2003 and 2004. Although niche products such as energy bars and fruit bars stimulated some sales growth for snack bars, overall sales in 2004 suffered from a lack of innovation and consumers favouring other breakfast substitutes, such as yoghurt and smoothies.
In the US, the bars market is dominated by five companies: PowerBar, Balance Bar, Atkins Nutritionals, SlimFast and Clif Bar, which between them snap up 56 per cent of all sales. In Europe, leading manufacturers include PowerBar, Isostar, Multipower and Inko, as well as regional leaders such as Overstime (France), Maxim and High 5 (UK and Scandinavia) and Sportvital (Switzerland).
With these numbers in mind, what are manufacturers planning for 2006? What formulations stand the best chance of regaining market share in the US, and maintaining strong growth in the EU? The key, insiders say, lies in market segmentation.
Finding a niche
One of the key trends cited by ingredients suppliers is a growing focus on specific age groups and health conditions. Research at Kerry indicates that mothers are the biggest single purchasers of energy bars (23 per cent) and that they are looking for family-friendly bars appropriate for both them and their children. Baby-boomers are another target market.
?The over-50 crowd is one of the largest population segments and one of their health issues is arthritis,? says Karen Holliday, marketing manager at Kerry Ingredients-Kerry Sweet Ingredients, based in Kansas. ?We?ve found chondroitin and glucosamine are a clinically proven formula that could easily be included in bars. It hasn?t been done yet — but it should!?
The same Kerry survey found that 42 per cent of those surveyed cite the alleviation of stress as one of their major health concerns. This opens the door to ingredients like lavender and chamomile.
?If I were to crystal-ball gaze, I would say that eating is going to be focused increasingly on the mental as well as the physical,? Holliday says. ?Mood food — helping memory, stress, gaining energy ? will be the wave of the future.?
Ram Chaudhari, executive vice president of research and development for New York-based Fortitech, also sees the next generation of bars as being segment- and health-condition specific. Fortitech has been formulating bars since it was founded in 1986, and is today a leading supplier for both PowerBar and Sure.
?By targeting groups like women, athletes or teens,? Chaudhari says, ?this will enable them to capture a specific health claim or nutritional benefit based on the ingredients they are using.? Bruce Kirk, president of natural sweeteners supplier Corigins in New Hampshire, believes diabetics will be one of the hottest niche segments in coming years.
?The diabetic market is an incredibly unmet need,? he says. ?Type 2 diabetics are more likely to start making different dietary choices, and low GI will mean something to them. They?re a huge market, and there?s a price premium for doing something for them.?
What ingredients will these new formulas rely on?
?For skin care, we will see bars that promise to beautify, containing antioxidants, co-Q10, B vitamins, lycopene, and vitamins C and E,? Chaudhari says. ?Teenage formulas might have antioxidants, vitamins C and E, betacarotene, B complexes, iron and magnesium, because they work as co-factors when energy is being released. For women, prebiotics like inulin and oligosaccharides, calcium and vitamin D.?
Glanbia Nutritionals is promoting its new Oatvantage ingredient in Europe as a perfect fit for low GI and consumers looking for cholesterol-reducing solutions because it contains 54 per cent concentrated oat beta-glucan. Another of Glanbia?s ingredients, Barpro milk protein isolate, is intended to boost shelf life and protein content, both qualities the company believes are important to existing and future bars formulations.
?Functionality in bars continues to be a major hurdle and requires investment in R&D applications,? explains Avril Twomey, Glanbia?s marketing manager for the European Union and the Asia Pacific. ?Shelf life and nutritional value are key attributes, and they can be cumbersome when developing new product ingredients. For example, protein bars tend to harden quickly because they soak moisture from the bar.?
Like protein, several other potent ingredients still face formulation challenges.
?Probiotics are not yet widely used in bars because of stability issues, but people are looking into it; it will be 12 months before we see that on the market,? Chaudhari says. ?Omega-3s are being investigated, but there are still flavour issues. Powerful microencapsulation technology is being developed but it isn?t cost-effective yet — it?s just a matter of time. Phytosterols are coming in eight to 12 months. They are slightly bitter and mostly fat-soluble, so formulators are trying to tackle their flavour issues.?
PowerBar sees a similar trend at work in Europe. A leading US bars manufacturer, the company kicked off European operations in 1998, and since 2000 has marketed bars in Europe under the umbrella of Nestlè.
All about the flavours
Most formulators agree, flavour innovation will be key in the coming years.
?People are moving in the direction of fruits like blueberry, cranberry, mango-lime and apple-cinnamon,? Chaudhari says. ?People are looking to all fruit flavours, natural and combos, such as cherry-mango and orange-raspberry. Pomegranate is on the horizon, and it has excellent science behind it. Ethnic food flavourings you also can?t ignore either because certain groups are growing, especially in California.?
Recent market research at Kerry supports this view. ?In a recent study, we asked women over 45 what was one of the most important ingredients in the bars they chose,? Holliday says.
?Their answer was fruit. They?re a big number. It?s also an incredible opportunity because not many products on the market right now are meeting that need. In particular we are seeing an opportunity to provide a full serving of fruit — half a cup — in a single bar product. We have found that through new formulations of fillings, we can get that into a bar. That?s big news, and exciting for industry and the consumer.?
The trend toward fruit flavours means new technological challenges. ?We are beginning to see the incorporation of actual fruits into the bars, where you can get all the nutritional benefit of fresh fruit and have a chocolate or yoghurt coating. That requires changing manufacturing technology ? and people are doing that kind of work now,? Chaudhari says.
The worldwide market
One reason the industry is so eagerly watching the US bars market is because it is, in some ways, considered a canary for what might happen elsewhere in the world.
?The European market is not as developed as the US, but in order for the category to continue growing, there needs to be a shift from the niche bar offering to mainstream,? says Twomey at Glanbia. ?In the US, high-protein bars are available in various ranges and formats and positioned differently toward men and women. If this trend extends to Europe, there will be room left for growth and expansion of the sector.?
Szlufcik, at PowerBar, agrees.
?In comparison to the US, the European energy bars markets are underdeveloped in distribution due to the fact that each European country has its own nutritional habits and food culture, and people in general are more into natural foods than processed foods,? Szlufcik says. ?Nevertheless, busy lifestyles and shortages of time are leading to an increase of sports nutrition usage, and that market is growing by double digits. Low carb is also slowing down in Europe, but in comparison to the US, the ?crazes and dips? aren?t as extreme over here.?
Euromonitor International pegs the combined market value share of Eastern Europe, Latin America, Africa and the Middle East at less than five per cent in 2004, or $297 million. ?Despite the Westernisation of many developing markets and rising consumer purchasing power, consumer knowledge of and exposure to snack bars is very limited,? Euromonitor explains in its 2005 report. ?There are, however, notable exceptions, with Argentina, Brazil and Mexico showing a significant level of snack bars sales, although demand is strongest among high-income consumer groups.?
In the US, bars makers are discovering the potential of the Hispanic market firsthand. ?We are learning that the average Latin consumer eats more bars than would be demographically common,? says Holliday. ?We have done some work in Los Angeles: sweet and salty combos, and bars that are less-sweet overall, with less chocolate and caramel, and more cinnamon and fruits. This is an untapped market with a lot of potential.?
What lies ahead
Despite the recent sales bumps, worldwide the bars market is looking strong. Euromonitor International predicts the sector will enjoy a five per cent compound annual growth rate between 2004 and 2009, to reach $8.4 billion, representing growth of 30 per cent over the forecast period.
North America will account for 63 per cent of global value sales by 2009, down slightly from 65 per cent in 2004, with the strongest subsectors being energy bars, granola bars and breakfast bars. The predicted growing European market share has at least one American company taking notice.
California-based Clif Bar, which has been in the business for 13 years, pulled out of Europe in 2001. But according to vice president of innovation Randy Erickson, the company returned to Europe on ?a fact-finding mission? in late 2003.