Customers paying to go without
Gluten, antibiotics, genetic modification — there’s profit in ‘free from’ foods
Food company General Mills spent five years and built a special eightstorey sorting facility to get rid of an ingredient that wasn’t in its cereal. To ensure that some varieties of Cheerios — made from oats and thus naturally gluten-free — didn’t contain even tiny particles of the protein that may have blown in from neighbouring fields, the company dispatched a team of engineers to retool machines to sort 4.5 million tonnes of oats a year.
“It was not easy,” says Mike Siemienas, a spokesman for the Minneapolis-based food company. “We knew if we wanted to take our Cheerios gluten-free we needed to create our own system.”
The increasing demand for food “free from” certain items — including gluten, antibiotics, pesticides or genetic modification — is changing the way companies procure, process and package your food. Sales of such foods are poised to grow 15 per cent, or US$1.4 billion, in the US between 2017 and 2022, according to Euromonitor data. The US is the largest global growth market for the free-from trend as consumers seek to avoid certain ingredients or additives.
“We know that we have to continue to evolve,” says Kyle Lock, senior director of retail marketing at North Carolina-based Butterball, the largest US turkey producer. If the company doesn’t accommodate consumers, “we risk some obsolescence, or at least some decline”.
Sales of “free-from” products are growing faster than overall food and beverage sales, according to data from researcher Nielsen. Products labelled antibiotic-free had growth rates of nearly 20 per cent, followed by soy-free at 19 per cent and hormone and antibiotic-free at 15 per cent.
“The health trend has been going for a while, but the challenge big packaged food companies have is how to make money out of it,” says Kenneth Shea of Bloomberg Intelligence. “A lot of companies are facing that identity crisis right now.”
Some of the largest food companies have taken steps to serve more discriminating customers. McDonald’s, one of the world’s biggest buyers of beef, plans to source more than 20 million Angus burgers in Canada over the next year from farms and ranches that have been certified sustainable.
Tyson Foods, the nation’s largest meat company, bought organic chicken producer Tecumseh Poultry this year. Ardent Mills, the top US wheat miller, has created “The Annex”, a unit that is trying to find the future of specialty grains and plant-based ingredients.
The shift is not always easy — General Mills faced an embarrassing early setback when it was forced to recall gluten-free Cheerios because wheat flour got into a facility in California.
“Americans increasingly want to know what’s in the products they buy and how they’re made,” says Sergio Fuster, president of the US yogurt division for Danone’s North American unit.
The yogurt maker began working with farmers eight years ago to identify ways to source nongenetically modified feed for cows. Since then, more than 26,000 hectares of farmland have been converted to provide the feed needed by the dairies, including grass and alfalfa, says Fuster.
The company’s Danimals brand, which is almost entirely non-GMO, is among its best performers.
Butterball sells organic and antibiotic-free products and recently expanded its all-natural products including turkey bacon, sausage and burgers.
Sales of the company’s antibioticfree ground turkey in the 13 weeks to August 12 were up 71 per cent on the previous year, and now make up 17 per cent of the total.
Achieving this is a logistical juggling act — its plant in Mount Olive, North Carolina, handles organic and antibiotic-free birds first thing in the day to ensure they don’t come into contact with the conventional products. There are also different coloured bins to store each type of meat to prevent mix-ups, says Jay Jandrain, the company’s chief operating officer.
“It’s a matter of storing and managing those materials — that’s the tricky part, just as far as keeping them segregated,” Jandrain says. “If you’ve got a raw breast meat, you now have three different types of raw breast meat that you have to manage through the facility.”
Farmers who were ahead of the curve, meanwhile, are now finding themselves well positioned to profit from the boom in demand for more specialised products.
In the late 1980s, John Gilbert started raising pigs on his farm in north central Iowa on pastures, with feed grown on site and without the use of antibiotics.
Ten years later, Niman Ranch, a supplier of sustainably-raised meats for Chipotle Mexican Grill, came looking for his product. Gilbert has slowly expanded as demand for antibioticfree, naturally-raised pork has risen. He now sends about 200 pigs a year to market, about 30 per cent more than 30 years ago, and hopes to increase by 50 per cent in the next five years.
“There’s a lot of people who understand making a small investment in food pays dividends in health care costs down the road,” says Gilbert.
The US is the largest global growth market for the ‘free-from’ trend.