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Business Insights from Entrepreneurial Companies—Part 1

Posted on:December 4, 2019

IN THE WORDS OF ONE INDUSTRY WAG, “If you need to attend a class on innovation, you’re no innovator.” If you agree, not so fast! A panel entitled “Managing Innovation: From Entrepreneurial Startups to Going Mainstream” offered attendees of the 2019 Protein Trends & Technologies Seminar a practical “how to” guide for innovators. It exposed pitfalls and proffered practical solutions to the challenges that plague those struggling at the leading edges of food and beverage development.

Read on for this two-part series on innovation.

Part 1:

Kara Nielsen, Vice President of Trends and Marketing at Emeryville, California-based CCD Innovation, a consulting agency focused on food and beverage innovation, moderated the panel. Her panel participants included five highly credentialed industry innovators, representing five very different entrepreneurial skill sets.

 

The panelists were:
Didier Toubia, CEO of Aleph Farms: This is an Israeli start-up company seeking to revolutionize the animal protein industry by artificially growing animal muscle tissues using a technology Toubia equated to producing “hydroponic meat.” He stat-ed that his company was still four years short of entering the market.

 

Anthony Brahimsha, Founder and CEO of PROMMUS Brands, LLC, harkened to his Syrian roots in describing his company’s origins. He was first exposed to the idea of “food as medicine” as a volunteer within Syrian refugee camps. “That experience allowed me to think differently about the foods that we consume here,” said Brahimsha. Chicago-based PROMMUS Brands, LLC introduced a line of high pressure-processed (HPP) hummus products enriched with protein isolates in 2018. These products, assured Brahimsha, were designed to “blow out the competition” on the nutritional label alone.

Umaima Merchant is the Director of Innovation and Growth at Premier Nutrition, a leading consumer brand company whose brands include Power Bar, SupremeProtein and JointJuice. Premier Nutrition is an affiliate of St. Louis, Missouri-based Post Holdings, a large CPG holding company. Merchant presented a largely CPG-based perspective on the challenges of innovation, leavened by her past experiences working with companies like Deloitte and Clif Bar.

Scott Mandell, Founder and former Chief Executive Officer of Chicago-based Enjoy Life Foods, drew upon Enjoy Life’s success in pioneering the market for gluten- and allergen-free foods. He subsequently transferred his entrepreneurial expertise to Chicago-based Cannibistry Labs, a developer of cannabis-based food and beverage products serving a plethora of start-ups in this still nascent market.

Mark Haas, Founder and CEO of The Helmsman Group, has been helping natural and organic companies grow for more than 20 years. With a background leading high-growth brands as well as founding his own contract manufacturing plant, Mark provides experienced insight and strategies to growing food and beverage companies.

 

When to Innovate…Or Not
Kara Nielsen jump-started the discussion by asking whether innovation was always necessary? Marc Haas noted that innovation came in many forms.

“Innovation,” said Haas, “is simply the application of something novel; it can be a new technology; new ingredients; or new ways of communicating a consumer ‘need-state.’” Or it can consist of a marketing campaign.

The type and degree of innovation undertaken depends largely on a company’s particular circumstances, offered Aleph’s Didier Toubia. “There are two ways to look at innovation; large companies are customer-driven, while start-ups are more vision-driven. Customer-driven innovation is much less risky, because one can afford the consumer research needed to mitigate risk.” Start-ups depend on yet-unproven visions of future opportunities.

This concept brought up another important role for innovation: to attract needed visionaries, risk-takers and capital. “We need continued innovation, in order to keep attracting the right kind of people to participate in our efforts,” explained Toubia.

An interesting question posed by Premier Nutrition’s Merchant discussed the role of innovation when a company’s brand is already growing quickly. Does a company apply its resources to pursuing riskier innovations or toward growing its winning brand? “It is a challenge for me to justify allocating resources to the innovation of new products in a fast-growth environment,” Merchant explained. For Premier Nutrition, new growth has come from market expansion into new consumer sectors. She concluded: “Because of the space we compete in, innovation is an option—but not a requirement.”

 

Carving Out Safe Spaces
One thing is clear, however: The high risk and limited resources that define small-company innovation leave little room for error. Thus, entrepreneurs and innovators need to articulate clearly defined business goals in their quest to meet clearly perceived market needs. For Aleph Farms, it was the recognition that most people who like to eat meat want to continue eating meat, not substitutes there-of. “Our goal is to provide real meat without any of the downsides,” said Toubia. Among the downsides he cited were sustainability, land-use practices, production timelines, widespread antibiotics misuse and animal welfare considerations.

Mandell explained, “At the time of Enjoy Life’s founding, nobody owned the allergen-free space that we set out to fill. We set out to build a true moat around our brand identity that would protect our runway to revolutionary innovation.” From day one, he continued, Enjoy Life invested in its own manufacturing facility, in order to maintain total control over production quality and thereby “keep our promise to create products free of all allergens.”

Mandell’s transition as a market service provider with Cannibistry Labs required a different business model altogether. Cannabis is not approved in the U.S. at the Federal level, so development has had to occur on a state-by-state basis and, for now, is not subject to Federal interstate commerce opportunities. The problem, noted Mandell, is that “while many start-up companies are securing cannabis licenses, they don’t know how to develop and commercialize food and beverage products. Our professionals create best-in-class products; develop brands around those products; and then license them to companies within the states where such products are legal.” An unstated advantage of this model is that it helps keep legal liabilities at arm’s length in confusing Federal and State regulatory climates.

Merchant observed that one successful model driving food and beverage innovation is to draw from global influences. Citing Brahimsha’s success in developing a market for traditional but nutritionally boosted hummus products, she noted that many new market ideas have come to the U.S. from other cultures and countries. “Greek yogurt wasn’t a big deal in the U.S. until the early-2000s, when it was introduced and built into a billion-dollar business by the Kurdish-immigrant Chobani family. The U.S. food and beverage industry boasts many similar success stories of immigrant origin.”

Toubia summed it up: “What is important in innovation is to make sure that innovation brings real value to its customers. It’s not just about our vision as entrepreneurs because, for the customer, it really is ‘all about me.’ Sometimes we forget that.”

This panel on innovation will be continued in Part 2


The “Managing Innovation: From Entrepreneurial Startups to Going Mainstream” panel at 2019 Protein Trends & Technologies Business Strategies program

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/


Changes in Food Development, Marketing and Distribution to Consumers

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“CHANGE HAS NEVER HAPPENED THIS FAST, and it will never be this slow again.”

Andria Long, Growth Advisor, drew upon her years of innovation experience working with consumer-packaged goods (CPG) companies to lay out thought-provoking challenge scenarios for the future food and beverage industries.

Long continued, “Consumers remain at the center of everything.” Pointing to the success of Apple, Inc., she said that innovation is “all about solving consumers need in new ways; they may not know what they need, but when you speak with them, they can clearly tell you what makes them dissatisfied.” So, where to start?

“Convenience is still king!” she continued. “We are spoiled. We don’t even like to cut or peel stuff anymore. It may cost more, but we prefer ‘grab and go.’ And nobody likes to clean utensils…we now want our portion-controlled meals and side dishes purchased and cooked in the same package,” she said.

Then came the gradual retreat of grocery shopping in the onslaught of online economy, for which delivery times have gotten shorter and shorter. “I remember when it used to take one to two days to get a home delivery. Now, I can receive my orders within one-to-two-hour time frames,” said Long. This has also shifted expectations, as “food on demand” rests only a smart phone away from the consumer’s couch.

Fast, home-based delivery services still have growing pains. Long elaborated, “I once ordered a meal kit and was shocked to find that the instructions were overwhelming. Not only that, but they expected me to cut and peel the ingredients. Come on…we don’t do these things anymore…the service failed to reflect my inability to cook!”

Long views Amazon.com as the great game-changer behind this trend: “Amazon rained us to expect not to have to wait for our electronic orders.” Beyond grocery, the U.S. has experienced a proliferation of ready-to-eat home delivery services in urban areas (e.g., GrubHub), she noted.

Small companies are proliferating in this environment. “The market research company, IRI, just published its top-100 company list of pacesetters and, for the first time, small companies represented more than 50% of that list.” But average company lifespans are also declining. Part of this “surge and churn” environment is attributable to lowered barriers to market entry.

At one level, just about anyone can now gain entry into the food industry through sub-contracted services and relationships. Traditional barriers to entry, such as access to manufacturing and distribution systems, are disappearing. For many large CPG companies, said Long, “retailers have now become competitors,” with their private label acting more like brands.

Entrepreneurship has become easier, as expertise is now readily available through innovation incubators, contracted expertise or on-line services. Capital is also more available. “I’ve been shocked by how many entrepreneurs in the Chicago-area start-up community openly say they didn’t know anything about CPG, or food or beverages before they founded their successful companies,” observed Long.

Branding is also being redefined; brands today are less associated with product attributes and more with emotional needs, Long averred. Many consumers attach their loyalty to companies that align with their own values. “We used to define ‘transparency’ by healthy ingredient lists, clean labels, transparent packaging and such,” she said. But now, consumers want more emotional connections to their food, starting with knowing where it was grown and how it was raised. “How many people would have anticipated that an outdoor apparel manufacturer such as Patagonia would ever enter the food and beverage industry based on shared customer values?”

Fast-changing technology combined with rising consumer expectations have pushed the envelope of consumer expectations to new heights and shattered barriers to entry to the food and beverage sector. But consumer expectations are fickle and can quickly change direction. “While the market used to be defined by ‘big fish, small fish,’ it is now defined by ‘fast fish, slow fish,’” she concluded. Be it in a big pond or small, failure to change can prove fatal.

“Impact of Disruption on the Future of Food,” Andria Long, Growth Advisor, www.andrialong.com

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/


Consumer Sales Data on Plant and Animal Proteins

Posted on:December 3, 2019

HIGH-PROTEIN DIETS mean different things to different people. So stated Kasey Farrell, Data Product Manager, Product Intelligence Team SPINS, while setting the stage for her talk “The Age of Protein: Emerging Opportunity for Plant-Based Alternatives.”

Historically, vegan products have been favored for animal welfare and environmental concerns but are often associated with poor taste qualities. The term “plant-based” is more about good health and flexible, customized approaches to eating.

The meat substitute market is expected to grow 74% to $2.5 billion globally by 2023, according to Euromonitor.

Sales of plant-based meat alternatives are growing with plant-based burgers seeing the most accelerated growth. Sugar-free, low-carb, gluten-free and keto-friendly products using plant-based protein sources are trending.

Farrell noted data from a 2018 International Food Information Council Foundation report that shows over 70% of people view protein from plant sources as healthy, whereas less than 40% view animal protein as healthy. In the retail sector, animal-based proteins—with the exception of egg and collagen—declined. Meanwhile, plant protein sales are still increasing, with pea protein showing the greatest growth.

Farrell presented data showing that plant-based alternatives to burgers and other meats, protein supplements and milks all saw impressive growth in the past year. Milks have the highest dollar sales, but burgers have seen the greatest percent growth. “Euromonitor International data noted that the meat substitute market was valued $1.44 billion and, by 2023, is expected to grow 74% to $2.5 billion,” Farrell stated.

Taste is still the primary determinant for consumers, and restaurants and chefs are formulating new recipes and menu items to broaden plant-based options. Farrell provided examples including Burger King’s “Impossible Whopper,” Carl’s Jr’s “Beyond Famous Star burger” and Silver Diner’s “Just Egg Benedict.” Additionally, Dunkin Donuts has announced the introduction of plant-based breakfast meats.

Farrell noted that, according to the Food and Agriculture Organization (FAO), environmental sustainability may be another driving force behind plant-based eating, with livestock farming leading to soil erosion, deforestation and destruction of natural habitats. Furthermore, FAO reports that 1-2,000 liters of water are needed to produce 1kg of wheat, whereas 13-15,000 liters is required to produce 1kg of grain-fed beef. The livestock sector contributes about 9% CO2, 65% nitrous oxide and 37% methane.

Traditionally, vegans and vegetarians are known to avoid meat for animal welfare concerns. According to GlobalData, the number of people in the U.S. who followed a vegan diet grew 600% between 2014-2017.

Non-GMO (or not genetically modified) is another claim or certification consumers may be looking for in their products. Many consumers shun GMO ingredients or products, believing these have not been studied enough to understand safety and long-term effects. Farrell explained that the USDA will require bioengineered foods to be labeled by 2022, with the exception of ingredients with undetectable levels of the ingredient, such as high-fructose corn syrup. Consumer demand for Non-GMO Project Verified items grew exponentially since 2011, across all retail channels.

Brands and manufacturers across all categories are looking for new and innovative ways to increase their products’ protein content. Products featuring pea protein grew more than other plant-based protein sources in the natural segment in 2018.

Plant-based options are expanding into new product categories and traditionally meat-based areas, like jerky and meat snacks. Farrell concluded by stating that protein sources are being combined to provide complete nutritional profiles as well as texture and taste properties. New categories of products are getting an added boost of protein, including items that inherently contain protein, like nut butters. Indulgent treats are following suit and appealing to the protein-conscience consumer.

“The Age of Protein: Emerging Opportunity for Plant-Based Alternatives,” Kasey Farrell, Data Product Manager, Product Intelligence Team SPINS

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/


RDA Determination and Over or Under Consumption of Proteins

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COMMON MYTHS REGARDING dietary protein were a key focus of the presentation, titled “New News About Protein: How Much is Too Much…and Not Enough,” provided by Steve Hertzler, Ph.D., RD, Sr. Scientist, Clinical Research, Abbott Nutrition.

“Can protein give you energy?” questioned Hertzler. “Yes, theoretically! But this is not preferred and occurs only to a limited extent, as amino acids are not the ideal source to burn for energy.” This is because excretion products of protein oxidation, such ammonia and urea, can potentially be toxic to the body.

Hertzler noted that the current Recommended Dietary Allowance for protein is 0.8g protein/kg of body weight per day. “The RDA is the amount sufficient to meet the nutrient requirements of nearly all healthy individuals in a particular life stage and gender group,” he noted. RDAs are based on nitrogen balance studies; however, these studies are difficult to perform and interpret correctly.

Indicator Amino Acid Oxidation (IAAO) is a “newer method in which humans are fed different amounts of IAA (typically an isotopically labeled amino acid such as 13C-phenylalanine). The 13C comes out of the body as 13CO2 when the amino acid is oxidized and can be quantified in expired breath samples,” stated Hertzler. The IAAO method removes some of the limitations that have been associated with older nitrogen balance studies.

The theoretical basis underpinning the IAAO method is that, at low protein intakes, essential amino acid (EAA) intake is insufficient to support protein synthesis, and IAAO will be high. As protein/EAA intake increases toward requirements, protein synthesis improves, and IAAO falls.

“At breakpoint,” Hertzler explained, “IAAO reaches its lowest point, and further increases in protein intake do not alter it. This breakpoint is referred to as the estimated average requirement (EAR). A margin of safety is added (typically 2 standard deviations above the EAR), and that protein intake number becomes the proposed RDA.”

Data from ten IAAO human studies indicate an EAR higher than the present RDA. (See chart “IAAO Studies to Estimate Human Protein Requirement.”) “This is important,” stressed Hertzler, “because, for non-exercising adults of all ages, the protein RDA (1.15-1.30g/kg/d) is around 50% higher than the present RDA.” For athletes, the present RDA is two-three times lower than the proposed RDAs derived from more recent IAAO studies, which range from 1.7-2.6g/kg/d.

Expert groups are recommending increases in protein intake. For example, this would include, for healthy older people or those who are (or at risk of) malnutrition, at least 1.0-1.2g and 1.2-1.5g protein/kg BW/d, respectively. (Deutz NEP et al. Clin Nutr 2014. https://bit.ly/2ZU2AuY) Hertzler stressed that nearly all new evidence points to benefits of protein intakes higher than current RDA, yet no specific changes are being implemented to current RDAs. Data from “National Health and Nutrition Examination Survey” (NHANES) 2011-2014 showed that 31-50% of older populations consume below the protein RDA (which may already be too low), as expressed on an actual BW (not ideal BW) basis. (Krok-Schoen JL et al. J Nutr Health Aging 2019/https://bit.ly/2xyzPaQ)

There appears to be a benefit for older people to consume higher protein intakes. Intakes of 1.5 vs. 0.8 g/kg/day protein resulted in muscle mass more than doubling in arms and legs in frail elderly subjects. Indices relating arm and leg muscle mass to BW, BMI and body fat all significantly improved, as did gait speed. (Oikawa SY et al. Am J Clin Nutr 2018/https://bit.ly/2XH52Iq)

Hertzler emphasized that it is very difficult to consume “too much protein.” High-protein diets within the U.S. Institute of Medicine’s Acceptable Macronutrient Distribution Range (AMDR) of 10-35% of energy (and up to two-three times the RDA) pose no direct safety concern. “However, the key proviso is that a person has healthy liver and kidney function to start.” (Antonio J et al. J Nutr Metab 2016/ https://bit.ly/2xyzPaQ)

High-protein diets are unlikely to have an adverse effect on bone health and may have positive effects. Indirect risks of high-protein diets have less to do with the protein and more to do with other dietary factors that may do harm, such as saturated fat or low fiber. “My main concern is with protein crowding out other healthy foods,” stated Hertzler. Many high-protein foods are low in carbohydrate and fiber, yet many healthy high-carbohydrate foods are low in protein.

He noted, “Plant-based proteins, as part of your overall protein mix, are a great way to get protein, as well as a lot of other beneficial nutrients.”

Hertzler concluded that current research suggests protein recommendations, such as the RDA, may be too low to promote optimal health and function, especially as people get older. Proper distribution of protein intake may be helpful as well.

“New News About Protein: How Much is Too Much…and Not Enough,” Steve Hertzler, Ph.D., RD, Senior Scientist, Clinical Research, Nutrition Science & Innovation, Global Scientific and Medical Affairs, Abbott Nutrition

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/


Market Size and Applications for Dairy Proteins

Posted on:December 2, 2019

THE DAIRY INGREDIENT SECTOR remains a dynamic and crucial source of proteins for foods and beverages. The global market for dairy proteins includes many mature ingredients. “However, it is the newer ingredients, such as native whey, micellar casein and peptides, that are creating added value in the sector,” said Tage Affertsholt, MSc, Owner, 3A Business Consulting, in his presentation titled “Global Market for Whey and Other Dairy Proteins.”

First, let’s look at the whey category. The more concentrated protein products, such as whey protein concentrate 80% (WPC80) and whey protein isolate (WPI), have been driving category growth and value, and this trend is expected to continue through 2022.

The global market value of whey ingredients was approximately 6 billion USD in 2017 and is expected to grow to 7.1 billion by 2022. While the EU is the dominant producer of whey powder and demineralized whey, production of whey protein concentrates in the ranges of 35-89% protein is equally distributed between North American and Europe.

The U.S. dominates production of WPC80 and WPI to fuel its protein-hungry sports nutrition market. Asia relies heavily on exports from North America and Oceania to meet their demand for these ingredients. Demand from the nutrition sector for higher protein ingredients is divided into four major usage categories: obesity; child and infant nutrition; healthy active lifestyles; and aging populations.

The sports nutrition category represents more than 15 billion USD annually and is growing by 10%. One of the biggest companies in sports nutrition is Glanbia, which has acquired many sports nutrition brands.

Milk proteins dominate the 12 billion USD clinical and adult nutrition category, which is also an opportunity area for whey protein hydrolysates.

The infant formula markets in Asia and the EU are major users of 90% demineralized whey powder, while whey powders with lower levels of demineralization are utilized in bakery and confectionery products. Lower protein WPCs are used in sports powders, infant formula and dairy. Key markets for whey hydrolysates include sports nutrition, infant formula and clinical nutrition.

The infant formula industry, valued at over 50 billion USD, continues to be a major market for higher value whey protein ingredients, including those enriched with alpha-lactalbumin or lactoferrin. The Chinese market is driving growth in this category.

Whey proteins are produced by a wide range of suppliers, some with limited portfolios and market scope. In contrast, larger companies have both a wide portfolio and a global scope.

A similar growth story is seen in the milk protein industry. The global market value of milk proteins was approximately 3.5 billion USD in 2018 and is forecast to reach almost 4 billion by 2022. Production of MPC with protein levels above 85% has increased in recent years, as has production of newer ingredients like micellar casein concentrates (MCC), micellar casein isolates (MCI) and native whey.

The EU and Oceania are the major suppliers of casein and caseinates, while North America is both a major producer and supplier of milk protein concentrates (MPC). Asia is a key user of milk proteins, and there is growing demand from developing countries.

Milk proteins are used primarily in infant, clinical and sports nutrition products, but they are also used in processed foods, including dairy and cheese. MCC, MCI and native whey are used almost exclusively in sports nutrition. MPC is seen in a wide range of new product launches, while MPI is used primarily in sports nutrition. Micellar casein in powdered sports nutrition products is touted as being “less processed.”

Clinical nutrition is a relatively small (12 billion USD) but growing market for milk proteins in sophisticated markets, such as the U.S., EU and China. Milk proteins are valued for their slower absorption rates.

Other examples of emerging dairy ingredients include casein phosphopeptides and osteopontin. Galactooligosaccharides (GOS), which are derived from lactose, also show growth potential.

A number of dairy ingredient companies are starting to produce organic whey and milk protein ingredients. The forecast is for continued steady and significant growth in the dairy protein industry.

“Global Market for Whey and Other Dairy Proteins,” Tage Affertsholt, MSc, Owner, 3A Business Consulting

This presentation was given at the 2019 Protein Trends & Technologies Seminar. To download free presentations and the Post-conference summary of this event, go to https://www.globalfoodforums.com/store/protein-seminars/

See past and future Protein Trends & Technologies Seminars at https://www.globalfoodforums.com/store/protein-seminars/


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