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B u s i n e s swww.new–nutrition.com March 2007 ISSN 1464-3308VoluMe 12 NuMber 5

T H E J O U R N A L F O R H E A L T H Y E A T I N G , F U N C T I O N A L F O O D S & N U T R A C E U T I C A L S

Cola giants give omega-3 seal of approval

Sleep-enhancing milk sees light of day in US

Balentine: Unilever continually improving its US portfolio

Time up for Prime Time joint

health milk

7-18 Page 25Page 7

Coca-Cola Co. and PepsiCo Inc. are moving their titanic battle for orange juice dominance to a new nutritional platform: omega-3. It’s a product proposition that executives of both companies believe has a chance to become as popular as calcium-fortified orange juice is with US consumers.

Since the beginning of the year PepsiCo’s Tropicana unit has been rolling out to US supermarkets a new version of its Tropicana Essentials Healthy Heart Orange Juice featuring “Now with Omega-3” on the pack front. Tropicana has also launched an omega-3-fortified orange juice in Canada.

Meanwhile, Coca-Cola’s Minute Maid brand has begun retailing new Minute Maid Fruit Solutions Omega-3 in Canada, a blended-juice product, but for the moment at least, the company is refraining from introducing an omega-3-specific new product in the US.

“We expect sales of Healthy Heart with Omega-3 to increase [over previous levels of Healthy Heart sales] because it hits the boomer trifecta of delivering convenience, taste and meaningful nutrition,” Jim McGinnis, vice president of marketing for Tropicana, told New Nutrition Business.

Eric Bentz, a Minute Maid brand manager in Canada, said that he believes consumer appreciation of the health benefits of omega-3s has reached such a level, at least in Canada, that building a new product around the ingredient “makes as much sense as building one around calcium”.

In a major coup for North America’sleading supplier of marine-based fish

oils, Ocean Nutrition Canada (ONC), of Dartmouth, Nova Scotia, is supplying the EPA and DHA omega-3 ingredients for all three new drinks.

Of course, in their enthusiasm for new omega-3-based products, orange juice executives must also consider the reality of the subdued marketplace performance of most of the nutrient-added new versions of

Tropicana and Minute Maid products that have been introduced in the recent past: they have done little, overall, to increase the market.

Will Omega-3 live up tO its prOmise?

It’s true that calcium fortification is so widely embraced by consumers that Information Resources Inc., a leading tracker of product-sales data, doesn’t break out calcium-fortified products separately, lumping them in with their umbrella brands. But industry executives confirm that calcium-fortified Tropicana and Minute Maid products are the biggest sellers of all the nutrient-specific versions that have been introduced.

The Tropicana Pure Premium brand led 2006 with sales of $1.1 billion (€840 million), according to IRI, while Minute Maid’s Premium main product logged $364 million (€277 million) in sales in food, drug and mass-merchandise stores (excepting Wal-Marts).

But among the several other functionally specific new products that both companies have introduced recently, only Minute Maid’s Heart Wise juice – which contains phytosterols to lower cholesterol – has broken through the $20 million (€15 million) annual sales barrier, generating nearly $30 million (€23 million) in sales, according to IRI.

And some beverage-industry experts believe it will be difficult for the new omega-3-based products to duplicate even that level of success. “After awhile, this stuff is done so many times that it becomes like a callous,”

By Dale Buss

Continued on page 3

March 2007�

n e w n u t r i t i o n B u s i n e s sw w w. n e w - n u t r i t i o n . c o m



c o n t e n t s & c o n ta c t s

LEAD STORY

1,3 Cola giants give omega-3 seal of approval

inTERnATiOnAL nEwS

4 First of its kind: A ‘rye miracle’ that lowers cholesterol and manages blood pressure

5 Valio’s ‘value-added dimension’

6 UK soy-juice market heats up

uS nEwS

7 Sleep-enhancing milk sees light of day in US

nuTRiTiOn RESEARCH

8 Studies back vitamin D for cancer

8 African Americans lack key nutrients

9 Survey: Americans want good food, not pills

9 Fruit, veges and enlarged prostate

10 Caffeine just the thing for older men

10 Seniors need both folate and B12 for healthy brains

EDiTORiAL

11-12 Danone delivers on its strategy - with

diamonds for today and tomorrow

13-15 Signposts for your health & nutrition strategy

16 America discovers functional dairy

inTERViEw

17-18 Balentine: Unilever continually improving its US portfolio

CASE STuDY

19-20 DAiRY: Activia’s record-breaking success shows that America is ready to embrace digestive health 21-22 DAiRY: Little bottles finally make it big in the US

23-24 DAiRY: US Hispanic market a ‘vast ocean of possibilities’

25 DAiRY: Time up for Prime Time joint health milk

26 STRATEgY: The long hard road to profitability

27 BAkERY: Sara Lee redefines white and whole wheat bread for Americans

29 STRATEgY: Danone joins Wahaha to boost China’s nutritional product range

inTERnATiOnAL nEw PRODuCT LAunCHES

31-33 Functional & healthy-eating new products in the US and the rest of the world

nEw nuTRiTiOn On THE nET

34 Get the most from your subscription

imPORTAnT nOTiCE

35 A polite reminder to our subscribers

nEw CASE STuDiES

36 Ten Key Trends/Five Key Trends

37 PepsiCo: The World’s Biggest Functional Food Company

38 Health Benefit Platforms & Strategies in Breakfast Cereals/Naturally Healthy Kids’ Food

39 Order Form

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european eDitorial office

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Arla Foods.............................................. 25

Benecol ............................................. 15,16

Bestfoods ...................................................6

Bestway .....................................................6

BevMark ...................................................1

BioGaia .................................................. 26

Brand New Brands....................................7

Coca-Cola ............................................. 1,3

ConAgra ................................................ 27

Dairy Crest ............................................. 25

Danone .....13,15,16,19,20,21,22,23,26,29

Dean Foods ............................................ 19

Delamere Dairy ...................................... 25

Dreamerz Foods Inc ..................................7

Emmi ...................................................... 26

Fazer Bakeries ...........................................4

Friesland Coberco .................................. 26

General Mills ............................... 16,19,28

Grupo Industrial Lala ....................... 16,23

Hangzhou Wahaha Group Co. Ltd....... 29

Hipp ....................................................... 26

Horizon Organic ............................... 19,20

Marquez Brothers ............................. 16,23

McNeil ................................................... 26

Muller ............................................... 13,14

Ocean Nutrition Canada ..................... 1,3

PepsiCo .....................................................1

Raisio ..................................................... 26

Sainsbury’s......................................... 15,25

Sara Lee ............................................ 27,28

Soya Health Foods....................................6

Tesco ...................................................... 25

Unilever .......................... 6,15,16,17,18,25

Valio .................................................... 5,16

Valen Group .......................................... 20

Wal-Mart ....................................... 1,15,24

companieS in thiS iSSue


March 2007 3


n e w s a n a L Y s i s

says Tom Pirko, president of Bevmark LLC, a leading industry consulting firm based in Santa Inez, California.

“It’s going to have very little impact compared with, say, the next price increase or decrease for orange juice.”

But as they take their competition in functional orange juices into the new arena of omega-3, both Tropicana and Minute Maid are betting that this ingredient really will become the “next calcium”. They base their optimism on two main factors: a quickly growing, nearly ambient understanding among North American consumers that omega-3s carry lots of nutritional and health benefits, and the fact that the new products don’t taste like fish oil, thanks to ONC’s technology.

“It’s not a shocker to most people that omega-3s are an ongoing trend with consumers,” Bentz says. “But we had been considering this for a year and a half, and there were some issues. One of them was: consumers didn’t necessarily want every product under the moon to be nutritionally fortified. But with omega-3s, it made sense.”

McGinnis notes that fewer than 25% of American consumers get enough omega-3s in their diets, 160 mg a day. And points out that, according to Health Focus research, nearly half of all baby boomers are seeking out omega-3s for their health benefits, while 59% of all consumers are interested in information about omega-3s.

ONC’s tHe KeY

But both companies were hesitant to trust an omega-3-fortified juice to the market because they didn’t want to compromise the taste of orange juice. Both have largely managed to field other nutrient-enhanced juices without doing so. Yet fish-oil sources of omega-3s risk lending orange juice a fishy aftertaste, especially because of the beverage’s high acidic content. ONC’s microencapsulation technology was the key factor for both companies.

ONC has signed a partnership agreement with Tropicana that is more extensive than its simpler supplier relationship with Minute Maid for Fruit Solutions. Among other things, under the Tropicana arrangement, ONC gets to put its logo-mascot, “Meg-3” in a fish shape, on a side panel of Tropicana Essentials Healthy Heart with Omega-3s.

The little Meg-3 logo might be significant to consumers, says Ocean Nutrition CEO Robert Orr, because the smiling fish will help reassure those who might be concerned, when they read the ingredient label, to find anchovy and sardines in the product, as sources of fish oil.

“One reason we use the friendly little fish is that it communicates clearly,” Orr says. “People know fish is good for you, but they have issues around lead and mercury. Yet they also know that fish oil is good for you. And they want the benefits of omega-3s.”

Minute Maid’s omega-3-based new product carries some differentiation itself: it’s a blend of mango, passion fruit and orange juices rather than straight OJ. “Blends are a growing area for consumers, and more people are getting more exotic in their flavour preferences, even at breakfast,” Bentz says.

Both companies are line-pricing their new omega-3 products, just as they do their other nutrient-enhanced varieties.

But there are different factors at play between the two companies, and between the US and Canadian markets. Tropicana folded the omega-3 benefit into its existing Healthy Heart product in the US, presumably in part, because it could use a boost. Healthy Heart has languished since its introduction in 2004, when a full day’s supply of vitamin C, extra folate and extra potassium were its functional attributes. That year, its IRI sales were $18 million (€14 million); that slipped to $17 million (€13 million) in 2005; and it slid further to $14 million (€11 million) last year.

Tropicana doesn’t have a Healthy Heart SKU in Canada, so folding omega-3s into it wasn’t an option north of the border. At the same time, McGinnis says, Tropicana was confident in basing a new product in Canada solely on the appeal of omega-3s “simply because Canadians are more aware of

omega-3s and their benefits,” McGinnis says.Minute Maid launched Fruit Solutions in

2005 in a single product that was positioned as an overall highly nutritious juice, which included “six essential nutrients” and three grams of protein in each serving. Fruit Solutions Omega-3 is the first new version of these blended products.

“With all the attention on omega-3s these days, it made a lot of sense to fortify specifically with that and then tell consumers it’s in the product – boldly akin to what we already did with calcium,” Bentz says.

Soon, Minute Maid will begin marketing Fruit Solutions Omega-3 with a national TV campaign but, more importantly, with lots of in-store sampling and other activities as well. “We’ll be looking for people to try the products and also get over the hurdle of what the fortification does to the juice – and show them that it doesn’t do anything taste-wise,” Bentz says.

DON’t stOp a BeatiNg Heart Wise

Minute Maid declines to comment on any plans it might have for an omega-3 product in the US. Coca-Cola’s Odwalla juice unit does offer DHA omega-3 in its soy milk and in its new Soy Smart product, and the ingredient is also in Odwalla Berries-Go-Mega juice.

One reason that Minute Maid may hesitate to introduce an omega-3 product in the US is that its Heart Wise product is relatively successful. Sales edged up to $30 million (€23 million) in 2006, according to IRI, from $29 million in 2005 and $22 million (€17 million) in 2004. It far outsells any of either its own or Tropicana’s nutrient-specific juices for adults and about doubles sales of Tropicana Healthy Heart.

Overall, however, neither company’s nutrient-specific products have been market sensations. Every year or so, Tropicana has introduced a new one – last year, it was Tropicana Essentials with Fiber. McGinnis insists that the fibre product is “meeting our expectations at retail” and adds that Tropicana Light ‘N Healthy and Low Acid “continue to perform well.”

Despite such assertions, Pirko is among the doubters. There’s so much information about nutrition, much of it still confusing and contradictory, he says, that consumers harbour some doubt about any claims.

“Pricing and promotion are the factors that really still affect the business more than anything else,” he says. “The orange juice business is driven by who’s got the best deal that week on half-gallons.”

March 20074




i n t e r n at i o n a L n e w s i n t e r n at i o n a L n e w s

Finland’s Fazer Bakeries has named its newly released cholesterol-lowering rye bread Ruisihme, which in English translates to “rye miracle”. While the name is obviously intended to espouse the double health benefit offered by the new bread, it also aptly describes the conditions of the bread’s launch which could be regarded as a “miracle” as well. It took an eight-year-long process and a great deal of persistence before Fazer was able to get the bread to market.

Such a long and windy road to the launch of a bread that was backed by Fazer’s intense product development and strong research on rye seems peculiar, especially in a nation known for their high consumption of rye bread. However, a brief look at the EU regulations and licensing issues in the years leading up to Ruisihme’s release helps to explain why the appearance of Fazer’s wholegrain rye bread with “nature’s own plant sterols” could be interpreted as a small miracle.

In 1999 Fazer took out a license for use of the MultiBene ingredient in bread applications in Finland. Developed by Finn Dr. Heikki Karppanen, MultiBene is a combination of three minerals and plant sterols. Worldwide patents protect simultaneous enrichment of food items with plant sterols and any of the mineral nutrients calcium, potassium or magnesium – in other words, a MultiBene license is required whenever plant sterol-enriched foods are also enriched with one of the three mineral nutrients and, vice versa, when foods enriched with calcium, potassium or magnesium are fortified with plant sterols.

But Fazer was prevented from using MultiBene in its rye bread because of an EU regulation. The Novel Food process which required that any novel food ingredients had to “be proven to be safe in tests carried out by the European Food

Safety Authority” before being placed on the market, had been introduced just before MultiBene was brought to market. It was only in March 2004 – four long years after the petition was lodged – that MultiBene finally cleared that process. It’s a timescale that is not unusual for the EU’s Novel Foods process and has helped make the system notorious within the food industry internationally.

To Fazer’s dismay, MultiBene was only approved for use in a narrow range of product applications such as yellow fat spreads and dairy products – bread was not included. Fazer had to wait until January 2006 to finally receive approval for its application. Even now that approval has been given, Fazer still has to deal with particularly tough requirements: the only approved bread type is rye and it must have very little added sugar or fat.

At the time of the Novel Food approval in 2006, Fazer’s research and development manager Sampsa Haarasilta was critical about the decision but said: “We have now got approval for a super healthy food, which is of course a good thing”.

Fazer’s Ruisihme is a 220g loaf in a package which carries the MultiBene logo and the Better Choice National heart health symbol. Claims on pack include:

• Wholegrain rye bread – with nature’s own plant sterols added

• Double effect: - Lowers cholesterol - Helps manage blood pressure

• Rich in fibre (11%)

• Low salt

• The world’s first bread that lowers cholesterol and helps manage blood pressure

• Fazer Ruisihme is a whole grain rye bread with nature’s own plant sterols added that are scientifically proven to lower cholesterol levels

Fazer recommends that 2 servings of bread are consumed daily, amounting to 4 slices of Ruisihme per day. Four slices provide a 2g dose of cholesterol-lowering plant sterols and the company emphasises that daily intake of the bread is a prerequisite for lowering cholesterol. Priced at €1.79 ($2.35) the product is marketed as the first bread in the world that lowers cholesterol and helps manage blood pressure. Further, the bread is low in salt, has 11% fibre and 70% of the rye is whole grain.

“Behind the product development is strong research on rye, knowledge of functional benefits and the skill of making tasty bread,” says Haarasilta. “Getting the cholesterol-lowering effect into bread is excellent,” he adds, “because bread is our everyday food”.

First of its kind: A ‘rye miracle’ that lowers cholesterol and

manages blood pressure

A small miracle indeed. After eight years in the making, Ruisihme, a double health-benefit rye bread, is finally on the shelves of Finnish supermarkets.


March 2007 5


i n t e r n at i o n a L n e w s

January tends to be a busy month for functional foods launches in Finland and this year is no exception. Valio Dairy is intensifying competition in the chilled section of the supermarket by adding new products to its substantial stable of functional brands and upgrading the existing brand portfolio with new health benefits.

According to company press material, each of Valio’s new health benefit products – HeVi Shot vegetable-fruit drinks; Oivariini Balansia heart health spread; and A+ Express digestive and gut health yoghurt – offer a “value-added dimension”. While the latter two products are upgrades of existing, well-established Valio brands, HeVi Shot is new to the market and represents a direct challenge to Unilever.

For Finnish consumers and for Valio’s competitors, especially Unilever’s Knorr, Valio’s most interesting and important new launch is HeVi Shot, a 100ml Tetrapak bottle containing a huge 200g of fruits and vegetables. Valio launched its new product in Finland just four months after Knorr’s Vie appeared in the chiller cabinets of Finnish supermarkets. Like Knorr Vie, which is a daily-dose product in a 100ml “little bottle” containing one serve of the recommended five-a-day of fruit and vegetables, HeVi Shot is positioned as a healthy and nutritious snack and is claimed to help you on your way to achieving Finland’s national nutritional recommendation of a 400g daily intake of fruits and vegetables.

Because Valio uses Tetrapak packaging that is easy to wash out and recycle and also because the product is free from preservatives, containing only sugar from fruit, Valio’s HeVi Shot has a good chance of gainingthe attention of Finnish consumers

who accept the “fruit and vegetable shot” concept offered by Knorr’s Vie but who have been doubtful about its brand, packaging and more than 60 day shelf-life. Moreover, with HeVi Shot Valio is in a position to exploit its reputation as a trusted Finnish producer of little bottles and juices.

Presented in 4x100ml packages, the product is available in an Apple-Carrot-Strawberry variety and a Pineapple-Carrot-Mango one. Priced at €2.30-€2.45 ($3.00-$3.20) the shots are sold at a significantly lower price point than Knorr’s Vie. Compared on a per-litre basis HeVi is priced at around €5.75-€6.13 ($7.60-$8.10), whereas Vie is sold at €7.83-€8.17 ($10.30-$10.75).

With the addition of A+ Express to its existing and well-established brand of daily wellbeing yoghurt A+, it could be easily assumed that Valio was producing a direct challenge to Danone’s competing digestive-health yoghurt Activia. Like Activia, A+ Express offers the benefit of assisting the stomach’s functioning but rather than using a probiotic it uses dietary fibre – galacto-oligosaccharides (GOS) – which it claims helps speed up intestinal function. GOS passes through the small intestine intact, but is broken down by the intestinal flora in the colon.

Valio argues that slow transit is one of the most common problems in the gastrointestinal tract affecting one in 10 consumers. One 125g carton of A+ Express contains 4g of GOS and is enriched with vitamin D.

Available in packs of four and priced at €1.65 ($2.20), A+ Express comes in two different combinations – 2 cartons of Strawberry-Cereals and 2 cartons of Bilberry-Cereals or 2 cartons of Plum and 2 of Pear. As with other yoghurts in the A+ line, the health benefits offered by A+ Express are indicated within a small blue dot which appears on-pack. Different varieties of A+ contain fibre, calcium, vitamin D and

flavonoids.With a market share of 25% and retail sales of around €20 million, the established Oivariini brand (formerly

Voimariini) is a butter mixed with vegetable oil. Valio has now extended the Oivariini range with a better-for-you variety called Oivariini Balansia.

This spread contains omega-3 and -6 and has only 30% fat; it is low-lactose and marked with the “Better Choice” Finnish heart health symbol. Valio promotes Oivariini Balansia as a solution for natural cholesterol management, with the on-pack statement: natural management of cholesterol and underneath the lid, the wax paper used to cover the spread reads:

Valio Oivariini Balansia helps to manage cholesterol because 2/3s of its fat is soft, unsaturated vegetable fat. In addition it contains essential omega-3 and omega-6 fatty acids.

Valio’s ‘value-added dimension’By patricia Wiklund

The tag on packages of A+ Express explains that the product “contains GOS, a fibre that speeds up stomach activities” and that is “scientifically researched”.

Valio isn’t going to let Unilever’s Knorr Vie brand become the undisputed champion of daily-dose fruit and vegetable drinks without a HeVi shot at the title.

March 20076




Last year Unilever launched AdeZ, a range of fruit juices blended with soy and fortified with vitamins and minerals – and backed it with a whopping £12 million ($23 million/€18 million) marketing push.

Now Soya Health Foods is trying to grab a slice of the action, launching its Sunrise Healthy Start brand at the International Food Exhibition in London this month. First established in 1984, the company is said to be one of the leading privately owned independent suppliers of branded and private label soy products in Europe.

There are three juices in the new range – all described as “Breakfast Juice & Soya Fusion”. Flavour variants are Orange & Mango, Mandarin & Pomegranate, and Apple & Raspberry. A fourth product – Organic Honey & Vanilla Breakfast Soya Milk – is designed for pouring on cereals and for use in porridge.

The juices – which are around two-thirds fruit juice with 22% “Soya extract” – come with a marketing message focusing on the health and taste benefits of the products. On the front of the pack, three bullet points (but with hearts instead of bullets) tell us that the product “lowers cholesterol”, is “heart healthy” and “tastes great”. On the back it reads:

Soya naturally lowers your LDL (bad) cholesterol so just by switching to Healthy Start you could be making an important change to your lifestyle by having a diet that could improve your wellbeing.

Healthy Start contains natural Soya proteins, is low in saturated fat and very low in sodium. We are revolutionising breakfast time; but Sunrise Healthy Start tastes so great we think you will enjoy it at anytime.

The inclusion of at least 25g Soya protein per day as part of a diet low in saturated fat can help reduce blood cholesterol, when used as part of a healthy diet.

A 330ml serving of the product, we are told, will provide one fifth of this amount.

Meanwhile, on the side, we hear of another benefit of the product:

Breakfast juice is great! Healthy, refreshing and a good way to get one of your five a day.

The original Sunrise Brand has been a mainstay of the traditional UK soy market for more than 20 years. During that time the country’s market for soy milk has grown substantially from almost zero to 80 million litres in 2006, representing a retail value of £100 million ($195 million/€149 million).Soya Health Foods marketing director Robin Gleave said at launch:

“The packaging design gets across the cholesterol-lowering benefits that come from soya, while the product delivery, especially in the crucial area of taste, is outstanding.”

Soya Health Foods claims that in consumer research it identified that one of the main barriers to growing the market was the resistance of both soy users as well as non-soy users to the taste of soy milk.

“The taste of the new Healthy Start range is designed to appeal to consumers who find currently available soya products – both the idea and the taste – a bit of a turn-off,” said Gleave.

The company says it worked with German ingredients supplier Rudolph Wild “to develop new processing technology to give the taste differential. This comes from the ‘gentle’ extraction of the natural proteins in the soya bean”.

In terms of retail selling price, Healthy Start is pitched on a par with Unilever’s Adez at around £1.69 ($3.29/€2.50) a litre, compared to AdeZ £1.68 a litre. The Organic Honey & Vanilla Milk is recommended to sell at £1.39 ($2.71/€2.06).

Thus far the company says it has secured listings for the brand with independent health food outlets and wholesaler Bestway.

The range will be supported by a marketing campaign including events, PR,

sampling and consumer offers. There’s also a consumer-facing website, offering more information on soya and health, and links to other sites.

It’s all a long way off Unilever’s budget for AdeZ. But, in what is still a relatively young category in the UK, it might be able to hitch a ride on the food giant’s gold-lined coat tails as it bids to make a splash in the UK’s £1.2 billion juices market (ACNielsen, 52 weeks ending 7 October).

Gleave is confident Sunrise Healthy Start embodies a real point of difference: “Although soya has been around for quite a while, no one has yet exploited its true potential”.

i n t e r n at i o n a L n e w s

UK soy-juice market heats upIt takes courage to go head-to-head with the likes of Unilever, but that’s exactly what UK company Soya Health Foods is doing with a new range of fruit juices blended with soy. By RichaRd GaRton.

uniLEVER’S ADEZ FiRST OFF THE SOY-JuiCE gRiD

Unilever’s AdeZ’s heritage lies in Brazil, where it has been around since 1997 and is called AdeS. Originally launched by American-owned Bestfoods, a com-pany later acquired by Unilever, it was the first soy beverage in Brazil, and as recently as 2002, claimed an 83% market share. For full analysis of AdeZ, see August 2006 New Nutrition Business.


March 2007 7


u s n e w s

Sleep-enhancing milk sees light of day in US

California-based incubator Brand New Brands has released another fully-fledged functional foods venture: Dreamerz Foods Inc. which has created a range of night time milks that promote healthy sleep and relaxation – a first for the US. Paul Vincent reports.

Amanda Steele, co-founder and CEO of Dreamerz Foods, is on a mission to improve Americans’ quality of sleep. Her company’s first offering is a range of dessert milks formulated to help people relax and fall asleep without having to resort to sleeping pills.

“Dreamerz is a result of the need to address sleep health issues, which in this country are nearly epidemic,” Steele told New Nutrition Business.

“According to the Institute of Medicine’s April 2006 report, 50 to 70 million Americans suffer from a chronic sleep disorder. Dreamerz offers a safe and delicious way to get a healthy night’s sleep without unpleasant side-effects.”

As a milk-based beverage targeting sleep and relaxation, Dreamerz, which is classified as a dietary supplement, is certainly unique in the US. In addition to “a unique physiological dose of 0.3 mg of melatonin”, the Dreamerz range is enriched with Lactium, a patented milk protein hydrolysate that promotes relaxation (even at high doses, however, Lactium has no sedative effect, according to its supplier Ingredia).

Steele is justifiably excited about creating a new category in the US. “We are in launch mode and focusing primarily on getting the word out through educational information and product samples. We will officially launch Dreamerz to the grocery industry at the upcoming Natural Products Expo West, March 8-11, 2007.”

The small – but highly profitable – “night time milk” niche (comprised of milks with enhanced levels of melatonin) was created in Finland back in 1999 and reached the UK and Japanese markets in 2001. Dreamerz joins a growing international line-up of high-melatonin milks, but while European and Japanese milks rely on increasing the level of melatonin naturally present in milk, Dreamerz is based on melatonin fortification.

Melatonin is the hormone which helps to regulate our body clock (the circadian rhythm). The amount in our bodies varies over the course of a 24-hour cycle. Melatonin occurs naturally in milk, but normally only at very low levels.

One of the reasons why it has taken so long

for the US to jump on the night time milk bandwagon is that, unlike most countries, in America one can buy melatonin pills over the counter (OTC). In most parts of the world melatonin is only available with a doctor’s prescription.

The US market for prescription drugs for insomnia was worth $2.2 billion (€1.7 billion) at the end of 2005 and is forecast to more than double to $5 billion (€3.8 billion) by 2010, according to the T. Rowe Price Health Sciences Research Fund. A whopping 35 million prescriptions for sleeping pills were filed in the US last year.

Such overwhelming figures suggest that there is undeniable potential for a product such as Dreamerz to benefit Americans with sleep problems in a comparatively natural, non-medicalised way. Unsurprisingly, the company’s target customers cover a broad spectrum of society: women 35 and older; health-conscious consumers (ages 18+) who want alternative, natural solutions; leading-edge baby boomers (ages 51-60) whose sleep is disturbed by reduced melatonin levels and menopausal symptoms; and busy professionals who are trying to live healthy lifestyles.

Steele is at pains to emphasise the all-natural alternative to prescription drugs

Dreamerz offers:“Dreamerz offers a safe and delicious

way to get a healthy night’s sleep without unpleasant side effects.”

The Dreamerz range features three flavours: Chocolate S’nores (milk chocolate), Vanilla van Winkle (French vanilla) and Crème de la REM (dark chocolate mint). The milks can be consumed hot or cold and have just 100 calories per serving. They are all natural, low in fat and a good source of calcium. Dreamerz is naturally sweetened with organic crystallized cane juice, erythritol (a zero calorie sweetener) and stevia (a zero calorie sweetener that is derived from stevia leaf).

The new milks are sold in shelf-stable aseptic packaging: the 8oz single serving has a suggested retail price of $2.59 (€1.97) and the 32oz four-serving pack is priced at $7.49 (€5.70). The range is now available at 22 Whole Foods Markets throughout Northern California.

These prices should make us pause for thought: regular milks sell for around $1.20 (€0.90) for a 32oz carton in US supermarkets, meaning Dreamerz is selling at a more than 600% price premium, which puts it squarely in the ultra-niche category. While Whole Food Market’s customers are certainly more willing to pay more, by setting such a huge price premium Dreamerz has gone even further down the ultra-niche road than its European counterparts: in Europe night time milk sells for only 2-3 times as much as regular milk.

To compound matters, a quick Internet search for OTC melatonin prices in the US reveals that the average cost of 100 3mg (a dose 10 times that present in 8oz of Dreamerz) tablets is around $10 (€7.60), or 10 cents a pill. This means that Americans will have to buy 2x32oz packs and 2x8oz packs of Dreamerz costing a total of $20.16 (€15.31), to get the same amount of melatonin available in one 10-cent pill. As this is exactly the kind of calculation pill-savvy Americans perform all the time, it would seem that Dreamerz Foods has set itself a very tough mission indeed.

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NEWS DIGEST

n u t r i t i o n r e s e a r c h

Studies back vitamin D for cancer Two new vitamin D studies suggest a role for the vitamin in cancer prevention, and the authors say vitamin D could possibly prevent up to half of the cases of breast cancer and two-thirds of the cases of colorectal cancer in the US.

The work was conducted by a core team of cancer prevention specialists at the Moores Cancer Center at University of California, San Diego (UCSD), and colleagues from both coasts.

The breast cancer meta-analysis (1) pooled dose-response data from two earlier studies – the Harvard Nurses Health Study and the St. George’s Hospital Study – and found that people with the highest blood levels of 25-hydroxyvitamin D, or 25(OH)D, had the lowest risk of breast cancer.

“The data were very clear, showing that individuals in the group with the lowest blood levels had the highest rates of breast cancer, and the breast cancer rates dropped as the blood levels of 25-hydroxyvitamin D increased,” said study co-author Cedric Garland. “The serum level associated with a 50% reduction in risk could be maintained by taking 2,000 international units of vitamin D3 daily, plus, when the weather permits, spending 10 to 15 minutes a day in the sun.”

The colorectal cancer study (2) is a meta-analysis of five studies that explored the association of blood levels of 25(OH)D with risk of colon cancer. All of the studies

involved blood collected and tested for 25 (OH)D levels from healthy volunteer donors who were then followed for up to 25 years for development of colorectal cancer.

As with the breast cancer study, the dose-response data on a total of 1,448 individuals were put into order by serum 25(OH)D level and then divided into five equal groups, from the lowest blood levels to the highest.

“Through this meta-analysis we found that raising the serum level of 25(OH)D to 34ng/ml would reduce the incidence rates of colorectal cancer by half,” said co-author Edward D. Gorham. “We project a two-thirds reduction in incidence with serum levels of 46ng/ml, which corresponds to a daily intake of 2,000 IU of vitamin D3. This would be best achieved with a combination of diet, supplements and 10 to 15 minutes per day in the sun.”

The meta-analysis on colorectal cancer includes data from the Women’s Health Initiative, which had shown in 2006 that a low dose of vitamin D did not protect against colorectal cancer within seven years of follow-up. However, the researchers wrote, the meta-analysis indicates that a higher dose may reduce its incidence.

1. Journal of Steroid Biochemistry and Molecular Biology, March 2007.

2. Gorham E et al, American Journal of Preventive Medicine, March 2007.

homocySteine anD Dementia High concentrations of homocysteine have been linked to a greater risk of Alzheimer’s disease, dementia, and cognitive decline. And in a new study, researchers from the University of California and the University of Michigan have found homocysteine is an independent risk factor for both dementia and cognitive impairment without dementia (CIND). They evaluated the association between homocysteine and 4.5-year combined incidences of dementia and cognitive impairment without dementia (CIND) in a group of 1,779 Mexican Americans aged 60–101. High homocysteine concentrations were associated with a greater risk of dementia or CIND: hazard ratio (HR): 2.39;

95% CI: 1.11, 5.16. The researchers say higher plasma vitamin B-12 may reduce the risk of homocysteine-associated dementia or CIND.

Mary N Haan et al, American Journal of Clinical Nutrition, February 2007.

Vitamin K StatuS pointS to cVD DiSeaSe riSK?Researchers at the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University examined dietary patterns of more than 40,000 men to determine if phylloquinone, the plant form of vitamin K, could serve as a marker for reduced risk of developing cardiovascular disease. While high phylloquinone intake did not appear to be an independent risk factor for cardiovascular disease, men consuming high amounts generally had better dietary habits, such as eating more fruits and vegetables and less saturated fat, and were less likely to smoke and more likely to exercise or take dietary supplements. This association led the researchers to conclude that “... in large population groups, phylloquinone may provide a more robust assessment of overall cardiovascular risk status than assessing multiple individual diet and lifestyle habits”.

Erkkila AT et al, Nutrition, Metabolism & Cardiovascular Diseases, January 2007.

Vitamin a may reDuce gaStric cancer riSK High intakes of vitamin A, retinol, and provitamin A carotenoids may reduce the risk of gastric cancer, concludes a study from Sweden that looked at data from 82,000 adults gathered over about seven years. The study found that high intakes of vitamin A and retinol from foods only (dietary intake) and from foods and supplements combined (total intake) and of dietary α-carotene and ß-carotene were associated with a lower risk of gastric cancer. However, no significant

African Americans lack key nutrients African Americans of all ages have lower average intakes of calcium, magnesium and phosphorus and consume fewer servings of dairy foods than non African Americans, says a new report written by researchers at the US National Dairy Council.

In the analysis, young African-American women did not meet Dietary Reference Intakes for phosphorus, and all African Americans did not meet Dietary Reference Intakes for calcium and magnesium.

African Americans in all age groups did not meet recommendations for three daily servings of low-fat or fat-free milk or milk products from the 2005 US Dietary Guidelines, nor did they meet dairy recommendations from the 2004 National Medical Association Consensus Report on the role of dairy and dairy nutrients in the diet of African Americans.

“Researchers continue to monitor populations that are at risk for nutrient deficiencies. In reviewing the science for this report, it was evident that African Americans are missing out on nutrients key to a well-balanced diet,” said Greg Miller, PhD., a report author and executive vice-president of science and research at the National Dairy Council.

The researchers comment: “Dietary patterns that include adequate intake of dairy products dramatically enhance nutrient intake. Results of this analysis and others indicate a need for additional efforts to increase dairy consumption in African-American communities, in which less-than-recommended intakes of calcium and other essential nutrients is widespread.”

Journal of the American Dietetic Association, February 2007.Continued on page 9


March 2007 9



Fruit, veges and enlarged prostate

Survey: Americans want good food, not pills

If you thought Americans would rather pop a pill to treat illness than make major diet changes, says the Physicians Committee for Responsible Medicine (PCRM), then think again. A survey commissioned by the PCRM – a group that endorses a low-fat vegetarian diet – suggest most would rather change their diets than use medicines. According to the nationally-representative survey of 1,022 adults conducted in mid-January, 69% of Americans would prefer to try a dietary approach. Just 21% preferred treating diabetes with medicines.

“A low-fat vegetarian diet offers a powerful way to control and even reverse diabetes,” says PCRM president Dr. Neal Barnard. “The idea that Americans would rather take pills than make diet changes is a myth. Americans clearly favour tackling serious diabetes with diet changes, including vegetarian diets.”

Other key survey findings:

• Women are even more likely than men to prefer food changes over pills. Women preferred diet by 73% versus 17% for medicines. For men, the split was 65% versus 26%.

• People with more education and higher incomes were especially likely to favour a diet approach.

• Americans aged 45 to 64 were more enthusiastic about diet changes, compared with older Americans; 76% of the middle-aged respondents preferred diet changes. Among those aged 65 and above, the figure dropped slightly, to 59%. The most pill-happy generation was the 18- to 24-year-olds. But even in this group, only 30% favoured using medicines, while 63% favoured diet changes.

• People living in western states were

especially likely to prefer diet changes: 73% versus only 17% for drugs.

Meanwhile, Baylor College of Medicine researchers studied 1,266 men and women aged between 20 and 38 to find what determines adults’ food choices. Their findings, published in the February issue of the Journal of the American Dietetic Association reveal that:

• Those with an income of greater than $45,000 ate fewer burgers and sandwiches than those who made less than that.

• Consumption of cereals, breads, dairy products, fruits, 100-percent fruit juices and vegetables was higher among people with more than 12 years of education.

• Married people ate more servings of snacks and desserts, but drank fewer alcoholic beverages.

• Active individuals consumed more servings of fruits and 100-percent fruit juices and fewer servings of burgers and sandwiches.

• African-American men and women consumed more servings of fruits and 100-percent fruit juices than European-American men and women.

• European-American women consumed more servings of dairy products, vegetables and fats than African-American women.

• The researchers conclude: “Public health research nutritionists and other food and nutrition professionals who encounter diverse populations need to consider the influence of income, education, sex, ethnicity, marital status, and physical activity on food consumption patterns when planning diets, nutrition education programmes and interventions for young adults.”

NEWS DIGEST

associations were found for ß-cryptoxanthin, lutein and zeaxanthin, or lycopene intake.

Susanna C Larsson et al, American Journal of Clinical Nutrition, February 2007

mother’S SeafooD benefitS chilDren’S DeVelopment

Mothers who eat more seafood while pregnant have children with better neurological function than children whose mothers eat low amounts or no seafood during pregnancy, according to an article published in The Lancet. Seafood is the predominant source of omega-3 fatty acids, which are essential for optimum fetal brain development. However, in the US, women are advised to limit their seafood intake during pregnancy to 340g per week, to avoid fetal exposure to trace contaminants of neurotoxins.

Joseph Hibbeln (National Institutes of Health, Bethesda, US) and colleagues from Bristol University, analysed an observational cohort study, the Avon Longitudinal Study of Parents and Children (ALSPAC), to assess the possible benefits and hazards to a child’s development of different levels of maternal seafood intake during pregnancy. Maternal seafood intake during pregnancy of less than 340g (ie, less than three portions) per week was associated with increased risk of their children being in the lowest quartile of verbal IQ, compared with mothers who consumed more than 340g per week.

Furthermore, low maternal seafood intake was associated with increased risk of suboptimum outcomes for prosocial behaviour, fine motor, communication, and social development scores. And the lower the intake of seafood during pregnancy, the higher the risk of suboptimum developmental outcome. The authors conclude: “We recorded no evidence to lend support to the warnings of the US advisory that pregnant women should limit their seafood consumption.”

The Lancet, February 17, 2007.

antioxiDantS Keep gumS healthyThe antioxidants found in fruit and vegetables could help keep your mouth healthy. Researchers at the University of Birmingham’s School of Dentistry in the UK have found that among 11,480 adults, those who had higher concentrations of antioxidants in their blood were less likely to have periodontitis, an inflammatory disease that affects the supporting tissues of the teeth. It is initiated by specific bacteria within the plaque biofilm and progresses due to an

abnormal inflammatory-immune response to those bacteria. Periodontitis is the major

Continued from page 8

Continued on page 10

A recent study from Harvard and Johns Hopkins Bloomberg School of Public Health backs up the hypothesis that a diet rich in vegetables may reduce the occurrence of benign prostatic hyperplasia (BPH) – enlarged prostate.

Participants were members of the Health Professionals Follow-Up Study and were aged 46–81 in 1992. In 1992 and biennially thereafter, the men reported having surgery for an enlarged prostate, and in 1992 and on three subsequent questionnaires they recorded their symptoms. The 6,092 cases were men who reported having surgery or who had a high symptom score, while control subjects

were men who had not had surgery and never

had symptoms. Participants’ intakes of fruit, vegetables, and antioxidants were assessed in 1986.

The researchers found that higher vegetable consumption was associated with less risk of BPH whereas fruit intake was not. Consumption of fruit and vegetables rich in ß-carotene, lutein, or vitamin C was inversely related to BPH. With increasing vitamin C intake from foods, men were less likely to have BPH. Neither α- nor γ-tocopherol intake from foods was associated with BPH.

Sabine Rohrmann et al, American Journal of Clinical Nutrition, February 2007.

α γα γ

March 200710





Caffeine just the thing for older menElderly men who regularly drink caffeinated beverages could be keeping their minds sharper and their hearts healthier, suggest two recent studies. In the first, investigators studied data from 676 healthy men born between 1900 and 1920 from Finland, Italy and the Netherlands (1). Over 10 years, men who consumed coffee had a cognitive decline of 1.2 points (4%), while those who didn’t have coffee had an additional decline of 1.4 points.

Men in the study who had the most coffee – three cups a day – had the least cognitive deterioration; their decline was 4.3 times smaller than the decline of non-consumers

In the US, researchers from the City University of New York and State University of New York found that habitual intake of caffeinated beverages provided protection against the risk of death from heart disease among elderly participants (2). “Motivated by the possibility that caffeine could ameliorate the effect of postprandial hypotension on a

high risk of coronary events and mortality in aging, we hypothesised that caffeinated beverage consumption decreases the risk of

cardiovascular disease (CVD) mortality in the elderly,” explain the authors. Their analysis involved 6,594 participants aged 32–86 with no history of CVD at baseline. Participants aged ≥65 y with higher caffeinated beverage

intake exhibited lower relative risk of CVD and heart disease mortality than did participants with lower caffeinated beverage

intake. A similar protective effect was found

for caffeine intake in mg/d. The protective effect was found only in participants who were not severely hypertensive. No significant protective effect was found in participants aged <65 or in cerebrovascular disease mortality for those aged ≥65.

1. B van Gelder et al, European Journal of Clinical Nutrition (2007) 61, 226–232.

2. James A Greenberg et al, American Journal of Clinical Nutrition, February 2007.

Seniors need both folate and B12 for healthy brains

Folate and vitamin B12, two important nutrients for the development of healthy nerves and blood cells, may work together to protect cognitive function among seniors, reports a new study from the Jean Mayer USDA Human Nutrition Research Center on Aging at Tufts University (USDA HNRCA)(1).

According to Martha Savaria Morris, PhD., epidemiologist at the USDA HNRCA, “we found a strong relationship between high folate status and good cognitive function among people 60 and older who also had adequate levels of vitamin B12.” The study also determined that low vitamin B12 status was associated with increased cognitive impairment.

Using data collected from the National Health and Nutrition Examination Survey (NHANES) between 1999 and 2002, Morris and colleagues found that people with normal vitamin B12 status and high serum folate had higher scores on a test of cognitive function.

“People with normal vitamin B12 status performed better if their serum folate was high,” explains Morris, corresponding author of the study. “But for people with low vitamin B12 status, high serum folate was associated with poor performance on the cognitive test.” Seniors with low vitamin B12 status and high serum folate were also significantly more likely than seniors in other categories to have anemia.

“For seniors, low vitamin B12 status and high serum folate was the worst combination,” says Morris. “Specifically, anemia and cognitive impairment were observed nearly five times as often for people with this combination than among people with normal vitamin B12 and normal folate.”

Morris notes that the study’s results are inconsistent with the idea, suggested by opponents of food fortification, that high folate status delays detection of vitamin B12 by masking one of its key signs: anemia.

And Tufts researchers investigating vitamin K status among the elderly say that despite consuming more than younger adults, many seniors are still not getting the recommended intake of vitamin K.

Sarah Booth, PhD., lab director of the Vitamin K Laboratory at the USDA HNRCA, says poor vitamin K intake may be associated with conditions such as bone fractures, bone loss, hardening of the arteries, and osteoarthritis (2). She also notes that factors other than diet may affect vitamin K status – for example, low estrogen levels in menopause may change the way vitamin K is metabolised.

1. Morris MS et al, American Journal of Clinical Nutrition, January 2007.

2. Booth SL, Current Opinion in Clinical Nutrition and Metabolic Care, January 2007.

NEWS DIGEST

cause of tooth loss and is also significantly associated with an increased risk of stroke, Type-2 diabetes and atheromatous heart disease. In a subpopulation of never-smokers, the protective effect was more pronounced. “Increased serum antioxidant concentrations are associated with a reduced relative risk of periodontitis even in never-smokers,” conclude the authors.

Iain L. C. Chapple, Mike R. Milward and Thomas Dietrich, Journal of Nutrition, March 2007.

heart DietS haVe improVeD, but coulD Do betterThe quality of people’s diets designed to prevent coronary heart disease in the US has “moderately improved” over the last two decades, according to researchers at the University of Minnesota, but there’s room to improve – by increasing fish consumption, for example (1).

The researchers analysed data from more than 5,000 men and more than 6,000 women who took part in the Minnesota Heart Survey to measure whether the volunteers were eating according to American Heart Association dietary guidelines.

During the past two decades, the researchers found study participants improved their diets by eating more fruit, vegetables, total grains and whole grains; and less saturated fatty acid, trans fatty acid, total fat, cholesterol and alcohol.

However, the researchers found continuing “areas of concern” in the study participants’ diets over two decades: “unfavourable” sodium and fish consumption and a “continuous deterioration” in overall “energy balance” – in other words, consuming more calories than we burn.

“Results suggest that efforts to improve diet for (coronary heart disease) prevention should include a focus on moderating energy and sodium intake while encouraging increased consumption of fish,” the researchers write.

Meanwhile, Johns Hopkins cardiologists are calling for an expansion of the criteria used by physicians to assess a postmenopausal woman’s chances of developing cardiovascular disease. In an editorial, Roger Blumenthal, MD., and colleagues say that a family history of heart disease and blood levels of a protein tied to vessel inflammation, C-reactive protein, should quickly be added to traditional assessments of women’s risk of suffering a heart attack, stroke or severe chest pain (angina)(2).

1. Journal of the American Dietetic Association, February 2007.2. Journal of the American Medical Association (JAMA) online February 14 2007.

Continued from page 9


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e d i t o r i a L

There’s no question that marketing products for their ability to enhance beauty is a tall order and it’s not an area which the faint-hearted should enter. Paris-headquartered Groupe Danone is not among the faint-hearted. It has made “Beauty” one of its planned “Tomorrow’s Diamonds” – a term it used to describe the beauty concept in a recent financial report. Danone’s track-record in creating single-minded brands on clear benefit platforms and turning them into billion-dollar success stories – such as Activia (see Case Study on page 19) – suggests that Beauty might just fulfill Danone’s hopes for it. Certainly, initial sales figures would suggest that’s the case.

According to Danone, a healthy 85 tonnes of Essensis, its new yoghurt marketed with the claim that it “nourishes your skin from the inside”, were sold in the beginning of February in its first week on the French market. That’s €400,000 ($500,000) at retail values. Unsurprisingly, retail reaction to the brand has been very positive and launches of the brand are taking place in Italy, Spain and Belgium before the end of March.

Danone is, in essence, a well-run business, strongly focused on core brands, investing heavily behind them, rolling them out across borders whenever it can, making strategic partnerships with smaller companies with high-growth potential, and making astute acquisitions. Arguably, Danone is, with PepsiCo, one of the two biggest functional food companies in the world and one of the two most successful strategically. Just four of the nutritional dairy brands owned by Danone between them account for 29% of the company’s total sales and half of its entire fresh dairy. How much of the total profit they account for we can only guess at, but it will be much higher than 29%.

Danone is so focused on health that it has become an all-pervasive force and it’s almost impossible to find any aspect of nutritional dairy, water or other beverages in which the hand of Danone is not in some way present – as many case studies in this issue of New Nutrition Business testify.

This achievement is even greater than we could have imagined when we wrote in

NNB back in 2001 that: “Few companies in the food and drink industries look better-run, more visionary or more single-minded in pursuit of a clear and well thought-out global strategy. Danone looks like a company better-placed than most to emerge as one of the winners in the global food and health marketplace.”

Our forecast has proven to be even more accurate than we believed possible at the time. Danone’s sales were €14 billion ($18 billion) in 2006, 9.7% up on 2005 (8.1% on a like-for-like basis) and their operating profit was up 10.1% to €1.9 billion ($2.5 billion). That’s an impressive 13.6% operating margin – a level that would make most food companies green with envy. The fresh dairy business, which accounts for 56% of Danone’s sales and grew 9.2% in 2006, has an even more impressive 14% operating margin.

OWNer Of tHe WOrlD’s seCOND-Biggest Digestive HealtH BraND

Danone’s single-mindedness is illustrated by the chart “Our blockbusters as the drivers of growth”. These four brands all grew more than 15% in 2006, with Activia growing fastest. Clearly positioned as “a natural way to regulate your digestive system”, Activia has grown since it was first introduced in France in 1997 to an impressive €1.3 billion ($1.7 billion) in sales – equivalent to €2 billion ($2.6 billion) at retail values, making Activia the world’s second-biggest digestive health brand after Japan’s Yakult Honsha and accounting for fully 9% of Danone’s total worldwide sales. Promoted with devices such as the

“Two-week challenge”, in which consumers are challenged to consume the product for two weeks and get their money back if not fully satisfied, Activia is one of the greatest successes in the history of functional foods. The ingredients of its success are:

• an aggressive marketing campaign that includes, consumer challenges, TV and print advertising and sampling;

• a unified global brand strategy which dictates that no countries can tamper with the brand’s single-minded and unchanging health benefit message about digestive health. Danone, more than anyone, knows that consumers for health are essentially the same the world over (Yakult and PepsiCo have also learnt this) and the same messages are used in advertising in almost every culture;

• products that taste great.

Activia is now available in 27 European countries, where it still records impressive growth. In the UK, for example, sales of Activia rose 80% in 2006 to £91 million ($180 million/€135 million). The product is also sought after in many countries outside Europe. Significantly Activia has become, in the space of 2006, its first year on the market, the biggest digestive health brand in the US

Danone delivers on its strategy – with diamonds for

today and tomorrow

These four Danone-owned brands all grew more than 15% in 2006.

March 20071�




e d i t o r i a L

(see page 19), jumping to $150 million (€115 million), thus creating a whole new segment of the yoghurt market – digestive health – which had hitherto been neglected by the entire US dairy industry. If US per capita consumption of Activia were to hit the same levels as it currently is in the UK then Activia could become a $750 million brand in the US. It might seem far-fetched, but when you’re talking about Danone nothing should ever be ruled out as impossible.

iN partNersHip WitH tHe WOrlD’s Biggest Digestive HealtH BraND

Not content with being number two, Danone has built up a 40% stake in Japan’s Yakult Honsha, the number-one company in the field, which has a 39% share of Japan’s JPY282 billion ($2.4 billion/€1.7 billion) market for dairy products with digestive health benefits. The two companies have an R&D collaboration and are together entering the Indian market, the first time that they have collaborated in a market.

OWNer Of tHe WOrlD’s Biggest immuNitY BraND

Number two among the Danone blockbusters is Actimel, the world’s biggest immunity brand, marketed with the simple message that it “supports your natural defences”. Launched in 1994 Actimel, too, is a successful multi-national brand in both Europe and South America. Sold in 100ml daily-dose bottles, it has helped create a category which did not previously exist. Its success factors are the same as those for Activia – in other words, Danone uses a very simple model with focus and a long-term view at its core. Not for Danone the endless changing of pack-design and marketing messages (an approach

easily identified with mediocre marketing talent).

What’s more, Danone is both patient and persistent. Faced with a US market that is not familiar either with probiotics or daily-dose dairy drinks, Danone has gone through a near-seven year test-marketing process before making Actimel – branded DanActive for the US – available in supermarkets nationally (see Case Study on page 21).

amBitiONs iN WeigHt maNagemeNt ...

Vitalinea is a brand that isn’t well-known outside of Europe, where it is particularly strong in the appearance and weight-conscious markets of France, Italy and Spain. However, it’s clear that weight management – which through Vitalinea earned Danone €900 million ($1.2 billion) in 2006 – is an area in which the company has big ambitions. The launch of a yoghurt in the UK based on a proprietary combination of fibres and proteins and claimed to have a satiety effect – and branded “Lasting Satisfaction” – is one example. A similar product is expected to debut in the US.

... aND alsO iN KiDs’ prODuCts

The recent re-launch of Danimals – as the €800 million ($1 billion) Danonino brand is known in the US – with the probiotic LGG as the active ingredient, is another sign of Danone’s ambitions. LGG is the world’s most-researched probiotic with a major body of evidence in support of its benefits for children’s health, which is why 10 infant food companies – including Mead Johnson Nutritionals, the world’s biggest – use it in their products. In Canada Danonino has also been revived with a successful re-launch as an omega-3 fortified product with a clear

message about “brain development”.

Danone has also been active in making valuable strategic partnerships with much smaller companies with innovative nutrition products. One example of many is Chicago-based Lifeway

Foods, America’s largest maker of kefir – a dairy beverage with intestinal health benefits. Danone holds a 20% stake in fast-growing Lifeway.

In particular, Danone has focused successfully on Asia, and most intently on China, where Danone’s stake in Wahaha (see Case Study on page 29) gives it a major hand in the Chinese market for nutritional dairy beverages for kids.

One example of how Danone sees the potential of good brands and knows how to make the most of that potential internationally was the acquisition of Frucor, a highly-innovative New Zealand beverage company whose Mizone functional water and “V” energy drink brands were the biggest in Australasia. Danone took Mizone into China, where it is today the biggest functional water brand and it has taken V into many other markets, most recently Argentina.

Nor has Danone neglected the rising consumer interest in organic and ethical products. Some three years ago the company bought Stonyfield Farm, the US maker of organic yoghurts whose unorthodox marketing methods and social campaigning have made it an iconic brand. Stonyfield Farm’s yoghurt is also a highly successful functional food, based on a scientifically proven probiotic (from Sweden’s BioGaia – see page 26) and soluble dietary fibre, earning almost $200 million in retail sales.

But it shouldn’t be thought that Stonyfield is “just another add-on” for Danone. Interestingly, Franck Riboud, Danone’s CEO, was quoted in the Wall Street Journal at the time of the acquisition saying, “if you want to examine Stonyfield Farm’s finances, I’m sure they’ll hold up to your scrutiny. But then you’d be missing the whole point: Stonyfield Farm represents an ethic that we at Danone have to adopt if we’re going to be successful in the 21st Century.”

A sign that Riboud meant what he said is Gary Hirschberg’s – the visionary founder and CEO of Stonyfield, and a committed organic pro-small farm activist – now key role in guiding Danone’s strategy.

The breadth of Danone’s strategy; the centrality of health to its present and future business; and its demonstrable skills in marketing products with health benefits suggest that this company can only go from strength to strength. While there are very few companies able to act as Danone’s resources enable it to, the lessons that everyone can apply are the importance of clarity of vision, a single-minded strategy, an unwavering mission to build brands and a health focus. These are virtues which even the smallest business can affect every day.

According to Danone, a healthy 85 tonnes of Essensis, its new “beauty” yoghurt were sold in the beginning of February in France.


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Even functional food markets mature sooner or later. The only way to get a niche for yourself in a “mature” functional food market is to create a new niche, perhaps with a new benefit platform. There’s no space for me-toos in most functional food markets and interestingly, there’s usually only space for two leading brands. Those in third place and below can run into trouble unless they find a new niche.

These themes can clearly be seen at work in the UK market and particularly in the “daily dose” probiotic dairy sector, where companies are using omega-3 fortified and kid-specific products to create new niches. The hunt for new niches is also intense in the market for products based on cholesterol-lowering plant sterols.

prOBiOtiC DriNKs – grOWtH tHrOugH NeW NiCHes, NeW BeNefits

The annual Top Products Survey by UK trade magazine The Grocer, a comprehensive annual report on British food and drink sales underpinned by ACNielsen supermarket data, shows that total growth slowed markedly in the probiotic daily-dose category in 2006, with the mighty Danone Actimel – the category leader – actually going into reverse. Its sales fell 5.4% in 2006 to £107.9 million ($210 million/€160.8 million). That’s a radical turnaround from the 50% growth it enjoyed in the previous year. But to put some perspective on that, Actimel is still the undisputed market leader with a 57% value share.

Actimel may have suffered in 2006 when the Advertising Standards Authority (the UK’s regulatory body for advertising) forced it to withdraw an ad in which a little girl licked a bus window, suggesting that Actimel could protect kids against germs. But new advertising for Actimel is back on screen with a £5 million campaign launched in January and under-pinned by an on-pack “Actimel

Challenge” – one of the now proven-to-be-a-winner offers through which consumers who try Actimel for a month can claim their money back. Danone reckons January 2007 will turn out to be Actimel’s most successful on record.

Overall the probiotic daily-dose category grew less than 1% in 2006 – the slowest growth rate ever-recorded for a category that has never experienced annual growth below 25%. Nonetheless, it’s an impressively large category. The combined sales of the brands are worth around £189 million ($368 million/€283 million) at retail values – not bad for a category which, prior to 1996, simply didn’t exist. In addition to the branded sales there’s perhaps another £30 million ($59 million/€45 million) in sales of low-priced supermarket own labels and back-water brands.

The brand that gave birth to the category was Yakult, from Japan’s Yakult Honsha. But Yakult has lost its way, with sales falling 16.1% in 2006 to £24.5 million ($48 million/€37 million). Overall Yakult is 25% off its peak sales and the UK’s first-ever functional food product is now just the fifth largest brand in its category, down from third last year and second the year before that. The fact that Yakult is the “original” and the “most serious” brand – communicating very strongly about digestive health – suggests that it sells primarily to the serious “technology” consumers – the people who want something semi-medicalised that they perceive as being serious enough to be able to really fight their digestive health problem.

There’s one other factor in Yakult’s slide: marketing budgets. Yakult has been massively outspent by Danone and Muller and if there’s one thing that’s very clear about functional foods it’s that brands with health benefits need continuous support with advertising and education if they are to earn their premiums and hold their ground.

But why has overall growth been pegged

back so much? Price promotions will have had some impact. The category is now so crowded that multi-buys (buy-one-get-one-free) and discounting are running almost constantly in a bid to score consumers. Danone Actimel has been particularly strong in such tactics and that may account for some of the fall off in sales value. Supermarket own-label may also have eroded some of Actimel’s business.

Never-ending price promotions may also have hit Yakult particularly hard, since its brand is (as Chart 1 shows) at a significant premium (on a per litre basis) to its competitors. Yakult has also lost relevance to the lifestyle consumer – and never held much appeal for the mass-market. While Actimel has spewed forth a continuous stream of new flavours, multiplying its SKUs, and so too has Muller Dairy, Yakult has stuck with just two variants – original (in one flavour) and a low-sugar version. Actimel has re-defined taste as a key factor in this category and that has worked against Yakult.

It’s curious that Yakult didn’t roll out more variants sooner – in its home market of Japan, for example, the company has tens of products – in a bid to offer some of the variety that consumers clearly seek.

The search for a new point of difference led Muller to reinvent its Vitality brand in late 2004. Vitality has had several years of slow growth and continued to lag Actimel, despite aggressive marketing and pricing. Muller added a dose of marine omega-3 to Vitality (sourcing its omega-3 oil from Ocean Nutrition Canada) and communicating the heart health and brain health benefits on pack and in advertising. In so doing it became effectively the first omega-3 daily-dose drink on the market – a clear point of difference.

Muller’s differentiation strategy has paid off and Muller Vitality enjoyed sales in 2006 of £42.2 million ($83 million/€63 million), up 30.1% on 2005, a year in which it had growth of 36.5%.

Signposts for your health & nutrition strategyThis is the first of a series of editorials in which we’ll be looking at the big trends in a number of categories and markets. We’ll be explaining what recent developments mean and what they say about the strategies companies can adopt for the best chance of success – and the least risk of failure. We begin in the UK, one of the three-largest health and wellness markets in Europe, in the dairy sector. Each month we’ll explore strategy and growth in different categories and in different countries in Europe or North America. Next month we’ll look at fruit drinks.

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Chart 1: New braNds seek New NiChes iN the Uk’s Competitive probiotiC daily-dose driNk market

Yakult has reversed into the “serious” technology consumer niche.Pricing: €3.67 per 7 x 65ml bottle pack (€8.10/litreequivalent). €36.75m sales/ 13% market share. Benefit platform: digestive health.

Market-leader Danone Actimel appeals to both lifestyle and early mass-market consumers. Pricing: €3.87 per 8 x 100ml bottle pack (€4.80/litreequivalent). €161m sales/ 57% market share. Benefit platform: “supports your natural defences” (immunity).

Muller Vitality matches Danone on price and appeals to the early mass-market consumer. Pricing: €2.78 per 6 x 100ml bottle pack (€ 4.65/litreequivalent). €63m sales/22% market share.Benefit platform: natural defence AND omega-3 for heart and brain.

Solid line = Sales volumes

Broken line = Unit selling price

Chart 2: kid-speCifiC prodUCts are the latest attempt to establish a poiNt of differeNCe iN the lifestyle/early mass-market area

Yoplait Petits Filous is an extension of the Petits Filous fromage frais parent brand, which has massive credibility among higher income “lifestyle” mothers and is the biggest kids’ dairy brand in the UK and the third biggest in Europe. Pricing: €2.22 per 4 x 100g pack (€5.55/litre). €4msales/1.4% market share. Benefit platform: calcium and probiotic for digestive health.

Nestle Munch Bunch. The Nestle brand has mass-market appeal. Pricing: €2.99 per 6 x 90g pack (€5.55/litre). €18msales/6.3% market share.Benefit platform: probiotics, calcium for growth and omega-3 for normal brain development.

In mid-2006 Danone responded to the prolifera-tion of kid-specific products by offering Actimel in new special Kids Packs with the message “helps support your child’s natural defences”. These packs are said to have clocked up sales of €2.25min half a year.

Muller Dairy’s latest launch is Muller Little Stars, with a strongly “all-natural” and “free-from” platform with “feel-good bacteria”. Pricing: €2.78 per 6 x 90g pack (€5.10/litre eqivalent). Recent launch (no sales figures available).

Solid line = Sales volumes

Broken line = Unit selling price

Key to chartSThe charts below show the standard product lifecycle, as applied to nutritional products. They aid understanding of brand positioning and the evolution of markets. Products start out on the left, selling in low volumes at premium prices and over time increase volumes and move down the price curve to the right, until they are mass-market products. Few functional foods have yet made this transition – many companies deliberately target the lifestyle area as a way of creating a defensible niche and maintaining premium prices.

the stages of the life-cycle are:

technology consumers: These are the early adopters. Representing, according to research by Health Focus International, between 2%-8% of the market, these are the people who have a medicalised or near-medical need for a product. They need the technology of the functional food to address their health condition. They put functional before food and see products in a medicalised context and, as with drugs, they will pay a substantial premium for something that addresses their condition.

lifestyle consumers: These are the people who like to be first with new benefits. They are interested in maintaining their wellness, not fighting illness. They will adopt new brands and will pay a premium for a product but only if it supports their lifestyle.

mass market consumers: They are motivated when a benefit becomes a standard and is available in products with low or no premiums, ideally from well-known and trusted brands.

Source: Mellentin & Wennström, The Food & Health Marketing Handbook

Source: Mellentin & Wennström, The Food & Health Marketing Handbook


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KiD-speCifiC prODuCts

The search for new niches in the market has led several players to offer kid-specific products. The trend was started by Nestlé, which in 2004 launched its 90g Drinky probiotic products as an extension of its ailing kid-oriented Munch Bunch yoghurt brand. Drinky got off to a very quick start and in late 2005 was fortified with marine omega-3s. Curiously, growth seems to have stalled (see Chart 2). One contributing factor may be the sudden upsurge in competition. Muller Vitality, for example, also offers probiotics and omega-3 in its bottles, and though these are overtly targeted to adults, health-conscious mothers appear to have been buying Vitality for its omega-3 benefits for kids, presenting direct competition to Munch Bunch.

The Yoplait Petits Filous brand – a much stronger brand than Nestlé Munch Bunch – also extended into daily-dose bottles in late 2005 with the launch of Petits Filous Plus. Marketed with a strongly “all-natural” and “free-from” proposition, it offers the benefits of both probiotics and calcium and has the credibility associated with the Yoplait Petits Filous brand name – the biggest kids’ brand in the UK, with over £78 million ($152 million/€116 million) in retail sales. Yoplait Petits Filous also has a strong bone health and “all-natural” benefit platform. Petits Filous Plus racked up £2.6 million ($5 million/€3.9 million) in 2006, its first full year on the market.

The newest entrant in the kids’ sector is Muller’s Little Stars. Like Petits Filous it makes a strong play on its all-natural and free-from qualities. Said to be selling well, it’s hard to see Little Stars as anything other than a me-too to Petits Filous.

Alarmed by all this activity to create a new kids’ niche, Actimel, a brand that is already widely consumed by kids as well as adults, took steps to emphasise its benefits for kids. Actimel Kids Packs were launched in April 2006. Essentially the same product but in a package that states, “Helps support your child’s natural defences”, the Kids Packs had clocked up sales of £1.4 million ($2.7 million/€2.1 million) within six months.

CHOlesterOl-lOWeriNg DairY surges

While the probiotic segment may have stalled, the cholesterol-lowering part of the daily-dose market has continued to surge.

The 70g Benecol drink, which pioneered the cholesterol-lowering daily-dose concept, grew a highly respectable 12.4% to £27.6 million ($54 million/€41 million). However, some of this growth could have come at the expense of Benecol spread, sales of which

fell 8.6% to £18 million ($35 million/€27 million), and Benecol yoghurt, which fell 8.8% to £7 million ($14 million/€10 million), underscoring the notion that cholesterol-lowering is truly a medicalised niche in which consumers switch brands.

Unilever’s rival Flora Pro.activ overcame the trauma of having one of its lines withdrawn – its blood pressure reducing variant (see New Nutrition Business December 2006) – and enjoyed sales growth of 77.6% to £27.2 million ($53.2 million/€40.5 million), sniffing at Benecol’s heels. Unilever is marketing both its Pro.activ sterol-based cholesterol-lowering drink and an omega-3 heart health drink under the Flora umbrella brand, It’s likely that taking the omega-3 drink out of the equation and comparing sterol-based products like-for-like then Unilever is still some way behind Benecol.

There are no prizes for guessing that Unilever will be determined to outspend Benecol in marketing and take market leadership in 2007. It’s a company that sometimes seems to act as if it “owns” cholesterol-lowering (or wants to) and will do whatever it takes to be number one.

The cholesterol lowering daily dose market proves the rule that in functional foods market there’s only room for one or two brands. Danone had the misfortune to be third to market with a sterol-based cholesterol-lowering product, branded Danacol. While Danacol has gone well in some European countries, it has performed on an ultra-niche basis in others.

DaNONe maKes a Heart HealtH BluNDer ...

From the outset in the UK Danacol has struggled to make headway against the much stronger Benecol and Flora pro.activ brands. In May last year Danone tried a “functional food make-over” adding omega-3 to Danacol as an “additional benefit”. Danone ought to have known better. Such make-overs almost never work and sure enough in 2006 Danacol’s sales fell 6.8% to £6 million ($11.7 million/€8.9 million), in spite of added omega-3 and in spite of a £4 million ($8 million/€6 million) marketing campaign. It doesn’t take a mathematician to figure out that Danacol has been an expensive misstep for Danone.

Despite Danacol’s troubles the market for dairy drinks that are primarily heart-healthy still grew an impressive 25% in 2006 (see Chart 2). Price promotions seem to have played a particularly big part in Flora pro.activ’s promotional strategy last year and have been a consistent feature in Wal-Mart Asda and Sainsbury’s stores.

... But aCHieves Digestive DOmiNaNCe

Danone’s “pillar brand” Bio Activia probiotic pot yoghurt grew a stunning 81.5% in 2006 to £90 million ($176 million/€134 million), propelling the brand from fifth place to third in a ranking of all yoghurt brands in the UK, functional and otherwise. Impressively, this level of growth for Bio Activia was even better than the previous year’s 71.3%. Danone’s focus on money-back-if-not-satisfied “consumer challenges” and multi-million dollar TV advertising campaigns continue to deliver growth.

TV ads for Activia last year showed a group of women who suffer from bloatedness eating the yoghurt every day for two weeks. All say they feel better after the experiment – a clear, specific, effective, no-nonsense message about the product’s benefits that has chimed with viewers.

In contrast, cholesterol-lowering yoghurts continued to show that, no matter how aggressively they are priced and promoted, their benefit keeps them in a niche. Benecol yoghurt fell 8.8%, perhaps as consumers switched to the rival Flora pro.activ yoghurt, which experienced a 19% sales jump. But taken together these two long-established products (they’ve been around for six years) earned only £15 million ($29.3 million/€22.4 million) between them – just 15% of the sales of Activia, providing yet more evidence that it’s wellness messages such as digestive health that consumers are interested in, not disease-related messages.

summarY

So what can we learn from the evolution of the UK’s functional dairy market?

• Digestive health, and other wellness messages, are more relevant and persuasive to consumers than death and disease-related heart health messages;

• Ultra-convenient formats such as beverages and particularly the daily-dose format make consumption easier and drive faster growth – as evidenced by comparing the daily-dose drinks with the performance of spoonable yoghurts

• There’s only space for two (or sometimes even one) lead brands in each category and if you’re in third place you’d better find some point of difference and create a new niche for yourself if you don’t want sales to go backwards; such brands are like Tamagochis, the children’s toys that need constant attention if they are to survive.

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Of the many differences between the US and European food markets, perhaps the single-biggest is the way in which Europe’s dairy industry has whole-heartedly embraced the concept of functional foods, creating a wealth of successful brands, while the US dairy industry has held back from what Europeans know to be a golden opportunity.

But America’s dairy bosses can no longer ignore the evidence of how successful functional dairy has been in Europe – where dairy products account for the lion’s share of the functional food market – and in South America on their own doorstep.

The credit for shaking America’s dairy industry out of its lethargy largely goes to Paris-headquartered Danone, whose Activia brand – the biggest digestive health dairy brand in Europe and the second-biggest in the world – achieved more than $150 million in retail sales in 2006, its first year on the American market (see Case Study on page 19).

What’s more, Activia achieved this with a brand which has a very explicit message about digestive health. It’s not a benefit that in my 10 years’ experience of the US dairy market, I’ve heard any American dairy marketers or market researchers acknowledge or embrace. Time and again they deny that digestive health is relevant to Americans also asserting that it’s not a benefit that would make American consumers dig into their pockets. Meanwhile, the same researchers and marketing executives have made no effort to imagine how functional dairy concepts which are successful from Japan to Brazil to Finland could be translated into their own market.

Interestingly, digestive health has never been a strong component of the marketing messages for US yoghurt brands, which may in part explain why Europe’s market for probiotic products is about $5 billion (€3.8 billion), and Japan’s about $4 billion (€3 billion), while the entire US yoghurt market still lags at about $700 million (€533 million) a year.

Activia’s marketing, by contrast, directly addresses the brand’s benefit of “reduced intestinal-transit time”.

At the same time as Danone is rolling out

DanActiv –Actimel’s nomenclature in the US – (see Case Study on page 21) American dairies will also have been rattled by the relaunch of Danimals – a kid-specific dairy drink in a 100ml bottle – as a probiotic, with clear on-pack messages about boosting immunity and “helping kids stay healthy”. The bug chosen is Valio’s LGG, the best-researched probiotic in the world, whose science portfolio includes many studies on its effectiveness for children in relation to allergy, immunity and more. Danimals is one of Danone’s pillar brands – like Activia and Actimel.

Against a background in which its biggest

rival is carving out a dominant place in probiotic dairy, Yoplait has broken with years of inactivity and has suddenly woken up to the potential: it is said to be test-marketing, in the city of San Diego, a probiotic dairy drink called Yo-Plus.

But the fact that Yoplait has only now reached the stage of test-marketing reflects a massive failure of innovation and strategic leadership by General Mills, the US licensee of the Yoplait brand.

Right now it looks as if Yoplait’s strategy is driven by reaction to Danone, not by a desire for leadership. For example, the announcement recently of the launch of an omega-3 DHA fortified version of its Yoplait Kids brand is most likely driven by having seen the success of Danone’s Danino omega-3 kids’ brand in Canada, where over the last year it has taken a 17% share of the kids’ yoghurt category.

America’s large Latin American and Asian communities have already proven to be fertile

markets for functional dairy products (see Case Study on page 23). That makes sense, since Hispanics have brought the habit of enjoying functional dairy from their home countries. In Brazil and Mexico, for example, probiotic daily-dose dairy drinks such as Danone Actimel and Yakult are massive brands, selling millions of bottles each day.

But its not brands like Yoplait that have been meeting the needs of a ready-and-waiting Hispanic market, instead, Mexican dairy companies Marquez and Grupo Industrial Lala have been enabled to make good businesses out of marketing probiotic yoghurt products in supermarkets catering to Hispanic communities. Japan’s Yakult Honsha, too, is popular in Korean and other Asian retail outlets, which it supplies out of its massive factory in Mexico.

The failure of the US market to live up to its promise for cholesterol-lowering products based on plant sterols can also in large part be attributed to the failure of this benefit to appear in dairy form. Europe’s cholesterol-lowering market, in sharp contrast, almost doubled in size when Benecol, Unilever and Danone introduced 100ml dairy drinks to lower cholesterol. In the UK alone – the one European market where consumers have the most resemblances to the US – these 100ml bottles had retail sales in 2006 of over £60 million ($120 million/€90 million), bigger than the entire US market for products based on plant sterols. If we pro rata the UK rate of sale of these “drinkable supplements” to the much larger US population then that equates to a $600 million business. It’s the opportunity that an entire industry was too conservative to seize.

While the US dairy industry shakes itself awake in response to the market change taking place under its nose, America offers a wealth of opportunity for European and South American dairies to find value-added niches. For Europe’s dairy ingredient suppliers, used to competing in Europe’s over-supplied market, America in particular offers opportunities to carve out new territory and educate uninformed dairy businesses in how to add value with health.

America discovers functional dairy

America offers opportunities

to carve out new territory

and educate uninformed dairy

businesses in how to add value

with health.


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Q. The conventional wisdom is that Americans are lagging behind Europeans in their eagerness to pursue a healthier diet. Given your experience on both sides of the Atlantic, what do you think?

A. My experience is that each culture is interested in health and wellness and even in the same benefit areas. People everywhere want to feel good every day, look better, be healthy for longer, and be free from disease. They want to achieve more. And they want to take care of their kids. Around the world, consumers recognise diet as important in this, and they’re all struggling with the same issues – especially with balance. On the other side, I see that each culture has its own way of interacting and dealing with food. It’s cultural. And we just need to apply different communications.

Q. What would you say are the most important distinguishing characteristics of the US market, where you’re now working?

A. Great taste and convenience are the keys here […] those are a necessary combination with nutrition and health. American consumers are willing to sacrifice a little on taste and convenience for health – but not much. And I actually see Europe changing to become more similar to the United States, for the most part. For instance, the more health claims that are allowed in the US, the more pressure there is to do the same in Europe. Europeans are embracing the same general

trend of trying to understand health and wellness. They’re also struggling with how to eat a balanced diet using the basic food groups but with taste and convenience on top of it.

Q. Can you give me an example of how you’re transitioning one of your brands more toward health and wellness in the US?

A. Knorr, our savoury brand – we’re beginning to make side dishes with whole grains and one or more servings

of vegetables. It’s the case of a brand recognising, in its essence, a balance of convenience and great taste, and a celebration of spices and herbs. But it’s beginning to provide a more nutritional element through whole grains and vegetables. That follows up the Lipton brand, which introduced side dishes with whole grains last year. They’ve been quite successful, and later this year we will have others.

Q. What are the dynamics of the Slim-Fast brand these days? It has had its problems in recent years.

A. It suffered during the Atkins diet. That has passed, and the new meal-replacement products – as a way of replacing calories – are rebounding again. It’s a proven, recognised way of cutting calories – studies show it’s one of the most effective ways. One struggle that people have is they think they’ll still be hungry after drinking a Slim-Fast. We control hunger well with these products, for up to four hours; last year we developed new formulas under [the Optima sub-brand] so that they’re controlling hunger for longer.

Q. What’s the key to the new Slim-Fast formula, if you can tell me?

A. Basically, it’s a unique emulsion technology that adds creaminess and satiation. The idea is that if you can get the fat to the ileum in the lower gastrointestinal tract, those fats will trigger a satiety response.

Q. The Atkins diet has obviously

Balentine: Unilever continually improving its US portfolio

As the nutritional point man for Unilever North America, Douglas Balentine has the crucial role of helping one of the world’s largest food companies decide how far and how fast to shift toward a better-for-you strategy in one of its biggest and most important markets. Balentine earned a PhD. in Food Science from Rutgers University in 1982 and published much notable work early in his career, including four comprehensive reviews on tea and the chemistry of tea flavonoids. He later spent four years working in Unilever’s global research and development organisation, running the company’s efforts in worldwide innovation for health and wellness at a time when it was developing its Vitality strategy. Now director of nutrition sciences for Unilever North America, he discussed the better-for-you approaches being taken by several of Unilever’s major brands, as well as elements of the company’s overall strategy, with dale Buss, North American Editor for New Nutrition Business.

Mood food, sterols and satiety are just a few of the blips on Douglas Balentine’s radar as he navigates Unilever’s product portfolio and manages brands’ shifts into better-for-you territory.

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disappeared as a factor in the market, but is Slim-Fast facing significant new competition from yoghurt drinks and smoothies?

A. There are more and more options out there, but Slim-Fast is the one backed by solid clinical evidence, and that makes it something consumers can depend on.

Q. What’s another significant US brand being affected by the better-for-you trend?

A. Well, Hellmann’s Mayonnaise has been viewed as fat and not healthy. Even dieticians have been saying that. But it’s basically liquid vegetable oil that is emulsified so that it’s spreadable. We launched a canola-oil variant of Hellmann’s last year, and we’re wanting to make sure consumers understand that this is basically spreadable canola oil that they can use in sandwiches and for cooking. Hellmann’s now is doing a marketing campaign around the ideas of healthy fats and taste and convenience. We think the product is drawing a reappraisal.

Q. What about Take Control, your sterols-based spread? Take Control and Benecol, which is distributed by Johnson & Johnson in the US, have had real trouble getting traction with American consumers.

A. Take Control will move under the Promise master brand as an active line containing sterols. Promise is a global brand, but it hadn’t been active in heart health for a number of years. So regular Promise has also been reformulated for better taste and colour.

Q. So what does that say about the fate of sterols as an ingredient?

A. The rebranding is part of our effort to create a reappraisal of sterols by consumers. Look at all the dietary means there are to control cholesterol: a low-trans-fat diet, for example, will cut cholesterol by 5% to 7%. Sterols will cut it by another 10% on top of that. So people should be doing all of this heart-healthy stuff, and sterols are one of the simplest, easiest ways to cut cholesterol.

Q. But that’s always been the case, hasn’t it?

A. Yes, but it isn’t something that consumers were really aware of. They’ve known about

soy fibre, and low-fat diets, but sterols have never been top of mind. So you’ll see an effort, with Promise, to actively create a reappraisal of sterols. The first step is to create the recognition that Promise is committed to heart health, and then kindling an appreciation of sterols.

Q. High prices always have been a big obstacle to the success of sterols spreads too. What are you doing about that?

A. We’ll always have to charge a premium. But we’re trying to communicate that Promise Take Control is one of the few products that will provide one gram of sterols per serving; so if you can get two servings a day, this product is one of the simplest ways to cut cholesterol. And we’ll be talking with doctors more about combining sterols with statins and other cholesterol-lowering medications. Sterols may not be a replacement for them, but they can be an enhancement.

Q. More generally, what else are you doing to overhaul your product portfolio and communicate more about nutrition to consumers?

A. We’re continuously working to improve the quality of our portfolio internally, so that over time, it’s consistently moving to be a better portfolio from the point of view of trans fats, saturated fats, sodium and added sugar. We’ve reduced the sodium in our Old World Style Ragu by 25%, and we’ve reduced added sugar by 25% in our Lipton ready-to-drink line, and we’ve moved all of our soft-spread portfolio to zero-grams of trans fats. Those things are just part of our overall initiative toward things we can do to

make our portfolio healthier.But we haven’t communicated most of

that to the consumer, at this point. So far, it’s just been about improving the quality of the portfolio. It’s something that we consistently do now in products not only that contain higher levels of those things but also products that began pretty well-balanced in those regards – and to make them better.

We’re not communicating all this to the consumer because, when you take things out of products, consumers equate that to saying it doesn’t taste as good – whereas we know it tastes as good as before, if not better. We don’t need to communicate this to consumers at this point. We think that our Eat Smart/Drink Smart logo [which Unilever plans to introduce on its relatively better-for-you products in the US this spring] will do much of that.

Q. In our Ten Key Trends in Food, Nutrition and Health 2007 we named brain health, mood and performance as the next big trend. Unilever has been marketing Lipton tea as containing L-Theanine, the mood enhancer, in Japan, Australia and the United Kingdom. Will you follow suit in the United States?

A. We realise there’s some scientific efficacy in mood foods. And because this space is being occupied by brands, it’s of relevance to Unilever to consider our options in this area. Australia and Asia definitely have embraced our Lipton tea with L-Theanine, although we’re still evaluating its performance in the UK and its relevance to consumers there. I can’t tell you for sure whether we’re planning to do something with it in the United States, but I can tell you that mood foods are definitely on the radar in the US.

American consumers are

willing to sacrifice a little on

taste and convenience for health

– but not much

– Douglas Balentine, Unilever North America


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Dannon’s Activia achieved more than $150 million (€116 million) in retail sales in its first year on the American market. “This performance boosts the product to blockbuster status,” Andreas Ostermayr, senior vice president of marketing, told New Nutrition Business. “It puts this product launch at a level achieved by less than a tenth of 1% of all product launches.”

Dannon is already rolling out an Activia Light version, “and we think the future of that product will be as bright as for the base range,” Ostermayr says. A drinkable form of Activia in the US market may not be far behind, especially when an Activia drink is popular in Europe already.

Dannon’s competitors are not sitting on their hands in the wake of Activia’s sudden success. General Mills executives hinted in January that they’re going to introduce a probiotic yoghurt under their market-leading Yoplait brand and Yoplait is said to be already test-marketing a probiotic dairy drink under the name Yo-Plus in the San

Diego area. And other US companies are rushing to fortify other foods with probiotic strains: Kellogg’s Kashi natural-foods unit, for example, launched Vive as a probiotic cereal last year.

Other rivals are simply expressing their admiration. “Activia’s launch is the cutting edge in this market,” says Carah McLaughlin, marketing director for Horizon Organic, the Broomfield, Colorado subsidiary of Dean Foods that offers its own yoghurt line. “Dannon has done a really outstanding job with this. It shows that they have … found a way to achieve the right balance in bringing gut health to Americans in a way that they can handle.”

Activia and Actimel are the twin pillars of Dannon’s double-digit sales growth in Europe these days. Introduced in France in 1997, Activia is now available in 27 European countries, and sales grew at 24% a year from 2000 through 2004. Activia posted sales for Danone of more than $1.7 billion (€1.3 billion) in 2006, an increase of 20%

over 2004, representing fully 9% of

Danone’s global sales. At a retail level the brand might be worth as much as €2 billion ($2.6 billion).

Executives of Groupe Danone and their US arm based in White Plains, N.Y., no doubt dared to hope they could repeat such success in the US market, but American consumers had proven stubbornly resistant to the appeal of intestinal-health products and messaging for many years. That’s why Activia’s phenomenal success in America is so astonishing for so many in the industry.

Activia’s performance “has made us much more comfortable that people here in the United States are ready for foods with a functional benefit,” Ostermayr says. “Clearly the US consumer, in great numbers, hears and understands that foods can taste great and have a specific benefit.”

So how did Dannon manage to achieve the seeming impossible and turn Americans on to the benefits of gut-health foods? In part it is simply the passage of time and the fact that, through the news media and other messaging, millions of Americans now

understand the concept of digestive health, which has been ingrained in the diets of Europeans and others for decades.

That said, however, digestive health had previously never been a primary component of the intrinsic-health message that Dannon, Yoplait and other US yoghurt makers had promoted over the decades of yoghurt’s rise in popularity in America. This is one reason that, at a conservative estimate,

Europe’s market for probiotic products is worth about $5 billion (€3.9 billion) a year and Japan’s about

Activia’s record-breaking success shows that America is ready to

embrace digestive health

Activia is a truly international brand with around €2 billion ($2.6 billion) in retail sales. As with so many of Danone’s success stories, it uses a similar package, an identical digestive health positioning and a near-identical communications strategy in every country, underscoring that, when it comes to health, people’s needs are more similar than different, regardless of their nationality or culture.

Dannon executives are justifiably patting themselves on the back about the outstandingly successful performance of Activia in its first year on the US market – and brimming with confidence after finally solving the puzzle of how to make digestive health an appealing proposition to American consumers. By dale Buss.

March 2007�0





$4 billion (€3.1 billion), while the US market is worth merely $300 million (€230 million) annually.

Yet Dannon’s eagerness to overcome the gut-health obstacle in the US clearly was a driving force.

“Here you’ve got a global company that is just doing phenomenally with its probiotic products in Europe, and so they look at the US as kind of a lagging market,” says Gus Valen, president of the Valen Group, an Atlanta-based better-for-you consulting firm. “They wanted to push that. And that’s what they did.”

And Dannon deserves credit specifically for their handling of Activia’s launch. One tactic was to snatch the product from the perception of being medicinal by offering it in six different flavours and in a variety of packages.

Even more important, Dannon named the proprietary, probiotic-bacteria culture in Activia “bifidis regularis”, making the primary benefit of eating the product – reduced constipation – comparatively clear to everyone and stating the culture’s name in advertising and on the label.

“It was truly smart to brand the bacteria to a name that isn’t scary,” says McLaughlin of Horizon. “It’s not ‘acidophilus’ or other words that people could have a hard time with. It’s ‘regularis’ – got it? They made it more accessible.”

The company also directly addressed the physiological functionality of Activia that provides its gastrointestinal benefits: “reduced intestinal-transit time”. Dannon posted on the Activia website results of clinical studies that showed the product helped improve digestion within 14 days. And it ran online promotional messages such as “Introducing the delicious yogurt that helps naturally to regulate your digestive system”.

“We have to be careful,” Dannon CEO Jose Cordero has said, “to make sure people understand that this is a great-tasting food and a natural solution that will help you over the long run with constipation, and that it’s worth a try. We needed to reassure consumers that on top of the benefits … it remains as tasty as other yoghurts. If you put this kind of product on the shelves and don’t advertise it, it will not sell”.

Putting its considerable marketing muscle behind Activia was, of course, Dannon’s other crucial move. The company launched Activia in the US in January 2006, with a $78 million (€60 million) promotional campaign. And while Dannon spent $55 million (€43 million) in measured media for all of 2005,

according to Advertising Age magazine, it spent $40 million (€31 million) in the first half of 2006 alone – and some $31 million (€24 million) of that on Activia.

Most of that spending has been devoted to TV, Ostermayr told the magazine, because “it is still the fastest medium to build awareness for the product in the first couple of months.”

Activia Light is Dannon’s latest move. “There might be people out there on a diet or who watch their weight – and they might also have this digestive-irregularity problem, and this product is addressed to them,” Ostermayr told NNB. “But the base [Activia] is a more important product.”

Drinkable Activia also makes sense, Ostermayr says, in part because the

success of Dannon’s Light ‘n’ Fit brand in a variety of spoonable and drinkable forms “makes it clear that our brands can exist in multiple formats. The concept clearly can apply to Activia if you apply the success of Light ‘n’ Fit”.

And now – with not only the success of Activia but also the rollout of DanActive and the introduction of probiotic Danimals (see the February NNB) – Ostermayr and other Dannon executives are beginning to open the floodgates on probiotic products in the US. Possibly next up: a rollout of a probiotic product called Light & Fit Crave Control, which Advertising Age reported Dannon has been testing and which is targeted at satiety.

Dannon actiVia: pacKaging meSSageS

On the outside of the 4-cup cardboard wrap, health messages read:

Dannon ACTIVIA is a delicious way to help naturally regulate your digestive system:

Clinically proven to be effective in two weeks, when eaten daily

Contains a unique culture – Bifidus Regularis exclusive to Dannon

A smooth, blended, lowfat yogurt with fruit pieces, everyone can enjoy

And on the inside of the cardboard wrapper the health messages continue:

ACTIVIAThe delicious way to help naturally regulate your digestive system. Activia is scientifically proven to help reduce long intestinal transit time.

To learn more, visit www.activia.com

Frequently Asked Questions

Q. What is Activia?A. Dannon Activia is a delicious lowfat yogurt with natural probiotic culture Bifidus Regularis. Activia is clinically proven to help regulate your digestive system when eaten daily for two weeks, by helping reduce long intestinal transit time.

Q. What are probiotics?A.The word probiotic literally means “for life”. Essentially, a probiotic is a culture that, if eaten in sufficient quantities, provides a positive benefit for the host that goes beyond primary nutritional effects.

Q. What is Bifidus Regularis?A. Bifidus Regularis is a probiotic culture scientifically proven to survive passage through the digestive system, arriving into the large intestine as a live culture that stays active.

Q. How long until I will feel a difference from Activia?A. Activia is clinically proven to naturally regulate your digestive system in two weeks when eaten daily.

Q. Where can I buy Activia?A. Look for Activia in the yogurt section of the dairy case at your favorite grocery store.Add Activia to your daily routine. Feel good inside and it’ll show outside!


March 2007 �1


d a i rY c a s e s t u d Y d a i rY c a s e s t u d Y

“We’re working with [retailer] clients to make the rollout a huge success,” Andreas Ostermayr, Dannon’s senior vice president of marketing, told New Nutrition Business in February. “We have high expectations for [DanActive] especially after Activia (see Case Study on page 19) has made us much more comfortable that people here in the United States are ready for foods with a functional benefit.”

Indeed, the runaway success of Activia, a probiotic spoonable yoghurt with a strong digestive health message, in its first year on the US market has emboldened Ostermayr and other executives of the N.Y.-based US arm of Groupe Danone to move DanActive relatively quickly through test marketing in Detroit and a handful of other American cities.

“We had dramatic increases in market share and overall consumption as it went through the test,” Ostermayr reports. In the test cities DanActive was selling for around $2.69 (€2.05) for a 4-pack of little bottles in flavours that included Strawberry and Plain.

Under the name Actimel the product has been a phenomenal success in Europe, South America and elsewhere, earning worldwide sales for Danone of more than $1.3 billion (€1 billion) – worth far more at retail values – and sales are growing at 25% a year. That’s not bad for a brand that was first launched in 1994. Astonishingly, Actimel produces 8% of Groupe Danone’s global operating profit. (For a detailed analysis of the Actimel strategy see New Nutrition Business May 2001).

Dannon – the name under which Danone is known in the US – took the product to the city of Denver several years ago for a very, very long test-marketing effort. In fact, it lasted about four years – a testament to Danone’s

long-term strategic vision. Satisfied that they finally understood how to make a success of Actimel with American consumers squeamish or ignorant of the health benefits friendly bacteria could work in their intestines, Dannon executives launched Actimel into natural foods superstore retailer Whole Foods Markets nationwide in October 2003, under the tagline “The little bottle with the big defense”.

But it wasn’t long before Dannon withdrew Actimel, which failed to catch on with American consumers – even though Dannon’s positioning and marketing of the product had soft-pedalled talk of intestines in favour of statements about immunity.

Dannon next took a completely new tack. It renamed the product DanActive, for one thing. “One of our key learnings was that the name could have been optimised, so we’ve optimised it,” says Michael Neuwirth, senior spokesman for Dannon. “We’ve brought the brand closer to the Dannon family.”

Dannon also changed the packaging colour to yellow from white, Neuwirth says,

“so it really pops out on the shelf ”. The company has made an even more determined effort to mainstream its advertising, even as it has stepped up its lobbying of dieticians, doctors and other health-care professionals about the benefits of DanActive. And its test marketing has included plenty of placements in supermarkets and mass-merchant discounters as well as natural foods stores

Sales of DanActive have more than trebled in three years of test marketing according to Information Resources Inc. (IRI), the Chicago-based market research company, which excludes sales from Wal-Mart, from $4.7 million (€3.6 million) in 2004 to $18.3 million (€14.0 million) for the 52 weeks ended mid-July 2006 (including $2.1 million (€1.6 million) from the new DanActive Light – see below). These figures are from mainstream grocery stores. Taking natural foods stores into account – whose sales IRI does not capture – the total retail sales figure for DanActive in 2006 might be as high as $35 million (€27 million).

Despite this impressive performance, for Dannon there was ultimately no dancing around the fact that, for DanActive to succeed, mainstream American consumers had to be turned on to the concept.

To that end, Dannon has now changed the way the name of the essential bacteria in the product appeared on the packaging to better-emphasise the benefit, a strategy which Actimel already follows in every other country in which it is successful: from L. Casei to L. Casei Immunitas. The company has also begun emphasising how DanActive assists the body’s “immunity

defenses” rather than the digestive system per se. This is in part aimed at leveraging consumer understanding

A long time to make the big time: the evolution of Dannon’s Actimel/DanActive. From left: 2003, 2004, 2007. Few companies pursue such a single-minded, long-term strategy.

Little bottles finally make it big in the US

Actimel is one of Danone’s “power brands” and a key generator of sales growth and profits. A success in Europe, South America and elsewhere, Actimel has a single-minded marketing strategy that has proven that, when it comes to immunity, consumers around the world have more similarities than differences. As a result Actimel is today the world’s biggest immunity defence brand. Now Danone has deemed Actimel ready for America and is rolling out its “little bottle” probiotic yoghurt drink, under the name DanActive, nationwide. That in itself is no mean accomplishment for a product that has undergone four years of US test marketing and changes to both its name and positioning. dale Buss reports.

March 2007��





of DanActive’s effects in the intestines while choosing a more oblique benefit than digestive regularity.

Yet, this is a decided tactical shift from Groupe Danone’s approach in Europe, where the company doesn’t explicitly mention “immunity” in its communications. Instead it communicates the concept in consumer language using terms such as “supports your natural defence.”

DanActive’s US advertising informs consumers that most of the body’s immunity defences “reside in the digestive system”. In the current crop of TV advertisements, ordinary consumers are depicted in a variety of typical life-situations that underscore the stresses and strains on them, including nasty weather, little sleep, and a variety of family demands. Viewers are reminded that their immune systems need extra protection: “70% of your immune system is in your digestive tract,” the ads state. “Help Strengthen Your Body’s Defenses” is the tag line. As an advertising strategy, it’s almost exactly the same as the one Danone pursues for Actimel in every other country, from Argentina to Belgium.

Interestingly, the spate of DanActive commercials in test markets and on the web has included one that is aimed directly at mothers’ concerns about their children’s immunity defences and depicts, in a rather matter-of-fact style, kids enjoying their daily dose of DanActive. This focus is also a reflection of what Danone has learnt in international markets, where some sources say as much as 30% of Actimel consumption is by kids.

Dannon also has a website devoted to DanActive, where visitors can track individual members of a typical family to see exactly how DanActive fits into their day and boosts their health. The family includes “seniors”, “adults”, “older kids” and “younger kids”.

Ostermayr proclaims some success already from using the immunity-defence emphasis to help American consumers embrace gut health. “People are increasingly understanding that a strong immune system is based on a balanced diet,” he says.

Even amidst its determined and largely successful efforts to relaunch its daily-dose probiotic drink on the US market, Dannon has made one misjudgement. Already, for example, Dannon tested but discontinued a DanActive Light product, presumably so that the availability of a “diet” version wouldn’t confuse consumers and so that its executives, retailers, and consumers alike would focus on the main attribute and differentiator of

DanActive: its immunity-defence proposition. However, Dannon said that it planned to resume production of DanActive Light at some unspecified point in the future.

For now, however, Dannon executives regard such a misstep as a minor stumble on the road leading to mass-market acceptance of DanActive.

Danone DriVeS probiotic anD immunity meSSageS home

On the front of the new look 4-pack’s cardboard wrap appears:

Helps Strengthen Your Body’s Defenses

This is reinforced on the back by messages considerably abbreviated from the product’s 2004 packaging:

CLINICALLY PROVEN TO HELP STRENGTHEN YOUR BODY’S DEFENSES

About 70% of your immune system is in your digestive tract. This is where Dan Active goes to work with the exclusive L.casei Immunitas™ cultures.

On the inside of the cardboard wrap – just in case consumers still haven’t got the message – the following text appears:

What is DanActive™?DanActive™ is a delicious, probiotic dairy drink that is clinically proven to help to strengthen your body’s defense system.

How does DanActive™ work?DanActive™ goes to work directly in your digestive tract, where about 70% of your immune system is located.

What makes DanActive™ work?A key ingredient in DanActive™ is its exlusive L.casei Immunitas™ culture. Each bottle of DanActive™ contains 10 billion L.casei Immunitas™ cultures. These cultures remain active in the digestive tract where they have a positive effect on your digestive tract’s immune system. Evidence from many studies demonstrate [sic] that daily consumption of DanActive™ with L.casei Immunitas™ helps strengthen your body’s defenses.

What are probiotics?The word probiotic literally means “for life.” Essentially, a probiotic is a culture that, if eaten in sufficient quantities, gives health benefits beyond basic nutrition.

Where can I learn more about DanActive™?Visit us at www.danactive.com or call 1-877-DANACTIVE for more information.

How many bottles of DanActive™ are consumed worldwide everyday?More than 3 million bottles of DanActive™ are consumed worldwide every single day!


March 2007 �3



US Hispanic market a ‘vast ocean of possibilities’

Dannon, Yoplait and other major global yoghurt makers may still be pussyfooting around the market opportunity presented by the burgeoning Hispanic populations of the US, but one small American company is pursuing the appeal of yoghurt products to Hispanics with everything it’s got. By dale Buss.

Wisconsin Cheese Group has taken a healthy bite out of the Hispanic cheese market over the last decade, establishing its El Viajero brand and becoming the nation’s leading supplier of private-label cheeses. The company’s three-year-old line of probiotic, cultured-dairy drinks, sold under the Bio Salud! Brand, is currently found in 28 states and pushing a total of $10 million (€7.7 million) annually.

Now the company has introduced a drinkable-yoghurt brand called Bio Vital! and is planning launches of other related products in the months ahead, quite possibly including spoonable yoghurt.

“We go out into a number of Hispanic communities and markets and try to identify products that aren’t widely available in the United States, that we could manufacture in the United States,” Michael Sigel, vice president of marketing for Wisconsin Cheese, told New Nutrition Business.

“Importing them would be virtually out of the question, with the added security at our borders these days. So we can make the products here in the United States according to traditional-type recipes, so Hispanic consumers here can still enjoy these types of products.”

Other yoghurt companies certainly recognise the Hispanic opportunity as well, including two that are based in Mexico: Marquez Brothers and Grupo Industrial Lala. The former’s El Mexicano yoghurt drinks racked up more than $7 million (€5.4 million) in sales in the 52 weeks ended 16 July of last year, in US retail outlets excluding Wal-Mart, according

to Information Resources Inc. (IRI), the Chicago-based compiler of sales data.

Within just two years of launching its products on the US market, Lala posted sales of $5 million (€3.9 million) for its spoonable yoghurts and $2 million (€1.5 million) for its yoghurt drinks in the same period.

Meanwhile Dannon is still testing the waters of the American Hispanic marketplace. Its first Hispanic-tailored marketing came during Activia’s launch in 2006 and consisted merely of dubbing in Spanish some of the English-language advertising for the product, as well as some public relations in the Hispanic community.

“It’s an area that increasingly, all food and CPG manufacturers are recognising,” says Michael Neuwirth, senior spokesman for Dannon. “But though clearly the scale is there, the question is how does Company X take advantage of it?”

WisCONsiN COmpaNY grasps OppOrtuNitY’s fOrelOCK

But where Dannon remains hesitant to tread, Wisconsin Cheese Group has rushed in. Company executives recognised that most Hispanic populations love dairy products,

especially cheese and yoghurt, even though they have a higher incidence of lactose intolerance than, say, Northern European populations.

One reason dairy products remain more popular with US Hispanics than with the general population is that Hispanics gravitate toward traditional notions of nutrition, and that sustains their embrace of dairy products despite the high fat, salt, sugar and cholesterol content of many of them. Hispanics also tend to be more concerned than mainstream consumers about calcium intake, in part because they have higher rates of osteoporosis, Sigel says.

Wisconsin Cheese Group began exploiting this scenario with cheese rather than yoghurt, which Dannon did last year. The effort started when the company’s founder lived in New York several years ago, and recognised a market opportunity in the Hispanic-branded cheeses that were retailed to the city’s huge Hispanic communities.

There was no reason such cheeses couldn’t be made in Wisconsin – the state already produced much of America’s Italian-cheese varieties including parmesan and mozzarella – so he launched a business around the idea. Now, popular El Viajero (translated as “The

Traveller”) varieties include Queso Blanco, a fresh snacking cheese, and Queso Quesadilla for melting.

Because about 85% of US Hispanics are either new arrivals to America or what Sigel calls “semi-acculturated”, Wisconsin Cheese Group conducted a lot of research in Mexico and other home countries of US

Latinos. That’s where they uncovered the

Bio Salud! is a daily-dose probiotic drink targeted at US Hispanics. The shapes of the bottles, packaging

and position on the shelf are meant to be reminiscent of the little bottles sold in Mexico and other

Spanish speaking countries.

March 2007�4





opportunity for a daily-dosage cultured dairy drink for Hispanic Americans.

“In Mexican supermarkets, you see huge displays of Yakult,” Sigel says. “Obviously, there’s a market for it there, and it’s something that becomes part of their growing-up culture and they drink it daily.” At the same time, they observed little penetration of such products in US markets that are populous with Hispanics. “Most of the existing products were Korean, and they didn’t have any Spanish on them. It didn’t make sense.”

little HispaNiC BOttles DeBut iN us

So Wisconsin Cheese introduced El Viajero Bio Salud! in 2004, in 5-packs of 2.1oz bottles, just as Actimel and Yakult are sold in Mexico and other Spanish-speaking countries. Retailing for a suggested 99 cents to $1.29 (€0.76 to €0.99), Bio Salud! comes in brightly coloured, shrink-wrapped packaging.

“In our package design and positioning on the shelf we wanted to make sure it’s instantly intuitive to our target buyer,” Sigel says. “The shapes of the bottles, the numbers, the packaging all had to be recognised by the consumer as being similar to the little bottles sold elsewhere. That was intentional – we could have done this a number of different ways. But it’s intuitive, and because of that routine, they buy large quantities of Bio Salud!”

Bio Salud! comes in four flavours: Original, Pineapple, Peach and Strawberry. “Those flavours are popular with Hispanics,” Sigel says. “We had some concern early that we’d be basically splitting our sales of original among the four flavours, but that hasn’t been the case. Every new flavour adds incremental volume.”

Wisconsin Cheese at first believed that Bio Salud! might be popular only in US communities with large populations of Mexican immigrants. “We disproved that thinking and found that it has broader

appeal than we thought among Hispanics whose origins are not just Mexico,” Sigel says. Bio Salud! is sold in a wide variety of outlets, ranging from Wal-Marts to Hispanic-neighbourhood convenience stores.

Marketing Bio Salud! has basically been one-on-one, including in-store and at Hispanic festivals, although Wisconsin Cheese has also taken out some billboards for the product in Hispanic communities.

‘staggeriNg’ pOteNtial iN DriNKaBle YOgHurt

Next, the company developed Bio Vital! in order to exploit the intense interest of consumers in Mexico in drinkable yoghurts. “In many supermarkets there, there’s an 80-foot run of nothing but drinkable yoghurt,” Sigel observes. “It’s staggering how much

space is dedicated to it and how many brands are vying for consumers’ attention. So we wanted to bring it here, and do so in a way that’s culturally correct.”

Wisconsin Cheese was not fazed by the

fact that, after blistering double-digit growth for about four years, sales of drinkable yoghurts in the US have stalled to the point where they’re growing only in the single digits. Competition within the segment has proliferated, while new competition from energy drinks and other products outside the segment has also grown.

“[It’s] the natural growth in the Hispanic population that we’re relying on,” Sigel says. “And we have a current following with our cheeses and Bio Salud!, so our customer base expects us to keep bringing them something new.”

Like most yoghurt drinks sold in Mexico and other Hispanic countries, Bio Vital! is positioned not just as a refreshing and tasty beverage but also as a vehicle for nutrition. “We wanted to do a product that was specifically engineered toward Hispanics’

health concerns,” Sigel says.

The company therefore cut the fat content to zero, because obesity runs higher among Hispanics than even among the general American population. Sucralose in place of sugar allows Bio Vital! to claim only about 1/3 the calories compared with other yoghurt drinks. And Bio Vital! supplies 20% of Americans’ recommended daily consumption of calcium, meaning that the US government allows the company to call Bio Vital! “high in calcium”.

Bio Vital! comes in Mango and Strawberry flavours and will be sold as a 4-pack of 7oz bottles, as well as in an 8oz, single-serve version and a 32oz family pack. The recommended retail price is 99cents ( €0.76) , for a sleeve of five 2.2oz bottles.

Sigel acknowledges that, to big global yoghurt

manufacturers, the US-Hispanic opportunity might seem “insignificant from a numbers standpoint.

But it’s all relative. To a company of our size, the market seems like a vast ocean of possibilities”.

Bio Vital! is a newcomer to the shelves of small convenience stores in Hispanic

neighbourhoods. Produced in the US by El Viajero, the yoghurt drinks are positioned as

tasty, refreshing vehicles for nutrition.


March 2007 �5



Top Life Prime Time was a drinking milk enriched with glucosamine and chondroitin, substances the company said were linked with relieving pain from arthritis and maintaining healthy joints, claims clearly spelled out on the front of the product’s carton.

Also containing vitamin D to aid calcium absorption and green tea to boost the immune system, the product was aimed at the over-35s, though imagery on its packaging, its characteristics and its marketing message immediately suggest an older target age-group.

At the time, Liz Sutton, joint MD at Delamere Dairy, said the milk was a natural extension to omega-3 products on the market. “We felt there was a gap in the market for active people who want to look after their joints and bones,” she said.

The product gained listings in major supermarket chains Tesco and Sainsbury’s, and also through Nisa-Today’s, a buying group that distributes products to thousands of independent supermarkets and convenience stores. But early in 2007 it was withdrawn after failing to generate enough sales. “Top Life Prime Time has been discontinued for the time being,” Sutton confirmed to New Nutrition Business.

“It had a faithful following of customers, although unfortunately there were not enough of them to

keep it on the shelves.”So what caused its downfall? Had

Delamere Dairy not done its homework properly? It had, insists Sutton, and there had appeared to be a genuine opportunity for the product.

“Our research into dietary supplements proved that glucosamine was the most widely consumed daily supplement in tablet form, so it made sense to add it to milk, which the

majority of the British public drink on a daily basis.

“This then eliminated the customers’ need to take glucosamine tablets. Two glasses of Top Life Prime Time a day contained similar levels of glucosamine as if they were taking it in tablet form.”

What about communications? “We backed the launch with various adverts and advertorials in consumer and trade press, a new website, PR, online media and competitions,” said Sutton.

However, the difficulty, she said, was that being a pioneer in the market meant the levels of activity Delamere Dairy was able to engage in were not sufficient.

“The problem we faced was that although existing glucosamine tablet consumers were aware of the benefits,

the wider public weren’t,” said Sutton.“Glucosamine doesn’t have the profile of

omega-3, for example. This has received lots of publicity, which allows new products to piggy-back on the benefits that are laid out before the public following lengthy research projects and costly marketing campaigns extolling its virtues.

“Unfortunately, although smaller companies such as Delamere Dairy can come up with ideas that do appeal, not having the budget to roll the product out to the masses partly hindered its success.”

It wasn’t just the cost of marketing programmes, though. It was the cost of making the product, too, and the impact this had on the retail selling price.

“Due to the relatively expensive supplement ingredients, this took the price point up to around £1.34 ($2.61/€1.99), which may also have been a turn-off for potential customers,” said Sutton.

Certainly, £1.34 a litre took the milk into the premium end of the market. Standard, own-label supermarket milk sells for the equivalent of 56p a litre – less than half the price of Top Life Prime Time.

It was even dearer than other speciality milks. Arla Foods UK’s lactose-free cow’s milk, for example, sells for £1.26 a litre. Unilever’s Flora Pro.Activ cholesterol-reducing milk sells for 99p a litre. And Dairy Crest’s omega-3 enriched St Ivel Advance milk sells for the equivalent of 72p a litre (all prices from Tesco).

Despite the withdrawal, Sutton hinted that Top Life Prime Time might be revisited in the future.

“We still believe it is a great product and clearly beneficial to a number of customers who were genuinely disappointed when it was discontinued, as they did feel it improved certain health complaints they were living with.We believe it is a fantastic product which was, perhaps, launched before its time.”

Time up for Prime Time joint health milk

In 1971, 13% of the UK population was aged 65 or over; by mid-2005, 16% of the country’s 60 million residents were in that bracket, according to government statistics. Theoretically there should be a great opportunity for some life-stage marketing of products to this expanding demographic. And no doubt this was in the mind of UK milk processor Delamere Dairy, when in January 2006 it launched its ill-fated Top Life Prime Time. RichaRd GaRton reports.

Joint health milk: a concept ahead of its time or a brand just making the same mistakes as past functional failures?

March 2007�6




strategY case studY

Stockholm-based BioGaia demonstrates that no matter how good a company’s science may be it’s the commercialisation plan for the science that matters most. A focus on distribution and sales and the unbounded potential of Asian markets has helped the company to finally achieve break-even, after almost 15 years of operating losses.

For its 2006 financial year BioGaia has reported a 46% increase in sales to SEK86.8 million ($12.3 million/€9.3 million) and achieved its first-ever operating profit of SEK1.7 million ($240,000/€182,000), a major improvement on 2005’s SEK20.7 million operating loss.

BioGaia owns the worldwide patents on Lactobacillus reuteri, one of the world’s most-researched probiotic bacteria. Reuteri is used in, for example, the highly successful Stonyfield Farm brand of yoghurts marketed in the US by Danone. In particular, this bacteria has well-attested benefits for children’s health. It can be found in infant formula marketed by Dutch dairy giant Friesland Coberco and in baby foods sold under the Hipp brand, one of Europe’s biggest baby food companies and the market leader in Germany.

But even this volume of business is not enough – since active ingredients are usually only needed in very small volumes in most products. Moreover, BioGaia has become just one of about 20 suppliers of probiotic bacteria to the dairy industry, and almost all these suppliers lack a point of difference.

After years of investment in its science base – the benefits of Reuteri are supported by over a hundred published clinical studies – the company has more recently focused on finding markets for Reuteri in dietary supplements and has created a worldwide network of business partners. It’s the growing sales of these supplements that has helped drive the company’s recent turnaround.

BioGaia also has a steady pipeline of new products, such as its Reuteri drops for children with gastrointestinal disorders as well as a Reuteri product for dental health. Recently,

strong evidence of Reuteri’s effectiveness in fighting colic in infants has opened the route for supply to companies who market products for the treatment of colic.

BioGaia has made the growing markets of Asia a major focus and now the Swedish company earns approximately half of its sales there. A sales office of three staff has recently been set up in Japan.

Unlike BioGaia, Finnish-based Raisio has been earning healthy profits from its ingredient business for some time. Its Benecol cholesterol-lowering plant stanol esters are the basis for Benecol branded products, sold through regional partners across Europe and in South America. Benecol, a brand which was once a by-word for functional food disappointment, is now a success story in its niche, second only to Unilever’s pro.activ, with worldwide retail sales perhaps exceeding $350 million.

Benecol’s fortunes were transformed when licensees McNeil, which markets Benecol products in UK and Belgium, and Swiss-based Emmi, began to market a 70g daily-dose dairy drink containing Benecol – a true innovation. In its first year in European countries 100 million bottles were sold, equating, by our estimates, to over €100 million ($130 million) in retail sales.

This innovation helped propel Benecol to an operating profit in 2004 – its first in five years.

But sustaining growth is difficult and in 2006 sales of Benecol ingredients actually slipped very slightly to €49.7 million ($65.3 million) and operating profit fell almost 20% to €7.8 million, from €9.7 million in 2005. The fall was mostly due to the Benecol business increasing its marketing expenditure, a necessary move for underpinning the brand and continuing to drive growth in an increasingly competitive market. And, if it’s serious about maintaining Benecol’s growth, investment in marketing is a must for Raisio.

Benecol has become particularly important since this functional ingredient is seemingly the one thing standing between

Raisio and financial meltdown. In 2006 Benecol was the company’s single most profitable operation – although it accounts for just 11.3% of group sales – and without it Raisio’s €6 million ($9 million) operating loss would have been much worse.

Benecol’s stalled growth suggests that it is losing share in its market – unsurprising when competing against a marketing behemoth like Unilever’s pro.activ with its giant marketing spend. A further challenge to Benecol’s growth is that cholesterol-lowering – the benefit offered by the ingredient – is of interest only to a niche of consumers – as NNB has always argued.

In BioGaia and Raisio we have two companies, both in the mainstream of functional foods, both pursuing commercialisation strategies that are better thought-out than most health ingredient companies (one focused strongly on Asia), yet, both taking a length of time to achieve profitability that would make most investors blanche.

For an ingredient business, Raisio’s Benecol has got to a very healthy level of sales and now must work even harder. A shift from earning the majority of its sales in Europe to becoming as globally-oriented as BioGaia should be in Raisio’s sights.

If BioGaia simply keeps cranking the handle on its strategy it will one day have a profitable, respectably-sized – but not spectacular – business. However, it will still be some time before the companies’ original investors see a return on their capital.

This is the reality of the health ingredients business – tough, competitive markets, in which it is almost impossible to achieve differentiation. It’s all a far cry form the hyped-up, ever-booming world that is so often portrayed in market reports and trade magazines. If your business plan assumes faster progress than that made by BioGaia or Raisio, it might be time to go back and re-write it.

The long hard road to profitability If anyone still needed to be convinced of just how tough the world of functional ingredients is, or of the elusiveness of profits, then the recently announced financial results of Sweden’s BioGaia and Finland’s Raisio offer conclusive proof. Their financial results are a lesson of how patents and science seem to be of scant value in generating and growing profits when compared to marketing power.


March 2007 �7


B a K e rY c a s e s t u d YstrategY case studY

Sara Lee redefines white and whole wheat bread

for Americans Americans have been abandoning white bread in droves over the last several years but Sara Lee may have turned around the US white-bread market single-handedly with its new Soft & Smooth whole-grain white bread, a blockbuster product less than two-years-old that already has reached annual sales of $140 million (€108 million). And now the packaged-goods giant is following that up with the introduction of Soft & Smooth 100% Whole Wheat. dale Buss reports.

Relying on Ultragrain, the ConAgra Foods invention that maximises the level of whole grains in traditional-flour products, Soft & Smooth Made with Whole Grain White Bread offers consumers the taste and mouthfeel of white bread without guilt about empty nutrition. And it’s an offer that has been emphatically taken up by American shoppers.

“It quickly became the No. 1-selling SKU of any branded bread (excluding private label) right after it was introduced,” Tim Zimmer, vice president of bakery marketing for Chicago-based Sara Lee, told New Nutrition Business.

“What we loved about the idea, and why it resonates with consumers, is very simple: what parents want to do is take some of the argument out of nutrition. Parents have found that this makes their lives easier and can give good whole-grain nutrition without the fuss. And it’s easier this way for parents to introduce whole grains into kids’ diets.”

But it’s more than just kids who are hooked on the new wonder bread: clearly a good portion of the success of Soft & Smooth can be put down to the nostalgia value for adults, especially baby boomers and older, as they discover that they can once again indulge in one of the pleasures of their youth – white bread – without feeling guilty.

tHe DeCliNe Of WONDer BreaD

Made from refined flour and lacking most of the components that lend nutrition to wheat,

high-volume white bread led the way among the many packaged-food innovations that flooded out of post-World War II America. Only re-fortification with added vitamins and minerals redeemed the stuff nutritionally. Wonder Bread nevertheless became synonymous over the years with nutritional

vacuity and, in a way, with the emptiness of some of America’s most vaunted brands.

White bread’s reputation also suffered as low-carbohydrate dieting spread among American consumers. And white bread has fallen into even deeper ignominy over recent years as whole grain and other varieties of breads caught on with the many American consumers who want their bread to be nutritious.

The US government’s hearty endorsement of whole-grain bread under its new dietary guidelines accelerated consumers’ rethinking

of white bread such that the $2.5-billion white bread segment had begun to decline as much as 8% to 10% a year, Sara Lee says.

“You think of white bread as a commodity segment,” says Andre Biane, vice president of bakery product development for Sara Lee. “But there’s actually a lot of passion among

consumers for white bread and a lot of love and memories. People mention grilled-cheese sandwiches and peanut butter and jelly sandwiches.

“But we found that passion was running up against concerns in the press about the lack of nutrition in white bread. So we went to the idea of taking that passion and redirecting it and giving people a product that has all the nutrition as well as the nostalgia.”

Technically speaking, then, Sara Lee’s challenge was “to deliver the real attributes that a white bread lover likes: smoothness of texture and whiteness of colour, and a taste that really means something, not just a piece of dough,” Biane says.

Another important consideration behind the introduction of Soft & Smooth, Zimmer and Biane say, is that American consumers had drifted away from the notion – so strongly promoted a generation ago by Wonder Bread – that there was anything special about branded breads at all.

“They had stopped perceiving any real difference in private label versus branded,” Zimmer says. “So in terms of consumer marketing, we had to go back in and look at this large segment and find the large white space that the consumer was looking to fill.”

Soft and Smooth is consumed by kids and adults. According to Sara Lee, the taste and mouthfeel of white bread is a pleasure which many baby boomers want to recapture.

March 2007�8




B a K e rY c a s e s t u d Y s t r at e g Y c a s e s t u d Y

Ultragrain is reportedly used by General Mills in perhaps the biggest whole grain hit in the US market: the company’s reformulated cold-cereal line. But for Sara Lee, Ultragrain wasn’t the only ingredient innovation required for something like Soft & Smooth. The company also incorporated whole brown rice flour.

“We had looked at several whole-grain options to try and hit the end point we wanted of colour, taste and texture that was so important,” Biane says. “It was the combination of those two that did it.”

Among other things, Sara Lee wanted to make sure that Soft & Smooth lacked an aftertaste. “Especially for kids’ palates, that’s important,” Biane says. “We didn’t want to have a negative impact. We wanted to make sure it didn’t alienate kids or turn them off with flavour notes.”

super suCCess COmes as a surprise

Sara Lee didn’t anticipate that Soft & Smooth white bread would take off the way it did after its July 2005 introduction. The product came closer to the “taste sweet spot” than product developers even had hoped, Biane says, and consumers reacted more positively than expected, added Zimmer.

Soft & Smooth was one of the company’s biggest new product launches ever, and so Sara Lee put “unprecedented levels of consumer spending behind it,” Zimmer says: the vast majority of the $40 million (€31 million) that the company spent on marketing in 2006. The amount was the most that any company has ever spent on a product launch in the fresh-bakery aisle, Zimmer reveals.

“We needed to build credibility behind the product both from a taste and nutrition standpoint,” he explains. The concept behind the launch marketing campaign was to highlight an amazing product with “all the taste and texture of white bread, with all the goodness of whole grains”. Sara Lee wanted to show that if kids liked Soft & Smooth, adults would too. The advertising therefore focused on kids playing with the product and accepting it. Ads ran on national television, in print, on the Internet and in stores.

The company also coordinated supermarket promotions of Soft & Smooth in the fall of 2005 with other “back to school” products, such as peanut butter and jelly. Also in stores, the company distributed a nutritional brochure about the benefits of whole grains. “There was a lot of information coming out at the time about whole grains, and we wanted to support and communicate why we thought they

were important for kids and families,” says Zimmer.

maJOr league sampliNg at miNOr league games

Soft & Smooth also relied heavily on sampling – by the loaf. Sara Lee delivered millions of free loaves into the hands of consumers at an interesting venue: minor league baseball parks across America. The brand selected minor league baseball because it’s a family-oriented recreation, featuring low ticket prices, and because the parks are easy to get into and out of.

“As people were leaving the games we gave them a full-loaf sample so they could make sandwiches for a week, and it was a great way to get a habitual trial – not just a slice-of-bread trial,” Zimmer says. “We wanted them to try it every day to see how they liked it.”

Pricing strategy was another building block of Soft & Smooth’s early success. For the first three months, Sara Lee maintained line pricing for the new product with its other breads, to encourage trial. After that, however, Sara Lee bumped the suggested retail price of Soft & Smooth white bread about 10 cents higher than its other lines, to around $1.99 (€1.53) a loaf. The extra dime “drives a bit of differentiation from the consumer perspective, and it gives us the ability to cover the extra ingredients costs,” Zimmer says.

NO plaNs tO rest ON tHeir laurels

Not long after Soft & Smooth White Bread shot out of the gate, Sara Lee was already working on Soft & Smooth 100% Wheat Bread. In its research on that product, the company came to understand that many American consumers were thoroughly confused about wheat bread – for example,

what the difference was between enriched wheat bread and whole-wheat bread. Enriched breads are often made from enriched wheat flour and a small proportion of whole-wheat flour; in fact, nearly three-quarters of the 650 million traditional loaves of wheat bread baked in the US last year lacked 100% whole-grain nutrition. And 73% of consumers mistakenly identified the enriched bread they were eating as 100% wheat bread.

“They might be purchasing one type of bread and not knowing exactly why they were purchasing it and not the other,” Zimmer says. “But we did figure out that people were buying enriched wheat bread because it was softer and whiter and didn’t have the whole-wheat aftertaste. Plus, with 100% whole wheat, the crumbs tended to be coarser and darker, so they didn’t get the smooth mouthfeel.”

So Sara Lee decided to marry the nutritional advantages of 100% whole wheat with the taste and texture appeal of enriched wheat bread. Soft & Smooth 100% Whole Wheat Bread has no less than 14g of whole grain per slice. And since introducing Soft & Smooth 100% Whole Wheat Bread late last December, it has already become the third-fastest-selling item in the company’s bread portfolio, behind Soft & Smooth White and Sara Lee’s regular Honey Wheat Bread.

With the wheat bread, Sara Lee’s marketing shifted to a greater focus on in-store promotions and even more sampling than they conducted with Soft & Smooth white. That’s partly because the company found that consumers were actually more sceptical about being able to get 100% whole wheat benefits in a bread of its taste and texture than they had been about the nutritional claims of Soft & Smooth White Bread.

Sara Lee consequently handed out a million samples – this time, at movie theatres, malls and minor league hockey games, due in part to seasonal differences. More significantly, its other marketing focus became the Internet, where a website educates consumers about Soft & Smooth 100% Whole Wheat and whole grains, and in-store brochures and other communications.

With the introduction of Soft & Smooth 100% Wheat, says Peter Reiner, vice president of Sara Lee brands, “we’re poised to continue mainstreaming whole-grain nutrition by offering great-tasting products that will please the whole family”.

Soft and Smooth 100% Whole Wheat Bread has no less than 14g of whole grain per slice, and is the third-fastest selling item in Sara Lee’s brand portfolio.


March 2007 �9


B a K e rY c a s e s t u d Y s t r at e g Y c a s e s t u d Y

Danone joins Wahaha to boost China’s nutritional product range

Hangzhou Wahaha Group Co. Ltd. (the word “Wahaha” is taken from a famous Chinese folk song and is meant to mimic the sound of a baby laughing) is the number one domestic beverage producer in China and today plays a major role in the children’s food and beverage sector, producing drinks of all sorts: carbonated; milk; tea; sports and nutritional. They also produce healthcare products, clothing, canned food and juice – all specifically developed for the kids’ segment.

In 2004 Wahaha’s sales were RMB11.4 billion ($1.37 billion/€1.1 billion) with a profit of RMB1.35 billion ($162.7 million/€127 million) and it accounted for 38% of the output of China’s top ten beverage companies.

Since 1996, French dairy giant Danone has invested millions of dollars in Wahaha, taking a 51% share in five Wahaha subsidiaries and owning a 30% stake of the entire company. In a country as fiercely nationalistic as China, this collaboration could have had a negative impact on Wahaha’s credibility with consumers, but the joint venture has not affected Wahaha’s status as one of the “520 Key Corporations of the Nation”, nor has it impacted on its sales in China.

QuiNgHOu ZONg: tHe maN BeHiND

WaHaHa

Qinghou Zong, one of the founders of Wahaha, is the company’s chairman and CEO. He and two schoolteachers started the company with a government loan they received in 1987. Under the very unwieldy and far less snappy moniker the Hangzhou Shangcheng District School-Run Enterprise Sales Department, they sold milk products and popsicles out of a school store until their interest in providing healthier fare to school kids led them to produce and sell nutritional drinks. When Zong finally founded

the Wahaha Nutritional Food Factory in Hangzhou in 1989, its main product was a beverage focused entirely on kids’ health. Called Wahaha Nutritional Tonic for Children, it was an instant success.

In 1991 with more Hangzhou Government support, Zong’s Wahaha Nutritional Food Factory merged with Hangzhou Canning Factory – a state-owned enterprise. It was at this point that the company took its current name – Hangzhou Wahaha Group Co. In 2000, Zong bought out 55% of the government’s shares in the then fully state-owned enterprise. He kept 30% for himself, allotted 20% to employees and 5% to senior management.

Beverage DevelOpmeNts a COre

part Of WaHaHa’s BusiNess

Wahaha Nutritional Tonic for Children – developed in 1989 – was Wahaha’s first major achievement. The Tonic has its base in Traditional Chinese Medicine but modern nutrition has also played a part in its formulation. The kids’ beverage distills extracts from several natural foods such as haw (Chinese hawthorn), longan (fruit from the Longan tree), lotus seed, medlar (fruit of the medlar plant), walnut and job’s-tears (a grain native to East Asia).

Wahaha markets the Tonic for its capacity to improve immunity and intestinal function and advertising emphasises its function as a boost for children’s appetites. It was this aspect of the Tonic which most attracted Chinese parents to what is now Wahaha’s signature kids’ beverage.

According to Made in China, a book released by the Harvard Business School Press in 2005, Zong’s tactic with Wahaha Nutritional Tonic for Kids was to look for the “market behind the market”. Rather than being the “301st competitor” to offer a

“general nutritional drink”, Zong rejected the option of following existing competitors and instead, “was the first to offer a nutritional drink for children”. It’s this kind of innovation-led, market-oriented strategy that is also the basis for Danone’s ever-growing success, so it’s easy to see why the French giant would be so interested in Wahaha.

It is in milk-based dairy drinks for kids that Wahaha has the biggest product stream and it is in these drinks that Wahaha’s main strength lies. The company currently offers 14 brands of dairy- and fermented-milk drinks. The box (see page 30) lists Wahaha’s most popular dairy drinks.

Although innovative in dairy, in water Wahaha has applied a market-follower strategy. When the first bottled waters entered the Chinese market, Zong waited for his competitors to “test the water” leaving it to them to take on the task of educating consumers about the benefits of bottled water before launching Wahaha’s own brand of bottled water which, thanks to Wahaha’s brand strength and marketing and distribution muscle is now China’s leading bottled water brand.

In functional waters, Wahaha also owns one of the top-2 brands, called G-vital – and its biggest competitor is Mizone, the Danone-owned number one brand which is marketed by Danone-owned Robust Corp..

While many Chinese companies focus only on the major cities, Wahaha sees the rural market as an ideal place for extending the life cycles of some products. The purchasing power of rural groups is becoming increasingly significant: rural communities account for nearly 70% of China’s entire population and these communities are experiencing the effects of China’s current economic boom.

Wahaha faces challenges, however. Its key competitive strength – its distribution network

There are very few places in the world where Danone doesn’t have a stronghold (see page 11), and China is no exception. Danone’s website ranks the Chinese brand Wahaha along with the Danone dairy brand, Evian mineral water and its Lu biscuit brand, as one of its four most-important businesses. It isn’t difficult to see why Danone is excited about its 30% stake in Wahaha which is China’s biggest kids’ dairy brand company and its biggest in still drinks. Wei denG reports.

March 200730




– is under threat due to the huge change in Chinese consumer shopping preferences. The company’s multi-level distribution network is now facing the challenge of dealing with more and more consumers who prefer to do their shopping in supermarkets.

Yet another challenge is the growing

sophistication of Chinese consumers. While in the past, package design, ingredients and product differentiation methods were not as important as distribution, new and increasingly attractive and appealing brands are edging Wahaha out of its strong position in the beverage market. To maintain

its current position the company will need to shift some of its focus away from distribution towards packaging and product differentiation. However, with a partner as brand-savvy as Danone it would be surprising if Wahaha didn’t manage to meet these two new challenges.

Wahaha Dairy DrinKS

Wahaha aD calcium milk Drink is milk enriched with vitamins A and D. Along with Wahaha Nutritional Tonic, it is one of Wahaha’s key products and has been a popular kids’ drink for 15 years. Many parents are attracted by the milk’s boosted calcium content.

On-pack claims tell consumers that “Wahaha Calcium Milk enriched with vitamin A and D greatly assists the efficient absorption of calcium to promote children’s growth and development”. Offered in several flavours including Original, Chocolate and Coconut, the milk retails for RMB1.00-1.50 ($0.15) for 220mls and RMB0.77 ($0.10) for a 100ml bottle. Its strongest competitor, Danone-owned Robust sells its equivalent AD Calcium Milk for RMB1.00-1.20 ($0.20) for a 100ml package.

Student milk is mainly targeted at China’s 300 million large student population. It is offered in a wide range of flavours including Original, Strawberry, Coconut, Chocolate, Vanilla and Honey Melon.

Wahaha’s Student Milk was developed to fit in with the Chinese National Agriculture Ministry’s and Education Ministry’s student milk campaign which aims to give every primary and secondary school student a glass of milk everyday. The Premier of China, Jiabao Wen requested that schools throughout the country implement this student milk project. In response, every province set up a student milk project management centre. The milk they provide for students must meet government specifications which include 100ml of protein and 2.3-2.5g of fat per 200ml package.

The nation-wide promotion of Student Milk has created business opportunities for many dairy drinks’ producers including Wahaha. Wahaha’s Student Milk retails for RMB1.50 ($0.20) for a 200ml package.

haha milk is targeted at young professionals and is marketed as a drink to be consumed at social gatherings. With added nutrients such as DHA, amino acids and zinc the milk is claimed to enhance consumers’ memories.

Shuang Wai Wai is a newly launched fermented dairy drink for children aged 4- to 6-years-old. It contains a variety of minerals such as potassium, calcium, sodium, magnesium, phosphorus, iron, and zinc as well as added vitamins A, D, B3, B6, B12 and Taurine.

Initial market feedback for Shuang Wai Wai, which retails at RMB1.25-1.50 ($0.20) for a 125ml bottle and RMB1.80-2.00 ($0.30) for 200ml bottle, has not been positive. Along with criticism of TV ads which accompanied the drink’s launch (the ads were criticised for their “sexual meaning”), the product’s lack of ingredient differentiation (from existing dairy drinks) has been the subject of concern amongst marketers.

fermenteD milK DrinKS

milk baby is a fermented dairy drink enriched with a variety of vitamins, minerals and Taurine (widely–recognised as a critical nutrient for boosting infant brain development). It is also enriched with vitamins A, D, B3, B6, B12. The drink targets those with lactose intolerance and retails at RMB0.80-1.00 ($0.12) for a 125ml bottle.

you Di ru is a probiotic yoghurt enriched with minerals such as protein, kalium, sodium, phosphorus, iron and zinc, and vitamins A, D, B3, B6, B12 as well as Taurine.

s t r at e g Y c a s e s t u d Y


March 2007 31


n e w p r o d u c t s

FunCTiOnAL & HEALTHY EATing nEw PRODuCT LAunCHESEach month we summarise recent new product launches from around the world.• Part 1 USA • Part 2 Rest of World

Company Brand Description

PART 1 uSA – FOODS AnD BEVERAgES

All new product information is sourced exclusively from mintel’s gnPD (global new Products Database), which can be visited at www.gnpd.com. mintel can be contacted at 18-19 Long Lane, London EC1A 9PL, u.k.. Tel. +44-(0)20-7606-4533, Fax +44-(0)20-7600-3327

BAkERY

Saputo Bakery Vachon Igor 100% Whole Grain Strawberry Snack Cakes are made with whole grains, and claim to provide a source

of fibre, calcium and prebiotics. 0g trans fat per serving. The product is low in saturated fat, contains no

artificial colours and is available in a 245g box with eight cakes.

Masterfoods Kid Didits Kid Didits Really Cheesy Crackers are said to be jam-packed with essential vitamins and minerals, and

calcium. The product retails in a 5.10oz pack.

Food Tree Whiffles Whiffles Wheat Cakes are 100% natural, contain no preservatives, additives, trans fats, sodium or sugars

and have only 19 calories per unit. They are said to be a healthy alternative for breads, crackers and

snacks. This product is Kosher certified and retails in a 2.1oz pack.

Kellogg USA Kellogg’s Eggo Minis Kellogg’s Eggo Minis Waffles Buttery Maple Syrup are ready to bake. They contain 10 vitamins and miner-

als, are good source of calcium and naturally flavored. They come in 10 sets of four waffles in a 10.9oz

pack. This product is kosher certified.

Flowers Foods Mrs. Freshley’s Snack Away Mrs. Freshley’s Snack Away Peanut Butter Wafers are available in a pack with six twin packs. This product

is said to be a good source of fibre, contains 140 calories per serving, probiotics and 75% reduced sugar.

It is also Kosher certified, sweetened with Splenda and retails in a 12oz box. Also available are Chocolate

Cupcakes.

Santa Fe Tortilla Company South Beach Diet South Beach Diet Multi-Grain Wraps are made with extra virgin olive oil and contain 100% whole grain.

They are free from trans and saturated fats, hydrogenated oils and cholesterol. The wraps are also enriched

with omega-3 and contain 110 calories and 8g fibre. They are Kosher certified and are available in a 20-oz.

pack with ten wraps. Also available are Whole Wheat Wraps.

BEVERAgES

IQ Beverages IQ H2O A new line of functional beverages designed to deliver “water, fruit, and vitamins.” Each 16oz bottle

delivers real fruit flavour and only 40 calories per serving. It is available in Orange Mango; Mixed Berry;

Pomegranate; and Green Apple varieties.

Tropicana Products Tropicana Pûr New under the Tropicana brand is Pûr Triple Berry 100% Juice Blend, which is a new range of 100% juice

blends. The Triple Berry variant is said to be an excellent source of vitamin C, with no added sugar and is

available in a one litre plastic bottle.

Tempest Tea Green U Said to be one step beyond green tea because it has healthful properties and antioxidants of green tea

extract, Green U is a caffeine-free lemon-lime flavoured sparkling tea beverage that contains less calories

and carbohydrates than typical energy drinks and even orange juice. It is all natural, clean, light and

refreshing and contains 100% daily value of vitamin C. This product is available in 8.4floz. cans and 4-pack

sizes.

Tempest Tea Tea’d UP Energy Power Shot Claimed to be the world’s healthiest and most powerful energy shot, it has been scientifically formulated

by physicians to maximise performance and provide energy up to seven hours with no crash. It contains

only two calories, 20% more caffeine than regular energy drinks, is full of green tea antioxidants, ginseng

and B vitamins. It is also suitable for vegetarians and is free from preservatives, gluten, dairy, sugar, salt, soy,

wheat and fragrance. It retails in a 2floz pack in a Pomegranate flavour.

Wal-Mart Wal-Mart Sam’s Choice A Cranberry Juice Cocktail Pack which provides a 130% daily value per serving of vitamin C. There are six

bottles in a pack. This product is certified kosher.

Honest Tea Honest Kids Honest Tea Company has introduced Honest Kids beverages which contain a day’s supply of vitamin C

and less than half the sugars and calories than other kids drinks on the market. It retails in Tropical Tango

Punch; Berry Berry Food Lemonda; and Goodness Grapeness.

O.N.E. World Enterprises O.N.E. Amazon Açaí water A 100% natural beverage made from açaí berries, it is enriched with antioxidants and is rich in omega-3, -6

and -9 as well as amino acids, vitamins B and E and ellagic acid.

Tropicana Products Tropicana Essentials Orange Juice with

Omega -3

Said to support the normal development of the brain, eyes and nervous system, it contains no pulp, no

added sugar and a 250ml glass contains the daily RDA of vitamin C. The product is available in a 1.89 litre

carton.

Ardea Beverage Company Airforce Nutrisoda Renew is a soda drink which contains zero sugar, zero sodium, zero aspartame and zero caffeine. It also

contains soluble dietary fiber, L-glutamine, L-arginine and B-complex vitamins.

March 20073�




Vital Lifestyle Water Vital Calm Vitamin Enhanced Water With a hint of guava, this water has all natural flavours and no artificial colours. It contains chamomile,

lemon balm and valerian which are said to be mild sedatives. It is recommended to drink a bottle twice a

day as a vitamin and mineral supplement. A bottle contains 591ml of water and has only 20 calories. Also

available are Dragon Fruit; Cucumber-Lime; and Acai Berry varieties.

Mott’s Mott’s for Tots Contains 40% less sugar than 100% apple juice and is free from artificial sweeteners. The product

is pediatrician recommended , contributes to daily water needs and contains 100% of the daily

recommended allowance of vitamin C. The product retails in a 9x6.75floz pack.

NUI Water Nui Kid Water Low in calories and sugar and made with all natural ingredients, the product is enriched with vitamins,

minerals and antioxidants from a caffeine-free green tea extract and other fruit extracts (like blueberries)

to help aid growing bodies. The product is aimed at children and is available in three flavours: Raging Red;

Outrageous Orange; and Purple Power.

BREAkFAST CEREALS

Wild Oats Markets Wild Oats Flax 500 A cereal comprising whole grains, crunchy wheat, and oat flakes sprinkled with flax seeds. It is said to be an

excellent source of fibre and a good source of calcium.

Trader Joe’s Trader Joe’s Heart Healthy Whole

Grain Instant Oatmeal Cranberry

Said to be an excellent source of 12 vitamins, minerals and whole grains and to be high in antioxidants.

It contains flax seeds which are a source of ALA omega-3, lignans, antioxidants (flavonoids), dietary fibre.

It also contains 0.65g plant sterol esters per serving which has shown to reduce LDL-cholesterol. The

product also contains inulin, a soluble fibre which helps to promote digestive health by stimulating the

normal beneficial bacteria in the digestive tract.

DAiRY

Farmland Dairies Really, Really Good! Lowfat Chocolate

Milk

An excellent source of vitamin D and calcium. The milk is made from cows not treated with artificial

growth hormones or antibiotics.

WhiteWave Foods Silk Plus Omega-3 DHA A new soy milk which contains vitamins and minerals and added fibre and omega-3 DHA. The product is

lactose free, dairy free and cholesterol free and is fortified with calcium.

Les Produits de Marque Liberté Liberte Yogourt Plain Yoghurt Containing 2% of milk fat (Vermont milk) and rbGH free, this product is available in a 16oz pack. Also

available is a Six Grain Yoghurt with 1.5% milk fat comprising pears and grains, such as: buckwheat, rice,

barley, wheat, rye and oats. It does not contain any sugar, but contains sweetener with fruit juice. This

product retails in a 6oz pack.

SnACkS

Florida’s Natural Au’some Fruit Juice Variety Pack With sour strings and nuggets with resealable zipper, the products are made from natural fruit juices and

contain all natural flavours. This product contains 100% DV vitamin C with eight vitamins and minerals. It is

kosher certified and is free from preservatives, fat, trans fat, gelatin and nut.

Trader Joe’s Trader Joe’s Veggie & Flaxseed Tortilla

Chips

Carrot & tomato, spinach & garlic, and red beet & onion are the assorted flavours. The product is claimed

to be a good source of fibre and to contain 500mg of Omega-3 per serving. It is also Kosher and retails in

12oz packs.

Fresh Express Chiquita Fruit Bites Red & Green

Apple Bites

A healthy on-the-go snack, it is washed and ready to eat. This product contains 96% more vitamin C, does

not contain any artificial flavours or artificial colours. It retails in a 14oz pack.

GOAT Food and Beverage Co. G.O.A.T. Jabs Mohammed Ali Themed crisps are to be introduced to college Campuses across the US to celebrate the

legendary boxer’s 65th birthday. The product is shaped in the form of boxing equipment and will be first

distributed at Yale, Ohio State, University of Pennsylvania, Texas A&M, and Georgia Tech. Holy Guacamole

is a guacamole flavored crisp (chip), which is said to have a right balance of carbohydrates, 12 vitamins and

minerals plus as much calcium as a glass of milk. The product is available in a 3oz bag.

Country Company Brand DescriptionPART 2 REST OF THE wORLD – FOOD & BEVERAgE

South Africa Vitagermine Babynat Organic Teething

Biscuits

Made with sweet organic essential orange oil, giving them a slight orange flavour that is

said to awaken a baby’s senses for new tastes. The shape and consistency of the biscuit

has been specially designed for the small hands and mouths of an infant from eight

months onwards whilst the texture is made to aid teething without crumbling. Each pack

comprises of 24 organic teething biscuits.

BAkERY

Germany Aerzener Brot Natreen Joghurtschnitte

Yogurt Cake

Available in Kirsche Cherry; Mandarine Mandarin; and Waldfrucht Forest Fruit flavours,

these products are calorie reduced and prebiotic.

South Korea Crown Confectionery Crown Couque D’asse

Green

Biscuits with Green Tea Powder which contain chlorella and spirulina. The product is

available in a box of 40 packs with 8g each.


March 2007 33


Australia Country Life Bakery Country Life Gluten Free

Fruit Bread

The bread is free from gluten, wheat and dairy, is high in fibre, and is claimed to be

naturally healthy. The product retails in a 510g pack. Also available is a Low Glycemic

Gluten Free Bread.

BEVERAgES

France Döhler et Wild Dohler et Wild Flavoured

Beers

A range comprising: Pomegranate; and Peach. Both beers contain omega-3 and co-enzyme

Q10, vitamins and minerals.

Colombia Agraria El Escorial Ocean Spray Light

Cranberry Juice

A juice with 80% less calories with no added sugar. Cranberry contains high levels of

antioxidants and anti-adherents, to help boost up good cholesterol and as research

suggests, cranberry juice may help to prevent some oral health problems. This product is

sweetened with Splenda and is available in a one litre pack.

Portugal Nabeirodis Tetley Red Tea Derived from the Rooibos vegetable, the product is said to be 100% natural, caffeine-free

and rich in antioxidants which provide health benefits.

Sweden Coca-Cola Minute Maid Fruit Plus Juice

Drinks

The range comprises Antioxidanter, a juice drink with Antioxidants and green tea extracts

which is claimed to help protect body cells and does not contain preservatives or

colouring. It is available in a 33cl bottle; and Probiotic Fibres Fruit Drink.

Norway Imsdal Imsdal Mineral Water with

added fibre

The product will have a Lime flavour and be the first functional water drink in Norway.

Taiwan Kuang Pin Enterprise Silver Income Healthy

Senior Drink

A healthy instant drink designed for seniors, which contains nano-calcium, mushroom

extract (champignon) and glucosamine formula. It is said to be digested easily and is

enriched with natural job’s tear aroma. It is also claimed to provide balanced nutrition for

seniors and available in a pack with fifteen 20g sachets.

South Africa The Zambezi Beverages Seltzer Lite Low GI Water A low glycemic index as many ingredients from the original drink (Selyzer) have been

replaced by fructo-oligo-saccharides. It is thus suitable for diabetics and those consumers

on low GI diets. It is available in a selection of thee flavours comprising: Cranberry &

Raspberry; Mango & Apple; and Lemon & Lime.

France Tropicana Tropicana Essentiels

Antioxidant Fruit Juice

This fruit juice is made with grape, apple, blackcurrant, blackberry and cranberry. The

product is rich in antioxidants, helping to stop cells ageing. It has been flash pasteurized

and is available in an 1l pack. Also new to the brand is Magnesium Banane Passion, a

Banana Passion Juice rich in magnesium.

Hungary Perfect Fond Sobe Guard An energizing soft drink retailed in a 250ml pack, the product purifies, refreshes,

disintegrates alcohol, and revitalises. It is made with natural ingredients and colourants.

It is recommended for hangovers due to its antioxidant properties. It is available in two

variants: Lemon & Ginseng; and Blackcurrant.

DAiRY

Singapore Jalna Dairy Foods Jalna Creamy & Smooth A yoghurt drink which is 98% fat free, gluten free and has a low glycemic index, no added

sugar, and is free from preservatives and artificial sweeteners. All ingredients are natural.

The product contains acidophilus bifidus casei, and retails in a 250g recyclable pack.

Finland Valio Valio Oivariini A Fat Blend Spread which contains vegetable fat and vegetable oil, with omega-3 and -6.

This product is low in lactose and salt.

DESSERTS & iCE CREAm

India Amul Amul Sugarfree Probiotic Ice Creams, comprising: Chocolate; Fresh Lychee; Strawberry; Shahi Anjir; and

Vanilla with Chocolate Sauce.

SnACkS

Guatemala Bimbo de Centroamerica Marinela Barritas Cereal

Bars

Available in Fresa con Salvado y Prebióticos Strawberry, Wheat Bran & Probiotic filling.

The product contains authentic marmalade and is available in a 318g pack containing six

individually wrapped packs.

Australia Freedom Foods Freedom Foods Pear &

Peach Fruit Strips

Enriched in vitamin C, iron and folate, the product has a low GI and is free from added

sugar, flavours, colours and preservatives. It is 100% pear and peach, and is claimed to be

equal to one fruit serve. It is claimed to be a nutritious snack for the health conscious,

lunch boxes, after school nibbles, bush walkers and sports people.

March 200734




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March 2007 35


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i m p o rta n t n o t i c e

March 200736




The 10 key trends below are shaping the future of the food industry.Key Trend 1: A future of weight management

Key Trend 2: Mood food – brain health, mood and performance to be the next big trend

Key Trend 3: Healthy snacking – pigs might fly as the boundaries between health, convenience and indulgence break down

Key Trend 4: Fruit: the future of functional foods?

Key Trend 5: Digestive health still has far to run

Key Trend 6: Brains, bowels, naturalness and healthy snacking are the drivers in kids’ nutrition

Key Trend 7: We’re all turning Japanese

Key Trend 8: Beauty from within – a marketing trend with many angles and wrinkles

Key Trend 9: The marketing power of ‘naturally healthy’

Key Trend 10: Functional foods and health – who really gets the benefits?

Available in PDF only

Ten Key Trends in Food, Nutrition & Health 2007

Using examples of successful business strategies followed by companies working in kids’ nutrition, we set out the trends that are having the most impact on the $300 million kids’ nutrition market.

Key Trend 1: Free-from and natural is the future of kids’ food

Key Trend 2: Healthy snacking – the boundaries between health, convenience and indulgence break down

Key Trend 3: Better brains with omega-3

Key Trend 4: Fibre and probiotics for better bowels

Key Trend 5: It’s all about beverages

Five Key Trends in Kids’ Nutrition 2007 is an indispensable “how-to” guidebook for your company.

Ordering is easy…see inside back cover or visit www.new-nutrition.com or www.kidsnutritionreport.comPrice: $195/€175/£100/A$250/NZ$295/C$229/¥25,000

Available in PDF only

Five Key Trends in Kids’ Nutrition 2007

Ordering is easy…see inside back cover or visit www.new-nutrition.com or www.kidsnutritionreport.comPrice: $195/€175/£100/A$250/NZ$295/C$229/¥25,000


March 2007 37


March 200738





March 2007 39


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