Hemisphere Overview
The Americas continue to be a dynamic hemisphere for packaged food consumption in 2014. Both Latin America and North America offer both great opportunities and unique challenges.
The health and wellness trend has driven many North America consumers away from packaged food and processed ingredients. Flat volume growth is pepped up by value-added health-and-wellness-orientated solutions, opening up many avenues for development and product reformulation. Likewise, but still largely in its infancy, Latin America is adopting a greater push for healthier packaged food options. Natural products and local ingredients are becoming a bigger focus. Similarly, companies have been testing international flavours, tying them to the World Cup.
Throughout the region governments continue to get more involved in driving public health initiatives. Consumers are left to navigate through improved mandatory nutritional labels, point-of-sale regulation and retail tax hikes. They are therefore increasingly more informed about the products they buy and consume, and quick to check for recommendations or post complaints online. With greater disposable incomes, they are also increasingly looking for the option to stand out and customise the products they purchase.
Packaging developments continue to push the boundaries and keep consumers coming back for more. New materials and pack types help refresh product lines. They may also translate into cost savings for the company that can be passed down to consumers, who enjoy better quality and lower prices. Smaller packs cater for the need for convenience in the increasingly hectic urban lifestyles.
While sales continue to stagnate in North America, innovation focusing on new flavour combinations and natural ingredients push the envelope in the search for the next big thing. A low consumption base and expanding middle class position Latin America as a stand-out region for growth on a global scale.
Big News Regionally
FIFA World Cup driving a world of opportunities and innovation
BRAZIL – In light of the World Cup, packaged food manufacturers focused on redesigned packaging, new flavours and fun advertising campaigns to promote their products. Yoki Alimentos promoted its chips/crisps, popcorn and nuts snacks with the slogan “Now the party is at home” and international flavours like Queijo Coalho (Brazilian cheese), Worcester/steak sauce, Argentinean barbecue, Mexican chili pepper and Japanese shoyu and wasabi. Garoto (Nestlé), one of the official sponsors of the games, launched ice cream in the format of a soccer ball, drawing the attention not only of children but also adults. New packaging for its chocolate confectionery range included the official World Cup mascot Fuleco and the emblematic yellow of the national team.
New tax law impacts Mexican packaged food
MEXICO - On 1 January 2014 Mexico’s new controversial tax package came into effect, increasing taxes on many segments of the economy, most notably packaged foods and drinks that are considered to be unhealthy. A tax of 8% is now levied on many categories of food, including confectionery, sweet and savoury snacks, ice cream and pastries, containing more than 275 calories per 100 grams. Companies have responded in a variety of ways, including by slowly increasing prices since 2013 to avoid immediate impact, creating smaller pack sizes that can be sold for the same retail price as before the tax and investing in research and development to help increase production efficiency to cut costs.
The FDA Makes Major Moves
US - The US Food and Drug Administration (FDA) is becoming much more active in packaged food regulation. In November 2013, the agency announced plans to phase out trans fats in foods. The move was not met with much of a backlash from manufacturers, who have largely been removing trans fats from their products for the last decade. Additionally, the FDA proposed new rules for nutrition labels in February 2014. The new proposal, which will be subject to lengthy review, would include adding a separate line for sugars added to food as well as more accurate representations of serving sizes.
Health and Wellness
Protein-enhanced products in the spotlight
CANADA - With healthier nutrition in mind, Canadian shoppers are showing an interest in protein-rich packaged foods. Protein snack bars are among the beneficiaries of this trend, with healthy growth in volume and value terms. The consumer base is expanding beyond those leading physically active lifestyles and is increasingly notable in households with children, with parents looking for healthier snacks during school time. The demand benefits leading sports nutrition brands as well as specialised brands like Quest bars, with the overall category contributing to the positive trend in snacks bars in Canada.
Lactose-free dairy sees rapid growth
COLOMBIA - Over the past five years lactose-free dairy has seen rapid growth in volume sales, driven mostly by UHT milk. The increasing incidence of lactose intolerance, mainly among adults, has driven demand and attracted new consumers to this category. In addition, lactose-free yoghurt has been introduced under the Alpina and Zymil brands, and, in flavoured drinks, Alpina has staked its ground with its oatmeal drink offers. In cheese, the lactose-free offer is much more limited, with mozzarella cheese from Colquesos as the most noteworthy example.
Gluten free positions as a healthy differentiating factor
COSTA RICA - The availability of gluten-free products has significantly increased in Costa Rica since 2013. The celiac-orientated local company Jinca Foods recently emerged based on offering a gluten-free product portfolio, which includes its own product development of bakery pre-mixes, flours, superfoods and seasonings, while importing complementary brands, such as Ener-G, and Glutenfreeda. Besides word-of-mouth advertising and use of the internet, gluten-free-orientated companies have benefited from support from major supermarket chains.
Marketing/Promotional Activities
Magnum did it again! Unilever is constantly on top with marketing campaigns
ECUADOR - Unilever Andina Ecuador created a quite successful marketing campaign to generate more brand recognition of its ice cream brand Magnum. Between February and May 2014, the Magnum Store was available during the first 45 days in Guayaquil and then in Quito. For US$2.50, consumers could create their own personalised Magnum, with mixes of toppings that ranged from marshmallows to salt. The “store” was located in one of the main shopping centres of each city, and it was very successful, as queues were huge and, on some days, the store had run out of raw materials long before closing time.
A benchmark in social media strategy
DOMINICAN REPUBLIC - Comunidad Rica, fresh milk leader Rica’s Facebook page, is the country’s largest online community for packaged food by far with more than 100,000 likes. This strong, and still growing, community enables Rica to launch promotions for products that leverage Rica’s brand umbrella and engage targeted consumers with high levels of interactivity. Brand recognition drives significant traffic to the community, allowing Rica’s evaporated milk to enjoy a strong springboard to compete with more established competitors like Nestlé’s Carnation, with promising results. Social media is underutilised for most packaged food brands, and the example of Comunidad Rica should be a catalyst for closing that gap.
Successful advertising activity carried by multinational PepsiCo Inc
PERU - In April 2014, Lay’s by PepsiCo, launched its “The Flavour’s Cup” campaign, in which it will progressively launch five new flavours: four based on international flavours and one inspired by Peruvian cuisine. Consumers will vote online for their favourite flavour, and participate to gain money prizes as well as choose the next permanent addition to the company´s portfolio of chips/crisps. Up to now, the flavours launched have been inspired by international cuisine from Italy, France, Brazil and Argentina. To date, the launches have rapidly raised their awareness thanks to a good level of distribution and strong advertising through Facebook, where consumers are encouraged to give their opinion.
Packaging
Single-serving packs shape new product developments
BOLIVIA - In 2014, new product launches were influenced by single-serving packs. As more consumers snack on the go, growth continues to be seen. For example, La Suprema by Molino Andino is a packaged/industrial cake priced at BOB1.50. It is widely available through modern and traditional grocery retailers and is quickly becoming popular thanks to its price. Also following this trend is Industrias Venado’s Kris line of chips/crisps and extruded snacks. It is expected that this trend will continue as lives get busier and consumers look for alternatives when it comes to snacks.
Scientists are developing the next generation of food packaging technology
CHILE - Researchers from the Packaging Laboratory of Nanoscience and the Nanotechnology Development Centre of the Universidad de Santiago de Chile are currently developing new food packaging that includes nano-composites with antimicrobial properties in order to optimise quality. Although this is a fairly new project and is still under development, this research in applied science may offer the possibility of extending the lifespan of packaged food and could contribute to the growth and development of the national packaged food industry, particularly for products that spoil quickly, such as vegetables, meats and dairy.
Cheaper packaging lowers unit prices to boost sales
GUATEMALA - In several packaged food categories, leading companies have begun to lower unit prices by introducing cheaper packages. Guatemalans tend to be price sensitive, and they are usually willing to switch between brands if they can save money. Therefore, it is a very positive thing for companies to have cheaper packages without sacrificing product quality. For example, Alimentos Kerns de Guatemala introduced its black beans Ducal brand in flexible packaging, which is more affordable than the traditional metal food can. In the baby food category, Enfamil from Bristol-Myers Squibb de Guatemala SA is introducing a new packaging for its milk formula, which is in folding cartons.
Regulatory Environment
Price controls to fight inflation
ARGENTINA - In the government’s constant battle to cap rising inflation, it has set an outdated policy of price controls on consumer goods, aimed mostly at packaged food. The programme started in late 2013 with 500 products under strict surveillance, although, less than a year later, it contained just 167 out of the original 500, and it is only intended for modern retailers. Thus far, the natural consequence of this policy has been product shortages on the shelves.
New regulations limit sales of snacks at schools
URUGUAY - Long-delayed regulation on the type of food that may be sold at school kiosks and nearby retailers has finally been approved, to be applied starting with the 2014 school season. The regulation basically bans the sales of snacks, especially alfajores, chips/crisps, extruded snacks and carbonated drinks, and puts an emphasis on healthy food and drinks. Difficult to be enforced, sales are still being made by retailers located near schools, but, once the government implements punitive measures, companies will have to adapt their marketing strategies to avoid losing volume sales.
Differentiation becomes difficult in the context of product shortages
VENEZUELA - Retailers have faced continued obstacles in trying to pursue effective differentiation strategies as a result of product shortages that have become more frequent and more serious. Differentiation based on price, variety or customer services are difficult because the shortages affect all retailers, and prices are forced to be in line with government decisions. Kromi Market is a good example. This brand operates two supermarkets in Valencia and was created to target upper-middle- and middle-income groups, with a wide range of items and improved customer services. Nevertheless, supply restrictions now position the brand as very similar to other supermarkets.
What to Expect
Looking ahead, packaged food in the Americas will continue to flourish, with new innovations driven by convenience, health and wellness, packaging, flavours and product personalisation. Sales in North America are being propped up by the adoption of value-added healthier options, while traditional products look to diversify their offering to keep up. Latin America offers huge rewards as the emerging middle class will drive sales. Smart and calculated positioning for long-term development will require careful analysis not only on a country-by-country basis, but also within diverse income brackets in a given geography. Richer consumers are expecting and demanding more than ever before. Lately, companies have responded creatively and, importantly, must keep up with social media to promote and engage their customers. Similarities and contrasts abound between Latin and North America, although, in all cases, continued success hinges on the ability of manufacturers to identify and adapt to changing lifestyles and consumption preferences.