Growth for niche brands

The fragmentation of consumers’ beliefs about health is contributing to the break-up of traditional food and beverage markets and opening the doors of opportunity for start-ups and small brands. This is according to Julian Mellentin, director of New Nutrition Business and author of 10 Key Trends in Food, Nutrition and Health 2016.

Key Trend 5: The Great Fragmentation explains how high volume opportunities are scarce and becoming scarcer, says Mellentin.

People’s ideas about food and health have become a menu of choices from which they select and change as new information becomes available.

This is producing a proliferation of niches that smaller companies and new brands – often premium – are perfectly placed to serve.

In the future, smart companies will only rarely launch mass market brands aiming to rapidly get high volume. Instead they will build portfolios of small brands, finely targeted at an increasingly fragmented consumer market. A few of these will become big brands, some will be big niche but most will remain niche.

The report gives the example of US giant General Mills as one of the few larger and more visionary companies already embracing the change. It has set up a new business unit – called 301 Inc – to invest in entrepreneurs and early stage food companies.

John Haugen, general manager of 301 Inc, says, “The rapidly evolving consumer landscape is dramatically changing the game in the food industry.”

As the great fragmentation moves forward, this new model will become the standard for large food and beverage businesses.

Meanwhile, Key Trend 7 illustrates the market redefining power of Plant-Based Foods and Beverages. Non-dairy plant ‘milks’ such as almond milk have seen sales jump by between 20% (Spain) and 50% (US).

This trend is not driven by beliefs in veganism or vegetarianism, but rather by consumers’ love of variety and novelty.

This trend has also been made possible by massive improvements in the taste of plant-based foods (which accounts for almond milk’s rise at the expense of soy milk), and by technical advances that make it easier to include plant-based ingredients such as beans and seaweed in good tasting snack formats.