The new year is here, and SPINS is ready to dive into what we think will be the top trends to watch in 2024, focusing on premiumization vs. inflation, sustainability, and allergy polarization.
Premiumization vs. Inflation
As we navigate the natural products industry in 2024, the landscape is evolving from a price-centric focus to a strategic emphasis on promotions. Recent data indicates a decline in inflationary pressure, especially in everyday pricing across the grocery department. This sets the stage for a nuanced exploration of the dynamics between premiumization and inflation, paving the way for a new era where promotional strategies take center stage.
Changing Dynamics & Leveraging Price Reductions
Despite inflation worries, food prices are stabilizing, with declining severity in price hikes. The shift towards promotions is evident, with values increasing since January 2022. Brands invested an additional $18 billion in promotions in 2023, emphasizing a strategic move towards enhancing promotional volume and average discounts.
Successful trends include leveraging price reductions for true unit sales growth. Subcategories like performance supplements and snacks experienced success in 2023 due to increased promotional activity, showcasing the potential of a well-executed pricing and promotional strategy.
Choosing the Right Strategy & Consumer Spending Amid Inflation
Brands and retailers should consider a combination of premiumization and promotional approaches. In 2023, the most significant lift percentage came from strategies combining features and displays, aligning pricing decisions with overarching business objectives.
Consumers, grappling with rising costs, have cut back on spending, with 80% adjusting in 2023. Grocery expenses take center stage, with 61% expecting increased expenditures on groceries compared to other retail verticals. The e-commerce landscape mirrors this shift, with grocery sales rising by 22% from 2022 to 2023, while luxury items experienced a stark decline of -66%.
In the face of economic fluctuations, the natural products industry is embracing promotions over premiumization. A strategic blend of pricing approaches is essential for sustained success, defining 2024 as a year marked by innovative promotional strategies that ensure resilience and prosperity in the sector.
Sustainability
In the ever-evolving marketplace, sustainability stands as a key consideration, encompassing three overarching themes: animals, planet, and people. Unlike external factors that force change out of necessity, sustainability is often viewed as an optional "initiative" rather than an imperative movement by the mass collective.
Shopper Priorities & Diets and Consumer Trends
Despite the growing importance of sustainability, shoppers continue to prioritize price, convenience, taste, and health over ecological considerations. Successful sustainability brands share a common trait: authenticity. Merely being sustainable isn't enough; shoppers seek a genuine connection beyond environmental attributes. Taste plays a crucial role, with appearance, aroma, flavor, and texture influencing choices. The premiumization trend, driven by added benefits, quality, exclusivity, emotional connection, and brand reputation, continues to shape consumer preferences.
Americans are embracing diets with low sugar, protein-rich options, and a focus on natural ingredients. The winners in authenticity moving forward will need to align with these dietary choices while addressing the multifaceted nature of consumer motivations.
Winners of Authenticity
Looking ahead, brands aspiring to win authenticity should focus on brand messaging, circular process, and packaging.
While being proud of sustainability initiatives, brands must recognize that authenticity plays a pivotal role. Consumers want to feel empowered to make a difference through sustainability without compromising on taste, health, or convenience. The winners of tomorrow will seamlessly integrate these elements, offering a holistic and authentic approach that resonates with the evolving priorities of the conscious consumer.
Allergy Polarization
Food allergies continue to impact a growing number of individuals, with 8% of children (approximately 6 million) and 11% of adults (at least 26 million) in the U.S. affected. Notable allergens include peanuts, milk, shellfish, and tree nuts, with 40% of allergic children reacting to multiple foods. Recent changes in allergen guidelines, specifically recommendations from the American Academy of Pediatrics (AAP), have sparked debates in the industry, influencing product formulations and marketing strategies.
Shifting Allergen Guidelines & Market Trends
Contrary to previous guidelines that advised delaying the introduction of allergenic foods until age three, the AAP now recommends early and regular exposure. This shift comes as research suggests that early exposure to allergenic foods may reduce the risk of developing allergies. The intentional introduction of allergens in baby and toddler products is gaining momentum, challenging the historical avoidance of sensitive ingredients.
While 56% of baby and toddler food sales remain free of the Major 9 Allergens, there's an evident shift as new products are no longer shying away from allergens. Tree nuts and soy have taken center stage in over half of new items, with sales for tree nut allergen products experiencing a notable +31% increase. Peanut allergen sales are also on the rise (+12%), with brands offering innovative products like peanut butter puffs for early introduction.
Probiotics: A Potential Ally in Allergy Prevention
As brands navigate the allergen dilemma, a promising trend emerges in the form of probiotics. Ongoing research explores the use of prenatal and infant probiotics as tools to prevent food allergies. Probiotics, known for supporting a healthy gut microbiome, may reduce allergy risk by modulating the immune system. While further research is needed, the potential for probiotics, alongside vitamin D and omega-3 supplements, offers a proactive approach to allergy prevention.
The allergen landscape is evolving, driven by changing guidelines, market trends, and ongoing debates within the industry. Brands must carefully navigate this terrain, weighing the controversies of early allergen exposure against potential benefits. Probiotics emerge as a promising avenue, offering a holistic approach to supporting gut health and potentially preventing food allergies. As the industry continues to grapple with these complexities, staying informed and adaptive will be key to meeting the diverse needs of consumers in the evolving landscape of allergen awareness.
