Cornetto price drop linked to falling sales

What are the motives behind Unilever dropping the unit price of Cornetto and what it could possibly means for the local impulse ice cream market?, asks Lianne van den Bos, Senior Food Analyst, Euromonitor International.

Take-home ice cream is the dominating category for Australasia, North America and Western Europe where manufacturers' efforts lie in making ice cream a year-round treat – and thus a planned purchase. For the remaining regions, impulse ice cream is most popular and underscores the fact that ice cream consumption is traditionally linked to warm weather and is thus bought on impulse.
 
In markets such as Australia, where consumers on average buy the most ice cream in the world, the top three players capture over 64 per cent of ice cream sales, with the retail landscape geared towards the ice cream powerhouses Unilever and Nestlé.
 
However Unilever’s market share in Australian ice cream has dropped by 4 per cent over 2010-2015. As a result, the company has developed a new strategy for its Cornetto brand, not only in Australia, but also across a number of other countries.
 
Unilever’s new strategy for the Cornetto brand looks to be making the brand a snack that competes directly with chocolate confectionery countlines by lowering the unit price significantly. 

In fact in Australia, Unilever has announced it will reduce the brand from a recommended AUS$3.20 to just AUS$2, in line with the average threshold of around AUS$2 per serving in chocolate countlines. With this drastic reduction Unilever wants to ‘unlock growth for Cornetto and bring new consumers to the category through this ‘loose change’ offer’.
 
By lowering the price of Cornetto to something in line with a standard chocolate bar, Unilever is positioning its ice cream as a much more affordable impulse snack. This tactic is an interesting way of growing the share of impulse ice cream in a market facing a dominant but stagnating take-home ice cream sector, which is typical across several large developed markets.

Maggi noodles get a Morogo makeover

A new variety of Maggi noodles is using a common plant that some people dismiss as a weed. 

‘Morogo’ or ‘South African spinach’ refers to different varieties of green leafy vegetable that grow wild in South Africa, and a popular dish of the same name. 

Traditionally, these vegetables formed a much-loved part of the nation’s diet, but urbanisation and changing attitudes to food in the countryside have led to a decline in their popularity.

Much as Europeans have traditionally foraged for mushrooms, generations of South Africans have gathered morogo (which is high in protein, vitamins and minerals), to fry, boil or steam, and serve with onions or tomatoes.

In its new format, morogo is causing a stir on South African supermarket shelves. Until today it has never been farmed on a serious commercial scale, but now Nestlé is using morogo in the ‘tastemaker’ sachet used to flavour and fortify its Maggi noodles.

“Many packaged food brands claim to cater for local tastes, but Maggi with morogo genuinely does so. We’re offering people an authentic taste of South Africa and bringing a nutritious ingredient to urban dwellers, in particular, through a product that is quick and easy to prepare,” said Maarit Rein, a scientist working at Nestlé Research Center in Lausanne, Switzerland.

The new Nestlé noodles developed out of a partnership with South Africa’s Council for Scientific Investigation and Research (CSIR) and Agricultural Research Council (ARC) from 2012, to research plants growing there with clear health benefits, for potential use in foods to improve the nation’s diet.

Taste, nutritional quality and abundance were three things that the scientists were looking for in an ingredient. It had to be possible to process it for use in a food product, and it was vital that the ingredient provide farmers with an income source. Crucially, it also had to appeal to millions of South Africans.

Nestlé and its partners decided to research three species of morogo – amaranthus, cow pea and cleome – and worked closely with farmers to perfect their cultivation, and to refine the plants into a powder that preserved their nutritional benefits.

Nestlé’s consumer research also showed that Morogo’s distinctive ‘South African taste’ is integral to its appeal across all ethnicities and income groups.

But it’s not just the taste that appeals, as Rein explained: “Using such a healthy ingredient is consistent with Nestlé’s commitment as a responsible company to promote vegetable consumption.”

Maggi noodles with real morogo are now being produced at Nestlé’s factory in Babelegi, north of Pretoria. If the launch proves successful, then Nestlé will work with farmers and the government, to develop the morogo supply chain and create lasting social value in South Africa.

“This remains our long-term goal,” says Rein. “But I’m proud of what Nestlé and our partners have already achieved with morogo over the past three years.”

Nestle Japan offers the ‘golden ticket’ of chocolate with luxury Kit Kats on sale for $23 per stick

A new golden Kit Kat bar has been released by Nestle in Japan this month to appeal to rich chocolate lovers.

500 single bars will be made and sold only in Japan at 2,016 yen ($23) per finger. Nestle Japan has produced more than 200 flavours –ranging from strawberry to green tea and wasabi –since introducing the chocolate in 1973.

Nestlé’s limited edition gold Kit Kat has been described as having a rich, bitter chocolate taste –the product will go on sale at chocolate boutiques in eight chocolate boutiques in eight department stores, from Tokyo to Sapporo in the north, and Fukukoa in southern Japan.

According to Nestle Japan spokesperson Melanie Kohli, Japan is a unique market in which a golden Kit Kat can be made a luxury product.

“In Japanese convenience stores, consumers are used to having new varieties all the time. It’s a special occasion, to celebrate the end of the year,” Kohli said.

Since Japan has a culture of bringing regional gifts back for family and work colleagues after trips away, Kohli believed that it was the only countries that linked its regional culture to chocolate. 

Nestle study shows probiotics foods to assist the immune system

A new study published by Nestle in the Journal of Allergy and Clinical Immunology has shown that heat-treated probiotics can act on cells to provide a balance for the immune system.

Probiotics are bacteria that are essential for human immune health, but they are mainly used in foods in a live form. Heat-treating probiotics remove the ability to replicate, a move which could help researchers develop more effective probiotic products such as infant formulas and drinks, with a longer shelf life.

The study explores how live and heat-treated forms of the probiotic affect immune cells through environmental factors.

Lead researcher Dr Carine Blanchard, from the Nestle Research Centre says a probiotic strain can deliver immunity benefits when heat-treated and existing in a neutral state.

“We tested several strains and actually when you heat treat stains for a lot of them the pro-inflammatory signalling goes down…and IL-10 production increases so they move toward a more immune-regulatory profile, so you can change the way probiotic influences the immune system,” Blanchard said.

Researchers found that both forms of the probiotic led to a greater production of interleukin-10 (IL-10), a protein that is vital for immune health in humans, but that the heat-treated probiotic was more effective. 

Nestlé recognised as ‘world leader’ in helping to tackle climate change

Nestlé has been acclaimed as a ‘world leader’ for its work to tackle climate change by sustainability ratings agency CDP, with the company one of only 64 out of over 2000 to claim the highest possible score in the prestigious annual ranking.

Nestlé heads CDP’s (formerly Carbon Disclosure Project’s) Climate A List with a 100 A score, for actions including the introduction of technologies to further optimise energy use to reduce emissions, including greenhouse gases (GHGs).

Nestlé is working with farmers to help them use water more efficiently, and has lent financial support to buy biogas digesters at dairy farms, to generate renewable energy and cut methane emissions. The company is also committed to preserving natural capital, and ensuring suppliers respect its ‘No Deforestation’ commitment.

Food waste is a major generator of GHG emissions, and Nestlé recently strengthened its commitment to reduce it, by announcing that it would achieve zero waste for disposal at its sites by 2020.

“Nestlé is committed to providing leadership on climate change, and we’re honoured to receive this accolade from CDP, which shows we’re on the right track,” said Magdi Batato, Executive Vice President and Head of Operations.

With the world’s water resources under threat from climate change, CDP recently commended Nestlé separately on the ‘excellent’ results of its water stewardship activities, which are also guided by public commitments.

Over the past decade, Nestlé said it has invested heavily in water-saving projects at factories, and a further CHF 62 million on community water projects with international agencies.

The CDP award comes after Nestlé received an industry-leading score of 99 per cent in the ‘environmental dimension’ of the 2015 Dow Jones Sustainability Index.

The 700 chocolate bars that could help save tonnes of packaging

In a sealed room deep inside a Swiss laboratory, 700 bars of chocolate sit neatly side-by-side, wrapped in transparent packaging, attached to sensors, exposed to light for 24 hours a day.

It might sound like the indoor farm of a chocoholic’s fantasies, but this is not a magic recipe for cultivating ready-made confectionery.
What’s being propagated here is knowledge. Knowledge, that could ultimately help save tonnes of packaging every year.

Information gap
Here’s why: some products are more sensitive than others to elements such as moisture, oxygen and light.
Not enough is known about the extent to which these ‘degradation factors’, as scientists refer to them, affect sensitive products over the course of their designated shelf lives.
The lack of precise data available, as well as the methods for gathering it, can lead manufacturers to overestimate the level of protection a product’s packaging needs to provide.
The problem? Generally speaking, the higher the barrier a packaging material offers, the more complicated its structure and the potentially greater its environmental footprint.
The more accurately you can predict a product’s sensitivity over a specific period of time, the more easily you can identify optimal packaging materials that will still keep it fresh.
Critical point
“There’s almost no such thing as a perfect barrier when it comes to packaging,” says Robert Witik, the scientist leading the study at the Nestlé Research Center in Lausanne.

People may think no oxygen gets through plastic, for example, but different types of plastic are actually permeable to different degrees.
"One of our goals here is to identify the critical point at which the amount of oxygen a product consumes begins to have an impact on its taste and quality."
In other words, how much oxygen does the chocolate bar need to react with before it goes off?

Test groups
Before they could begin their tests, Robert’s team had the painstaking task of wrapping each of the 700 individual chocolate bars in different packaging materials with varying properties.
“We’ve divided the bars into groups and packed them under different storage conditions,” he explains.
“Some are wrapped in packaging with a high oxygen barrier, while others are wrapped in packaging with a low oxygen barrier.
“We’ve also adjusted the level of oxygen inside the packaging, so some bars have more oxygen between chocolate and wrapper than others.”
Accelerated situation
What doesn’t vary in this experiment is the light, which the chocolate is exposed to continuously, and at the same intensity.
“In normal circumstances the product would never be subjected to this much brightness,” says Robert. “This is an accelerated situation.”
To discover exactly how much light the chocolate would see in reality, the team is conducting a parallel study that simulates its journey through the supply chain.
They’ve taken another set of bars, packed them in same conditions, and are moving them from periods of dark to light to dark again, mimicking their passage from warehouse, to shop, to kitchen cupboard.

Data driven
Back to the first lab, where over the next few months the scientists will be measuring the amount of oxygen the bars consume, using delicate sensors attached to chocolate from the different test groups.

Every 30 days, they send a handful of bars from each group for another type of test: this time with sensory experts, to see if there has been any loss of quality and taste.
In the long run, their findings should enable the company to calculate how much oxygen chocolate will consume when packed in a given material under specific conditions.
But the research is not only about chocolate. This is just the start. Robert and the team are already studying other products to establish a methodology that could be applied to Nestlé’s entire portfolio.
Their aim is to feed all the information they collect into a ‘shelf-life prediction tool’ they’re developing to help packaging engineers across the company to make more informed decisions about the packaging they select.
“Packaging materials can be very complex, with many layers performing different functions,” says Robert. “So choosing the right material is a very technical process.
“We want to help our engineers take a more data driven approach to what’s known as packaging ‘optimisation’ – better matching the performance of packaging with a product’s actual protection requirements.”

Challenging convention
Providing packaging engineers with an improved means of selecting material to ensure a product’s quality and safety over a particular shelf life is one aspect of this research.
Challenging conventional wisdom is another.
The scientists are also trying to encourage product managers to question the duration of the shelf life they’ve assigned to a particular product in the first place.

Why? Let’s say a product is given a shelf life of 24 months, but in reality people consume it within nine.
The chances are it’s being ‘over packed’ in an unnecessarily high level of protection.
Shortening its shelf life, and adjusting its associated packaging requirements, can be a simple but highly effective way of improving its environmental performance.

Public pledge
It’s a lesson Nestlé has learnt thanks to a recent pilot project in the Philippines.
Using information they already had on how moisture affects powdered beverages and coffee mixes, its researchers re-examined the shelf lives accorded to some of these products.
By tailoring the shelf lives, and so revising the packaging specifications that went with them, the company has managed to reduce the amount of packaging used by 1,500 tonnes annually.

All of this work contributes to Nestlé’s public commitment to improve the environmental performance of its packaging, with a pledge to avoid the use of at least 100,000 tonnes by 2017, while guaranteeing the safety and quality of its products.

Future proof
Although at first glance, wrapping up 700 chocolate bars and leaving them on a shelf for months may not appear to be contributing to this target, the long-term gain is clear.
The closer Nestlé can get to predicting exactly how certain products will react to different conditions, the less packaging those products will require.
So while scientists may not have a formula for growing your own confectionery, they might have found a way to ensure some of your favourite products are more sustainable in future.
It’s hard to imagine even the most dedicated of chocolate lovers being disappointed by that.

Nestlé JV set to add cream and confusion to its global ‘nutrition’ portfolio

It has been a very busy few weeks for food behemoth Nestlé. Currently it is in advanced discussions to launch a joint venture with British ice cream manufacturer R&R, owned by private equity firm PAI Partners. 

Those whose memories last longer than two weeks will remember that the company has repeatedly stated that it aims to become a leading manufacturer in the health and wellness industry. So what does this move mean for the allegedly health-focused Nestlé asks Jack Skelly, Euromonitor’s International’s confectionery expert.

Although cynics may suggest that Nestlé has an extremely flabby definition of what constitutes “health”, the reality is that indulgence is an extremely important source of revenue for the company. 

In 2014, confectionery, ice cream and frozen dessert sales accounted for nearly a third – or US$24 billion – of the company’s total food sales. 

Of that US$24 billion, 49 per cent stems from Western Europe and North America. However, these are two markets where many snacking companies are enduring a difficult time, with chocolate confectionery sales achieving just 2 per cent and 4 per cent CAGRs, respectively. By broadening the reach of Callier, Nestlé has smartly moved into the premium segment of chocolate, which is substantially outperforming the overall chocolate market in these two regions.

Nestlé is looking to consolidate its share in a number of fast growing markets, including Egypt, Brazil, and Western Europe. Combined, ice cream and frozen desserts have grown by US$4.9 billion in these three markets between 2010 and 2015. In the latter two markets, the company is significantly overshadowed by Unilever, the world’s largest ice cream manufacturer with 21 per cent global market share. Nestlé has been underperforming, seeing market share decline from 12 per cent to 10 per cent over the last five years.

Both Nestlé and Unilever have been selling off their slow growing food business parts, but ice cream is seen as a growth area, with the global market set to rise to US$107 billion by 2020, up from US$71 billion currently. 

Nestlé has a long-standing working relationship with R&R, with whom it has licensing agreements in place in a number of countries. R&R is extremely strong in Western Europe, where it manufactures a vast range of private label products and ice cream for the likes of Mondelez and Mars.

The company has needed to focus on reversing the fortunes of its ice cream business in Western Europe for some time. Thus, the joint venture is certainly in harmony with a strategic priority for Nestlé.

The partnership with R&R also provides Nestlé with a number of options in ice cream. It could move into a more premium, dairy based ice cream mould. 

This is something that Unilever has had significant success with in relation to its Magnum, Carte D’Or and Ben & Jerry’s ranges, which have contributed an additional US$658 million in sales in Western Europe since 2015. 

However, given Unilever has so effectively cornered this market, an alternative option is to focus on the mass market. Given R&R has extensive expertise in producing private label goods, which are generally aimed at as wide an audience as possible, this could be logistically easier to achieve.

In the medium term, Nestlé certainly has the financial wherewithal to purchase R&R outright. Whether the company will do this is a different question. Certainly, it goes against the health message that features so prominently in Nestlé’s annual reports and investor calls. 

It may be that Nestlé will stay true to its newly found principles, and eventually spin off its ice cream division in several years’ time. However, considering R&R has already been subject to cost-cutting measures during the tenure of PAI Partners, it will be interesting to see how Nestlé could possibly improve efficiencies further, and how it could boost values further. 

Ultimately, with R&R providing such a useful fit, and with ice cream being such a significant cash generator, we may hear Nestlé continue with its Janus-faced approach to business for some time to come.

Euromonitor International Food Analyst Lianne van den Bos noted that, "If the venture goes ahead, Nestlé will be further removed from its aim to be the world’s leading nutrition, health and wellness company. In 2014, a third of Nestlé packaged food sales were generated by its ice cream and chocolate divisions, combine that with its recent global launch of premium Swiss chocolate brand Callier and the company’s health and wellness vision is becoming blurred."

Ski launches new lite yogurt

Yoghurt Company Ski has announced a new range of Ski D’Lite that contains 25 per cent less sugar. 
 
“We’ve been working hard to improve Ski D’Lite’s formulation to offer families a healthier, delicious way to start the day and we believe we’ve achieved this with the 25 per cent less range,” said Brent Whelan, Category Marketing Manager for Yoghurt at Fonterra. 
 
To celebrate the launch of the new 25 per cent less sugar formulation, Ski D’Lite has also released a new branded content campaign titled ‘Practically Perfect’.
 
The advertising campaign is targeted at ‘Practically Perfect’ mum whose job it is to juggle work, home, kids, social commitments and family.
 
The new Ski D’Lite provides a lower sugar content "unlike many other low fat flavoured yoghurt," the company said.

KitKat set to go 100% sustainable

KitKat is the first global chocolate brand to announce that it will use only sustainably sourced cocoa to manufacture all of its products, and will do so from early 2016.

The brand already uses only sustainably sourced cocoa, accredited by independent third-party bodies, in products sold in certain markets, but this new announcement extends the practice worldwide, including the United States.

Sandra Martinez, Head of Confectionery for Nestlé, said: “We’re delighted to be a flag bearer for the industry, as the first global chocolate brand to announce such a move.

Sustainable cocoa sourcing helps safeguard the livelihoods of farming communities and delivers higher quality cocoa beans. This announcement will only strengthen consumer trust in KitKat as a responsible brand.”  

The initiative, which coincides with KitKat 80th birthday, is part of what the company said is “Nestlé’s commitment to source 150,000 tonnes of sustainably produced cocoa by 2017 via the Nestlé Cocoa Plan.”

“The Nestlé Cocoa Plan aims to improve the lives of cocoa farming communities and the quality of the cocoa Nestlé purchases,” the company said.

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