The Changing Consumer and the Transparency Imperative March 2017 Deb Arcoleo Director, Product Transparency @debarc darcoleo@hersheys.com linkedin.com/in/deboraharcoleo
A little about Hershey Consumer perspective The trust issue in the food industry The imperative for transparency Implications
PRODUCTS AVAILABLE IN PRODUCTS MADE ~ $7.4B 18,000 OVER 70 IN 7 NET SALES EMPLOYEES COUNTRIES AROUND COUNTRIES THE WORLD 85% of products sold in the U.S. are manufactured in the U.S
We are a purpose-driven organization
We approach sustainability broadly • Environmental sustainability • Engaging workplace • Responsible sourcing • Global giving • Ethics and integrity • Volunteerism • Education and nutrition for children
New goals announced in late 2015
We are working extensively to support cacao farmers in West Africa 70% of the world’s cocoa is grown in West Africa, primarily on farms of 5-10 acres • Good farming practices, farm safety, labor practices and health information delivered to any farmer in Ghana and Côte d’Ivoire via mobile phone text
We are working extensively to support cacao farmers in West Africa • Farmer training started in 2012 on best practices in sustainable cocoa farming to improve farmer livelihoods and promote their incomes • T ouches 464 communities in Ghana, Cote D’Ivoire and Nigeria and 31,000 farmers enrolled (goal is 70,000) • Leads to UTZ certification as a producer of sustainable cocoa, which means premium payments for their cocoa https://youtu.be/koc3QW3jbsI
We focus on childhood education and hunger in Ghana and the U.S.
A little about Hershey Consumer perspective The trust issue in the food industry The imperative for transparency Implications
Quiz: Who eats chocolate confection? 81% of adults in the U.S., and Millennials more than any other age group Mintel, Chocolate Confectionery – US, March 2016
How is it changing? Mintel, Chocolate Confectionery – US, March 2016
Consumers are increasingly concerned about what goes into their food and where it comes from
Top drivers of demand for transparency ALLERGENSAND USE OF PESTICIDES CROSS-CONTAMINATION GMOs ANIMALWELFARE FARMER S’ AND FARM SUSTAINABILITYAND WORKERS ’ FINANCIAL RESPONSIBLE INGREDIENT WELL-BEING SOURCING
62% of consumers have recently sought information on sustainable products – they increasingly read packaging labels on the products they purchase and turn to the internet for more in- depth information The Hartman Group, Transparency Report, 2015
These trends are not limited to the coasts, but are mainstream think it’s important to understand how 67% their food is produced want to know more about where their food 65% comes from would like to see the food industry take 66% more action in educating people on how food is produced Emerging Faith in Food Production, Sullivan Higdon Sink, March 2014
Over a third of consumers say they do not have access to all of the food-related information they need Have Enough Access Unsure 20% No 15% Yes 65% Yes No Unsure Center for Food Integrity, 2016 Consumer Trust Research
For decades, taste, convenience and price have been the purchase drivers in food Deloitte study:
Now, 50% of consumers make purchase decisions beyond those traditional factors Deloitte study:
Across all demographic groups, a majority of people believe a product with fewer ingredients is healthier Mintel, Free-From Food Trends, US, May 2015
The top ten claims consumers would most like to see 38% 36% 33% 33% 19% 18% 18% 15% 12% 10% Mintel, Free-From Food Trends, US, May 2015
Foods with free-from claims perceived to be healthier, more natural, less processed Trans fat-free Preservative-free Growth hormone-free GMO-free Sodium-free Nitrate/nitrite-free Cage-free/Free range Lactose-free Allergen-free Free-From Foods Trends – US, Mintel, May 2015
Food companies must pay close attention to consumers perceptions and desires Top Ingredients AVOIDED Top Ingredients SOUGHT Reimagining Health and Wellness, Hartman Group, 2010
Food products are being reformulated in response to consumer demands ■ Clean labels and shorter ingredient lists with simple, familiar ingredients are the new standard, coupled with a rise in “nothing artificial” and “free - from” claims. ■ Major brands and food service providers have announced or pledged to remove artificial ingredients, colors, flavors and/or preservatives from their products, including Kellogg, General Mills, Nestle, Hershey, and Kraft as well as McDonalds, Panera Bread and Chipotle. ■ In the US, 22% of food and drink product launches had a no additives or preservatives claim, a 31% increase since 2011 Ingredients & Additives Global Annual Review, Mintel, January 2016
• Removal of artificial flavors and reduction in sodium in frozen pizza and snacks • Whittled down ingredient list in Stouffer’s Lasagna from 19 to 15 http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/09/Why_Nestle_changed_its_lasagna.aspx?ID=%7BF2DC6A8B-E273-49D1-9BB7-D79EA09A11FD%7D
• Commitment to source cage- free eggs by 2025 • Removal of artificial preservatives from Chicken McNuggets • Debuting new buns without high-fructose corn syrup http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/08/McDonalds_announces_major_menu.aspx?ID={65036C03-35E3-4A24-AA6F-6D5929E547FC}
• New Old El Paso taco shells made with three simple ingredients • Lärabar uses only fruit, nuts, and spices • Häagen-Dazs uses only fresh cream and other high- quality natural ingredients • Synthetic dyes removed from Trix cereal http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/07/Four_trends_translate_to_growt.aspx?ID={C4BE5CCF-6316-4E1C-8EC6-3A594784D84B}
• David Simply Seeds with reduced sodium and no artificial flavors or preservatives • Snack Pack Naturals made with simple ingredients and no artificial flavors or colors http://www.foodbusinessnews.net/articles/news_home/New-Product-Launches/2016/07/ConAgra_innovation_touting_org.aspx?ID={8C5FDC6A-A1E4-4373-B03A-4C106BA36BB0}
• Since 2015, we have transitioned more than 500 product SKUs to simple ingredients, including the iconic Hershey’s Kisses Milk Chocolates and Hershey’s Milk Chocolate Bars • Introduced new Hershey’s Simply 5 Syrup made with five simple ingredients and no high-fructose corn syrup or artificial preservatives and flavors • Reformulated all varieties of chocolate baking chips to contain no artificial colors, no artificial flavors and no artificial preservatives
Too far?? PURCHASE, N.Y. — G Organic, a line of U.S.D.A. certified organic Gatorade brand sports drinks, is debuting this fall from PepsiCo, Inc. Available in lemon, strawberry and mixed berry varieties, the beverages contain seven ingredients, which include water, organic cane sugar, citric acid, organic natural flavor, sea salt, sodium citrate and potassium chloride. http://www.foodbusinessnews.net/articles/news_home/New-Product-Launches/2016/08/Gatorade_launches_organic_vari.aspx?ID={571269D2-B630-45F1-8622-65A85EF931CA}
A little about Hershey Consumer perspective The trust issue in the food industry The imperative for transparency Implications
Consumers primarily hold food companies responsible for transparency across all food topics FoodCompanies Farmers GroceryStores R es taurants Impact of food on health Impact of Food on Health Food safety Food Safety Environmental impact Environmental Impact Labor & human rights Labor & Human R ights Animal well-being Animal Well-Being BusinessEthics Respondentsallocated 1 0 0 pointsacrossthe groupsresponsible for providing information in each transparency topic.The numbersshown are the average number of pointsallocated to each group,acrossall respondents. Center for Food Integrity, Consumer Trust Research, 2015
Food companies are at the bottom as trusted sources of info on food safety and types of food to eat Groups more Groups more Types of food you should be eating Food safety likely to trust: likely to trust: Registered Age 50-80, 70% 70% Age 50-80 Dietitian/Nutritionist Women Your personal healthcare Age 50-80, Higher 65% 57% income, Higher BMI professional 37% 52% Men US government agencies Health-focused Website, 31% 31% such as WebMD 24% 19% A friend or family member 23% Age 18-49 17% Fitness professional Age 18-49 16% Age 18-34, Lower income Farmer 18% 13% 11% A food expert on TV Health, food and nutrition 13% Age 18-34 14% Age 18-49 bloggers Food company or 8% 10% Men manufacturer 2016 n=1,003 International Food Information Council Foundation, 2016 Food and Health Survey
A “big is bad” bias among consumers is creating trust issues Likely to Put Their Interests Ahead of Consumers’ Interests 57% 47% Large Food Companies Large Commercial Farms Small Food 29% 27% Family Farms Companies Center for Food Integrity, Consumer Trust Research, 2015
The agriculture industry would benefit by being more transparent Emerging Faith in Food Production, Sullivan Higdon Sink, March 2014
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