When discussing predictions about the future of any market, it is always wise to also ponder the present. Joe Derochowski, director of business development for NPD Foodworld, offered a look at the past, present and future in “Eating Patterns in America.” One important lesson to learn, said Derochowski, is the relative weight to give trends in the market when making decisions.

In spite of what common knowledge would suggest, coffee drinking actually has been on the decline for over 20 years—even away-from-home consumption. Yet despite this seemingly difficult environment, Starbucks emerged as one of the biggest success stories in recent years.[Ed.’s note: Since this speech, recently released roasting volume indicates coffee consumption is once again growing.]So how did its founders create a billion-dollar brand in a declining market? “It is not always about the trend,” Derochowski explained. “Often, we forget that it is size of the market. A big behavior that is declining does not necessarily mean that there is a lack of business opportunity.” When pondering Starbucks’ success, consider that 32% of breakfasts include coffee and 37% of all restaurant breakfasts include coffee. It is the number-one item consumed for breakfast, and Starbucks recognized and capitalized on that opportunity.

Conversely, many audience members were surprised to learn that consumption of fried chicken has been growing strongly, again in the face of an oft-noted trend that would suggest otherwise. The NPD Group tracked consumer behavior and identified the rise in fried chicken prompting an important observation from Derochowski: “It is behavior that is important to track, more so than the trends. What are Americans currently doing?”

Examining food-dollar trends, he found that most meals are still prepared in the home. Some 50% of the food dollar is used in the home while the remaining 50% pays for more than just food when spent elsewhere. Most of the away-from-home food dollar goes toward the service, the building and a restaurant’s overhead costs. However, when it comes to the actual food itself, 76% of all meals are eaten in the home and 22% in the restaurant.

While coffee consumption has declined steadily in recent decades, a company centered around coffee has emerged as one of the industry’s biggest success stories over that time. New and diversified products definitely have played a role.

Domestic Battles

The home is the main arena for dining and has been for some time. However, at-home dining has been declining. Over the past 21 years, home meal consumption has dropped about 39 meals per person. Surprisingly, Americans are not eating out more, either. Quite the contrary, the percent of meals made and eaten at the restaurant has declined over the same time period, and on-premise dining is at its lowest point in the past 20 years. The growth in the restaurant segment has been at the take-out level, and even that has flattened out in the past three or four years. Derochowski reports that about 50% of take-out purchases are actually brought back home, while eating in the car has been growing.

Would a better question be: What influences consumers most when it comes time to make dining decisions? Labeling, health warnings, concerns about obesity and other health-related news and fears have been widespread throughout the media, yet health/wellness registered no better than sixth on the list of reasons consumers gave for what impacts their food selection. Topping the list were convenience concerns: simplicity, ease of planning and no time-consuming cleanup. Less-complex meals are the ideal for today’s consumer. “The complexity of the meal is declining,” Derochowski observed. Consumers also have discovered that less is more when it comes to increasing convenience: “The meal will always have a main dish and will always have a beverage, but side dishes are declining.”

With all the worries about convenience, what about obesity and health concerns? “As Americans gained weight over the years,” Derochowski explained, “they have adjusted their perception of overweight. Simply put, their attitudes about overweight changed.” In turn, they became less conscious about caloric content (though it remains the number-one statistic considered on the nutrition label), and label-reading in general is likewise expected to decrease. One interesting observation is that over the past 16 years, Americans have not been dieting any more or less. When the low-carbohydrate trend emerged, all it did was steal dieting market share.

Meanwhile, the number of overweight consumers in this country appears to have peaked. It has to stop somewhere, Derochowski reasons. Regardless, he believes the important factor is not whether it is growing: the key is that it is 64%. He was quick to note that health is and always has been a major concern for consumers. However, most of the new products that have highlighted health benefits have been more about being new than they have been about being healthy.

The More Things Change

That being said, are Americans really changing their eating patterns? A look at the top-selling products from 10 years ago does not show much of a change. In 1996, the top 10 products were:
1. Sandwiches
2. Carbonated soft drinks
3. Milk
4. Vegetables
5. Coffee
6. Fruit
7. Juice
8. Potatoes
9. Ready-to-eat cereal
10. Bread

Structural change is not as frequent as many might suspect. For instance, carbonated soft drinks, despite some decline, remain near the top of consumers’ favorites list.

In 2006, nine of those 10 remained the same; the only change was that salty snacks replaced bread. What does the future hold? Based on past performance, Derochowski believes that by 2016, nine of those 10 will remain the same. Put simply, structural change is rare. Consumers may alter the favored brand, flavors or type, but the fundamental structure does not change as quickly as some may believe.

Take sandwiches, for example: in 1986, the number-one sandwich was ham; in 1996, it was also ham; and in 2006, ham again finished in the top spot. Eight of the top 10 sandwiches from 1986 made the 2006 list, which was completely unchanged from the 1996 findings. Of the top 10 restaurants determined in 2001 and 2006, eight of the top 10 were the same. “The order may change; the degree may change but, structurally, change is within parameters,” he opined.

Which segment has seen the biggest change over time? It is actually a decline: toast. Interestingly, from 1985 to the 1990s, ready-to-eat cereal was hitting its peak, most likely a reflection of its convenience. The 1990s also saw bagels emerge—a competitor from within. Around 2001-02, came the low-carbohydrate diets. “Remember,” he cautioned, “it is not just about your products, not just about brand competition. There is a broader context that companies are always battling amongst.”

The 2006 New Products Conference “Future of Foods Panel”: from left, Michael W. Pariza, PhD, Food Research Institute, University of Wisconsin; Joe Derochowski, director of business development with NPD Foodworld; and Steven Steinborn, partner with Hogan & Hartson LLP.

Sides Kicked

The desire for quicker and more convenient meals is leading to a long-term structural change in the way Americans eat and drink. Side dish consumption is eroding as dinners become one-dish meals. Nevertheless, there may be opportunities for side dishes.

Derochowski explains that consumers, as they age, are much more likely to eat side dishes, albeit choosing easier to prepare options. Consider this: the empty nester population will grow by about 27 million annually in the coming years, most of them 50 and older. (By comparison, the Hispanic population is growing by about 12.5 million people a year.) These empty nesters are much more likely to have medical conditions requiring dietary adjustments. In fact, 58% of them will have health concerns, and more physician-prescribed dieting will be seen among that group. Some 50% lack the recommended daily allowance of folate, vitamins B6, C, A and E, calcium and magnesium. These factors may well position this group to serve as an agent for the type of structural change Derochowski mentioned.

In the midst of this change, it is important to note one characteristic shows little sign of changing: mothers remain the key to the food dollar. Some 80% of meal planning still falls on her shoulders, as does 79% of the grocery shopping, 79% of meal preparation and 72% of the cleanup. “This evening, mom will prepare 53% of all dinners,” Derochowski predicted. “Restaurants will do about 17%. Roughly 3% will dine as a guest at someone else’s home—an all-time low.”

Could “from-scratch” preparation be the next agent of change? Granted, only 59% of all meals are fresh or prepared from-scratch, a trend that is steadily declining. “However, at the end of the day, it is big,” he explained. Remember coffee: a declining trend, but one that hid an undiscovered opportunity. “There is an opportunity. Can you help the consumer manage fresh? The fresh trend is biggest among home-made sandwiches: 51% say it is important for food to be fresh when bought.” However, the portion who “completely agree” with that statement has shown a decline.

Trend experts might suggest otherwise, but a look at actual consumption patterns shows the top 10 food and beverage items consumed has changed little over the past decade and are not expected to alter much in coming years.

Label Able

Communicating to those consumers is challenging, to say the least. Often, legal input is the best way to determine how to channel the message in a way that will inform consumers adequately but not mislead them and create regulatory problems. The second portion of the “Future of Foods” Panel featured Steven Steinborn, partner with the Hogan & Hartson Group, offering his take on the current regulatory environment and its future. He notes that on the federal regulatory front, the FDA is focusing all new resources into food safety and biosecurity, with little focus on nutrition. Limited resources likely will result in limited FDA enforcement and as a consequence, the marketplace could become somewhat erratic, due to the greater prospect of state and local enforcement. Within the next two to three years, however, FDA is expected to update the nutrition facts panel, once it can find the resources to do so. Additionally, the USDA’s prior-approval system “while antiquated and not terribly efficient, exists and will for some time to come,” says Steinborn. He recommends companies build in time to deal with USDA’s process.

With more than a dozen health claims approved, there are not many areas of diet and nutrition remaining where gold-standard science supports an unqualified health claim, so Steinborn predicts there will be far fewer claims approved in the next few years. When it comes to qualified health claims, the FDA has gotten very tough: more companies are receiving negative responses from the FDA or long, qualified health claims that are not terribly effective as marketing tools.

Steinborn discussed a number of “hot” issues facing the FDA:
  • Probiotics, from a regulatory standpoint, exemplify the challenge of developing the science and communicating it in a way that is meaningful to the consumer. Translating is the key, and he advises companies make sure the benefit associated with the ingredient is translated into the food being sold. Another key factor is to make sure the claims do not get ahead of the science. Furthermore, the totality of scientific evidence is the gold standard: do not cherry-pick studies to fit one specific need or desire. Important questions to consider include: Is the study good enough, and were there enough subjects?>
  • Steinborn believes organic is “here to stay,” and like low-fat and some other claims, there is a regulatory structure already in place. For those companies that qualify, the term has a great deal of meaning, and concerned consumers also benefit from the existing strict requirements. What if a company is not willing to make the organic leap? “Natural seems to be the poor man’s organic,” opined Steinborn. “It has some working definitions. None are terribly well defined, and it is not a term that lends itself to easy definition.” The USDA’s definition of “natural” is distinct from the FDA’s and might offer a hint to the direction the definition is headed. The term is “ill-suited to regulation,” and varying use of the term may diminish its marketing value and utility. “It may, to the point that consumers see little benefit from the presence on the label,” Steinborn foresees, noting he does not believe there will ever be a regulation for natural.
  • Structure-function claims do not require government pre-approval (an example is “calcium builds strong bones”). “Good science can get you where you want to be without having to ask the government,” Steinborn related. “Look in a medical text; if you can find a diet/body relationship in a medical textbook, then the chances are it is a structure-function claim.”
  • For the most recent dietary guidelines, a guideline committee with FDA and USDA input gave a detailed scientific discourse underlying all the recommendations, a trend that Steinborn believes will surely continue. He likewise suspects the guidelines will increasingly influence how companies can communicate to consumers and, therefore, companies should deal with the regulatory issue now and recognize their limitations.
  • Steinborn has been trying to get a handle on satiety and recognizes it is difficult to find an objective benchmark. There are so many different factors: psychological, social, environmental—that it is not easily measured. Furthermore, an objective claim without any substantiating proof can lead to trouble. A few of the questions that exist include: Are studies needed? How long does the fullness last? How full is full?
  • Marketing to children will increasingly be debated, and Steinborn cautions companies to be aware of the new guidelines restricting advertising to children and to be well aware of the media outlets where children might be in the audience.

The days of the side dish appear to be numbered, as time-pressed consumers are turning to one-dish options to trim preparation times.

Risky Business

Michael W. Pariza, PhD, with the Food Research Institute at the University of Wisconsin, described trends to watch in coming years as part of “Six Issues to Consider in ’06.” The first on his agenda was the precautionary principle: “the idea that if there is any risk at all, we should err on the side of safety. However,” he believes, “conservative assumption on top of conservative assumption on top of conservative assumption can lead to no action at all.”

For instance, he has heard of a recommendation in Europe so unwieldy that it is impossible to implement. In Europe, roughly 25,000 chemicals are used at a level of a ton or greater every year. The recommendation is to test each and every one. Pariza argues there are not nearly enough facilities to achieve that goal. He believes that if any such outlook migrated to the U.S., it would make for a significant roadblock to innovation.

Proposition 65 in California is a voter initiative that stipulates labeling for substances in a food product that the state has deemed carcinogenic or having genotoxic effects. Pariza believes the assumptions being made are extremely conservative, and the trend has not moved much beyond California.

The stage is set for a “Big Fat Food Fight,” he foresees. The lawsuit against McDonald’s is back in court, as of October 11. That was the day Judge Robert Sweet determined the suit claiming the fast food giant played a role in leading to a pair of teenagers suffering obesity had merit.

Other health concerns, though health benefits in this case, were Pariza’s subject when discussing nutraceuticals. This topic was defined broadly to include health food store products as well as common ingredients in food that might offer claims. “While it is important to consider whether these are GRAS (generally recognized as safe),” he notes, “it might be more important to consider if they are GRASP—generally regarded as scientifically proofed.” Important concerns include:
  • Is the ingredient safe? FDA considers whether it is safe under the intended conditions of use, which partially explains why dose is important.
  • Next to be considered must be effectiveness. What kind of a claim may be developed? An overt claim is getting more difficult to get.
Additionally, Pariza finds acrylamide may be a regulatory issue at some point, and glycotoxins could well be a topic to consider in the future. Similarly, he notes a gallery of pathogens—prions, E. coli, etc.—that are all-natural, 100% organic and a concern every step of the way, and nothing could put a company out of business quicker. Food bioterrorism also must be considered, and Pariza hopes “procedures are in place to make sure plants are secured—suppliers too.”

Looking to the future, he cited nanotechnology. This science deals with products smaller than 100 nanometers, of interest because chemical properties change at those minute levels. Some nanotech patents exist, but it will move slowly in the food industry, which probably will be the last industry to embrace it. While there may not yet be a legal definition, the industry is not too far away from a scientific definition. “In the end,” he concludes, “science will provide rational perspective, if followed correctly.”

Website Resources:

www.ncbe.reading.ac.uk/NCBE/GMFOOD/menu.html— “That Was the Food That Was” explains how it became so difficult for modified foods to appear in the U.K.

www.npdfoodworld.com— NPD Foodworld

www.wisc.edu/fri— Food Research Institute

www.fda.gov/bbs/topics/NEWS/2006/NEW01508.html— FDA’s “New Tools to Help Consumers Use the Nutrition Facts Label”

www.caru.org— Children’s Advertising Review Unit