Between 1999 and 2004, Mintel International reports the sugar-free food and beverage market--defined as carbonated beverages, gum, desserts, condiments and mints--grew a healthy 24% in constant 2004 dollars and is poised for great performance in coming years. Mintel forecasts steady, inflation-adjusted, annual returns of 2.4%, and an overall growth of 32% (12% at constant prices) between 2005 and 2009. While a large number of factors contributed to the market's recent success, some that spurred double-digit growth include spillover effects from recent diet crazes, i.e., Atkins and South Beach, as well as artificial sweetener innovations.
Other, more consistent factors, such as the increasing number of Americans with diabetes, and a heavier, aging population, have fueled the steady growth of the market and will continue to do so. The growing number of American consumers willing to make small changes in their diets for weight reduction and improved health will be able to facilitate these changes by using sugar-free foods and beverages.
However, lingering suspicions and beliefs continue to intimidate a significant portion of consumers surveyed, making them wary of purchasing foods and beverages with artificial sweeteners.
Market Breakdown and Corporate Activities
Carbonated beverages, the largest segment of the sugar-free food and beverage market (accounting for some 81% of the total market), is a crowded sector, with little room for innovation. Nevertheless, in 2004, Coca-Cola released a fractional sugar product, Coke C2, and PepsiCo released Pepsi Edge. Both also have launched new formulations of their products using sucralose as a sweetener, rather than aspartame.Between 1999 and 2004, only the desserts segment of the sugar-free food and beverage market grew at a noticeably more sluggish pace (9%) than other segments. Owing largely to marketplace crowding, the desserts category experienced a slight decline between 2000 and 2002. While renewed interest in the sector spurred 7.2% growth in 2003 alone, it was still insufficient to outpace inflation.
Despite being the two smallest segments, condiments and mints demonstrated the most impressive growth over the period--26.1% and 33.3%, respectively. Among condiments, strong fruit-flavorings, able to mask the taste of artificial sweeteners, and high calorie/serving-size ratios in sugared condiments, made for ready conversions to sugar-free status. Dramatic changes in mint packaging (e.g., replacing rolls with tins), reversed years of decline in the segment, bringing 78.4% growth in 2004 alone.
On an individual company level, much of the market growth has been organic. The hungry pace of acquisitions by Cadbury Schweppes affected products throughout the sugar-free food and beverage market. Cadbury Schweppes, one of the leaders in this arena, also has a hand in the carbonated beverages sector--with Dr Pepper, 7-Up, and Diet Rite, as well as gums and mints, with the strong Trident and Dentyne brands. Between 2002 and 2004, the company grew some 38% and came to control 18% of the entire market.
Diet Crazes
Whether Sugar-busters, Atkins, South Beach or just plain calorie-counting, a significant portion of the most popular diets of the 21st century's first decade has called for reduced sugar consumption. These recent diet trends have helped intensify America's appetite for sugar-free foods.Mintel's Global New Products Database registered the launch of 739 new sugar-free food and beverage products in 2003, and an additional 1,364 new products in 2004. These introductions straddled categories, including Nestle Kids Frozen Treats, Pepperidge Farm sugar-free Milano Cookies, sugar-free Jelly Belly beans, Monin sugar-free syrups, and even sugar-free ice cream offerings from Dean's.
Mintel's consumer research revealed appreciable differences in the way consumers feel about the specific artificial sweeteners: 56% of respondents note an appreciable difference in safety and quality between different types of artificial sweeteners. Clearly a taste, safety and value hierarchy is attached to artificial sweeteners, and the consumer-branded product Splenda (sucralose) is currently at the top. In 2004, while only 10 new products containing the consumer brand Sweet 'N' Low (saccharin) were launched in the U.S., 130 contained the consumer brand NutraSweet (aspartame), and 352 had Splenda.
Sucralose has made a huge splash as an ingredient brand across all segments. Leading the charge in its use among sugar-free jams and jellies has been Smucker's, a brand long partial to artificial sweeteners. Taking maximum advantage of consumers' perceived differences in taste and safety of particular artificial sweeteners, Smucker's line now includes products explicitly sweetened with the branded aspartame as well as sucralose, in both fractional formulations and products with “no added sugar” labeling.
Steady Factors
In addition to strong sales of sugar-free foods and beverages to women, evidence suggests men are getting more excited about diets and diet foods. Heretofore less inclined than their female counterparts to purchase and consume sugar-free foods and sodas, male consumers increasingly have become inured to them, with a full 31% of men and 41% of women reporting usage of diet soda. This reversal is particularly noticeable among younger male consumers. However, in other sugar-free segments, such as condiments, the trend is reversed: while only 20% of surveyed consumers aged 18-24 used sugar-free condiments, 31% of consumers aged 65+ did so.Many consumers in Mintel's sugar-free food and beverage survey revealed underlying suspicions about foods containing artificial sweeteners: 64% were concerned about the safety of such foods. Respondents also demonstrate nearly universal agreement (81%) that sugar-free foods do not taste as good as those made with real sugar.
Yet, when it comes to parenting, many consumers are willing to sacrifice concern for convenience. Nearly half of all surveyed parents with children under 18 in their households report feeding their children sugar-free sweets rather than sugared sweets, in efforts to prevent tooth decay, hyperactivity and excessive calorie consumption.
Nearly half of the consumers surveyed (48%) believe sugar-free foods are more expensive than they are worth but continue to shop for them in the same venues they always have. Despite significant efforts of mass merchandisers and drug stores to grow their grocery sections, the vast majority of consumers (more than 85%) prefer to shop for sugar-free foods and beverages in supermarkets.
A Future of Fractions
Though many food categories have been affected by the recent success of the sugar-free food and beverage market, one notable exception has been ethnic foods. Outside of the RAB Food Group's sugar-free offerings, the ethnic foods category has seen precious little sugar-free activity. The increasing amount of shelf space dedicated to the segment in large supermarket chains makes this food genre a ready target for manufacturers, marketers and retailers of sugar-free foods. In addition, some ethnic groups are in dire need of sugar-free food products. According to recent Centers for Disease Control (CDC) estimates, the incidence of diabetes among Hispanic-Americans is nearly twice the national average.Effective consumer research by large food manufacturers such as Post has led to the release of a new category of sugar-free food and beverage products: partial- or fractional-sugar products. Some 56% of surveyed consumers were interested in half-sugar products. These “fractional foods,” made with one-third to one-half of the sugar of traditional versions of the same product, often are touted as tasting virtually the same as whole-sugar versions, but with significantly reduced caloric impact. Because the use of such products is consistent with the ways in which many American consumers conceive dieting--the sacrifice/indulgence notion, and the ability to satisfy cravings while allaying guilt--such products are bound to be a sales success.
This article contains information from the Mintel Report “Sugar-free Food and Beverages-U.S.-June 2005.” Please visit http://reports.mintel.com for more information or call Mintel at 312-932-0400.
