Flavours for food and beverages in Europe 2021

Flavours for food and beverages in Europe 2021

Regions in the Spotlight 12-23 April 2021

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Contents Flavour innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The impact of COVID-19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Top 5 growth areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Extracts and concentrates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Adult beverages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Plant-based foods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Snacks plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Sauces and dressings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Natural flavours and technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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European flavour market outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Key takeaways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Bringing the global food and health ingredients industry together digitally

Regions in the Spotlight 12-23 April 2021

Health Ingredients in the Spotlight 14-18 June 2021

Plant-Based Ingredients in the Spotlight 13-17 September 2021

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Flavour innovation Flavour innovation plays several roles in consumers’ experience of food and drink, such as providing a wide variety of flavours regardless of the season, helping create healthier products without compromising on taste, and as a way to make flavours from scarce resources accessible to more people.1 The flavours industry invests about 10% of its income in innovation and R&D, according to the European Flavours and Fragrances Association, compared to the EU average of 2.18% across industries.2 However, COVID-19 has had a major effect on how, what and where consumers eat and drink. In turn, this has affected flavour suppliers, both in terms of quantity and the types of flavours that are in demand most.

The impact of COVID-19 Jamie Rice, Director of Global Trends and Insight at Foodtrending said:

“New product innovation has been put on hold. The majority of food and beverage manufacturers are focusing on manufacturing and delivering their core products to the supermarkets, often with reduced staff.”3 Speaking at Fi Europe CONNECT 2020, Rice told delegates that flavour houses have had to respond to shifts in category sales, as sales of flavours related to foodservice have declined, including those for meat and poultry, carbonated soft drinks, alcohol and cheese.3 Meanwhile, consumers are eating more plant-based foods, confectionery, and snacks, so sales of flavours for these categories have increased.3 Rice said that;

“For the moment, flavour innovation is very much on pause, as food manufacturers and retailers focus on feeding the population. However, a new pattern is slowly starting to emerge and companies who are flexible and innovative will be best placed to face these new challenges.”3

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Flavours for food and beverages in Europe 2021 | 3

5Top growth5areas for natural flavours growth areas

1. Extracts & concentrates

2. Adult beverages

3. Plant-based food

Demand for natural extracts is growing faster than flavours or seasonings, the market in Western Europe is growing at a rate of 8.7% y-o-y.

Consumers are shunning traditionally carbonated beverages in favour of naturally low sugar alternatives - with sophisticated flavours and positive health messages, fuelling growth in lowcalorie alcoholic and adultorientated soft drinks.

Interest in plant-based is at an all time high, fuelled by Covid-19, concerns over food safety and health benefits. The market for plant-based food is forecast to grow at rates of up to 13% per year depending on the category.

◾ Extracts and concentrates are being used in new and emerging categories, flavours are moving towards savoury and herbal.

◾ Rise in mood enhancing and immunity boosting beverages, fuelled by the Covid-19 pandemic.

Requires less sweet, more sophisticated flavours.

◾ Plant-based is moving from lifestyle to luxury, from sweet to savoury – flavours need to work with new trends and technologies.

4. Snacks + Covid-19 has seen consumers increase in sales of comfort and indulgent food products, including snacks, confectionery and biscuits.

Healthy snacks are moving beyond low fat, low salt to positive vitamin and immunity benefits.

◾ Snacking is changing.

Health no longer means low fat or low salt –snacks now need to have a positive health benefit – from immunity to gut health.

5. Sauces & dressings Increased demand for convenience food, prepared salads, meat and poultry products and meals, is driving increased use of industrial sauces and dressings – a small but fast growing part of the market.

◾ Sauces and dressings are used to naturally add flavour. Flavours need to reflect latest cuisines and consumer trends.

Source: Foodtrending presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours”4

Foodtrending has identified five growth areas for natural flavours: 4

1. Extracts and concentrates Demand for extracts and concentrates is already growing at around 14% per year, according to Foodtrending data, faster than any other flavour technology. Rice predicts that this growth will continue, driven by the clean label trend as well as positive health connotations associated with extracts, powders and oils.5 This makes such flavours particularly well-suited to several growing categories, such as beverages for immune support, functional dairy products and alcohol alternatives.6

2. Adult beverages Consumer demand for healthier beverages has increased during COVID-19, and this is an important market for natural flavours.7 Jamie Rice, Director of Global Trends and Insight at Foodtrending said;

“We are seeing sophisticated flavour combinations being used in a new breed of adult-oriented beverages, offering consumers a healthier alternative to traditional sugary carbonated soft drinks and alcohol. COVID-19 has also accelerated growth in immunity boosting and mood enhancing beverages – another growth area for suppliers of natural flavours.” 8

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Fever-Tree Mexican Lime Soda

TRIP CBD INFUSED Elderflower Mint Lightly Sparkling Drink

“Our Mexican Lime Soda is made with Tahiti lime from Mexico’s fertile groves in addition to pressed oil extract from the wonderfully floral Japanese yuzu to create a low-calorie soda that’s perfect for mixing with premium vodka or tequila for a mouth-wateringly zesty summer spritz.”9

Ingredients: water, elderflower extract (1%), fruit juice from concentrate (grapefruit, apple), rooibos, lemon balm, chamomile, mint (0.2%) natural sweetener (steviol glycosides), flavour enhancer (erythritol), ginseng, L-theanine, CBD (15 MG)10

Source: fever-tree.com9

Source: drink-trip.com10

3. Plant-based food Interest in plant-based food is at an all-time high as consumers look to naturally boost their vitamin and mineral intake and increase their immunity.11 Although still a small part of the overall market, plant-based food is fast growing and has moved rapidly from alternative proteins to a range of innovative fruit and vegetable-based alternatives.12 Rice said that;

“Here we very much expect to see new trends – such as plant-based ice cream, and new technologies such as clean meat, all requiring flavours – to grow over the next few years.”13

Abbot Kinney's Coco Frost Mango & Passionfruit Organic Ingredients: 60% fermented coconut milk * (coconut milk *, thickener: locust bean gum *, yogurt cultures), cane sugar *, 9% mango *, 7% passion fruit juice *, glucose syrup * (corn, agave syrup *), water, stabilizers: locust bean gum *, guar gum * , emulsifier: sunflower lecithin *.14 * = of biological origin.

Source: abbotkinneys.com 14

Flavours for food and beverages in Europe 2021 | 5

4. Snacks plus Snacking has taken off during COVID-19. Healthy snacking used to be about low fat and low salt products but a new trend is starting to emerge: snacks with a positive health benefit, from gut health to immunity boosting snacks. The snacks category has always been a large user of seasonings, and a growing snacks market means increased use of these types of natural flavours, but now the focus is on snack flavours that can communicate positive health benefits.

Boundless Activated Nuts & Seeds Tamari & Aleppo “The Umami One: Salty tamari soy and hot Aleppo pepper combine to create the ultimate umami experience.

Ingredients: almonds, cashew nuts, pumpkin seeds, sunflower seeds, tamari (soya) (8.3%), cider vinegar, aleppo flakes (2.2%), sesame oil.”15

Source: weareboundless.co.uk 15

Fennel & Chia Seed Snacks “The unique taste of fennel seeds combined with the nutritional punch of chia seeds produces a savoury snack that does more than fill the gap. Fennel is loaded with manganese and rich in powerful antioxidants. Chia seeds are packed with nutrients including magnesium, calcium, fibre and quality protein”16.

Ingredients: Apple Puree, Sunflower Seed, Linseed, Chicory Root Fibre, Chia Seed (10%), Rice Protein, Buckwheat Flakes, Rice Flour, Hemp Seed, Fennel Seed (1.7%), Sunflower Oil, Himalayan Pink Salt, Blue Poppy Seed, Pink Peppercorns17.

Source: pepandlekker.com16

Berlin Organics PROTECT Protein Balls with Strawberry & Hibiscus Ingredients: rice syrup *, sunflower seed protein *, almonds * natural (15.5%), cranberries * dried (cranberries *, apple syrup *, sunflower oil *) (9.25%), inulin *, ground hibiscus blossom * (2.2%), Acerola * powder (acerola *, maltodextrin *) (2%), dried strawberry ground * (1.6%), almond flour * (1.5%), maitake fruit body extract * powder (0.75%) (Grifola frondosa) *from controlled organic cultivation18 Source: berlinorganics.de18

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5. Sauces and dressings A small but overlooked part of the market, sauces and dressings will play an increasingly important role over the next few years, Rice said, fuelled by growth in convenience products such as pre-prepared salads, meat and ready meals.19

Natural flavours and technologies Natural flavours have increasingly become the norm in Europe, as a large proportion of consumers aims to avoid artificial additives and preservatives. According to research from EIT Food, 29% of Europeans say avoiding artificial ingredients will continue to be more important post-pandemic.20 The definition of ‘natural’ has been a sticking point for many years, and Jamie Rice, Director of Global Trends and Insight at Foodtrending suggests a better question: How are today’s food and beverage products flavoured? He said;

“This brings us to a wider and more appropriate definition for today’s food industry, as foods and beverages can be flavoured in many different ways, including ingredients that are not necessarily added or defined as a flavour.”21

With that in mind, natural flavours can be defined in the following ways: • Natural flavours: from plants or raw materials • Seasonings: industrial mixtures of herbs and spices • Flavouring materials: concentrated juices, plant extracts, vegetable powders and oils • Marinades, rubs and glazes: especially used for meat products • Stocks: concentrated for gravies and sauces, or spray dried for snacks • Sauces and dressings: bulk liquid sauces bought by food manufacturers22

Flavours for food and beverages in Europe 2021 | 7

How food and beverages are flavoured, naturally

How food and beverages are flavoured, naturally 2.6%

Sauces & Dressings

6.3%

148 357

Stocks

Liquid sauces bought in by food manufacturers. Used in meat and fish products, salads and meals.

42.3%

2402 Seasonings

Industrial blends of seasonings, herbs & spices.

Used in meals, snacks and pizzas.

Natural stocks, used for flavouring gravies and sauces.

Retail

10.6%

602

Marinades

Rubbed or tumbled on outside of meat as surface flavour or glaze. Includes wet and dry.

Used in meat products.

Out-of-home 1069

18.8%

Flavouring materials

Juices, extracts, powders and concentrates. Used in soft drinks and alcoholic beverages.

1102 Share of market By flavour technology, 2019 ______

19.4%

Natural flavours

Flavouring substances from plant or raw materials. Widely used in soft drinks and dairy products.

ource: Foodtrending - Global Flavour & Ingredients Market Database

Source: Foodtrending presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 23

European flavour market outlook According to Foodtrending data, the European market for flavours was worth $9.8 billion in 2020.24 This is the total market for flavours in all food and beverage products, defined as natural flavours, juices, extracts and powders, (industrial) seasonings, herbs and spices, and process flavours. Natural flavours make up a large and dynamic proportion. Sales of natural flavours were worth $5.7 billion in 2019, an increase of $1.1 billion compared to 2017.25 The market for natural flavours is growing at 11.7% a year, faster than many other food and beverage categories in Europe.25 In volume terms, Western European companies bought more than 983,000 tonnes of natural flavours in 2019, an increase of 103,000 tonnes compared to 2017.25 Rice said that:

“We have seen how flavour technology has changed dramatically over the past ten years. Gone are the days of simply adding a flavour. Suppliers now need to offer a wide portfolio of flavour products and technologies depending on the category and the customer. Therefore, it is now more than ever important to understand the size of the market and growth in demand for these technologies.”25

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Key takeaways • Flavour and new product innovation have paused during COVID-19, but some new growth areas are beginning to emerge • Sales of plant-based foods, confectionery and snacks have risen, as have flavour sales to these categories • Extracts and concentrates are the fastest-growing category of flavours • Demand for clean label and health benefits are key drivers of flavour innovation across categories • Natural flavours encompass a range of technologies beyond traditional flavouring compounds • The market for natural flavours is growing at 11.7% a year • A wide range of flavour products and technologies is needed to respond to customer and category demands

The information provided here was compiled with due care and up to date to the best of our knowledge on publication.

Sources https://www.effa.eu/flavourings/world-of-flavourings https://ec.europa.eu/eurostat/statistics-explained/index.php/R_&_D_expenditure Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 4 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 5 https://www.mdpi.com/journal/foods/special_issues/benefit_plant_extract_health 6 https://www.figlobal.com/content/dam/Informa/figlobal/fieurope/en/2020/documents/HLN20FIE-GM-Shifts_In_Demand_for_Health_Ingredients-Report.pdf 7 https://www.globenewswire.com/news-release/2021/01/07/2155073/0/en/Global-Functional-Beverages-Market-Report-2020-2030-COVID-19-Impacts-Growth-and-Changes-The-Report-Recommends-Companies-Should-Focus-on-Providing-Immunity-Boosting-Beverages. html 8 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 9 https://fever-tree.com/en_GB/products/mexican-lime-soda 10 https://drink-trip.com/products/elderflower-mint 11 https://proveg.com/what-we-do/corporate-engagement/plant-based-food-sector-report/ 12 https://proveg.com/what-we-do/corporate-engagement/plant-based-food-sector-report/ 13 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 14 https://abbotkinneys.com/vegan-ice-creams/coco-frost-mango-passionfruit 15 https://weareboundless.co.uk/collections/entire-collection/products/tamari-and-aleppo-sharing-bag 16 https://pepandlekker.com/shop/fennel-chia 17 https://etico.store/product/seed-snacks-fennel-chia-seed-5-x-30g/ 18 https://www.berlinorganics.de/bio-protein-balls-protect 19 https://www.eitfood.eu/media/news-pdf/COVID-19_Study_-_European_Food_Behaviours_-_Report.pdf 20 https://www.eitfood.eu/media/news-pdf/COVID-19_Study_-_European_Food_Behaviours_-_Report.pdf 21 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 22 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 23 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 24 Jamie Rice, Foodtrending via email, 24 February 2021 25 Jamie Rice, Foodtrending, presentation at Fi Europe CONNECT 2020, “Five growth strategies for natural flavours” 1 2 3

Flavours for food and beverages in Europe 2021 | 9

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