News - Midlands
Sugar and Spice
Nanny state or constructive guidance - the jury is still out on government interference. But, as Lisa Miles discovers, food and drinks manufacturers are adapting to change.
Salt, sugar and suet pudding. Life used to be so tasty. These days everything is bad for you. Luckily the word on the street is that chocolate's panacean properties are making a comeback, so life can go on.
But food and drink manufacturers and retailers face pressure from government and from the consumer to make our diets healthier. And this, combined with increasing red tape on labelling and traceability, creates an expensive minefield that could damage the competitiveness of one of the Midlands' strongest sectors.
"The government's drive for healthy eating is having a significant impact on the way in which manufacturers operate," says Andrew Durbin, partner with Smith Cooper Corporate Finance. "One of our clients is taking the equivalent of two and a half African elephants' weight in fat out of their annual production and one African elephant's weight in salt. We may see more deals coming to fruition as businesses respond to these pressures and adapt their service offering to take advantage of these new trends."
In November the Public Health White Paper was released. Entitled Choosing Health, it detailed targets for improving public health from diet and nutrition through to alcohol and tobacco. Politicians have concluded that if people won't do what's good for them voluntarily, then it is down to the state to regulate their health.
But change does create opportunities for the fleet-footed and for companies that pursue a truly healthy product. "A lot of the large manufacturers pay lip service with healthy options that are marginally healthier than their regular product," says Stuart Grantham, associate director and member of the food sector team at Tenon Corporate Finance in Nottingham. "But something like an organic product takes time to grow and a true healthy eating market will start to develop."
Newark-based PJ Smoothies cannot help but benefit. "Our products are 100 per cent natural, so we are ideally positioned," says chief executive Andrew King. "We are clearly benefiting from health kicks and smoothies are a very good vehicle for getting five-a-day into your kids."
PJs, whose PR credits the company as having "single handedly created the UK's smoothie sector", has launched a major new branding programme and introduced two new flavours - apples and blackcurrants; blackcurrants and yoghurt. PJs leads the £332m UK smoothie market with a 41 per cent value share.
The key to the company's success, says King, lies in its ability to respond to consumer requirements and its in-depth knowledge of the product. "Some of the fruits in our Super Smoothies are pretty unknown, but performing very well for us. It shows not that consumers suddenly want dragon fruit in a smoothie, but rather they want to detox and are aware of chemical balance and nutrition," he says. "The role of a brand such as ours is to introduce people to the market."
In October Kingswinford-based Julian Graves, retailer of specialist snacks and ingredients, reported a healthy increase in sale. The purveyor of pumpkin seeds and unsalted nuts attributed its growth partly to heavy rainfall driving people into shops and partly to the success of Channel 4's fat-busting programme You Are What You Eat. The 220-store company also launched a month-long, £3125,000 TV advertising campaign.
Managing director Nick Shutts says: "The public's appetite for the foods highlighted in the programme created a huge demand for our pumpkin and sunflower seeds and brazil nuts. We had to find other sources for these products as our own suppliers weren't able to cope."
Like for like sales for June, July and August rose by 21 per cent on the same period last year. The company has also seen a 13.5 per cent rise in net profits since the start of its financial year in April. It was acquired by Icelandic retail group Baugur in December 2003 and has just embarked on a three-year expansion plan that will increase the number of stores to 310 by the end 2007.
All is well for businesses lucky or canny enough to have jumped on the health train. Not so easy if one of the main ingredients of your product is the government's pet hate: salt. Take bacon. Salt gives bacon its taste and its shelf life. Admittedly the curing process has evolved since the days when you could leave half a pig lying around on a hot summer's day, but bacon is still essentially salty.
The focus of business at TMI Foods in Northampton is bacon products. But the company has already devised new product ranges and new techniques to address its salt issues. Danish founder and non-executive chairman Steen Steenholdt has over 30 years' experience in the bacon trade.
"We don't feel under pressure directly from government, but we do have a lot of communication with our major customers on salt issues because they are under pressure," he says. "We are looking at several projects to reduce salt levels in bacon and we already have some up and running. Timewise it's costly because it requires a reformulation of recipes and affects shelf life, which means more frequent deliveries and higher costs."
There is still some way to go if bacon producers are to help in the government's quest to reduce adult salt consumption to below 6g a day. TMI is trying new flavours such as sweet cures with honey, apple and maple, as well as stronger natural smoke flavours. The £312m to £313m-turnover company is also innovating with leaner products.
Chris Brock, food cluster manager at the East Midlands Development Agency (EMDA) and former research and development director at British Bakeries, recalls the bakery industry's own battle with salt. "Go back around 20 years or so and bread contained about 2 or 2.5 per cent salt. Because it was one of the largest sources of salt, the industry came under pressure and so it reduced the salt content, gradually over a few months, to 1 to 1.5 per cent. It made a substantial reduction by weaning the public off it. The whole bread industry acted together and it became a barrier to changing back because bread would have tasted exceptionally salty."
But while healthy eating is - for now - still just an option rather than a legal imperative, food and manufacturers are obliged to respond to a raft of legislation and regulation. And, to maintain a competitive edge, balance the law with consumer trends. "Where do you start?" says Ron Reid, partner at law firm Shoosmiths in Northampton. "There is so much that is peculiar to food - health and safety, labelling, consumer habits. Regulation in health and safety is forever being increased. There is something new every day on the Health and Safety Executive (HSE) website.
"The biggest problem is inconsistency in the way regulatory authorities approach the same issue. Food safety is enforced by the environmental health officer from local authorities. There is supposed to be a consistent approach, but in reality what's one person's non-event is another's major concern. And trading standards officers at the county councils will also go on certain campaigns."
Reid gives the example of one county that is focusing on the origins of products and "getting itself into a complete lather" about whether the picture on a product is likely to be misleading as to where it was made. Companies that have never had a customer complaint will find themselves greeting an irkesome trading standards officer who claims that he was misled by the picture of a country cottage on their box of fudge. And as for calling your product 'traditional', don't even get them started.
"Many of our authorities do exactly what the regulation says," says Reid. "In other parts of Europe the regulations are not enforced in the same way. They have a better concept of proportionality. If no one is going to be harmed, they are not worried. We go to prosecution on the basis that someone might be harmed."
On 1 January 2005 new regulations on traceability come into force: retailers and manufacturers must be able to trace the origin of their ingredients up and down the line. In November 2004 amendments to labelling regulations mean that virtually every ingredient must be listed where previously anything that took up less than 25 per cent of the total was exempt. The EU has pinpointed 21 ingredients deemed to be the most common cause of food allergies - these must be clearly labelled.
Stuart Grantham, associate director and member of the food sector team at Tenon Corporate Finance in Nottingham, says that regulation is nothing new to the industry but that it is the manufacturers that will have to absorb the costs. "The cost of compliance will always be pushed to the manufacturer, not absorbed by the consumer or the retailer," he says. "There is going to be increased cost from increasing disclosure requirements on packaging. A large manufacturer has that ability in-house, while SMEs have to buy it in at a cost. We will start seeing an increase in businesses that provide analysis and laboratory work."
Grantham expects this pressure to lead to more consolidation in the ingredients sector. "The more power that sits with retailers and the more legislation that comes in, the harder it will be for small and medium businesses. The worst thing for a retailer is bad publicity. Retailers will make the decision to rely on the manufacturer to protect their reputation. They think: 'I don't want to appear on Watchdog with two times the salt as it says on the packet.' So they will use large and established business."
Food manufacturers argue that they are skilled at self-regulation. The Food and Drink Federation (FDF), voice of the UK food and drink manufacturing industry, continues to work with government on issues such as salt, health and safety and disclosure. But consumers are unwilling to pay more for healthier or newly labelled products and while retailers continue to push down prices, manufacturers have to look at ways of retaining flavour and quality while meeting the demands of new regulations and new trends.
The FDF is committed to working with the government to ensure more informative labelling. Its Food and Health Manifesto, published in September, agreed commitments to providing full nutritional information, even where not legally necessary; adding guideline daily amounts; reducing salt, fat and sugar levels; removing vending machines from schools and broadening vending choices. It is also addressing advertising and public education.
The Food Standards Agency is exploring ways to make labelling easier for the consumer to understand. But changes to labelling incur a hidden cost. Changing labels can be a time-consuming and costly process, particularly for small manufacturers that buy labels in bulk to keep costs down.
Red tape is the bugbear of any business. When there are more lenient locations available abroad, with cheaper labour costs on top, food and drink companies could be forgiven for moving production out of the UK. And if consumers fail to respond to friendly advice on the virtues of a low-salt diet and demand the return of salt-rich chicken nuggets, could the government resort to ruling with an iron rod?
"In one breath it's 'human rights'; in the next breath it's 'don't eat this'," says Reid at Shoosmiths. "At the moment they are trying to 'persuade' manufacturers to reduce salt and fat levels and if they can't get them to do it voluntarily, then they will legislate. They have been trying to persuade the drinks industry to voluntarily introduce smoke-free zones for a long time, but eventually their patience has been exhausted. Don't be surprised if we end up in a situation where there is regulation to limit salt or fat"
VIRTUAL NANNY
Aware that lecturing from the lofty heights of Big Ben or littering GP surgeries with piles of dog-eared leaflets is perhaps not going to get the message across, government is increasingly turning to the all-pervading power of the world wide web to encourage the pursuit of a healthier lifestyle. The idea is that if Joe 'web-surfer' Bloggs demands less salt in his chicken nuggets then manufacturers will have to oblige.
Out goes the strict, domineering matron approach (far too likely to incur references to a nanny state), in comes a hip and happening Mary Poppins style. Here are a handful of government sites designed to stop us dining out on a mix of fast food, alcohol and ashtrays:
www.salt.gov.uk
Meet Sid the Slug, whose father always said that salt was bad for you. A spin-off site of the Food Standards Agency (FSA) designed to help consumers make informed choices about the amount of food in their diets. It's a mix of serious advice and a more light-hearted approach from Sid and his games.
www.eatwell.gov.uk
A colourful FSA site on essential nutritional help from Vitamin A through to Zinc, with advice on obesity, labelling and food hygiene. More games, quizzes and easy-to-read tips.
www.food.gov.uk
The FSA website provides detailed information for the consumer and industry on a wealth of legislation and guidance from the UK and the EU. Includes information on genetically modified food, nutrition, hygiene, diet and health, BSE and labelling.
www.talktofrank.com
Cartoon people who say "dude" and persuade you that drugs, drink and cigarettes are like, so not cool, man. Plus a handy A to Z of drugs and their various nicknames.
www.givingupsmoking.co.uk
This site doesn't seem to work very well in the Insider office - possibly overwhelmed with hits. Advice on why you should give up smoking, how to do it and how to stay smoke free.
For the full story read on...
For the fuller picture,
subscribe to Insider
every month.
Salt, sugar and suet pudding. Life used to be so tasty. These days everything is bad for you. Luckily the word on the street is that chocolate's panacean properties are making a comeback, so life can go on.
But food and drink manufacturers and retailers face pressure from government and from the consumer to make our diets healthier. And this, combined with increasing red tape on labelling and traceability, creates an expensive minefield that could damage the competitiveness of one of the Midlands' strongest sectors.
"The government's drive for healthy eating is having a significant impact on the way in which manufacturers operate," says Andrew Durbin, partner with Smith Cooper Corporate Finance. "One of our clients is taking the equivalent of two and a half African elephants' weight in fat out of their annual production and one African elephant's weight in salt. We may see more deals coming to fruition as businesses respond to these pressures and adapt their service offering to take advantage of these new trends."
In November the Public Health White Paper was released. Entitled Choosing Health, it detailed targets for improving public health from diet and nutrition through to alcohol and tobacco. Politicians have concluded that if people won't do what's good for them voluntarily, then it is down to the state to regulate their health.
But change does create opportunities for the fleet-footed and for companies that pursue a truly healthy product. "A lot of the large manufacturers pay lip service with healthy options that are marginally healthier than their regular product," says Stuart Grantham, associate director and member of the food sector team at Tenon Corporate Finance in Nottingham. "But something like an organic product takes time to grow and a true healthy eating market will start to develop."
Newark-based PJ Smoothies cannot help but benefit. "Our products are 100 per cent natural, so we are ideally positioned," says chief executive Andrew King. "We are clearly benefiting from health kicks and smoothies are a very good vehicle for getting five-a-day into your kids."
PJs, whose PR credits the company as having "single handedly created the UK's smoothie sector", has launched a major new branding programme and introduced two new flavours - apples and blackcurrants; blackcurrants and yoghurt. PJs leads the £332m UK smoothie market with a 41 per cent value share.
The key to the company's success, says King, lies in its ability to respond to consumer requirements and its in-depth knowledge of the product. "Some of the fruits in our Super Smoothies are pretty unknown, but performing very well for us. It shows not that consumers suddenly want dragon fruit in a smoothie, but rather they want to detox and are aware of chemical balance and nutrition," he says. "The role of a brand such as ours is to introduce people to the market."
In October Kingswinford-based Julian Graves, retailer of specialist snacks and ingredients, reported a healthy increase in sale. The purveyor of pumpkin seeds and unsalted nuts attributed its growth partly to heavy rainfall driving people into shops and partly to the success of Channel 4's fat-busting programme You Are What You Eat. The 220-store company also launched a month-long, £3125,000 TV advertising campaign.
Managing director Nick Shutts says: "The public's appetite for the foods highlighted in the programme created a huge demand for our pumpkin and sunflower seeds and brazil nuts. We had to find other sources for these products as our own suppliers weren't able to cope."
Like for like sales for June, July and August rose by 21 per cent on the same period last year. The company has also seen a 13.5 per cent rise in net profits since the start of its financial year in April. It was acquired by Icelandic retail group Baugur in December 2003 and has just embarked on a three-year expansion plan that will increase the number of stores to 310 by the end 2007.
All is well for businesses lucky or canny enough to have jumped on the health train. Not so easy if one of the main ingredients of your product is the government's pet hate: salt. Take bacon. Salt gives bacon its taste and its shelf life. Admittedly the curing process has evolved since the days when you could leave half a pig lying around on a hot summer's day, but bacon is still essentially salty.
The focus of business at TMI Foods in Northampton is bacon products. But the company has already devised new product ranges and new techniques to address its salt issues. Danish founder and non-executive chairman Steen Steenholdt has over 30 years' experience in the bacon trade.
"We don't feel under pressure directly from government, but we do have a lot of communication with our major customers on salt issues because they are under pressure," he says. "We are looking at several projects to reduce salt levels in bacon and we already have some up and running. Timewise it's costly because it requires a reformulation of recipes and affects shelf life, which means more frequent deliveries and higher costs."
There is still some way to go if bacon producers are to help in the government's quest to reduce adult salt consumption to below 6g a day. TMI is trying new flavours such as sweet cures with honey, apple and maple, as well as stronger natural smoke flavours. The £312m to £313m-turnover company is also innovating with leaner products.
Chris Brock, food cluster manager at the East Midlands Development Agency (EMDA) and former research and development director at British Bakeries, recalls the bakery industry's own battle with salt. "Go back around 20 years or so and bread contained about 2 or 2.5 per cent salt. Because it was one of the largest sources of salt, the industry came under pressure and so it reduced the salt content, gradually over a few months, to 1 to 1.5 per cent. It made a substantial reduction by weaning the public off it. The whole bread industry acted together and it became a barrier to changing back because bread would have tasted exceptionally salty."
But while healthy eating is - for now - still just an option rather than a legal imperative, food and manufacturers are obliged to respond to a raft of legislation and regulation. And, to maintain a competitive edge, balance the law with consumer trends. "Where do you start?" says Ron Reid, partner at law firm Shoosmiths in Northampton. "There is so much that is peculiar to food - health and safety, labelling, consumer habits. Regulation in health and safety is forever being increased. There is something new every day on the Health and Safety Executive (HSE) website.
"The biggest problem is inconsistency in the way regulatory authorities approach the same issue. Food safety is enforced by the environmental health officer from local authorities. There is supposed to be a consistent approach, but in reality what's one person's non-event is another's major concern. And trading standards officers at the county councils will also go on certain campaigns."
Reid gives the example of one county that is focusing on the origins of products and "getting itself into a complete lather" about whether the picture on a product is likely to be misleading as to where it was made. Companies that have never had a customer complaint will find themselves greeting an irkesome trading standards officer who claims that he was misled by the picture of a country cottage on their box of fudge. And as for calling your product 'traditional', don't even get them started.
"Many of our authorities do exactly what the regulation says," says Reid. "In other parts of Europe the regulations are not enforced in the same way. They have a better concept of proportionality. If no one is going to be harmed, they are not worried. We go to prosecution on the basis that someone might be harmed."
On 1 January 2005 new regulations on traceability come into force: retailers and manufacturers must be able to trace the origin of their ingredients up and down the line. In November 2004 amendments to labelling regulations mean that virtually every ingredient must be listed where previously anything that took up less than 25 per cent of the total was exempt. The EU has pinpointed 21 ingredients deemed to be the most common cause of food allergies - these must be clearly labelled.
Stuart Grantham, associate director and member of the food sector team at Tenon Corporate Finance in Nottingham, says that regulation is nothing new to the industry but that it is the manufacturers that will have to absorb the costs. "The cost of compliance will always be pushed to the manufacturer, not absorbed by the consumer or the retailer," he says. "There is going to be increased cost from increasing disclosure requirements on packaging. A large manufacturer has that ability in-house, while SMEs have to buy it in at a cost. We will start seeing an increase in businesses that provide analysis and laboratory work."
Grantham expects this pressure to lead to more consolidation in the ingredients sector. "The more power that sits with retailers and the more legislation that comes in, the harder it will be for small and medium businesses. The worst thing for a retailer is bad publicity. Retailers will make the decision to rely on the manufacturer to protect their reputation. They think: 'I don't want to appear on Watchdog with two times the salt as it says on the packet.' So they will use large and established business."
Food manufacturers argue that they are skilled at self-regulation. The Food and Drink Federation (FDF), voice of the UK food and drink manufacturing industry, continues to work with government on issues such as salt, health and safety and disclosure. But consumers are unwilling to pay more for healthier or newly labelled products and while retailers continue to push down prices, manufacturers have to look at ways of retaining flavour and quality while meeting the demands of new regulations and new trends.
The FDF is committed to working with the government to ensure more informative labelling. Its Food and Health Manifesto, published in September, agreed commitments to providing full nutritional information, even where not legally necessary; adding guideline daily amounts; reducing salt, fat and sugar levels; removing vending machines from schools and broadening vending choices. It is also addressing advertising and public education.
The Food Standards Agency is exploring ways to make labelling easier for the consumer to understand. But changes to labelling incur a hidden cost. Changing labels can be a time-consuming and costly process, particularly for small manufacturers that buy labels in bulk to keep costs down.
Red tape is the bugbear of any business. When there are more lenient locations available abroad, with cheaper labour costs on top, food and drink companies could be forgiven for moving production out of the UK. And if consumers fail to respond to friendly advice on the virtues of a low-salt diet and demand the return of salt-rich chicken nuggets, could the government resort to ruling with an iron rod?
"In one breath it's 'human rights'; in the next breath it's 'don't eat this'," says Reid at Shoosmiths. "At the moment they are trying to 'persuade' manufacturers to reduce salt and fat levels and if they can't get them to do it voluntarily, then they will legislate. They have been trying to persuade the drinks industry to voluntarily introduce smoke-free zones for a long time, but eventually their patience has been exhausted. Don't be surprised if we end up in a situation where there is regulation to limit salt or fat"
VIRTUAL NANNY
Aware that lecturing from the lofty heights of Big Ben or littering GP surgeries with piles of dog-eared leaflets is perhaps not going to get the message across, government is increasingly turning to the all-pervading power of the world wide web to encourage the pursuit of a healthier lifestyle. The idea is that if Joe 'web-surfer' Bloggs demands less salt in his chicken nuggets then manufacturers will have to oblige.
Out goes the strict, domineering matron approach (far too likely to incur references to a nanny state), in comes a hip and happening Mary Poppins style. Here are a handful of government sites designed to stop us dining out on a mix of fast food, alcohol and ashtrays:
www.salt.gov.uk
Meet Sid the Slug, whose father always said that salt was bad for you. A spin-off site of the Food Standards Agency (FSA) designed to help consumers make informed choices about the amount of food in their diets. It's a mix of serious advice and a more light-hearted approach from Sid and his games.
www.eatwell.gov.uk
A colourful FSA site on essential nutritional help from Vitamin A through to Zinc, with advice on obesity, labelling and food hygiene. More games, quizzes and easy-to-read tips.
www.food.gov.uk
The FSA website provides detailed information for the consumer and industry on a wealth of legislation and guidance from the UK and the EU. Includes information on genetically modified food, nutrition, hygiene, diet and health, BSE and labelling.
www.talktofrank.com
Cartoon people who say "dude" and persuade you that drugs, drink and cigarettes are like, so not cool, man. Plus a handy A to Z of drugs and their various nicknames.
www.givingupsmoking.co.uk
This site doesn't seem to work very well in the Insider office - possibly overwhelmed with hits. Advice on why you should give up smoking, how to do it and how to stay smoke free.
For the full story read on...
For the fuller picture,
subscribe to Insider
every month.