Data determine the environment for producers

Cyrille Filott is one of more than 90 staff in Rabobank’s analysis and strategy unit working on worldwide developments in agricultural and nutrition markets. Our dialogue partner’s specialisms also include worldwide baked products markets.

+bbi: Mr. Filott, During your speech at the Annual Meeting of the German Plant Bakery Association you talked about major consumer trends and the possible impact on bakery business. Most bakery markets in Europe see a declining volume and a more or less flatish turnover. Do you see trends that will give bakeries a chance to boost their business?

+ Filott: For the market as a whole I am not that bullish. In some markets such as the Netherlands lower prices (e.g. 4 croissants for 1 euro) are driving volume, but not value. Also consumer trends, especially for at home consumption, are not that positive. Consumers are ordering more hot food, are eating breakfast on the go, etcetera. Key for bakers is to understand the important consumer trends (e.g. convenience, nutrition, sustainability) and create products that play into these trends. An example I used was the Digestion Boost bread range by Roberts bakery in the UK, focusing on nutrition.

+ bbi: Focussing on regional products or ingredients is a major trend in the bakery market. Now big companies like Mondolez, Nestlé etc. adopt these strategy. What is the strategy behind and what impact this will have on local, regional or national producer who identify their products with the region?

+ Filott: The idea is that the consumer increasingly focusses on local origin of food products. Especially in France this is a very strong trend, but it is important in other countries as well. Also important is that the technology is increasingly available to distinguish local preferences, making it “easier” to tailor to local needs. The impact is mostly on sourcing (local ingredients) and potentially also a preference for local production, local brands.

Rabobank

Cooperatieve Rabobank U.A. is a Dutch cooperative bank headquartered in Utrecht and offering international banking & financial services focused mainly on the agriculture & food sector. Worldwide turnover in 2018 was EUR 12,020 billion, the number of employees was 41,861 and the number of branches 802. Women occupy 30% of managing board positions, and there are 31.3% in the level below that. All figures are taken from the 2018 annual financial statements

+ bbi: Consumer are looking for guidelines to find the right personal nutrition or the right product. Do you see more statutory rules or more impact of information shared by organization and or even companies like Yuka via internet?

+ Filott: Both. I believe governments are going to play a more important role in either recommending better nutrition or even taxing unhealthy and unsustainable food. But as the consumer tends to trust other institutions over the government, apps like Yuka will find an audience as well. The latter empowers the consumer to make a better choice – this is very important.

+ bbi: Will retail play a decisive role in this game, for example asking for a specific labelling?

+ Filott: Yes. Some retailers will do this, especially those that are looking for differentiation. Albert Heijn in the Netherlands will make Nutriscore mandatory on private label products. A very interesting a move. And yes, I know in Germany Nutriscore is not well liked, but regardless, we will see labels front of pack.

+ bbi: Free from, meatless – not everybody needs to void gluten or lactose and not every meatless burger is really healthy – how important it will be in future, to meet the perception of consumers?

+ Filott: It is really important – for some consumers. Others will not care. And see here the challenge: how to cater to all? Or perhaps food companies should give up on that… a few food companies are looking into catering into tribes, groups

++ Trending in China: Product development stimulated by online portals: since then, Oreos have been available in China with wasabi and chicken wing flavors, Snickers in a savory version and KitKats in a smaller format, as well as in family packs. All three products are extraordinarily successful of consumers that have the same preferences or characteristics. Think age groups, think hobbies (sports), think lifestyle.

+ bbi: A platform like Yuka – in its own words "a mobile application that scan food & cosmetics products to get clear information on the health impact of the products you consume" is privately owned and paid by the millions of user. The most important criteria are the Nutri-Score and the presence of additives. Will platforms like this guide consumer behavior? Who can control its independence and when will there be the first one manipulating the results?

+ Filott: Great questions which I really cannot answer. We do see some retailers having an interest in this space. Albert Heijn in the Netherlands acquired the FoodFirstNetwork, a health and wellbeing platform that provides advice to consumers. The platform will remain independent, however ofcourse Albert Heijn will now have a propriety data source.

+ bbi: You presented a new kind of product development and marketing in the UK bakery sector – a Bread line special tapping gut health Trends with a range of Digestion Bloomers and packed into a paper bag. The product line is only available in London. What is the strategy behind it? Why only for urban region and what kind of consumer expectation will be met by this kind of product, packaging and marketing?

+ Filott: The strategy on where the product is sold was determined by the retailer. Retailers are starting to think in tribes as well. The London tribe is very different from the Birmingham tribe. This is because the cities consist of different types of people. In the example the retailer sees that in London there are much more millennials, young people, who are (more) interested in sustainability and nutrition.

+ bbi: You also talked about Digitization to impact all suppliers and pointed to platforms like Alibaba, JD.com which in China drives new product development. Can you show us some example and describe the way and the success of their influence?

+ Filott: Yes, the retailers over in China are supporting food companies and others with innovation, thereby a) making sure the right products are produced that fit consumer demand and b) shortening innovation cycles. A famous example is the development of the Spicy Snickers – Alibaba through their Tmall innovation center suggested to Mars that this flavor would be a hit to Chinese consumers. So Mars produced it, and it was/is a success.

+ bbi: Coming back to bakeries and their chances – platforms who tell you what to develop and manage the sales, ingredients companies, who are serving not only ingredients but complete product solutions and last but not least equipment supplier who control the process automation via cloud – is there still space and margin left for a producer himself ?

+ Filott: This is a bleak picture you paint, but you are not wrong. And this will not happen overnight, this is a long term thread to the sector. Therefore bakeries need to think: what is it I stand for? How do I differentiate? Should I think about catering to certain tribes? Or perhaps more generically – where can I add value? And this still may be process technology, this may be product development. But then the bakeries should invest accordingly.

+ bbi: What are the main issues bakeries should think about to have a future and why we should look to china to see the future of consumption?

Yuka, or “I’ll tell you what you should eat”

+ Filott: Especially those bakeries that sell into retail should have a look at China (then again, food service is changing quickly as well). Technology developments in China are going so quickly, and they are all data-lead. China is, and I am exaggerating a bit here, going to bypass modern retailing the way we know it. Platforms such as Alibaba and JD.com are taking the lead. What is important, is that these platforms have the connection with the consumer. The platforms will use this connection to direct trade, to direct products and product innovation. Of course we are a bit behind in Europe (and slightly more in Germany I have to say), but the direction is clear. This will not be a revolution, but an evolution into a data-lead food production and sales environment.

+ bbi: Mr. Filott, thank you for the interview. +++

It’s a textbook example of a startup – three young people, an idea, a database and an app. Their logo is a carrot and their idea is a database accessed via an app and providing understandable-by-all information about ingredients and the health value of foodstuffs, cosmetics and drugstore articles. Those behind it are the Benoit and François Martin brothers and Julie Chapon. According to their self-portrait, it was Benoit who had the idea for Yuka, because he asked himself how healthy the foods he gave to his three children really were.

The app can be used to scan the barcode of supermarket products to see their Yuka score, a rating derived from three sources. Nutritional quality according to NutriScore makes up 60% of the rating, and 30% relates to the presence of additives. Data for these are obtained from EU and national supervisory authorities and other institutes. 10% of the rating depends on whether or not the product is organic. The result displayed by the smartphone shows the categories in which the product ends up: which are in the red field (not good), and which are in the green (good). On request, users are given recommendations of an alternative product that has a better rating and can generally be found in supermarkets. A filter also states retailers. Alcoholic products, infant foods and protein powders are not analyzed or assessed due to their very specific composition.

Yuka is financed exclusively by premium users of the app and via a nutrition program publicized through a blog, although available only in French up to now. As the company itself says, support, money or manufacturers’ advertising are all refused on principle.

The database, complied in early 2018, currently includes 450,000 foods plus around 150,000 cosmetics and drugstore articles, and around 2,000 new articles are added every day. An internal audit system checks the data for conformity with the package declaration and to ensure that identical products receive the same rating, regardless of the name or brand under which they are sold. Since the database began, ten million users have accessed the information, and viewed the rating of three million products as a daily average. A British offshoot of Yuka has existed since June of this year. +++

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