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March 2017
Deb ArcoleoDirector, Product Transparency
The Changing Consumer and the Transparency Imperative
@debarc [email protected] linkedin.com/in/deboraharcoleo
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Consumer perspective
The trust issue in the food industry
The imperative for transparency
Implications
A little about Hershey
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~ $7.4BNET SALES
18,000EMPLOYEES
PRODUCTS AVAILABLE IN
OVER 70COUNTRIES AROUND
THE WORLD
PRODUCTS MADE
IN 7 COUNTRIES
85% of products sold in the U.S. are manufactured in the U.S
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We are a purpose-driven organization
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We approach sustainability broadly
• Environmental sustainability• Engaging workplace• Responsible sourcing• Ethics and integrity • Global giving
• Volunteerism
• Education and nutrition for children
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New goals announced in late 2015
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We are working extensively to support
cacao farmers in West Africa
• Good farming practices, farm safety, labor practices and health information delivered to any farmer in Ghana and Côte d’Ivoire via mobile phone text
70% of the world’s cocoa is grown in West Africa, primarily on farms of 5-10 acres
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https://youtu.be/koc3QW3jbsI
We are working extensively to support
cacao farmers in West Africa
• Farmer training started in 2012 on best practices in sustainable cocoa farming to improve farmer livelihoods and promote their incomes
• Touches 464 communities in Ghana, Cote D’Ivoire and Nigeria and 31,000 farmers enrolled (goal is 70,000)
• Leads to UTZ certification as a producer of sustainable cocoa, which means premium payments for their cocoa
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We focus on childhood education and
hunger in Ghana and the U.S.
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Consumer perspective
The trust issue in the food industry
The imperative for transparency
Implications
A little about Hershey
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Mintel, Chocolate Confectionery – US, March 2016
Quiz: Who eats chocolate confection?
81% of adults in the U.S., and Millennials more than any other age group
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Mintel, Chocolate Confectionery – US, March 2016
How is it changing?
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Consumers are increasingly concerned
about what goes into their food and where
it comes from
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ALLERGENSAND
CROSS-CONTAMINATION
GMOs
SUSTAINABILITYAND
RESPONSIBLE INGREDIENT
SOURCING
USE OF PESTICIDES
ANIMALWELFARE
FARMERS’AND FARM
WORKERS’FINANCIAL
WELL-BEING
Top drivers of demand for transparency
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62% of consumers have recently
sought information on
sustainable products – they
increasingly read packaging labels on the products they purchase and
turn to the internet for more in-depth information
The Hartman Group, Transparency Report, 2015
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Emerging Faith in Food Production, Sullivan Higdon Sink, March 2014
67%
65%
66%
These trends are not limited to the coasts,
but are mainstream
think it’s important to understand how their food is produced
want to know more about where their food comes from
would like to see the food industry take more action in educating people on how food is produced
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Center for Food Integrity, 2016 Consumer Trust Research
Over a third of consumers say they do not
have access to all of the food-related
information they need
Yes65%
No15%
Unsure20%
Have Enough Access
Yes No Unsure
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For decades, taste, convenience and price
have been the purchase drivers in food
Deloitte study:
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Now, 50% of consumers make purchase
decisions beyond those traditional factors
Deloitte study:
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Across all demographic groups, a majority
of people believe a product with fewer
ingredients is healthier
Mintel, Free-From Food Trends, US, May 2015
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The top ten claims consumers would most
like to see
38%36%
33% 33%
19% 18% 18%15%
12% 10%
Mintel, Free-From Food Trends, US, May 2015
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Free-From Foods Trends – US, Mintel, May 2015
Foods with free-from claims perceived to
be healthier, more natural, less processed
Trans fat-free
Preservative-free
Growth hormone-free
GMO-free
Sodium-free
Nitrate/nitrite-free
Cage-free/Free range
Lactose-free
Allergen-free
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Reimagining Health and Wellness, Hartman Group, 2010
Top Ingredients SOUGHTTop Ingredients AVOIDED
Food companies must pay close attention
to consumers perceptions and desires
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Food products are being reformulated in
response to consumer demands
■ Clean labels and shorter ingredient lists with simple, familiar ingredients are the new standard, coupled with a rise in “nothing artificial” and “free-from” claims.
■ Major brands and food service providers have announced or pledged to remove artificial ingredients, colors, flavors and/or preservatives from their products, including Kellogg, General Mills, Nestle, Hershey, and Kraft as well as McDonalds, Panera Bread and Chipotle.
■ In the US, 22% of food and drink product launches had a no additives or preservatives claim, a 31% increase since 2011
Ingredients & Additives Global Annual Review, Mintel, January 2016
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• Removal of artificial flavors and reduction in sodium in frozen pizza and snacks
• Whittled down ingredient list in Stouffer’s Lasagna from 19 to 15
http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/09/Why_Nestle_changed_its_lasagna.aspx?ID=%7BF2DC6A8B-E273-49D1-9BB7-D79EA09A11FD%7D
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http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/08/McDonalds_announces_major_menu.aspx?ID={65036C03-35E3-4A24-AA6F-6D5929E547FC}
• Commitment to source cage-free eggs by 2025
• Removal of artificial preservatives from Chicken McNuggets
• Debuting new buns without high-fructose corn syrup
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http://www.foodbusinessnews.net/articles/news_home/Business_News/2016/07/Four_trends_translate_to_growt.aspx?ID={C4BE5CCF-6316-4E1C-8EC6-3A594784D84B}
• New Old El Paso taco shells made with three simple ingredients
• Lärabar uses only fruit, nuts, and spices
• Häagen-Dazs uses only fresh cream and other high-quality natural ingredients
• Synthetic dyes removed from Trix cereal
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http://www.foodbusinessnews.net/articles/news_home/New-Product-Launches/2016/07/ConAgra_innovation_touting_org.aspx?ID={8C5FDC6A-A1E4-4373-B03A-4C106BA36BB0}
• David Simply Seeds with reduced sodium and no artificial flavors or preservatives
• Snack Pack Naturals made with simple ingredients and no artificial flavors or colors
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• Since 2015, we have transitioned more than 500 product SKUs to simple ingredients, including the iconic Hershey’s Kisses Milk Chocolates and Hershey’s Milk Chocolate Bars
• Introduced new Hershey’s Simply 5 Syrup made with five simple ingredients and no high-fructose corn syrup or artificial preservatives and flavors
• Reformulated all varieties of chocolate baking chips to contain no artificial colors, no artificial flavors and no artificial preservatives
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Too far??
PURCHASE, N.Y. — G Organic, a
line of U.S.D.A. certified organic
Gatorade brand sports drinks, is
debuting this fall from PepsiCo, Inc.
Available in lemon, strawberry and
mixed berry varieties, the
beverages contain seven
ingredients, which include water,
organic cane sugar, citric acid,
organic natural flavor, sea salt,
sodium citrate and potassium
chloride.
http://www.foodbusinessnews.net/articles/news_home/New-Product-Launches/2016/08/Gatorade_launches_organic_vari.aspx?ID={571269D2-B630-45F1-8622-65A85EF931CA}
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Consumer perspective
The trust issue in the food industry
The imperative for transparency
Implications
A little about Hershey
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Respondentsallocated 10 0 pointsacrossthe groupsresponsible for providing information in each transparency
topic.The numbersshown are the average number of pointsallocated to each group,acrossall respondents.
Consumers primarily hold food companies
responsible for transparency across all
food topics
Center for Food Integrity, Consumer Trust Research, 2015
FoodCompanies GroceryStores Restaurants
Impact of Food on Health
Food Safety
Environmental Impact
Labor & Human Rights
Animal Well-Being
BusinessEthics
Farmers
Impact of food on health
Food safety
Environmental impact
Labor & human rights
Animal well-being
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Groups morelikely to trust:
Age 50-80,Women
Age 50-80, Higher income, Higher BMI
Men
Age 18-49
Age 18-34, Lower income
Age 18-34
Registered Dietitian/Nutritionist
Your personal healthcare professional
US government agencies
Health-focused Website, such as WebMD
A friend or family member
Fitness professional
Farmer
A food expert on TV
Health, food and nutrition bloggers
Food company or manufacturer
70%
57%
52%
31%
19%
17%
18%
11%
14%
10%
70%
65%
37%
31%
24%
23%
16%
13%
13%
8%
Groups morelikely to trust:
Age 50-80
Age 18-49
Age 18-49
Men
Food safetyTypes of food you should be eating
2016 n=1,003
Food companies are at the bottom as
trusted sources of info on food safety and
types of food to eat
International Food Information Council Foundation, 2016 Food and Health Survey
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A “big is bad” bias among consumers is
creating trust issues
Likely to Put Their Interests Ahead of Consumers’ Interests
Center for Food Integrity, Consumer Trust Research, 2015
Large Food Companies
Small Food Companies
57%
29%
Large Commercial Farms
Family Farms
47%
27%
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Emerging Faith in Food Production, Sullivan Higdon Sink, March 2014
The agriculture industry would benefit by
being more transparent
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Likewise, food companies need to focus
on transparency
Emerging Faith in Food Production, Sullivan Higdon Sink, March 2014
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For one-third of consumers, “healthy” defined by what food does NOT contain
2016 n=1,003
Coded for multiple responses
35%
18%
17%
14%
10%
10%
7%
7%
6%
5%
17%
8%
Does not contain (or has lowlevels of) certain components
Good for you
Contains certainfoods/components
No artificial ingredientsor additives
Natural
Unprocessed/unadulturated
Simple/fewingredients
Organic
Fresh
Nutritious
Other
Don't know/Refused
How do you define a healthy food? (Open-ended response)
DOES NOT CONTAIN CERTAIN COMPONENTS
19%
13%
9%
8%
2%
1%
3%
Low/no fat
Low/no sugar
Low/no calories
Low/no sodium
Low/no carbs
Low/no cholesterol
Other
International Food Information Council Foundation, 2016 Food and Health Survey
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23%
11%
17%
11%
5%
8%
9%
5%
4%
51%
41%
37%
36%
26%
25%
23%
17%
17%
16%
4%
The right mix of different foods
Limited or no artificial ingredients or preservatives
Natural foods
Can easily be incorporated into my daily routine
Flexible and easy to maintain over time
Organic foods
Eating only foods I define as healthy
Can include higher calorie treats in moderation
Everything you eat over a long period of time
Non-"GMO" foods
None of the above
Ranked #1 Ranked #1-3
International Food Information Council Foundation, 2016 Food and Health Survey
Nearly one quarter of consumers have their own definition of “healthy eating”
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The perfect storm in the food industry
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Consumer perspective
The trust issue in the food industry
The imperative for transparency
Implications
A little about Hershey
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Hershey began transparency work in late
2013
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We launched an internal effort to develop a
better transparency tool in 2014
Lead/catalyze the development of an alignedindustry solution for product transparency, leveragingmobile and web technology
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PACKAGING ISCONFUSING
AND HARD TO READ
Normally whenI look at apackage,the first thing I jump to is always
thenutrition label, but allergen information isn’t alwayseasy to find.
SHAYLA
CONSUMERS WANT FULL
DISCLOSURE–THE GOOD
AND THE BAD
I want more.Theyare just putting forward thegood stuff.
I want to knowthebadstuff too.
KAT
CURRENTMOBILE APPS
AREDISAPPOINTING
Anyonecanwriteanappif they want to.Tocitewhere this
information is coming from would bolster my confidence.
AMANDA
We started by exploring with consumers
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SIZELIMITATIONS
Packaging is the most common way to
deliver transparency information, but it
has significant limitations
EXPENSIVE AND TIME CONSUMINGTO CHANGE
LABELSARE ALREADY CROWDED,DIFFICULTTO READ AND CONFUSING
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% consumer saying they must know the information
CURRENT REQUIREMENT
NEW INFORMATION
Consumers have clear opinions on what
they want to know
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We began developing, evolving and
consumer-testing prototypes
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Final prototype shared with the Grocery
Manufacturers Association (GMA) in 2014
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325 people from 90 organizations
1WorldSync Cargill General Mills IFRA Nestle RQA Tate&Lyle
Abbott Clorox FONA JM Smucker Ocean Spray SCI Topco
Accenture Coca-Cola Georgia Pacific Kellogg P&G Seventh Generation TraceOne
ACI Colgate-Palmolive Givaudan Kraft PCPC ShopWell TROY Group
Action Company ConAgra Gravity Tank Kroger Pepsi Co SNET Tyson Foods
Ahold CSPA GMA Kiwikee Pharmavite Stibo Underwriter Labs
Amazon.com Deloitte GS1 LandO’Lakes Phoenix Brands Sun Products Unilever
Amway Corporation DuPont Harris Teeter L’Oreal Post Foods Sunny Delight Bev. Wakefern
Arylessence ES3 Hershey Mars Reckitt-Benckiser Sustainability Cons. Walgreens
Big Heart Pet Brands FCPC Hormel McCormick Reily Foods Symbology Walmart
Bimbo Bakeries Ferrero House-Autry Meijer Revlon Syngenta WhiteWave
Bumble Bee Foods Firmenich Idahoan Mondelez RILA Target Wrigley
Campbell‘s FMI IFF Monsanto
A cross-company consortium under the
GMA and FMI designed the program in 2015
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210 4.5 150 21
SmartLabel™ was announced in December
2015
• Hershey was first to go live with our Holiday KISSES
• We developed the HTML and CSS solution and gave it away to GMA to give to any other company
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Consumers get to a web landing page by
scanning a QR code on the package
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Consumers can also use search and/or
links on company/brand sites to reach the
landing pages
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There is also a product search tool on
www.smartlabel.org
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Five tabs deliver a full suite of information
Nutrition Ingredients Allergens Company/BrandOther Info
Food attributes: 52 required, 189 voluntaryNon-Food attributes: 51 required, 57 voluntary
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The SmartLabel™ program ensures
consistency and accuracy of data
■ Data directly from brand owners hosted on their own web sites; updated immediately with any changes
■ SmartLabel™ information subject to the same regulatory oversight as on-pack labels
■ Strict governance rules for participating companies to provide consistent user experience
■ No marketing, advertising or pop-ups allowed
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Dozens of CPG companies and retailers
committed to participating
26 companies are live now, over 5,000 items 34,000 predicted by the end of 2017
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Consumer use of our landing pages is high with no awareness-building or marketing to date
59
LATEST THREE MONTHS (Dec 1 – Feb 28)
Number of Hershey products in market 2/28/17 with QR codes and live landing pages: ~500
Mobile Tablet Desktop TOTAL
Sessions 17,436 1,467 1,337 20,240
Pages viewed per session 1.27 1.39 1.83 1.32
Avg. session duration (sec) 0:41 1:17 2:59 0:53
Note: All Hershey IP addresses are filtered out
Mobile traffic almost all via scanning QR codes
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Sourcemap is the next step in transparency for Hershey
https://www.thehersheycompany.com/en_us/food-philosophy/sharing-whats-inside.html
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Consumer perspective
The trust issue in the food industry
The imperative for transparency
Implications
A little about Hershey
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Implications for those in the food business
• Consumer education about nutrition and health needs to continue
− FDA is helping by re-defining “healthy” and defining “natural”
• Food companies and farmers can do a better job de-mystifying our food supply chain
• Transparency builds trust, but it has to be the FULL story, not just the positive stories
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