2022 Year in Review

Hello,

Welcome to our year in review for NZMP Perspective and my own reflections on the trends we’ve seen developing. 2022 saw conditions continue to change in New Zealand and around the world. While we are now living in a post-Covid normal world, the past three years have shown us that the world is increasingly unpredictable; changes are rapid, supply chains are fragile, and climate change and its impacts, command our attention.

Throughout 2022, we saw a rise in the conscious consumer focusing more on self-care and immunity, sustainability, and lifestyle budgets. This was a key theme in Perspective throughout 2022, and we expect it to gain even more momentum in the new year.

The good news is that customer and consumer demand is growing for sustainable dairy, produced naturally. Consumers want natural products that promote wellbeing and provide multiple benefits, and that are science-backed and evidence-based to support wellbeing at all life stages.

At Fonterra, we have a clear strategy to address this demand, which sees us prioritise New Zealand milk, and lead in sustainability, dairy innovation and science.

We have a true and proven sustainability story. Our New Zealand farms have the lowest carbon footprint among major dairy producers globally and our milk comes from grass-fed herds which are well cared for. This ties in to our world-class dairy expertise which allows us to partner with our customers and respond to the evolving needs of consumers. Given the quality, science and sustainability of our dairy, we see unlimited potential for it.

In June this year, Fonterra announced that it was combining our AMENA (Americas, Middle East, Africa, Europe and North Asia) and APAC (Asia-Pacific) regions into one business unit, called Global Markets.

Global Markets brings a co-ordinated, customer-centric focus to our markets leveraging the strength of our Co-op’s sustainability, dairy innovation and science, and processing capability.

It allows us to enhance our coordination and build on the existing relationships and market know-how to provide even greater expertise and support to you, our customers.

As we all start preparing for the holiday season, I do look forward to 2023 knowing that the goodness of dairy created by our farmers will continue to provide the world with more health and climate conscious solutions.

Being both budget and climate conscious

Consumers are not only more conscious around healthier food options, but in this era of inflation, they are also more conscious of their household and lifestyle budgets. In October, we spoke to Matthew Crabbe, Regional Trends Director for Mintel Asia-Pacific about the impact of inflation led by increasing food prices the Asia-Pacific (APAC) area is currently experiencing. Matthew believes that brands should give warning of intended price rises, link price to value and focus on product quality (e.g., multiuse).

Matthew also believes that brands can also demonstrate how they are working for the common good of all, working to keep costs and prices down, maintaining quality to protect consumers, or standing up for good causes in the community.

The impact on consumer behaviour

When it comes to food, consumer reaction to inflation will vary from person to person. Some will cut back on food service spend in favour of cost-effective retail alternatives, e.g., swapping their takeaway coffee for a cheaper at-home version. Others will limit the number of purchases per week. When times are tough, food can be a source of comfort, so some food items will see an increase in retail sales.

Signal price changes to your consumers

When price rises are unavoidable, brands should to be transparent when explaining price increases and offer ways for consumers to maximise their budgets, increase food ‘yield’ and reduce wastage.

We can also look at increasing value perceptions during price rises by emphasising design, aesthetics, functionality, social responsibility, exclusivity, or adding limited editions.

Conscious consumerism

The year 2022 saw a rise in the conscious consumer focusing more on self-care and immunity, sustainability, and lifestyle budgets. In February, we spoke to Roshena De Leon, Global Insights Manager for Fonterra. Roshena talks about how immunity remains top of mind with the pandemic raising concerns about whether our health is good enough to fend off viruses.

Consumer focus on immunity

In 2022, we saw a further increase in consumer interest around how food and nutrition can support a healthy immune system. Consumer demand in this space is diversifying; consumers are looking to a wider variety of ingredients like protein, vitamin C, iron and probiotics. Product development is starting to move towards different categories and targeting different consumption occasions. Looking ahead, brands should be ready to substantiate their health claims to satisfy consumers.

The growing importance of mental wellbeing

Together with the consumer focus on immunity, the importance of mental wellbeing is also growing. The link between food and non-clinical mental wellbeing related issues has become a global consideration. Putting aside clinically related mental wellbeing concerns, mental wellness in the day-to-day world can include reducing stress, promoting relaxation, restful sleep, and mental alertness and focus.

Sustainability gains momentum

In our October Perspective, Matthew Crabbe pointed out that while concern about the climate crisis continues to rise, consumers do feel increasing difficulty in prioritising sustainability in daily purchasing amid rising costs. They will look to companies to provide them with affordable, climate-friendly consumption choices and guidance. Roshena De Leon agrees that consumers are anticipated to demand greater accountability from brands to provide evidence on how they are being sustainable.

As a result of the pandemic, consumers have started to recognise how interconnected the world is. Food supply shortages have made consumers more aware of sustainable, agricultural and manufacturing practices. Technology such as digital product labelling and mobile tracking apps will be critical in promoting traceability and transparency.

Roshena De Leon also mentions that being able to trace the origin of food also provides reassurance of quality and safety for consumers. Attention around dairy’s carbon footprint has also accelerated, with consumers seeking information around farming practices, manufacturing and supply chains involved in the dairy industry. While packaging has long been the key sustainability focus for many consumers and brands, there has been a significant shift to consumers being concerned about the environmental impact of a brand’s entire supply chain. This is a key advantage for NZMP customers who have the opportunity to leverage Fonterra’s Sustainability Solutions.

Balancing the excitement of texture innovation with health claims

As consumers seek novelty, dairy players may need to balance indulgence with better-for-you options. Back in June, we spoke to Merianah McQuin-Tan, Account Director from Mintel ANZ. Merianah and her team incorporated key insights from a range of internal sources to highlight the importance of texture innovation in dairy products.

The pandemic has brought the notion of healthy living to the forefront, and food and drink products that provide added functional health benefits are being sought out by consumers, driving interest for a range of functional benefits. This suggests opportunities for new product launches that combine texture innovation with healthier living.

Brands are utilising textural ingredient inclusions to boost a product’s sensory experience ranging from fruits to chocolate, biscuit pieces, and grain-based ingredients such as muesli, cereal, and granola. Consumers are more likely to be interested in textural ingredients when these enhance the corresponding flavour profile of the product.

Along with richer, thicker and creamier textures, the novelty factor of crunch or melt-in-your-mouth ingredient infusions are becoming more appealing to consumers. These playful add-on ingredients help enrich the taste and texture of dairy products such as yoghurt. Mintel data shows that Thai women consumers, particularly Gen Z aged 18-24⁴, are the health-conscious demographic most interested in yoghurt products specifically made as a pre- or post-workout snack.

The use of natural ingredients, which often contain less sugar, fat and calories, can help dairy products hold firm on their health credentials. By incorporating natural sweeteners (e.g., honey, monk fruit, agave) and introducing no-added-sugar formulations into products, brands can create an exciting taste experience that allow consumers to enjoy dairy as a healthy treat.

Both Merianah McQuin-Tan and Matthew Crabbe have noticed the current trend for comfort food with Matthew pointing out in a previous issue of NZMP Perspective that we will see an increase in demand for products that are perceived by consumers as a treat. Mintel’s 2022 Global Consumer Trend Enjoyment Everywhere⁵, shows how dairy products can provide both comfort and functionality. Textural innovation can amplify the indulgence factor to target experimental consumers, while enhancing nutrition or health benefits can address consumers’ rising health consciousness.

To read the full article, download this month's Perspective publication below.

The views expressed above are the opinion of the author, not those of Fonterra, and Fonterra is not responsible for any decisions taken in reliance on the same.