18 Jan 2023 UK: ‘Healthier’ brands challenge Krispy Kreme and Nutella

Anthony Fletcher, the former head of snack brands Graze and Innocent smoothies, was looking for a new healthy-eating venture when he landed on an unlikely category: donuts.

His fledgling Urban Legend brand, launched a year ago, is taking on Krispy Kreme in UK supermarkets as it seeks to persuade hungry consumers to switch to a low-sugar, low-calorie alternative.

His banoffee pie, strawberry cupcake and “Choc Party” confections, made using a patented process that “sets” the dough by steaming instead of frying it, put him among a generation of start-ups. -ups seeking to replace well-known food brands. with healthier options.

These start-ups should also benefit from new anti-obesity regulations in the UK, which limit where supermarkets can place foods high in fat, sugar and salt (HFSS) – but not versions with significantly healthier ingredients. .

“The idea of ​​Urban Legend is not to ask the consumer to change. . . it’s about taking junk food out of junk food rather than creating something that looks different to the consumer,” Fletcher said.

“Krispy Kreme is a deeply indulgent product that’s loaded with all sorts of things. We wanted to recreate that taste experience without the higher levels of sugar, fat and calories – that was our outrageous vision.”

Pressure to healthier innovation

The obesity problem in the UK, one of the worst in Europe, has put packaged food companies in the spotlight. Unilever, under pressure from investors, released a nutritional assessment of its portfolio last month which found only 35% did not fall into the HFSS category.

Companies like Unilever, which makes Magnum and Ben & Jerry’s ice cream and Hellmann’s mayonnaise, are aware of changing consumer habits and regulatory pressures to provide a healthier offering. Unilever has set new nutritional targets this year.

Yet entrepreneurs like Fletcher think something more is needed. His latest venture was inspired by a conversation with a senior public health official, who told him that the overall UK diet continues to deteriorate every year despite voluntary sugar reduction targets for industry – and despite the growth of companies like Graze, which reported annual revenues of £38m. in 2020, the first year after its purchase.

The rise of the healthy snack brand “had barely moved the needle,” he said. “I didn’t want to make another premium healthy product.”

Instead, he turned to donuts as part of an attempt to make healthier foods accessible and affordable for those most vulnerable to obesity.

Public health groups such as Impact on Urban Health, part of the non-profit Guy’s & St Thomas’ Foundation, argue that low-income households are more likely to have poor diets due to high food prices. a proliferation of unhealthy foods in deprived areas, and a lack of “money and head space” to prepare healthy meals.

“[For companies] unhealthy foods are cheaper to produce, taste great, and sell,” said Louis Bedwell, chief executive of venture capital firm Mission Ventures.

Although the UK’s new rules have brought about some changes, “there are healthier snack options, but they belong to a small set of categories, are stocked in some stores and are often more expensive,” Bedwell said.

Multinationals are often reluctant to take risks on new brands or healthier versions of existing brands, especially after a series of failures in areas such as low-sugar chocolate.

Meanwhile, around £42m of venture capital investment in ‘healthy’ food categories between 2018 and 2022 has been dwarfed, for example, by the £296m invested in drinks brands, according to business finance group Oghma Partners.

Good Food Program

In an attempt to fill the void, Mission Ventures and Impact on Urban Health have set up the Good Food Program, which provides funding and guidance to “healthy challenger brands”, including Urban Legend, which make affordable products in unhealthy categories. expensive and nutritious. options. They not only want these brands to succeed, but to influence global food manufacturers.

Another brand supported by the program is the seven-year-old Jim Jams chocolate spread, which challenges Nutella directly. Others include Naturally Jelly, made with fruit juice and added fibre, and Rootles Chocolate Cookies made with 40% root vegetables.

These products are not without their own problems. Many low-sugar brands use polyol sweeteners which can have laxative effects when consumed in large amounts or by people with digestive issues.

Products will need to show that they can entice consumers to try a new brand, taste good enough to attract repeat customers, and shoppers won’t eat large amounts emboldened by a lower calorie count.

Baked goods such as donuts are considered one of the hardest categories to recreate in healthier versions, Fletcher said, with chocolate being the most technically challenging. But new technologies to recreate texture and flavour allow for more compelling alternatives, he added.

However, Ferrero, the multinational company that makes Nutella, said that “reformulation is not an easy option. We have yet to find alternative recipes that our consumers prefer.”

Ferrero said Nutella focuses on portion control in terms of health, with its marketing materials encouraging consumers to eat a single 15g serving. Krispy Kreme did not respond to a request for comment. It also offers smaller “bite” portions.

Experts agree that a much wider shift is needed to tackle obesity, including a move towards increased consumption of fruits and vegetables.

Katharine Jenner, director of the Obesity Health Alliance, said: “We’d like to see a much more level playing field when it comes to what’s on our shelves – if it’s possible to make donuts and pasta chocolate spread with less sugar, then all donuts and chocolate spreads could contain less sugar.

“Food companies need to be given enough incentive, and for that we need political will from the highest levels of government.”

For the first cohort of brands participating in the Good Food Programme, the test is popularity.

Jim Jams is available in all UK supermarkets and the Good Food Program said there had been a “significant shift” towards the product among low-income families. The company became profitable this year.

Urban Legend donuts are available in London branches of Tesco and Selfridges, with a trial underway at Sainsbury’s. Fletcher acknowledged it was the start, but said he wanted to convert a significant number of buyers from Krispy Kreme, which brought in $1.4-billion in net revenue last year.

Donuts are “a product that makes people feel good and impacts their health – that’s why I chose it,” he said. “A healthier bun wasn’t going to change the world.”

Source: Financial Times