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Clean Label Products Present Net Gains for Food Stocks in Increasingly Health Conscious Market - Wed Mar 15, 2023

USA News Group – In recent years, the food industry has seen a significant shift towards natural and organic foods with non-GMO ingredients and without fillers, additives, hormones, antibiotics, and bioengineering, more simply known as the clean label ingredients market. It’s a market that’s grown in popularity over the last few years, projected to grow to US$41.5B by 2030, growing at a rapid CAGR of 17.56%. Part of the reason for this is that 78% of consumers are willing to pay more for clean label products, according to global consumer research from Ingredion Incorporated (NYSE:INGR). While the increased consumer awareness of the potential health benefits of clean label products may have grown organically, there’s also credit to be given for strategic marketing and branding as new products are unveiled, such as the successful rollouts by natural foods producers such as Pangea Natural Foods (CSE:PNGA) (OTC:PNGAF), United Natural Foods (NYSE:UNFI), General Mills, Inc. (NYSE:GIS),and The Hain Celestial Group, Inc. (NASDAQ:HAIN).

Though a relative newcomer to the space, Pangea Natural Foods (CSE:PNGA) (OTC:PNGAF) has been on a hot streak of product launches since going public in July 2022. Its most recent product release was its Energy Gel, an all-natural, 100% vegan, gluten free pre-workout supplement that contains only 5 ingredients: Organic Matcha, Organic Blueberries, Organic Hibiscus, Organic Beetroot, and Apple based Honey.

But part of the marketing behind Pangea’s Energy Gel is also not only attributed to the simple ingredients, but also the state-of-the-art packaging designed for simple one-handed opening. It’s the first product from Pangea’s arsenal to break away from the company’s iconic simple green packaging.

Pangea Natural Foods quickly built up a reputation with retailers having grown the visibility of its multiple lines of innovative healthy food products into over 250 leading national retail food stores across Canada and the United States. Across its portfolio of products are its initial launch product Pangea Patties, Old Fashioned Ghee, Munchie Mix, Pangea Chikken Nuggets product, and the newly launched vegan pre-workout supplements.

But behind the scenes is a team that has been connected to the food industry across generations. This includes the CEO Pratap Sandu with a background in marketing and professional sales and is also a Director for Prabu Foods which manufactures and distributes to retail and wholesale outlets across the world, and Director Nashir Virani who started Golden Boy Foods in 1979, which grew from coffee to wholesaling of nuts, dried fruit and much more before being sold to Kraft.

Now the Pangea team has added two more marketing experts, by naming Daryl Louie the company’s new Chief Marketing Officer, followed by ex-Boston Pizza (TSX:BPF.UN) executive Jordan Melville.

“Last year we reached many milestones, including the introduction of four new product lines and the launch of Pangea products in over 250 retail outlets,” said Pangea CEO Pratap Sandhu. “We are looking forward to having Jordan join us and help support our growth plans in order to reach our 2023 goals.”

Melville brings Pangea decades of experience in food manufacturing, distribution and franchising, especially with Boston Pizza where he provided strategic direction and led the opening of over 400 locations across North America.

While, by adding Daryl Louie, Pangea gains over a decade of experience in marketing, as the co-founder of AntiSocial Media Solutions, a digital marketing agency with offices in Vancouver, Toronto, Montreal and Los Angeles, working with several clients such as Starbucks, 7-Eleven, Subway, Cheetos, and many more.

Earlier this year United Natural Foods (NYSE:UNFI) expanded its private label Wild Harvest organic produce line by more than 40 new offerings nationwide. But with the launch, it’s been noted that all new items will be launched with Wild Harvest’s distinct purple branding and a prominent USDA Organic Certified label. The bold color scheme and easily recognizable branding helps both consumers and store associates distinguish which products are organic, while offering the trust of the Wild Harvest label.

“The new Wild Harvest organic produce packaging features eye popping, bold colors and imagery that sets itself apart on the shelf versus national brands,” said David Siegel, CEO of America’s Food Basket. “But what really sets it apart is what’s inside, a great quality product that is good for you.”

Back in 2014, General Mills, Inc. (NYSE:GIS) acquired the popular natural food company Annie’s Homegrown for $820 million. One year later, the Annie’s Homegrown product was still selling strong, despite an initial pushback from concerned consumers who thought the brand would be lost within the General Mills basket.

“We have not been asked to compromise one single thing with ingredients, values or sourcing,” said John Foraker then-President of the Annie’s brand for General Mills. Now almost 8 years later, General Mills continues the legacy of the organic, all-natural “Bunny” brand, maintaining Fair Trade certification, USDA Organic designation, and being Non-GMO Project Verified. Along the way, the brand has increased its recognition beyond its healthful benefits, towards being marketed as regenerative and environmentally responsible as well. The Annie’s brand was also part of General Mills’ first rollout of products made in a peanut free facility, along with another organic product line of bars from Cascadian Farm, which the company acquired way back in 1999.

While General Mills was acquiring natural foods brands, late last year The Hain Celestial Group, Inc. (NASDAQ:HAIN) announced it was selling its Westbrae Natural brand to Bush Brothers & Company for an undisclosed amount.

“In our continuing journey to simplify the company and focus on the brands and categories with growth potential in line with our strategic direction, we are pleased to announce the divestiture of the Westbrae Natural® brand to Bush Brothers,” said Mark L. Schiller, Hain Celestial’s President and CEO. “The transaction allows us to focus more resources on driving distribution and expanding innovation on priority brands.”

This wasn’t to say that Hain was in any way stepping away from natural foods. On the contrary, Hain Celestial continues to market several brands that fit the description, including its Earth’s Best Organic line which includes branding with the image of Elmo from Sesame Street on its packaging, as well as other brands that cater to clean label consumers such as Garden of Eatin’, Thinsters, Terra chips, Sensible Portions, ParmCrisps, Lima, Natumi, Ella’s Kitchen, and Hain Pure Foods among several others.

As per the research of Ingredion Incorporated (NYSE:INGR), more than three quarters of consumers report a willingness to pay more for natural clean label products. The company itself is among one of the strongest consumer staples companies in the market today, having recently reported a strong 2022, and 13% net sales growth in Q4 2022.

According to Daniel Haley, globally platform lead for clean and simple ingredients at Ingredion this willingness of customers to pay more for clean label products also generates a “significant margin of profit, and a very strong value proposition.

“When it comes to food and beverage and clean labels, there are certain areas of clean labeling that certainly have seen the big net gains in consumer focus and behavior,” said Haley. “Our research shows a 40% net gain in consumers wanting products only made with natural ingredients, a 43% gain in those checking labels, a 29% [net gain] in looking for products with no artificial ingredients and 24% gain in those looking for organic.”

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