The Health Trend Is Irreversible: 7 Trends to Watch in Food and Drink

As it turns out, nearly all of it started with small companies.

"What should I eat?"

Or, "What's healthy to eat?"

That's the question you might ask yourself standing in front of a convenience-store or supermarket shelf, or scrolling through Ele.me or JD Fresh on your phone.

It's also the question food companies, ingredient suppliers, retailers and market research firms want answered. Not everyone in those industries cares about your health, but all of them now have to watch what health-conscious shoppers pick up.

When Coca-Cola and PepsiCo start talking about health and organic food, investing in yogurt companies and making cold-pressed juice, industry gatherings like the FBIF 2018 Food and Beverage Innovation Forum are one of the places where they work out what to do. This year's forum drew a record 1,800 people, under the theme "the rise of new categories." You have probably seen plenty of the categories under discussion — sparkling water, coconut water, almond milk, Greek yogurt. Those have already risen.

New categories are how small and mid-sized companies, and startups, get to challenge the big players. In fact, growth in packaged food and drink now comes from the small companies. To claw back ground, the big ones have set up incubators to invest in or buy startups. Over the past four years, the number of acquisitions in the industry has climbed every year, reaching 727 last year.

The era of the single blockbuster product is over. Products built for mass-market, mass-appeal tastes can no longer stay on top the way they once did. Consumers are readier to try something new, and even a classic like Coca-Cola is spreading out its flavors. Diet Coke posted standout results in North America on the strength of four new flavors. In China, Coca-Cola has launched ginger Coke and cherry Coke.

Most important of all, every company is talking about health. That trend is irreversible.

What has changed in packaged food and drink over the past year or two, and what is worth watching in the year ahead? Drawing on what we saw at FBIF 2018, the new products major food companies launched over the past year, and Whole Foods Market's trend report, here is what we observed.

After 9 Years of Pushing, Sugar-Free Drinks May Finally Be Catching On in China

Early this year there were noticeably more sugar-free drinks on the market than in years past.

Vita launched two sugar-free teas — green tea and roasted brown rice tea — with the words "sugar-free" printed large on the pack. Despite losing round after round in tea drinks in the past, Coca-Cola went ahead in April and launched its sugar-free tea line Authentic Tea House. It is really a product already established in Hong Kong, now being brought to the mainland and still rolling out store by store. Itoen is widening its own sugar-free tea line too, adding a Tieguanyin flavor. More brands entering a category means it is about to enter a phase of fast growth.

The earliest sugar-free tea brands all went through a long dormant stretch. Suntory brought black oolong tea to mainland China in 2009. Seven years ago, when Nongfu Spring launched its sugar-free tea line Oriental Leaf, nobody expected it to work. It was also around 2011 and 2012 that Itoen, the Japanese company built on sugar-free tea, entered the Chinese market, selling mainly around Shanghai.

In 2013, sugar-free teas like Oriental Leaf and Suntory's sat at the bottom of consumer satisfaction rankings. Uni-President launched a sugar-free tea called Mingming Shicha in 2014 and later pulled it. That gives you some idea of how unwanted sugar-free tea once was.

It wasn't only that there were few brands. Counting from Suntory's first launch, sugar-free tea spent a decade in China with thin distribution, sold mostly in the Jiangsu-Zhejiang-Shanghai region and in first-tier cities. Even with a market that small, Nongfu Spring never gave up on Oriental Leaf. Zhou Li, secretary of Nongfu Spring's board, said: "We looked at the Japanese market — sugar-free took five to seven years to take off there too."

Sugar-free and low-sugar sodas rose a little earlier than sugar-free tea. Coca-Cola launched Coke Zero in China in 2008; its aspartame drew plenty of argument, and sales stayed lukewarm. Coca-Cola China put out a sugar-free Sprite in 2016.

In Japan and the United States, falling sales of soda and other sugary drinks are both thought to be tied to a growing elderly population. China became an "aging society" — where people over 60 make up more than 10% of the population — around 2000. In the sixth national census, in 2010, the share over 60 reached 13.3%, and aging is expected to deepen.

As rates of chronic disease, diabetes above all, have risen, Chinese consumers — especially in first- and second-tier cities — have grown warier of sugar. According to the World Health Organization, China had about 110 million diabetics in 2016, a figure expected to reach 140 million by 2040. According to 2014 data from China's Center for Disease Control and Prevention, 35.7% of Chinese people are pre-diabetic.

According to Ipsos, 73% of consumers had drunk a sugar-free beverage in the past year. Sugar also worries them more than fat or calories do: more consumers link "low-sugar/sugar-free" to "healthy food and drink" than link "low-fat/low-calorie" to it.

Healthier natural sugar substitutes — monk fruit, stevia, erythritol, inulin — are turning up in more drinks. Uni-President's Xiaoming Tongxue and Nongfu Spring's Chapi both use steviol glycoside, a sweetener extracted from a plant in the daisy family. It is 200 to 300 times as sweet as sucrose and carries 1/300 of the calories.

Leoda Esteve, a senior brand strategy consultant at the French creative agency Marcel, presented the reduced-sugar yogurt they designed for the supermarket chain Intermarché. They made a set of six cups: the first had 5% less sugar than the old recipe, the second 10% less, and so on, until the sixth cup had half the sugar of the supermarket's original private-label yogurt. "Cut the sugar step by step, and it gets hard to go back to the high-sugar cup you started with."

Soda Can Sell Health Too, Because of Resistant Dextrin

When sales are falling or flat, a food company that wants to hold its revenue has only one lever: raise prices. And giving a product some added value is one of the better ways to justify the higher price.

Coca-Cola China's most important product this year is Sprite Fiber+, which went on sale in March. The fiber comes from an ingredient called resistant dextrin.

Resistant dextrin is extracted from corn or wheat starch. This water-soluble dietary fiber gives you a certain feeling of fullness. The Omnivore's Dilemma describes the ingredient this way: "Because humans cannot digest resistant starch, it simply slides through the digestive tract rather than being converted into calorie-bearing glucose."

Coke and Sprite with resistant dextrin have done well in Japan, and their reputation for helping you lose weight has made Chinese consumers curious on social media. Building on that Japanese success, Coca-Cola started rolling out resistant-dextrin products in China. Sprite Fiber+ costs more than ordinary Sprite: at FamilyMart, a 600ml regular Sprite is 3.8 yuan, while a 500ml Sprite Fiber+ is 5 yuan.

Other resistant-dextrin products on the domestic market include Danone's new fruit tea Tianfang Yetan and Itoen's strong-flavor oolong tea. Now that companies this size have adopted resistant dextrin, the ingredient may become more mainstream.

Probiotics and Prebiotics, Which Rose With Yogurt, Are Being Added to Other Foods and Drinks

Another ingredient reshaping categories the same way is the probiotic and prebiotic, which has just stepped outside yogurt.

In 2017 yogurt sales passed milk sales, making yogurt the dairy product Chinese people buy most. There are many reasons: yogurt comes in more flavors, and because lactose intolerance is common in China, yogurt goes down more easily than milk.

But the bigger reason is that yogurt does something — it contains probiotics. According to a GfK survey, Chinese consumers care about prebiotics and probiotics more than consumers in any of the other 17 countries surveyed. More than half of Chinese respondents called them very important, 21 percentage points above the second-ranked country.

So why not put probiotics in other snacks and drinks? That logic is presumably what has landed them in kombucha, biscuits, milk tablets and more.

Kombucha, brewed with a scoby (a symbiotic culture of bacteria and yeast), has been popular in the United States for a while now. This fermented tea started as a niche drink that enthusiasts made at home. GT's Kombucha was the first to turn it into a ready-to-drink product. As low-carb diets and superfoods like chia seeds caught on, GT's Kombucha grew fast and took a 50% share of the category. The big companies followed: PepsiCo bought the kombucha brand KeVita in 2016.

According to the market research firm Euromonitor International, kombucha has become the main engine of growth for ready-to-drink tea in the US. In 2017 the American market for refrigerated kombucha and fermented drinks reached $556 million, up 37.4% year on year.

Some newer probiotic products: Barlean's gelatin-free probiotic gummies, with 2 billion CFUs of Bacillus coagulans; Elixir, a probiotic sparkling water from Lifeway, an American brand built on fermented dairy; and a potato chip with yogurt and live probiotics that Lay's maker Frito-Lay plans to launch in the US, though its shelf life is only a month — the company patented it last year. PepsiCo's Tropicana has also put out a juice with added probiotics. Chen Yueqin, China market manager for dairy, beverages and ice cream at DuPont Nutrition & Health, said in a keynote at FBIF 2018 that American consumers pay closer attention to fermented products.

Other "Functional" Foods and Drinks Are Catching On Too

When Red Bull first came to China in 1995, there was a wave of talk about whether drinking too much of it might do you harm.

The Chinese market is far more relaxed about "function" now. Bulletproof coffee, which we have written about before, is another example of a functional drink. Inspired by Tibetan butter tea, it is carb-free and high in fat, made with coconut oil, "grass-fed butter" and MCT (medium-chain triglyceride oil, a fat that is easy to digest).

Some bulletproof coffee brands, Bulletproof among them, claim their products help you hold your attention, control your weight and raise your IQ. The drink is popular in Hollywood and Silicon Valley.

The same craze is heating up in China. The internet brand Beast Life saw sales grow fivefold in six months. Early this year it teamed up with the COFCO Nutrition and Health Research Institute to launch a bottled bulletproof coffee.

In modern life, whatever the problem — a wandering attention span, not enough dietary fiber, anything at all — some food company will offer to fix it with food. Sleep is no exception. In 2016 Coca-Cola launched a "sleep water" containing L-theanine and GABA. It never went on sale officially in China, and became an internet hit there anyway, with single bottles going for as much as 26 yuan on Taobao.

Ingredients like L-theanine and GABA are not what decides whether you sleep well, but in Japan the market for functional foods sold as sleep aids has already passed 8 billion yen (about 463 million yuan), with Ajinomoto, Kirin and others taking part.

Behind all this added function sit an aging society and a consumer pursuit of health. Resistant-dextrin Coke and Suntory's black oolong tea, which claims to "cut through the grease in food," are both classified in Japan as Foods for Specified Health Uses (FOSHU).

The FOSHU market is worth about $6.3 billion, and its size has been fairly stable since 2013. Suntory, Coca-Cola, Kao and Kirin are the established players, and consumers aged 40 and up drive it.

Dr. Machiel, Coca-Cola's R&D director for Asia-Pacific, said the company launched "health-oriented" products like resistant-dextrin Coke and Sprite in Japan mainly because the society is aging and consumers there keep looking for healthy, functional food. Similar shifts in consumption and society are now surfacing in China.

There is another side to it. As people grow more health-conscious, snacking has become bound up with guilt, so companies hand consumers a reason — usually some added function — to eat a snack with a clear conscience.

"When we combine health with a guilt-inducing snack, consumers feel free to indulge. Consumers also say they want to snack to relieve stress, and in fact the GABA in many products really can help the body relieve stress," said DuPont's Chen Yueqin.

Beyond adding nutrients to snacks, attention is moving back to where ingredients are grown: mushrooms high in vitamin D, bananas high in vitamin A, rice high in resistant starch, eggs high in omega-3s and spinach high in lutein have all appeared.

Whether these snacks and drinks really aid digestion, take weight off, or get you a good night's sleep, and whether adding these nutrients to food does more good than harm, is not what this article is about. What we can say for certain is that more and more consumers want them.

Labels Are Starting to Talk Like People

Three Squirrels' recent baked-goods line, 27 Days Ultra Fresh, marks each cookie's sweetness with one to three stars. It is a crude scale, but it does help shoppers choose within the range. This kind of rating — the quantitative comparison you find in food review posts — is now showing up in a food company's own guidance.

It isn't entirely new: melons and watermelons in the Japanese market already carry sweetness labels, and FruitDay launched oranges with sweetness ratings back in 2015.

Labels have genuinely grown friendlier, though. Some coffee brands (Sumida River, for one) and beer brands now mark bitterness or acidity, so consumers can find the one they like best within a line.

Judging bitterness or acidity across varieties takes some knowledge. Beer has the International Bitterness Unit, or IBU, a finely divided scale from 1 to 100. People usually guess at a coffee's acidity and bitterness from where the beans come from. For a new consumer, that is not direct enough.

Labels are also closing the information gap between companies and consumers. And the change runs the other way: better labels let consumers screen for products with simpler formulas and fewer artificial additives.

Janina Buyi, R&D manager for the Feiniao "clean label" project at Royal FrieslandCampina, described the clean-label trend as simple formulas, transparent information, simple processing, and fewer or no artificial chemical additives.

Nestlé announced that across six product lines — Edy's, Outshine, Skinny Cow, Nestlé Ice Cream and Nestlé Drumstick — it would stop using ingredients such as high-fructose corn syrup that fail clean-label standards. The bakery-café chain Panera Bread switched all its ingredients to "clean ingredients" in January 2016. Danone has promised consumers it will make its products more transparent and use more natural ingredients while cutting the number of synthetic and genetically modified ones.

Euromonitor International predicts the global market for clean-label products will reach $180 billion by 2020.

The clean-label wave may reach China before long. A Nielsen survey of healthy food found that 74% of Chinese consumers want product labels to be simple and easy to understand, and 73% particularly dislike artificial or synthetic flavoring.

Some voices question the trend, though. Fear of synthetic food additives may have gone too far. Companies now hesitate to use ingredients with long, unfamiliar names, worried they will be misread. Norbert Kaminski, director of Michigan State University's Center for Integrative Toxicology, said "natural doesn't mean safe," and noted that effective preservatives such as benzoates and sorbates have come under attack they don't deserve.

Primitive Processing Has Spread From Restaurants to Packaged Food

"We want to see more primitive, more old-fashioned ways of processing food," said Patrick Mannion, general manager of the consumer research firm Innova Market Insights, talking about how food gets made. "How a product is made, and whether that fits the trend, is part of the product's story — and part of the brand's positioning."

The American supermarket chain Whole Foods Market made the same point in its 2018 trend report: consumers want food processed in more primitive or simpler ways — roasted, dehydrated, high-pressure air-fried, puffed without frying.

Popchips, a high-pressure air-fried potato chip, sells well in the US and was once named by Forbes one of the 20 most promising small companies. Whole Foods has also stocked puffed cassava chips, seaweed chips and pasta snacks. "How a product is made, and whether that fits the trend, is part of the product's story — and part of the brand's positioning," Mannion said.

In China, simply processed — dehydrated — dried fruit and vegetables are popular too, a fixture on convenience-store and supermarket shelves and in snack review articles. Lawson and FamilyMart have both launched dehydrated fruit and vegetable snacks under their own labels. People tend to treat them as relatively healthy snacks, though they still carry plenty of calories.

Cold brewing may be the most popular processing method in drinks. According to Ipsos's 2017 study of Chinese snack and beverage consumers, 57% of consumers have tried a cold-brewed drink — tea, coffee or milk tea. Some new ready-to-drink teas, such as Xiaoming Tongxue and Vita's sugar-free line, carry a "cold-brewed" label. Cold brewing lowers the caffeine in the tea, which is easier on the stomach, and it leaves the proteins, catechins and other nutrients in the leaves intact.

Consumers like simple processing because they want "whole food," something closer to what the ingredient actually looks like.

NFC juice is still growing at 160%, but more than one speaker at FBIF 2018 brought up HPP (high pressure processed) juice. This "cold" technology is said to preserve more nutrients than heat-pasteurized NFC juice, and it gives products a longer shelf life. Domestic HPP juice brands include Fruiti and HeyJuice.

Greg Steltenpohl founded the smoothie brand Odwalla and sold it to Coca-Cola; his almond milk brand Califia Farms has done well too — since 2014 it has posted the highest compound annual growth rate among plant-based drinks, ahead of big-company brands like Silk. Califia Farms plans to launch an HPP juice next.

How Things Spread Online Is Changing Food and Drink Strategy

Internet fame has become a marketing method, and food is no exception.

The food and drink products that turn into social media hits tend to be Instagrammable — cherry blossom Coke, peach Coke, matcha chips — with novel flavors and packaging that photographs well.

The other kind trades on curiosity. After a 2016 list of the "5 worst-tasting drinks" — Hey Song Sarsaparilla, Laoshan White Flower Snake Grass Water, Oriental Leaf, Scream and kvass — made the rounds, search volume for Laoshan White Flower Snake Grass Water, until then a niche product confined to its home region, jumped almost a hundredfold, and sales took off with it: 300,000 units on Taobao in a single week. Plenty of sellers bundled all five drinks together.

Social media can blow up a food fast, and it is hard to predict — the "5 worst-tasting drinks" roundup had in fact first appeared on the Tianya forum in 2013. However the timeline plays out, what matters is that the company follows up.

After Coca-Cola Plus launched in Japan, it was Taobao sellers who first brought the product into China. Huang Xiaoyan, Coca-Cola's vice president of R&D for Asia-Pacific, said, "People we didn't even know were importing it into China to sell." Coca-Cola later simply had the trading companies it works with import the products that came after, peach Coke among them.

Once a product becomes a runaway hit, imitators arrive quickly. Coca-Cola launched cherry blossom Coke in Japan, and before long Yanzhong put out a strikingly similar cherry-blossom cola called Qinying. That has forced the big companies and conglomerates to move faster in bringing products from overseas markets into China, especially the successful ones.

Not Everyone Can Afford to Eat Healthy, and the Foods Considered Less Healthy Still Matter

The Hong Kong Trade Development Council ran online surveys and focus groups with 2,400 mainland consumers, spread across first- and second-tier cities including Shanghai, Beijing and Wuhan. Eighty percent agreed that "I would rather buy a fresher but more expensive version of a product than one close to its expiration date," and 74% said "I relatively prefer packaged food with a shorter shelf life, since it means fewer additives and more freshness." The respondents' average household income was above 20,000 yuan a month.

Across China as a whole, though, such households are a minority. Cold-pressed juice at 18 yuan for 300ml, craft beer delivered by cold chain at 40 yuan for a 420ml can, preservative-free, additive-free cookies at 100 yuan for a 280-gram box — these are clearly not what most Chinese people eat and drink regularly.

Over the past century, the food industry added additives, added calories and stripped out nutrients not to hurt anyone but to make products keep longer, reduce spoilage losses and, in the end, lower costs, so people could buy more calories with less money.

Consumers who care more and more about health are now pushing that extreme back. Still, not everyone can afford the healthiest food.

As fresh, short-shelf-life and preservative-free foods gain ground, the foods and drinks considered less healthy are being pushed toward new markets. Shelf-stable yogurt and shelf-stable NFC juice remain important to food companies like Bright Dairy and Nongfu Spring, especially in places where the cold chain is patchy and buying power is still weak.

Michael Pollan put it plainly: not everyone can afford to eat healthy.

Cover image from VisualHunt