75% of Consumers Will Pay Extra For Clean Label Ingredients

The concept of clean label food and beverages--products containing clean and simple ingredients that consumers recognize—is nothing new, but it has been thrust into the spotlight over the past few years as health-conscious consumers want to know what they are putting into their bodies.

Clean label is no longer a fad or a trend—it’s the “new norm" that is spurring innovation across all CPG categories. But nowhere is this more apparent than in the food & beverage industry where global sales of clean-label products hit US$165 billion in 2015 and are projected to reach $180 billion by 2020. The food & beverage industry is undergoing a paradigm shift in how they process, create and deliver their products to consumers; however, going clean label isn’t as easy as 1-2-3. In fact, there are a lot of uncertainties and often clean label is more about consumers’ perceptions than it is about anything concrete and tangible. This was the topic of the “Delivering on the Clean Label Expectation" Summit at SupplySide West 2016. In fact, clean label is predicted to be the No. 1 trend in 2017 as demand for total transparency now incorporates the entire supply chain, as a clean label positioning becomes more holistic.

This concept is supported by results of a recent survey commissioned by specialty PR agency Ingredient Communications that found as many as 73 percent of consumers are happy to pay a higher retail price for a food or drink product made with ingredients they recognize and trust.

In a survey of 1,300 consumers across Europe, North America and Asia-Pacific, 52 percent of respondents said they would spend over 10 percent more on a food or beverage product that contained ingredients they recognized and trusted. Meanwhile, 18 percent said they would pay 75 percent or more extra. Overall, 76 percent of respondents said they would be more likely to buy a product that contained ingredients they recognized and trusted.

The findings underline the growing importance of clean and clear labeling and the use of ingredients that are familiar to consumers. They also suggest that there is a significant opportunity to harness the potential of co-branding between food and beverage manufacturers and their ingredients suppliers.

“Co-branding of ingredients in the food and beverage industry is still fairly unusual, and yet our survey suggests it would resonate with many consumers," said Richard Clarke, director, Ingredient Communications. “We have seen the power of the ‘Intel Inside’ concept in the home computer market. If it works for selling laptops, then why not food and drink? Co-branding can develop consumer trust and provide a clear signpost for differentiation, which can be converted into higher spend, loyalty and repeat purchases."

He noted marketing finished products that contain ‘branded’ ingredients that consumers recognize could be key to commanding a substantial price premium in-store. “One barrier to co-branding is a perception among food and beverage companies that it reduces their ability to shop around among suppliers of raw materials to achieve the best price. However, with consumers willing to pay such large price premiums for products made with ingredients they know, this factor might easily be offset by increased sales and profits," he added.

Interestingly, U.S. consumers were willing to pay the highest prices—with 44 percent stating they would pay 75 percent or more extra for ingredients they recognized and trusted. This was followed by consumers in India (32 percent), the Philippines (29 percent) and Malaysia (26 percent), indicating a strong preference for recognizable ingredients among consumers in Asia.

According to Neil Cary, founder of Surveygoo Market Research Consultancy that conducted the survey, “Our survey reveals significant convergence in the way consumers across the globe share similar priorities in sourcing and consuming high quality foods. However, there are also key differences between markets. Willingness to pay more for recognizable ingredients is strongest in the US, highlighting the importance of clean and clear labelling in the American market. Asian consumers also put a very high value on the quality of their food and are willing to pay a premium for the best ingredients, even though average incomes are lower."

The survey found recognition of ingredients to be one of the biggest drivers of product choice, with more than half of respondents (52 percent) considering it to be an important factor. This was comparable with an ability to see nutrition information on-pack (considered important by 53 percent) and acceptability of price (55 percent). An ability to recognize ingredients by name was rated more important than both an ability to tell that a product was high quality (selected by 32 percent) and taste (50 percent).