The ongoing effects of COVID-19 are causing strain across nearly every industry—from tech to transportation, hospitality to health care—and businesses small and large are facing tough times. However, people need to eat, which bodes well for the food and beverage sector.

One category experiencing an uptick in retail sales is bakery. According to the American Bakery Association, sales in the U.S. bakery aisle jumped an unprecedented 62.3% over the week ending March 15, 2020, with IRI finding a sales increase of 44.3% for cookies and crackers alone. SPINS data found options in the natural channel are especially appealing, with sales of natural bread and baked goods growing 11.3% in the 52 weeks ending March 22, 2020. Bagels and muffins led the way in terms of growth at 23.4%, and bread loaves topped the category in market share, reaching nearly US$1.2 billion. Sales of natural shelf-stable cookies and snack bars grew 10% during the same time.

“In times of crisis, people tend to buy comforting, indulgent treats,” noted Jennifer Mapes-Christ, food research manager for Packaged Facts. Consumers are also “stress baking,” she added, which translates on the shelf to a preference for less processed and more homemade-style products.

These indulgent categories are experiencing transformation as demand for clean label options inspires formulation, ingredient innovation and market growth. What’s more, brands are launching bakery items that boast added benefits such as extra protein, superfoods, hidden veggies, good fats and more.

It’s an area with incredible opportunity, as evidenced by the new and novel clean label bakery ingredients from suppliers through our SupplySide and Food ingredients North America (FiNA) events, where food and beverage executives connect with ingredient buyers and suppliers across the health and nutrition marketplace. Brands looking to enter the natural bakery space or expand their existing portfolios should consider the following:

Understand market drivers for natural bakery products

“Consumers around the world have a love affair with baked goods; however, with the rise of dietary concerns related to carbohydrates, sugar and trans fats, there is growing pressure for bakery manufacturers to create better-for-you products,” noted Pam Stauffer, global marketing programs manager at Cargill.

That demand for better-for-you products was evident in the June release of Information Resources Inc.’s (IRI) 2019 New Product Pacesetters report identifying the most successful consumer packaged goods (CPG) brands based on exceptional first-year dollar sales across food and beverage, nonfood and convenience store sectors. Six food and beverage New Product Pacesetters earned more than $100 million in multioutlet channels—the last time the food and beverage category had at least six products break the $100 million mark was in 2012. The median food and beverage New Product Pacesetter earned $19 million in 2019, compared with $11 million in 2018.

That $8 million bump is notable and considerable and, according to IRI, driven by brands shifting toward natural and non-GMO ingredients. Three bakery products made the Top 10 food and beverage New Product Pacesetters list—Arnold/Brownberry/Oroweat Sandwich Thins ($103.2 million), Cheez-It Snap’d ($88.7 million) and Pop-Tarts Bites ($68.3 million). The products represent different bakery subcategories including bread, baked snacks/crackers and sweet baked goods.

Consider the bread category, which represents the largest slice of the bakery pie. As noted in Research and Markets’ “Bread Market - Growth, Trends, and Forecasts (2020-2025)” report, demand for functional ingredients in bakery products is rising, owing to their nutritional benefits. The report noted bread, a staple that constitutes a major part of the daily diet, has catered to more functional demand. New low-carb, high-fiber, multi-grain and fortified breads that appeal to health-conscious consumers have triggered the market growth. In addition to functional health benefits, incorporating natural ingredients, such as natural preservatives, antioxidants and enzymes in bread are on the rise. Brands are targeting to replace shortenings and fat with omega-9s and omega-3s that improve the fatty acid profile and support performance. Cholesterol reduction, weight management, high protein and sugar control are the key consumer trends.

In his article, “Cross-generational marketing: What’s on a bread label is as important as what’s not,” Bill Hanes of Lesaffre noted fortification presents an opportunity for bread brands to stand out on the shelf. Various ingredients offer many options to add protein and calcium to bread formulations. Both protein and calcium have appeal across generations, but protein especially has potential to encourage purchases among Gen Z and Millennial consumers.

Jamie Mavec, senior marketing manager at Cargill, agreed, noting the biggest opportunity for fortification exists in the bread, muffin, cracker and breakfast biscuit sectors since they can help consumers start their day off on the right foot. Fiber is top of mind at Corbion, since it can allow bakery brands to carry on-pack claims related to improving cholesterol and blood sugar levels, managing weight and increasing energy.

Keep ingredient selection and functionality top of mind

For many consumers, healthier baked goods—whether sweet or savory, shelf stable or frozen—are defined by what they lack: gluten, allergens, unhealthy fats, added sugars or sodium. These products have potential to soar if they contain the right mix of ingredients to help products maintain the taste, texture, shelf life and indulgence consumers desire. According to Allied Market Research, the global bakery ingredients market was valued at $12.6 billion in 2017 and is projected to reach nearly $18.6 billion by 2025, growing at a compound annual growth rate (CAGR) of 5% from 2018 to 2025.

In her article, “Clean label bakery takes the cake,” Melissa Kvidahl Reilly noted increased interest in gluten-free products is propelling the market for alternative flours. Ancient grains and other wheat alternatives have reached mainstream status not only because they’re celiac-friendly, but because they tend to also offer health benefits attractive in a clean label market, she wrote.

Eugenia Erlij, vice president of marketing and communications at Innophos, said some of the most popular gluten-free flours on her radar include those made from flaxseed, millet, buckwheat, rice and quinoa. “New heirloom varieties of barley, such as black and purple barley, are making their way into production of baked goods and other products,” she added.

Sugar reduction also is an important trend in the sweet bakery category. “This trend is not only driven by simple calorie reduction but also by the negative image that sugar is facing at the moment,” said Jorge Cortines, product manager, application technology at Jungbunzlauer. “We have noticed that knowledge about sugar and sugar substitutes has increased in the last few years, and therefore consumers are turning to sugar alternatives that are viewed as natural and clean label.”

Fats and oils also are staple ingredients that make bakery products taste so good; however, cost and functionality are critical areas brands must consider when making the switch to natural. In some cases, removal of certain fats is straightforward and results in minimal extra cost; in other cases, fats can have a major functional role, and therefore must be replaced with other ingredient or processing solutions. Bakery fats require an optimal level of plasticity for functionality and must be pliable with the correct degree of firmness. To ensure bakery success, a fat needs to be solid at room temperature to provide the right structure, creaming capabilities and mouthfeel. However, even solid fats are not entirely solid. They consist of two phases: a solid portion (solid fat) and a liquid portion (liquid or oil).

When choosing a fat, manufacturers must target a balance between the solid and liquid components. For example, too much solid content or too high a melting point, and the product will not have the proper melting characteristics, yielding an undesirable mouthfeel. Consequently, too much liquid can make the product oil out or taste oily. In an icing, the product won’t aerate properly.

Colors add function to bakery products

Color additives used in food development not only make products more visually appealing, they also offset possible color loss, enhance naturally occurring colors or give bland-looking foods an attractive hue. Besides imparting flavor to a product, flavor additives have functional roles, such as masking off-notes and bitterness from nutritional ingredients such as certain proteins, fibers, omega-3s, botanicals, and vitamins and minerals.

The global food colors market—synthetic, natural and nature-identical—reached US$3.8 billion in 2018 and is projected to reach $5.12 billion by 2023, according to MarketsandMarkets. The natural segment, fueled by increased demand for food and beverage products made with natural and clean label ingredients, accounted for the lion’s share of the total market.

The use of synthetic colors in food and beverage products has been a hot-button issue ever since the 2007 University of Southampton’s study (Lancet. 2007 Nov 3;370(9598):1560-7) linking food colors to hyperactivity in children. The study’s results eventually were found to be lackluster by the European Food Safety Authority’s (EFSA) Panel on Food Additives, Flavourings, Processing Aids and Materials in Contact with Food. Nevertheless, the study set the stage for growing consumer backlash against artificial colorants in food.

The result has been increased market opportunity for natural colors in key application areas including dairy, beverages, bakery and confectionery. Natural sources include beta carotene, astaxanthin, anthocyanin, annatto and others, while natural-identical sources include mixed carotene, lutein, canthaxanthin, lycopene, curcumin, titanium oxide and more. Furthermore, fruits, vegetables, concentrates and extracts also are becoming more popular as natural alternatives.

In her article, “Using clean label colors to transform bakery,” Alice Lee of GNT Inc. noted natural food colors can be used for a wide range of baked goods such as breads, muffins, cupcakes, pancakes and waffles. Further, natural colors are available in a variety of formats, including liquids and powders, providing options for different product requirements. Liquid colors, which can be added to any water in the formulation, are well suited to many bakery applications. She cautions these types of ingredients are not a plug-and-play solution. To ensure they deliver the best possible performance, it is vital to understand the technical aspects that affect the chosen application.

That means understanding factors such as the pH value, density and fat content of the formulation as well as knowing how it will be processed, packaged and merchandised. Extensive testing, including exposing the product to extreme heat and light, should be undertaken to establish the stability of the colors.

Labeling and packaging matters

In his article, “COVID-19 driving clean label bakery market,” Will Cowling of FMCG Gurus explained COVID-19 is causing consumers to shop for healthier products, and brands need to promote clean label attributes to reduce the risk of price sensitivity in the bakery sector that may occur later in the year. For example, 56% of consumers say they will pay greater attention to natural claims as a result of COVID-19, while 42% say this when it comes to sustainability claims and 49% locality claims. These claims appeal to consumers because products are deemed to contain real and authentic ingredients, as well as being free from chemicals. This helps position products as tasty, nutritious, better quality and safer than comparable options. All these attributes will intensify in importance in 2020 and beyond as a result of the pandemic.

Brands also need to be keenly aware that consumers also are looking for indulgent products that reflect some of today’s most noteworthy dietary tribes. In her article “Wholesome indulgence,” Adrienne Smith noted shoppers are seeking out wholesome, real food ingredients, functional add-ins, limited processing and qualities such as USDA Organic, non-GMO, vegan, plant-based, Fair Trade and more. Base Culture Original Keto Bread is a frozen loaf from wholesome ingredients such as eggs, almond butter, arrowroot flour and golden flaxseed meal. Purely Elizabeth’s Ancient Grain Pancake Mix is a gluten-free, Non-GMO Project Verified and fueled by organic grains and seeds such as teff, buckwheat, chia, hemp and flax. Foodstirs Organic Keto Chocolate Chip Cookie Mix features almond flour, pea protein powder, Fair Trade Certified chocolate and other consciously sourced ingredients.

Lessons learned

The bottom line: Consumers crave the indulgence baked goods offer, but they haven’t fully abandoned the clean label trends that dominated pre-COVID. Food & Beverage Insider spoke with representatives from three brands—Angelic Bakehouse, Simple Mills and Udi’s Gluten Free—about better-for-you bakery trends, innovative ingredients and how COVID-19 is changing the way consumers shop for baked goods.

This market analysis was based on the “Clean label innovation in the bakery aisle” digital magazine. Click the link to read the issue in its entirety.

U.S. regulations governing the labeling of “bioengineered food” were challenged Monday in a lawsuit filed in California against the U.S. Department of Agriculture.

USDA’s rules that took effect in 2019 “will leave the majority of GMO-derived foods unlabeled; discriminate against tens of millions of Americans; prohibit the use of the widely known terms ‘GMO’ and ‘GE’; and prohibit retailers from providing more information to consumers,” according to the nonprofit Center for Food Safety (CFS), one of the plaintiffs, in a news release.

The lawsuit, pending in the U.S. District Court for the Northern District of California, moved to have the court declare the regulations unlawful and nullify them, then order USDA to address portions of the rules alleged to be unlawful. CFS was joined in the lawsuit by Natural Grocers, Citizens for GMO Labeling, Label GMOs, Rural Vermont, Good Earth Natural Foods and Puget Consumers Co-op.

Plaintiffs challenged USDA permitting electronic disclosures on packaging—otherwise known as a “QR code” or “smartphone” labeling—without requiring additional information on the label.

USDA moved ahead with QR codes despite a study that showed they would fail, according to CFS. While 62% of study respondents did not express challenges that might affect their access to information in a digital link, researchers in the third-party study conducted by Deloitte “observed key technological challenges that prevented nearly all participants from obtaining the information through electronic or digital disclosure methods.” However, the study concluded the technological challenges could be overcome through proper implementation of the law.

The lawsuit is concerned with nomenclature— specifically USDA limiting the use of the term “bioengineered” when making required disclosures on food packages. According to plaintiffs, USDA prohibited the use of “GE” and “GMO” in on-package text or symbol labeling, despite those terms being widely used and understood by the public.

“For 25 years, all aspects of the public dialog around GE foods—scientific, policy, market, legislative, consumer—have used either ‘genetically engineered’ (GE) or ‘genetically modified’ (GMO) to refer to genetically engineered foods,” the lawsuit stated. “Those are terms that all federal agencies, including USDA during this very rulemaking, used. They are what the public knows, understands, and expects, and what is currently used in the marketplace by producers.”

While USDA’s Agricultural Marketing Service (AMS) acknowledged concerns raised by commentators to its draft rule that the term “bioengineering” could confuse the public, the agency disagreed.

“AMS considered similar terms to bioengineering as permitted by the amended Act, but ultimately determined that bioengineering and bioengineered food accurately reflected the scope of disclosure and the products and potential technology at issue,” the agency stated in the final rule.

The lawsuit also challenged USDA’s restriction on which foods are covered by the rule and mandate disclosure.

“The vast majority of GE foods (by some estimates over 70%) are not whole foods, but highly processed foods with GE ingredients, like sodas and oils,” CFS explained in the news release. “Yet in the final rule USDA excluded these ‘highly refined’ products, unless the GE material was ‘detectable.’”

According to CFS, USDA also improperly restricted retailers and products from voluntarily providing additional information to consumers that would be more meaningful to them, such as using the terms GMO and GE.

A USDA spokesperson declined to comment, citing "pending litigation.”

Congress in 2016 passed the Bioengineered Food Disclosure Act, which directed USDA to issue regulations regarding foods required to make a disclosure indicating food is or may be bioengineered.

On Dec. 20, 2018, Agriculture Secretary Sunny Perdue—one of the named defendants in the lawsuit—announced the “National Bioengineered Food Disclosure Standard.” Jan. 1, 2022 is the mandatory date for compliance with the regulations, which took effect last year.

Gut health is top of mind for consumers, with Google searches for "microbiome" almost doubling since 2016. As more research emerges on the microbiome's role in supporting not only digestive health but also immune, cognitive and metabolic health, interest will continue to grow.

Products with probiotic benefits, such as kefir and kombucha, currently dominate the gut-health beverage market. Brands are rolling out a new generation of ready-to-drink (RTD) beverages with prebiotics as well as synbiotics (both probiotics and prebiotics) to meet consumers' digestive health needs. Before either prebiotics or synbiotics can become as ubiquitous as probiotics, though, beverage manufacturers must deal with important formulation and digestion challenges.

Prebiotics: Fueling the microbiome

Prebiotics and probiotics are easily confused but play distinct roles in maintaining good digestive health. Probiotics are the good bacteria that displace bad bacteria in the gut and help establish a healthy microbiome. The most common probiotic bacteria strains used in food and drink manufacturing are Lactobacillus and Bifidobacterium.

Prebiotics are the crucial nondigestible fibers that fuel the growth of healthy bacteria, including probiotics. Unfortunately, sometimes popular prebiotic fibers such as inulin can cause gastrointestinal (GI) distress and bloating, making it difficult for consumers to incorporate them into their healthy diets.

One ingredient shown in an unpublished study to promote a healthy microbiome and support healthy blood glucose levels is arabinoxylan, a plant-based prebiotic dietary fiber extracted from the cell walls of stalks, leaves and hulls. Results of the clinical trial revealed consumers can take up to 12 g/d of arabinoxylan (as Arrabina from Comet Bio) with no negative gut or bowel reaction. Despite its prebiotic and health benefits, arabinoxylan has not previously been widely available for use due to inefficient extraction technology. Thanks to its solubility, stability in solution and flavor, beverage makers can incorporate it to create products while strengthening their nutrition label claims.

Consumer awareness of prebiotics' role in the microbiome is growing, and RTD beverage manufacturers are quickly innovating new products to meet this demand. Functional beverage brand REBBL has a line of Sparkling Prebiotic Tonics with 6 g of prebiotic fiber per serving. REBBL's effervescent drinks boast flavor profiles like cold-brew cola and ginger turmeric, with only 6 g to 8 g of sugar per bottle. Olipop has a line of RTD beverages containing eight plant-based botanical and fiber-filled ingredients such as naturally sourced burdock root. LION Dandelion Tea uses dandelion root and leaf as the prebiotic source in its line of detox and digestive teas.

Synbiotics: Finding the perfect pairing

Given the symbiotic relationship between probiotics and prebiotics, it is not surprising that synbiotic beverages containing both ingredients are emerging as the next big trend. Besides providing consumers with a more complete gut health regimen option, supplying prebiotics and probiotics in tandem is thought to help improve the activity of beneficial microorganisms in the gut. In simpler terms, providing probiotic bacteria with a prebiotic gives the bacteria a better chance of surviving and thus positively impacting the microbiome.

Synbiotic beverages present a complex formulation challenge. Manufacturers must be careful in choosing the right probiotic strains and prebiotics to combine. To truly be a synbiotic product, the presence of the prebiotic must improve the probiotic's survival and ability to colonize in the microbiome. Simply combining any prebiotic and probiotic does not necessarily create a true synbiotic beverage. Luckily for manufacturers, many prebiotic fiber options are available.

Despite the formulation hurdles, several RTD beverage companies now have synbiotic beverages on the market. Wonder Drink Kombucha has a line of prebiotic kombuchas that include its proprietary culture and organic prebiotic corn fiber. Wonder Drink claims its prebiotic nourishes probiotic bacteria by "increasing and energizing beneficial bacteria." It also claims it normalizes the gut by restoring the balance between good and bad bacteria, thus giving good bacteria a "competitive advantage" over bad bacteria in the gut.

Golive has a line of RTD probiotic and prebiotic waters that include "a complex blend of prebiotics to nourish and support the health and growth of the probiotics." It notes that its selection of diverse and complex prebiotics has been clinically tested with its probiotic strains to ensure a maximum positive impact on the body's digestive, metabolic and immune functions.

Veteran gut-health brand Activia recently reinvigorated its Probiotic Dailies line by adding prebiotic fiber varieties in Lemon & Ginger and Honey & Ginger flavors. The yogurt-based products use a daily shot format and promise to “deliver billions of live and active probiotics with prebiotic fiber for optimal efficacy.”

More time is needed to see how consumers react to beverages with prebiotic and synbiotic digestive health benefits. Both have the potential to be as successful as probiotics if manufacturers tackle these digestion and formulation challenges.

Loula Merkel is vice president at Comet Bio and has more than 15 years of experience in agribusiness and energy industries. Previously the director of project development at Coskata, she was responsible for the development and financing of commercial projects. She also spent eight years at McKinsey & Co., serving clients at the intersection of chemicals and agribusiness industries, including multinational fertilizer, agrochemical and food companies.

To cater to today’s younger consumers, it is important to deliver food products with visual appeal. Research suggests as many as 69% of Millennials regularly take a picture or video of their food before they eat it—and bakery products are among the most widely shared on social media.

There are now more than 80 million Instagram posts tagged with #cake alone, with colorful options such as #rainbowcakes and #unicorncakes proving particularly popular.

Yet while colorful baked goods are very much on-trend, that does not mean consumers are willing to turn a blind eye to artificial colorants. In fact, Nielsen research has shown that more than 6 in 10 shoppers globally try to avoid artificial flavors, preservatives and colors.

Consumers calling for clean labels

Clean labels are rapidly becoming the new normal, with ‘naturalness’ a highly important concept for consumers.¹ For example, research published by the American Bakers Association last year found that, for Generation Z and Millennial shoppers, ‘natural ingredients’ was among the most important nutritional descriptors for baked goods, alongside ‘whole grains’ and ‘freshness’.²

While ‘naturalness’ lacks any formal definition, a recent survey of American, British and Australian consumers found products derived from plants and those with natural colors and flavors are seen to be the most natural overall.³ A 2019 study, meanwhile, revealed many U.S. consumers do not trust ingredients they do not recognize or those described by chemical names and numbers.⁴

Clean label colors—or food-sourced ingredients that impart desired color to a product—offer bakery manufacturers an ideal solution, delivering all the colors of the rainbow while supporting clean and clear ingredient lists. Such colors are plant-based, made from fruit, vegetables and edible plants using physical processing methods and no chemical solvents. Based on the straightforward principle of coloring food with food, they make use of raw materials such as blueberries, carrots and spirulina to bring products to life.

Clean label colors can be used for a wide range of food and drink applications, including baked goods such as breads, muffins, cupcakes, pancakes and waffles.

They are available in a variety of formats, including liquids and powders, providing options for different product requirements. Liquid colors, which can be added to any water in the formulation, are well suited to many bakery applications.

To read this article in full check out the Clean label innovation in the bakery aisle – digital magazine.

Alice Lee has a B.Sc. in Food Science from University of Guelph and a culinary diploma from the Institute of Culinary Education in NYC. Today, thanks to her ever-growing expertise and versatility, Lee has been able to provide invaluable support to industry professionals for nearly a decade in her role as the Applications Manager at GNT, Inc. by educating food manufacturers and product developers on the benefits and best practices of natural food coloring.

It’s true that American consumers are trying to eat better and live healthier lifestyles. But even the most stringent dieters deserve a treat every now and then, and they’re turning to baked goods. According to SPINS, options in the natural channel are especially appealing, with sales of natural bread and baked goods overall growing 11.3% in the 52 weeks ending March 22, 2020. Bagels and muffins led the way in terms of growth at 23.4%, and bread loaves topped the category in market share, reaching nearly US$1.2 billion.

"Natural" claims resonate with consumers

When it comes to purely indulgent baked treats, natural claims resonate, according to SPINS. Sales of natural shelf stable cookies and snack bars grew a whopping 10% in the past year. And while bars led the way with 17.3% growth and the majority of the market share (not surprising due to their role as a meal replacer and wellness product), indulgences like naturally positioned cookies performed quite well, clocking in at a $305 million market and growing 2% in sales.

Better-for-you alternatives

This growth is partly thanks to increased interest in better-for-you alternatives overall.

“Consumers around the world have a love affair with baked goods; however, with the rise of dietary concerns related to carbohydrates, sugar and trans fats, there is growing pressure for bakery manufacturers to create better-for-you products,” said Pam Stauffer, global marketing programs manager at Cargill.

Plus, according to Kemin marketing director Courtney Schwartz, growth in niche areas such as keto, vegan and Whole30 is also driving sales in the bakery sector as consumers look for ways to adhere to these strict diets with a bit more ease.

“Consumers are changing their dietary preference and seeking products that contain nutrient-dense, functional and clean label ingredients,” agreed Andrea Weis, customer innovation applications specialist, bakery, at AAK USA, Inc. The key to success is maintaining traditional textures and flavors while replacing unwanted ingredients with clean label alternatives. And though bakers are having to reformulate to meet these demands, the payoff is significant, said Mark Stavro, senior director of marketing at Bunge Loders Croklaan, as “many consumers say they would pay more for products that offer these benefits.”

To read this article in full check out the Clean label innovation in the bakery aisle – digital magazine.

Melissa Kvidahl Reilly is a freelance writer with 10 years of experience covering the natural products industry, from food and beverages to personal care, from research developments to market trends. Her work appears in a number of industry publications, including Natural Products Insider, Food Insider Journal, Natural Foods Merchandiser, Delicious Living and more.