When my kids were toddlers, I used to bring a Kinder Surprise home when I returned from travelling. They were little happy moments. The chocolate gave them a sugar-high and more smiles followed when they completed building the trinket on the inside.
Children in Chile will not have this Kinder Surprise experience. The brand has been banned as part of sweeping food regulations. Chileans can no longer find dancing M&M characters in stores and Frosties’ Tony the Tiger has been removed from Kellogg’s packaging.
Claims like ‘natural’, ‘healthy’ and ‘fortified’ have become sparse. In its place have come warning signs. If products have high levels of sugar, saturated fat, sodium or calories, black hexagons with warnings are added to the front of the pack – in some cases, as many as four have been added per product. In addition, any products deemed unhealthy are banned from advertising during the day-time.
It’s too early to judge the results. Sugar sweetened beverages (SSBs) have experienced a 25% drop in sales. 20% of all products available in the supermarket have been reformulated to avoid the dreaded black marks. Most experts agree it might take years to change consumer behaviour.
Chile was relatively poor in the 1980s, with malnutrition commonplace. Over the last 35 years, there has been rapid economic growth not dissimilar to Malaysia. This led to rapid growth in processed and packaged foods. The spend on diabetes-related health problems is now $800 million per annum, growing to approximately $1.5 billion in the next decade. As one Chilean senator said: “Sugar kills more people than terrorism and car accidents combined.”
Many Asian governments are carefully examining diabetes and the effectiveness of food regulations implemented in Chile and 30 other countries around the world.
In Singapore, the front-of-pack label of beverages will be colour-coded and will show a grading to indicate if the drink is healthy, neutral or unhealthy, mostly linked to sugar levels. In addition, there is a ban on advertising being proposed for products that have higher than mandated sugar content.
This would reduce brand’s ability to drive mental availability, especially impacting light brand/category consumers and new entrants. The impact could be a gradual, non-reversible decline for brands that don’t change their ways.
There is time, though. In Chile the proposal was first made in 2007 and stringent regulations finally put in place in 2016. The industry in Singapore has taken proactive action, in association with the government.
The Healthier Choice symbol in Singapore is currently awarded to brands with less than three teaspoons per 250ml (approximately 12 grams per glass). Similarly in Malaysia, all products with more than five grams per 100ml are deemed unhealthy. Consumer expectations are likely to continue to get higher and government regulations will get stricter. A Singaporean government minister already said: “We start with (packaged drinks) but we won’t end there. Let me make that clear – the objective is sugar, in whatever form.”
What can brands do to future-proof themselves?
1. Create healthier products: The obvious first step is to explore reformulating to meet changing expectations. Reformulating the entire portfolio can be expensive and risky, especially if the taste and texture profile change. One potential strategy is to develop a “healthier SKU” and make that SKU the hero of the range, focusing all/most communication of the healthier product to change the perception of the product over time.
An alternative is to build new brands. Pepsi has successfully launched Bubly and LifeWtr in the water category. In addition, it has invested in Soda Stream and kombucha brand, Kevita. Coca-Cola has acquired dairy and fruit based beverage portfolios (Fairlife, Innocent). Cranberry giant Ocean Spray is launching the Atoka brand early next year which will bring it into an entirely new category of wellness drinks, including a variety of oat milk, tea tonics, and herbal shots in different blends. In a wink to the past, Atoka is the word for cranberry in the language of the first nations in eastern Canada.
It is important to note that it can be dangerous to focus on new government regulations, rather than underlying consumer sentiment. Some Chilean manufacturers reworked their formula to remove all marks, which was greeted with suspicion by consumers who were worried that artificial or unhealthy ingredients were added or processes changed to avoid regulation warnings. That it was a matter of cutting corners.
Specifically, consumers commented that the objective should not be to avoid a single warning sign, but to allow consumers to make informed decisions, so that they can have a balanced diet. Research has shown that consumers focus on the negative messages and do not notice any positive messages that were added to counterbalance the warnings (eg extra fibre, vitamins etc).
2. Stop doubtful claims now: One of the key challenges for brands is around suspicion and distrust. Companies were disappointed when products that had been communicating “health benefits” (‘enhanced’, ‘additional fibre’ for instance) saw several “black hexagons” being applied, after the regulations came into effect.
It created suspicion and lack of trust towards the brand and its owner; consumers felt they had been lied to. This distrust can impact not just the unhealthy products, but the brand as a whole. For example, several dairy, isotonic and sports drinks claim a range of functional benefits and ingredients (energy, vitamins), but contain significant amounts of sugar, which could lead to health warnings on the pack in the future. This could lead to loss of trust towards the brand as a whole.
It is advisable to pre-empt upcoming/future regulations and to become (more) transparent in communication around a product, benefits and health impacts. This can create a more honest, authentic relationship with consumers, which can withstand the regulatory changes. The cereal category has been suggesting using (semi-)skimmed milk and/or adding fruit to your breakfast; it will remain to be seen whether consumers see this as genuine advice or masking the high sugar content of the actual cereal itself.
The challenge is that constitutes typical brand building – there is a positive long-term effect, but in the short-term there could be no impact or even a loss of sales. In the current economic landscape, this will be a real challenge for brand owners.
3. Embrace distinct brand assets: Cartoons and other endorsees might disappear, as we saw with Tony the Tiger and M&Ms “spokescandies” in Chile. Brands should evaluate what their core distinctive assets are. Based on research carried out for one of our clients, the visual equity directly associated with and linked to the logo is the most powerful.
The logo and associated core brand equity is also the last area that will be changed, as we have seen in other categories, like tobacco. The “Marlboro roof” remains highly recognisable despite its absence from advertising in many countries for years.
Once you have defined your distinctive brand assets, embrace them across all touchpoints – TV, in-store, digital, social, pack, experiential or anywhere else. You need to build mental availability based on these hard-working assets.
Beyond the visual, verbal and sonic assets, can brands become genuinely associated with lifestyles beyond the product? Lucozade Sport has a fitness app, Gatorade in the US offers personalised hydration tracking and digital dosage systems. How can brands have a positive role in a healthy and/or active lifestyle, beyond the product, to stimulate consumption and loyalty?
This will be challenging for brands who have portfolios that include healthier and less healthy products. They will need to decide what their “hero” product is; the existing formulation with more sugar or the “new product” with lower mental availability. Advertising the latter might provide less ROI for the brand, however could have better long-term effects as it future-proofs the brand. These will be challenging decisions for brand owners to make: there is little available data and it is hard to research, as it involves future behaviour.
4. Prepare beyond sugar: For several decades, the focus was on fat and sugar escaped scrutiny. Sugar continued to escape the regulatory spotlight even further as the focus shifted firmly to tobacco. What “woke” consumers increasingly care about is the behaviour of companies and brands beyond the products they produce. Investors and other stakeholders are examining whether companies have a “social license” to exist.
With the relatively recent economic crisis, digitisation and impact of disruptors, many consumer goods companies are facing challenges, visible via frequent restructures and challenging forecasts. These quarterly pressures are unlikely to subside in the near future. A strategy that does not consider the changing landscape can pose existential questions of many companies in the next decade.
5. Embrace sugar: All the trend spotters and early adopters are loudly proclaiming that millennials and other generations are migrating to healthier foods and active lifestyles. At the same time “freakshakes” and craft beer are increasingly popular, two members of the Kardashian family feature in the top 10 most popular profiles on Instagram and TikTok is full of lip-synching teenagers. It’s not a complete “woke” generation yet.
One strategy is to embrace the indulgence and focus on the absolute joy your product delivers. Potentially consider some limited editions, like Starbucks Unicorn Frappucino – yes, that’s a real thing.
Oversizing or micro-sizing products to make them more ‘grammable’, adding wild colourings or working on food pairing to give your product epicurean credentials can all drive positive imagery for your brand and drive sales.
My toddlers have grown into teenagers and are no longer impressed by Kinder Surprise, but have not experienced any adverse effects from eating it. I appreciate the memories of that past, but I am also embracing the present and the uncertain, new future ahead of us.
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