Industry Innovators

By Rebecca H. Madley | June 1, 2002

Examining innovative product introductions in the areas of supplements and functional foods.

Examining innovative product introductions in the areas of supplements and functional foods.

One of the most philosophically driven innovators this year, 8th Continent™ has big plans to take the soymilk category to new heights by creating a new place of wellness for consumers. Discussing the company's beginnings and the launch of its flagship product of the same name was Scott Lutz, president and CEO, 8th Continent, LLC, Minneapolis, MN. "The first I ever heard about this idea was back in October of 1999, in fact it was Halloween. It is unclear who approached who but suffice it to say that research and development minds at both companies came together to discuss how we might be able to work together," he said. "In September of 2000 we cut the deal and put the people in place. Then we worked on building a plant, developing technology, getting a frame breaking concept and taste and building an economic plan that made sense. When that was all done we went to market in July of last year and the rest is soy history."

Explaining the significance of the 8th Continent's name, Mr. Lutz said, "One the key things we found early on is that consumers are not looking to be more wellness aware, they are looking to be more wellness active. Everybody in our initial category talked about it the same way, which was to say they had finally created a great tasting soymilk," he said. "Our product wins hands down versus key competition in head to head tasting."

But there was a bigger issue to address for the company. "8th Continent was created to allow consumers to take back control of their life. Rather than being about getting soy protein in the diet, it was about taking back control of health and wellness with something that was efficacious enough to make a difference but simple enough to do that you would actually stick with it," Mr. Lutz explained. "We quickly decided that a name containing the word soy was only going to reinforce the very literal benefits of soy and would totally miss the whole bigger control and enabling aspects of our concept. 8th Continent was something that many of us founders did not like initially but when we saw consumers reacting to it, we knew we had it. Very quickly consumers came to realize that 8th Continent is a better place of wellness and a place that consumers can go to take the steps they need to make a difference."

In a category worth $300 million today and potentially $1 billion a few years down the road, 8th Continent soymilk is poised to take advantage of a market on the brink of explosion. "We are creating something totally new as well as a category that pretty much does not exist. The category is $300 million today and in three years it will be $750 million, which indicates that half the business isn't even happening today," Mr. Lutz said, adding, "Some days I think we were late to market because there is already $300 million in business out there and somebody has a large portion of it. We would have loved to have been first in helping consumers understand the right way to think about this category."

As for consumer testing, Mr. Lutz said, "To say we did extensive testing on this product would be an understatement. We did a lot of both quantitative as well as qualitative testing. We tested everything from the product itself to the packaging to the name."

In terms of the product's performance thus far, Mr. Lutz said the jury is still out but there are some early indicators of success. "It is a little early to tell but I think the product does fulfill our expectations so far. We have received a lot of consumer feedback and it is running much more positive than negative," he said. "One thing we have really noticed is that we are seeing trial, repeat and re-repeat, which are all dramatically ahead of what we thought they should be. However, whether people are exactly getting our message is a little premature to determine. The one consistent theme in a lot of the comments is, 'finally someone has done it right.'"

So would Mr. Lutz choose to go about things differently if launching the product again? Yes and no, he said. "If I were doing this again I would have my corporate parents be more than aligned with what I am doing-I would have them engaged," he said. "In most companies you are paid to drive the stuff your grandparents left you 2-3% ahead as you steward the business. But we have created something totally new."

What are the lessons to be learned? "Too many functional foods are cause and effect. They hit heavily on the rational component but they don't hit hard enough on the emotional end benefit. For instance, yes we are rationally selling soy protein that is proven to do great things for cholesterol, but what we are really selling is the emotional hook, which is, it is about time to take back control of your life and here is a product that helps you do that," Mr. Lutz offered. "The advice I have for the nutraceuticals world is, you need the science and the rational reason why something works but what people really want to know is 'what emotional value does this add for me?' I have seen a lot of nutraceutical products that are missing the emotional element because either they don't know what it is or they believe people will figure it out on their own. The fact is, people are bombarded with things in their life and they need a little help to know how to think about this."

Based on the fact that heart disease is the number one killer of Americans, Kashi decided to take matters into its own hands when it unveiled its Heart to Heart™ cereal last year. Spending approximately two years in the product development pipeline, Heart to Heart was launched to address the specific needs of consumers concerned about heart health. Commenting on filling the consumer need was Andrew Aussie, senior vice president, marketing & strategy, Kashi, La Jolla, CA. "Kashi has always tried to concentrate on making products that are healthy and part of that is looking at market needs and we saw that heart disease was the number one killer in America," he said. "There are a lot of heart healthy products out there but none specifically targeted toward that health issue."

Describing the uniqueness of the product was Karen Moyer, senior product manager. "It is the combination of different ingredients that differentiates the product from others on the market," she said. "We did research for quite a while to find out what the latest was in heart health in terms of what has been working over the years and what has been tested. The cereal is not only unique for the grape seed or green tea, it's the combination or what we call the 'healthy heart system' that makes the product stand out."

Adding his perspective on the product was Jeff Johnson, director of nutrition. "We intended to move away from cholesterol reduction and more toward improving blood vessel integrity. Having the antioxidant protection in there prevents build up as well as damage from oxidized cholesterol," he said. "We also addressed the homocysteine issue by including 100% of vitamins B6 and folate, so we really came from three angles and that is why we included a lot of the different ingredients that we did."

The process for assessing the performance of a product varies from company to company because size dictates the way it conducts business, according to Mr. Aussie. "Because we are not a regular kind of company, our way of judging a product is not necessarily based on sales. Our method of judging the product is to gauge what exactly it is doing for people," he explained. "I think this is a breakthrough product that really addresses a health concern and if one person avoids having a heart attack over the next three years because of this cereal, then that is certainly a victory for us. Financially, I don't think we are going to know if it is a victory for years to come." However, so far, Mr. Aussie said, "According to SPINS data, Heart to Heart was the number six ranked item among all cereals sold in natural foods stores, based on February data. By that standard, being in the top 10 when you only have 300 SKUs out there is a great achievement."

Also lying at the very heart (no pun intended) of Kashi's mission is education. "We have always been ahead of our time in the types of products that we generally put out and we understand that there is always a wrap up cycle as far as the consumer is concerned. When consumers finally get it, then we are the overnight success right? The reality is that it does take a while and we are very committed to education," said Ms. Moyer.

In terms of supporting further growth of the product, Mr. Aussie offered, "We will continue to educate and work with heart-related groups to do grass roots marketing of the product," he said. "We hope it is a successful product, but you don't make a product that was as expensive as this was to make unless you are really committed to help."

The discovery of glucosamine by the mainstream was something of a miracle for joint pain sufferers. It has no serious side effects and is hailed for both relieving joint pain and building cartilage. There is just one problem, glucosamine pills are typically bulky, which is a turnoff to consumers. Dr. Kevin Stone, founder of Joint Juice, Inc., San Francisco, CA, became aware of this issue firsthand when his patients constantly complained about the size of the pills but still ex­pressed a deep desire to take glucosamine. To remedy this, Dr. Stone decided to creating a delivery system that was more consumer friendly-the result was Joint Juice™.

Dr. Stone discussed how glucosamine, and later Joint Juice, came into the picture. "In the mid 1990s our patients at the Stone Clinic stopped taking the ibuprofen or other anti-inflammatory products that we had given them and started taking glucosamine because it made their joints feel better. So we listened to them and researched the basic world literature and the studies that had been done on glucosamine," he explained. Dr. Stone said the research was so convincing that he and the other physicians at the Stone Clinic decided that they would rather give patients glucosamine as the first line of defense rather than something else that could potentially have a serious side effect. As Dr. Stone began endorsing glucosamine, however, patients began to take is­sue with the 'horse' pills generally characteristic of a glucosamine supplement. To solve this problem, Dr. Stone met with a food technology company in San Francisco and started down the path of fabricating Joint Juice.

In terms of formulation, Joint Juice breaks away from the traditional combination of glucosamine and chondroitin. According to the co­mpany, this is because studies on chondroitin indicate that it is converted into glucosamine in the digestion process. Therefore, taking glucosamine directly is a more effective way to geta daily supply.

As for selecting a target audience, Dr. Stone said that several different segments are drawn to this product. "Glucosamine typically appeals to the audience of 35 years and older-the aging baby boomers. But it is also useful to young athletes who want to take care of their joints and be active later on in their life," he said. And the trend seems to have caught on as some of the biggest proponents of Joint Juice are high profile athletes, including Olympic skiers Jonny Moseley and Picabo Street.

So how does Joint Juice fit into the innovation definition? Dr. Stone said he feels that Joint Juice is innovative because it is the first beverage on the market that contains a full day's dose of glucosamine and solves the consumer problem of taking big pills.

The market performance of Joint Juice has been impressive since its launch a little over a year ago. Expanding on this was Dr. Stone, who said, "Nine months after launch Joint Juice has taken 21% of all Albertson's glucosamine sales in the stores that it is in and it is the number one selling glucosamine," he said, adding that, "Glucosamine is nearly a billion dollar market right now and if Joint Juice continues to go out across the country, it will post $210 million just in glucosamine sales, never mind the beverage opportunity."

Most recently Joint Juice inked a deal with Safeway Stores to take the product national. It will now be available in key markets including California, Portland, OR, Seattle, WA, Alaska, Arizona and Denver, CO, expanding to the rest of the nation shortly. Coming soon, Dr. Stone said, is a new low calorie version of the juice that will be ready for launch by this summer.

If you want to talk about a product that was a long time in the making, Quorn™ is a great example. This year's innovator on the food front actually began development several decades ago during the 1960s and, according to David Wilson, vice president, Quorn Foods, Inc., Riverside, CT, consisted of two development cycles. First, was the discovery and development of the mycoprotein, the principal ingredient in Quorn Foods, and second, was the development of the actual line of products.

Mr. Wilson explained the company's beginnings in more detail. "In the very beginning, Lord Rank, the chairman of Ranks Hovis McDougall (RHM), a major British food company, commissioned his research and development team to go out and find a new protein source," Mr. Wilson said. "He asked them to do this because at the time in the late 1960s the world was concerned that there was going to be protein shortage." As the story goes, the scientists looked all over the world for a new protein source when they finally stumbled upon a protein occurring naturally in the soil, literally, in their own backyard.

After the discovery, scientists at the company spent the next 17 years developing this protein, learning how to grow it in a way that would be economically viable and safe for humans to consume. "That is really the work that took place between the late 1960s and 1985," said Mr. Wilson. "Marlow Foods was developed in 1985 because that was when we received public safety approval from The Ministry of Agriculture Fisheries and Foods (MAFF)."

In terms of going to market with the new brand, Mr. Wilson pointed out, "In the beginning, because we were working with a no-meat-based protein, the vision really fit a vegetarian audience. However, only 5% of the population in the U.K. was vegetarian and we wanted to reach a wider audience of people," he explained. "At this, we decided it would be essential to focus on good taste."

Between 1985 and today, Mr. Wilson said there are three main phases of the business to consider. From 1985 to 1993 the company had a fairly small production facility where it grew the mycoprotein and produced Quorn Foods. However, the facility was just a pilot plant and because there was limited capacity, Marlow only marketed in London and the southeast of the U.K. Things changed, however, in 1993 when the company commissioned a much larger production facility to manufacture enough product to market across the U.K. and eventually to other European markets as well. As a result, Mr. Wilson explained, "Between 1994 and 2002 we moved from $2 million in sales to $160 million in sales," he said, adding, "We really wanted to move this along from being a project to being a thriving international food business."

These events are what led the company to the U.S. launch of Quorn in January of this year where it has caused quite a bit of excitement. Before launch, the company actually spent over two years in the U.S. preparing the market for the brand. This included a heavy amount of consumer and market research as well as gaining the much needed generally recognized as safe (GRAS) a­pproval to market the product to the American public.

With the meat-free category waning in popularity among mainstream consumers primarily due to taste issues, Mr. Wilson said the arrival of Quorn is very timely. "We do face some tough competition and the products have generally improved but we still, in terms of the research we carried out last year, have a very clear taste advantage over the competition."

And the growth potential looks promising. "According to AC Neilsen Scantrak data from December 2001, the meat-free market is growing at 12% (currently valued at $302 million) per year, and with better marketing and products, the market can continue to grow at that rate or greater," Mr. Wilson said, ad­ding, "An interesting fact about the U.S. market is that the $302 million figure comes from only 15% of the population in the U.S., so it has fairly low category penetration. However, if you compare that with the U.K. the category penetration is about 45%. If we can achieve in the U.S. what has been achieved in the U.K., I think this market can grow at least three fold with the potential of being a billion dollar market in about three to five years."

In terms of innovation, Mr. Wilson said the long run view is most appropriate. "Things just can't be created over night," he said. " Innovation really requires huge persistence." The actual innovation in Quorn's case, he said, lies at a technical level in terms of identifying a new protein source and then being able to grow it in a way that it can be commercially produced. "Mycoprotein is fermented much in the way that yogurt or cheese is fermented. Our innovation lies in developing a method to grow enough of this at a price that would be reasonable for people to buy, eat and enjoy," he said. "I think Quorn has come a long way. We now have $160 million in sales and are about to sell our billionth portion of Quorn, when those guys back in the 1970s struggled to produce a few pounds of the stuff."

Quorn was not as warmly received in U.S. as it had hoped. Most recently, it has had to contend with the likes of Center for Science in the Public Interest (CSPI) and its concerns over Quorn's labeling. CSPI believes that the company is misleading consumers by telling them that its mycoprotein is of mushroom origin or that it is mushroom-based. Mr. Wilson's response to this was that Quorn has an open dialogue with CSPI and has even sent them product samples. In fact, he said, CSPI gave Quorn its "Best Bite Award" in its March action newsletter for being a great tasting, nutritious product. "Clearly they thought it tasted great because they recommended it to their membership, so they must see it as quite safe. But on the other hand they put a letter of complaint into FDA asking them to determine if the myco­protein is a mush­room or fun­gi and to be honest with you, that is really a trivial debate," he said. "We officially have to list it as myco­protein because that is what is generally ac­cepted by FDA and the public health bodies in Eu­rope." Mr. Wilson explained further, "A majority of Americans don't know what myco­protein is, so we try to explain it as a food association and the closest thing that people understand is the mushroom connection. We are very comfortable with our labeling. But when you introduce something truly innovative you are going make waves in the marketplace."

As this year's winner in the supplement arena, Remdex™ certainly had its work cut out for it considering a struggling supplement market and a mild cold season. Commenting on the latter was Toni Speyer, senior marketing manager, new products, Pharmavite, Northridge, CA, "Unfortunately we just got through one of the shortest cough/cold seasons in the last three years and with a seasonal product like this one what happened was that people just weren't getting sick." Despite the challenge, Remdexhas cemented its position in this year's industry innovator line up by rising above the adversity.

Pressed for time in terms of launching Remdex based on the seasonality of the product, development was accelerated to meet the demand of the cold and flu season, said Ms. Speyer. To meet the demand, it hit store shelves in September of last year, having only been in the product development cycle for approximately six months. "There are only a few windows of opportunity each year to launch a new cough/cold product and we were determined to hit the market running with this new, innovative product," Ms. Speyer said.

Interestingly, Remdex is not found in the supplement aisle, rather it is shelved in the cough/cold section of stores because through extensive research, Pharmavite found that most consumers suffering from colds (most adults suffer two to three colds per year) look for remedies in the cough/cold section.

So who proposed the use of the herb Andrographis paniculata? The idea for Remdex, said Ms. Speyer, came from Dr. Norman Farnsworth, senior university scholar at the School of Pharmacy at the University of Illinois at Chicago, who had known about the herb and its clinical history. "We did our own investigation into the clinical history of the herb and developed a consumer concept and tested it with the consumers once we confirmed there was good science behind it," she said. "We found that it scored well with the reduction of the severity and duration of the common cold. At this, we went forward with educating our sales people."

In terms of obtaining the raw material for the product, Ms. Speyer said, it is imported from China. After the raw material is shipped in from China it is sent to Germany where the extraction is done. "It is a pretty long process to get the right raw material that meets our standards but it is worth it," she said.

In terms of the research, Ms. Speyer explained that there are at least four clinical studies (all double-blind, placebo-controlled) on Andrographis paniculata regarding the reduction of severity and duration of the symptoms of the cold. "There are reports that if you catch the cold early enough Remdex can cut the duration of the cold in half. Some consumer testimonials even suggest that the cold can vanish within a day," she said. "Andrographis works to build immune system function and helps kick out the virus. Echinacea is also thought to work similarly but Remdex seems to work as a 'Super Echinacea,' helping to kick the virus out quicker."

Describing the consumer testing process, Ms. Speyer offered, "We started out with concept testing, which involved writing a description of the product including its benefits and price and sending it to a quantitative sample of consumers. They were to read the concept and then respond on certain key measures such as their purchase interest, which we needed to understand in order to find out which section of the store the product should be placed."

In terms of its place in the innovation paradigm, Remdex has met several of the criteria. The product fills consumer need, it solves a consumer problem and it contains something new to the supplement market in the U.S.

Ms. Speyer said it is essential for this industry to create products that fill a consumer need and that are science-based in order for it to grow. "Our industry has been subject to a lot of scrutiny and this product, like all of the products from Pharmavite, is grounded in good science," she said. "The nice thing about Remdex versus some of the other dietary supplements is that you can see the effects immediately unlike some other supplements. Furthermore, there is nothing like it in the U.S. market."

In terms of success, Ms. Speyer said it will come in time. "Education and patience is key. You need support programs in place that help raise awareness of these new products, especially in store," she said. "Consumers also need to understand that they need to follow dosage recommendations and look for products of high quality."NW

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