The Size of the Market • Many products were gluten-free already • Can the market provide ROI to justify entry? • $2.64 billion at the end of 2010 • Poor product quality affects sales negatively
The Size of the Market • Only those with a true medical need • 18 million people with gluten sensitivities • 3 million with celiac disease • Domestic per capita wheat flour use is estimated at 134.7 pounds
The Size of the Market • 21 million households • 2.6 people per household • Whole families eat gluten-free • Emotional support – feelings of isolation • Products good enough for the whole family to enjoy
The Need A demand not currently met offers opportunity • Fortification and nutrition • A bread good enough for the whole family to enjoy • Fresh bread / shelf stable bread available through mainstream distribution • Products with poor quality or limited availability
Can the need be met?What technology is available to allow for a competitive edge?
Gluten-Free Breads • Weak and crumbly grain structure • Poor volume and eye-appeal • Dense and uneven grain • Undesirable eating qualities, e.g. lack of flavor and aroma, dry mouth feel • Excessive packaging for longer shelf-life • Substandard nutrition for health and wellness
What Are Major Challenges to the Formulator? • Optimizing appearance • Reducing dryness and crumbliness • Improving flavor and eating enjoyment • Extending shelf life • Dough make-up and handling • Nutritional aspects
Watson Technology • Unique combination of starches and gums for increased gas retention • Proprietary emulsifier blends for appearance and texture • Blends of proteins for structure, flavor and palatability • Special blends of baking powders and yeast • Incorporation of nutrients (vitamins, minerals, fibers) • Extension of shelf-life
Watson Solutions . . . gluteNONE™ Mixes • Breads and rolls • Pizza crust, pocket pita, tortillas, bagels, pretzels, coffee cakes, English muffins • Donuts, crackers, sandwich thins • Cakes, brownies, cookies, muffins • Breakfast bars, waffles, pancakes
Profit Model • Gluten-free products can still be very profitable. • Gluten-free groceries cost about 79 percent more than traditional products. • Gluten-free bread can cost about $6 to $7 a loaf and have half the servings of an average loaf. • If they are not spending that money now they are going to pay down the road in health care costs. • Medical expenses can be tax deductions.
What are the latest developments in the gluten-free market?How much of the market is due to fad dieting?
Latest Developments • Media coverage and celebrities • National restaurants successfully offer gluten-free dining options • Grocery stores offering gluten-free lists on their websites • Gluten-free sections in grocery stores • Gluten-free private label offerings • Economic slowdown – consumers try dietary self-help when mainstream medical assistance is out of reach
Latest Developments • Trend dieters help increase demand for quality products • Trend dieters lead to the misconception that this is only a fad • Think of the 21 million households
Latest Developments • Over a third of products picked up from the Summer Fancy Food Show 2011 were flagged with the low/no/reduced allergen claim, with the majority of these (97%) marketed as gluten-free. • Major companies in the market • Celiac support groups • Gluten-free food fairs • Gluten-free phone apps • Gluten-free at sporting events
Latest Developments • Federal government finalizes regulatory criteria for gluten-free labeling • No wheat, rye or barley & under 20 ppm of gluten • Started in 2007 • Comment period closed October 3, 2011 • Targeting 3rd quarter 2012 to issue standard • Companies seeking to label their products as gluten-free will need to comply with the requirements • FDA enforcement tools
Can you pull all the resources together before the window of opportunity closes?
Producing Gluten-Free Products • Robust allergen program in place • Allergen materials labeled and segregated • Watson is a member of the Food Allergy Research and Resource Program (FARRP) • Wait at least 24 hours after running a product containing gluten, before running a gluten-free product • Positive pressure in production room • Avoid cross contamination – brushes, scoops, clothing
Testing Pre-operational swabs • ATP Hygiene Test • Reveal 3D gluten test Product testing • EZ gluten test kit – Elisa Technologies • Samples sent out for testing – FARRP • R-Biopharm Gliadin test sensitive to 5 ppm gluten
Certification • Watson chose GFCO (Gluten-Free Certification Organization) – a program of Gluten Intolerance Group • Requires a questionnaire to be completed • Facility audit of equipment that will be used to produce gluten-free
Growth Projections While growth rates will slow over the next five years, Packaged Facts projects that U.S. sales of gluten-free foods and beverages will exceed $5 billion by 2015.
Factors Stimulating Expansion in the Gluten-Free Market • Increasing diagnoses of celiac disease and food allergies • Growing awareness of these ailments among patients, healthcare practitioners and the general public • More products and better ones • Interest from big retailers • Friends and family members eating gluten-free to support loved ones
The Gluten-Free Consumer • Totally incremental sales – they are not eating traditional baked goods now • Very loyal to a brand • Trust and credibility are very important • Whole families eat gluten-free in support of a single member • They know they need to pay more and understand why • Committed, well educated and want to have better access to quality food
Thank you for your time.www.watson-inc.com/GFinfo.php Contact us at 1-800-388-3481