If there was ever an opportunity to convince consumers to drink their next meal out of a bottle, now would seem like the time.
The concept of a meal replacement drink category itself isn’t new; ever since beverage makers began convincing weight conscious consumers to swap out breakfast and lunch for a ready-to-drink beverage in the 1950s, brands in the space have used changing nutritional preferences and use occasions – from diet trends like low-carb and keto to medical recovery – to put different spins on the same basic proposition. According to market research group IRI, the “weight control” category, including liquid and powdered products, grew 3.9% last year to over $4.2 billion. The shelf-stable segment – populated by legacy brands like Ensure, Premier Protein and Muscle Milk, along with Slim Fast – grew 4.8% last year to $3.8 billion, while the market for refrigerated products increased 5.4% to approximately $113 million.
But in 2019, larger market forces are acting to shape the segment’s future: consumers are moving away from the grocery center aisle and towards e-commerce, and they’re also paying closer attention to the types of ingredients and benefits in meal replacement products. Theses changes have opened the door for a new crop of category players eager to embrace a fresh, lifestyle-driven approach to ready-to-drink meals that emphasizes clean ingredients and are sold primarily online.
CLEAN LABEL IS KING
If there’s any clear and simple way for a new brand in the category to distinguish itself from the products that preceded it, it begins with cleaning up the ingredient list.
Consumers across the food and beverage market are increasingly making choices based on what they see on products’ ingredient panel; according to Innova Market Insights, 91% of U.S. consumers believe food and beverage options with recognizable ingredients are healthier than those without. In that sense, the meal replacement category has much to catch up on. As they focused on delivering a product fit for a specific purpose and aimed at a small group of core users, many of the leaders in the space – from legacy brands to newer players like Soylent, which has proudly embraced its use of GMO ingredients – have had little incentive to change their established formulations to remove artificial or synthetic additives. The relative lack of movement by those brands has others seeing their chance to disrupt the category.
Acquired by CPG portfolio company Halen Brands in 2017 to be part of its allergen-friendly brand platform Safe Allergen Friendly Environment (S.A.F.E.), plant-based nutrition company OWYN has made ingredient transparency and safety foundational pieces of its identity. The company markets a six-SKU line of protein drinks (20 grams each), as well as bars, a protein powder and two varieties of dairy free milks for kids. OWYN is now aiming to use that same core message to build a bridge between its existing products and its new meal replacement line which debuted in July as an online exclusive. Available in chocolate and chai varieties, each 12 oz. bottle contains 300 calories, 20 grams of protein and 20% of the daily recommended allowance of 23 different vitamins and minerals. The product is sweetened with five grams of organic cane sugar and is certified vegan, dairy free and gluten free. The line is also Low FODMAP Certified and has been endorsed by the Crohn’s & Colitis Foundation, which will receive 100% of profits from sales of the meal replacement drink during its first 30 days on the market and 1-2% of sales thereafter.
“One thing we’ve really learned is that there’s a new customer in the nutrition category,” said OWYN CMO Mark Olivieri. “That customer doesn’t want the filthy ingredient label of some of these legacy brands that are out there. They don’t want soy, they don’t want chemicals, they don’t want fillers, they don’t want sugar alcohols. (Meal replacement) was a real opportunity for us to develop the first meal replacement with the cleanest label.”
LovePlantz, the recently introduced new brand identity for plant-based drink Chimp Food, is also aiming to showcase its clean ingredient deck. The four-SKU line, available in 12 oz. PET bottles, describes itself as a “whole food” beverage made from a blend of fruits, vegetables, nuts and seeds. While not explicitly marketed towards Paleo dieters, it has a similar nutritional profile, and could stand to benefit from increased interest in (and expanding retail shelf space for) Paleo products, listed as one of market research group SPINS’ 2019 food and beverage trend predictions.
“I don’t think meal replacement is very sexy,” said LovePlantz founder Scott Joseph. “I think rather than calling it that, we do better selling the benefits – the more fruits and veggies you eat the more energy you’ll have. I think that consumers looking for meal replacement products is our market, but I don’t think you go after them by saying that.”
Other young brands – such as Bear Squeeze, Ample, and new mix brand Mele (pronounced “meal”) – see providing vegan-friendly, clean label options as the key to attracting a new generation of consumers. In co-founding Mele with her business partner Elise Tresley, Lauren Benbassat said the idea came from their personal desire for a more appealing type of meal replacement product that fit into their lifestyles as a busy professionals living in New York City.
“We weren’t happy with a lot of the product offerings out there as far as ingredient profiles – there was a lot of added processed sugars, soy, and preservatives,” said Benbassat.
Their solution was to use freeze-dried ingredients, allowing for longer shelf-life without preservatives, and to offer both plant- and whey-based varieties in three flavors: Rawberry, Supergreen and Cocoa-Nut. According to Benbassat, that approach has found traction with female shoppers.
“We are finding a lot of use case in the female market, the busy, active woman who’s looking for something a little bit more real food and health-based, less of the old-school meal replacement dietary type of vibe, which was something we always wanted to avoid,” she said.
EXPANSION LIVES ONLINE
As brands in other CPG categories have already learned, the new generation of consumers lives online.
Rather than serving strictly as a bridge to brick-and-mortar retail, e-commerce is proving to be a viable long-term home for meal replacement products. Founded in 2015, London-based Huel, which markets both powders and ready-to-drink beverages online, has seen 150% year-over-year growth and is projecting a $1.25 billion valuation within three years. In four years, Huel claims to have sold the equivalent of over 50 million meals in total, currently shipping over 1.5 million meals per month direct-to-consumers in 80 countries worldwide.
While Soylent used online success as a means to penetrate mainstream retailers like 7-Eleven and Target, Huel is approaching brick-and-mortar expansion with caution – even in the U.S., which is the strongest global market for the format. The brand launched its third RTD variety, chocolate, in the U.S. in July, joining existing flavors vanilla and berry. Each 16.9 oz. bottle contains 20 grams of protein and 400 calories for a “balanced macronutrient profile” consisting of 27 essential vitamins and minerals. The product is sold in 24-packs for $89.10 each (around $3.71 per bottle), with a 10% discount offered for subscribers.
“We are still in the planning phase of finding what’s the best way to consider retail,” said Huel CEO James McMaster. “We are very established I how to run an international e-commerce business.”
For brands hoping to position themselves as modern takes on an old category, a strong online presence helps develop a dedicated audience that may spend more time browsing the internet than grocery store aisles. McMaster noted that Huel has leaned heavily on the strength of positive word of mouth on social media and the “pride” that users have in being part of an active community (nicknamed “Hueligans”), which the brand helps foster through everything from t-shirt and discount code giveaways to its online message forum.
Whatever form they take, these are all essentially different ways to gain insights about customers. For brands in a category that continues to shift, that knowledge is power. While not positioned explicitly as a meal replacement drink, LovePlantz launched in July exclusively online to better understand its core audience, to which it subsequently directed Facebook and Instagram advertising.
“We feel the best way for us to launch is online for anywhere from 30 to 90 days,” Joseph said. “The more we stay online, the more we can understand our consumer, especially over the first 30 days. When we are selling in Whole Foods, we know nothing about the person who’s grabbing our drinks except that they happened to be in Whole Foods that day.”
Olivieri also noted the important role online consumer data played in shaping OWYN’s approach to the meal replacement category.
“We specifically saw consumers coming from sponsored ad campaigns from competitor meal replacement brands” he said. “We had the ability to track not only keyword terms they clicked but also the efficiency of those terms and the return on ad spend. 2019 was a year where we saw a massive amount of people searching for meal replacements and coming to OWYN.”
While OWYN’s meal replacement line will debut exclusively online, Olivieri said the product will likely be moved into “one or two major customers” in retail by 2020. Linking the company’s channel strategy to its product strategy, he explained that the line is being positioned not just to fit into an existing category set but to serve a specific role within OWYN’s brand architecture.
“There hasn’t been one nutrition brand ever that has successfully competed in pure protein, a meal replacement drink and a nutritional milk offering for kids,” he said. “About 60-70% of consumption dollars in protein liquid sub-cat comes from meal replacement. So we want to offer a very clear winning story where our original (protein) is winning in key DSD, natural, and grocery sets, our meal replacement in mainly e-commerce, and our nutritional non-dairy kids milk in the club channel. OWYN is the only liquid nutrition brand ever to effectively play across all day parts, all use occasions and all channels. That’s meaningful.”