close-up of clean label soup with bread

Uncovering the clean label connection to business growth

May 16, 2022 | clean label

Discover what a clean label strategy can mean for the growth trajectory of your brands — and what the most successful manufacturers do differently to drive more clean label success. 

Food and beverage manufacturers continue to face headwinds as they reformulate or innovate their packaged goods. While navigating issues of inflationary pressures, supply chain constraints and widely varied consumer preferences, they must stay focused on the goal — helping their brands deliver the great eating experiences and the valued attributes consumers demand most.

Today, one clear way forward is a clean label approach — utilizing the ingredients that consumers recognize and feel good about choosing. By formulating with familiar consumer-preferred ingredients, manufacturers can position their brands to win with a growing group of consumers willing to pay more for the clean label products that match their values — and enable their brands to capture tangible gains in revenue, margin and pricing.

The promise and the challenge

Ingredion proprietary research shows the clean label movement is gaining momentum for consumers and manufacturers alike:

  • 71% of consumers find it important to recognize a product’s ingredients.1
  • More than half of consumers find it important to have a short and simple ingredient list.1
  • Nearly eight out of 10 manufacturers worldwide say they have reformulated for clean labels in the last two years,2 with at least six in 10 reporting they are currently reformulating their products for clean label.

With great opportunity comes some challenges. Ingredion's proprietary Global Clean Label Manufacturer Study found about nine of 10 global food and beverage manufacturers say they have challenges formulating with clean label ingredients.2 That's because a significant R&D effort is required to retain the brand’s expected taste and texture in clean label products — not to mention the sourcing challenges, fear of potentially higher ingredient costs and product quality and shelf-life concerns. This makes finding the right strategic partner even more important to innovation and renovation projects.

Positive impacts on revenues, margins and pricing

There's a good reason for manufacturers to press forward, despite the hurdles: growth potential. The 2021 Global Clean Label Manufacturer Study found that converting product to clean label led to average self-reported gains of 15% in overall revenue, 11% in margins and 18% in product pricing.2

That's an impressive payback, even if the gains are not distributed evenly. About half or more of manufacturers worldwide are saying their clean label efforts have been able to increase revenues and margin, with about four in 10 reporting desired pricing improvement.

Business impact of clean label globally

Discovering differences that drive success

Success rates vary greatly from region to region, but most manufacturers have been able to either maintain or improve their financial performance by implementing a clean label strategy, while adding valuable benefits that build consumer loyalty. In fact, 75% of North America manufacturers reported that they were able to increase overall revenue, and 68% reported an increase in margin.2

Business impact of clean label North America

While this study cannot answer all of our questions about the causal factors driving clean label success for some regions over others, there are some significant differences in how manufacturers approach capturing the opportunity.

Overall, North American manufacturers self-report a clear and elevated cross-functional focus on clean label activities. It is central to and integrated into all aspects of the brand, business and marketing strategy. This high level of focus and cross-functional participation in bringing the strategy to life may be contributing to the more impressive business results.

This becomes clear in the following summary of key differences reported in the study:2

  • Personal involvement from the C-suite — A high percentage (56%) of this region's manufacturers involve executives in clean label reformulation key initiatives.
  • Perceived importance to overall business strategy — 81% of these manufacturers consider clean label extremely important to their business strategies. They also are likely to view clean label as a mark of high quality and source of positive brand reputation for their products.
  • Emphasis on finding suppliers able to provide clean label ingredients — 75% of these manufacturers place extreme importance on their ingredient suppliers offering clean label options.
  • Emphasis on clean label in marketing claims — Manufacturers in this region place a strong emphasis on highlighting clean label claims on packages and in multichannel marketing efforts.
  • Prevalence of multichannel marketing support for clean label — The manufacturers in this region also favor the use of social media, online advertising, website presence and sales representatives to communicate clean label attributes and benefits related to their clean label initiatives.

The bottom line for food and beverage brands: Clean label is proving to be a crucial route for manufacturers to fulfill consumer needs, build brands and potentially improve their financial results. For more reliable success with clean label efforts, our survey suggests making a strong companywide commitment to an ongoing clean label strategy, working closely with capable clean label suppliers and investing in multichannel marketing. All of these appear to be factors that contribute to the most favorable clean label business impacts.

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Powering profit with clean label

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Start moving the sales needle with clean labels and a shorter list of simple ingredients

Learn more about the consumer, brand and business value of clean label. Visit our clean and simple page or contact our experts.

 

1ATLAS, Ingredion Proprietary Global Consumer Research, 2020

2ATLAS, Ingredion Proprietary Global Manufacturer Research, 2021

Dan Haley, Global Platform Leader, Clean and Simple Ingredients

Daniel Haley

During his nearly twenty years at Ingredion, Daniel has held a number of customer-facing leadership roles, managing sales and technical teams working to meet the needs of retailers and customers across several leading clean label markets. Today, his primary focus is driving Ingredion's innovation strategy in clean and simple ingredients, using proprietary research to ensure its alignment with consumer expectations.