Food service eyed as the next frontier for gluten-free

by Keith Nunes
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The National Restaurant Association honors in-dividual exhibitors at its annual convention and expo-sition with its Food and Beverage Innovation Awards. At this year’s event, held May 8-10 in Chicago, seven honors were handed out and three of the recipients’ products were gluten-free. The recognition underscores how quickly the gluten-free trend is moving into the food service category.

The winning gluten-free products ranged from an organic quinoa pasta from Edison Grain, Inc., Emeryville, Calif.; a spinach, feta pocket from Kiki’s Gluten Free Foods L.L.C., Arlington Heights, Ill.; to a portion controlled chocolate tart from Hail Merry L.L.C., Dallas.

Darren Tristano, executive vice-president for the market research firm Technomic, Inc., Chicago, was at this year’s N.R.A. convention and confirmed that gluten-free is gaining greater attention from restaurant operators.

“At last year’s N.R.A. there was a lot of discussion around gluten-free,” Mr. Tristano said. “This year there were more companies with products. I think we are still in the early stages of growth for gluten-free, but it is becoming a part of the menu.”

Data provided by Technomic highlight how the gluten-free trend is evolving at food service. Year-over-year, the number of items on menus listed as gluten-free has increased 29% from the first quarter of 2012 through the first quarter of 2013, according to the market research firm’s MenuMonitor service. Key areas of growth include “add-ons,” which signifies a restaurant will provide a menu item in a gluten-free format if it is requested. More specific areas include burgers at 54% year-over-year growth, sandwiches (52%), salads (33%), Mexican dishes (30%) and pizza (16%).

“When you consider the challenges restaurants face to prevent cross-contamination, the growth we are seeing is an indication there may be more to come,” Mr. Tristano said. “If you look outside the U.S., in countries like Australia, England and other parts of Europe, gluten-free is more top-of-mind. We are late adopters in the U.S.”

Preventing cross-contamination is a significant hurdle for restaurant operators. Kiki’s Gluten Free Foods incorporates packaging to alleviate the cross contamination of its finished products, and Mr. Tristano said operators are making back-of-house adjustments to prevent any issues.

“It’s a huge challenge,” he said. “At one of the panels at the N.R.A. an operator talked about how they have a toaster that is dedicated to gluten-free products.”

Going forward, Mr. Tristano said that for gluten-free to continue to grow restaurant operators are going to have to make more operational changes.

“Preventing cross-contamination is going to have to be done at the ingredient level,” he said. “At the same time you are seeing the interest in gluten-free growing, you are also seeing demand for products that are house made or made from scratch. It’s not going to be easy, but I think proactive suppliers and operators that can create products that fit this need are going to benefit down the road.”

Getting gluten out of the bowl

One restaurant operator that has made the transition to offering some gluten-free menu items is Cosi, Inc., Deerfield, Ill. In January, the company introduced Cosi bowls, which initially were available in three varieties, each on a bed of grains and each with fewer than 500 calories. But beginning in June, the bowls will be gluten-free and most likely will include more than 500 calories.

In a May 16 conference call with analysts to discuss first-quarter financials, Carin Stutz, president and chief executive officer, said that while most consumers liked the bowls, some compared them to other bowls that already are in the marketplace.

“They want them to be bigger and more plentiful,” she said. “So we did try to go with the 500 calories and try to zero in on a real healthy number, but the consumer is saying we want those to be a little more filling.

“There are a lot of requests for gluten-free. So, the new grain on those (bowls) will be a gluten-free base.”

Cosi initially used Colusari red rice, barley and rye as the “bed of grains” for the bowls. Colusari red rice is gluten-free, while barley and rye are not. Cosi has not disclosed what grain will be the gluten-free base for the revamped bowls.

One purpose of the Cosi bowl introduction was to bolster the dinner business, and to a degree, that has been a success, Ms. Stutz said.

“As you look at it as a percentage of the product mix, (Cosi bowls) s.k.u.s well over 10% at dinner time, and just slightly under that at lunch,” she said. “So we know that it has a higher pull there. We have not done any marketing of it yet to really try to drive that business yet. But, just from the product mix alone, we believe that it is a great product for us for dinner.”

Project ‘gluten freedom’

Boulder Brands, Inc., Boulder, Colo., has set its sights on being the largest manufacturer of gluten-free products in the world. To achieve that goal will mean it must also extend its reach into the food service category. In a May 2 conference call with financial analysts, Stephen Hughes, chairman and chief executive officer of Boulder Brands, said the company is on track to generate about $10 million in sales to food service in 2013. He said food service is “about three years behind” wholesale grocers in latching onto the gluten-free market. That said, food service operators are aware of gluten-free, he noted.

“Everybody’s trying to figure it out,” he said. “But we’re knocking down whether or not it’s bread, it’s pizza. Hamburger, hot dog buns are going in most. I think we’ve got 250 universities. We’ve got 85 sports stadiums. That’s kind of an early-stage thing. I think we’re going to see really strong
robust growth at good margins on food service for the foreseeable future.”

Mr. Hughes said once a Boulder Brands facility on Florence Street in Boulder, Colo., is running “there won’t be another person a major food service operator is going to want to partner with when they decide to get serious about gluten-free.”

Asked whether Boulder Brands’ expansion into various channels will affect the price point of gluten-free products, Mr. Hughes was emphatic in his belief that quality and availability — not price — are most important right now.

“Quality and availability are the issue,” he said. “I think price point might become a factor three to four years from now, but I really don’t — that’s not something we really hear at all. We’re not seeing it in any of the consumer dynamics at all.

“When you ask the consumer about gluten-free — it’s availability, it’s quality (and) it’s trust. It’s always going to be, always was, always is gluten-free. I think that’s going to be tough for new entries into the category. I think there’s a lot of credibility to Udi’s and Glutino because they always have been (and) always will be gluten-free. Price shows up as the No. 5 attribute of focus for consumers. I don’t think we have price sensitivity coming.

“We clearly have an advantage given our scale. Many of our competitors are very much in the batch-production model. I think this move with a continuous bread line is a bit of a game-changer. Strategically, it’s going to give us a more consistent product and the cheapest possible bread made in gluten-free. In fact, I think the Florence Street facility will be the state-of-the-art gluten-free baking facility in the world when it opens up in the fall.”

‘The health issue of the day’

The NPD Group, Chicago, said that according to its Dieting Monitor tracking service, one-third of U.S. adults said they want to reduce or eliminate gluten from their diet. The result was the highest percentage of consumers making the claim since NPD started asking the question in 2009.

“For as long as NPD has been tracking the eating habits of Americans, which is since 1976, they have been expressing a desire to eat healthier foods and beverages,” said Harry Balzer, chief industry analyst and author of NPD’s Eating Patterns in America. “It’s not that we want health and wellness more but that we are constantly changing how we address health and wellness.

“A generation ago health was about avoiding fat, cholesterol, sugar, and sodium in our diet. While those desires still exist for many, they no longer are growing concerns. Today, increasingly more of us want to avoid gluten in our diet, and right now it is nearly 30% of the adult population … and it’s growing. This is the health issue of the day.”

Mr. Balzer said that as recently as 2011, the gluten-free trend may have run its course, but then more consumers started to say they would like to reduce or avoid gluten in their diet.

Interest in gluten-free menu items at restaurants also is growing. In NPD’s Crest food service market research, which tracks daily how consumers use restaurants, consumers are asked if they ordered something off the menu that was listed as high protein, whole grain, sugar-free, or described in another way. The incidence of consumers ordering food described on the menu as gluten-free or wheat-free has grown over time and is now more than double what it was four years ago — accounting for over 200 million restaurant visits in the past year.

“The number of U.S. adults who say they are cutting down on or avoiding gluten is too large for restaurant operators to ignore,” said Bonnie Riggs, NPD restaurant industry analyst. “Restaurant operators and marketers can find opportunities to address consumer needs when it comes to their growing interest in cutting down on or avoiding gluten, like training staff to accurately answer customer questions, using symbols on menus and menu boards to highlight items that are gluten-free, as a way to extend consumer awareness and confidence in ordering.”

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