just the answer - Dr Schar UK MD Bob Trice
Dr Schär focuses on people that "really need the product, not lifestylers"
Gluten free is a category growing rapidly in a number of markets, including the UK, where mainstream companies like Warburtons, as well as overseas firms like US group Boulder Brands, have moved into the sector. Italy-based Dr Schär is the world's largest gluten-free specialist. Bob Trice, the MD of Dr Schär's UK arm, spoke to Dean Best about the growing competition in and the outlook for the industry.
just-food: What were the business reasons for the NPD push? Was it a reaction to competition intensifying?
Trice: Yes, there is a lot of competitive activity out there. It's a dynamically-growing market and we obviously want to maintain our leading position. But anyway, every year, we develop a series of new products as part of our innovation cycle - we just decided in the last year to develop some very unique products for the UK market. Next year we aim to develop even more.
just-food: Describe your "leading position" in the UK.
Trice: We work in a number of sectors. In the healthcare sector, we have the Glutafin brand, which is targeted at diagnosed coeliacs. There we have a 40% share of the market. In retail, in supermarkets, we have DS Gluten Free. That has a 12% share of the market. UK retailers are seeing the opportunity with this sector growing very rapidly and have developed their own private-label offering. That's starting to take a sizeable chunk of the fixture unfortunately. The third channel - foodservice - is a relatively new one for any gluten-free operator and we've got some exciting plans for that.
just-food: How much of a competitive threat is private label?
Trice: It's a huge threat. The accepted wisdom is brands build up a category and private label comes in and takes some of the business well-known brands have established. In gluten free that has been short circuited by many years. You have private label developing products that don't exist in brands and we know that retailers are targeting their buyers to develop gluten-free products rapidly.
That's our biggest challenge really - getting some of the retailers to take enough of our products to have a decent shelf presence. You look at the shelf, there's a lot of private label and there's a lot of niche or tertiary brands, who come in and have one or two products or work in one or two categories. What we've done is have a full range of gluten-free products under our DS brand. We have bread, rolls, pasta, pizza, crackers, biscuits, flour mixes. We cover all the basic gluten-free sectors and we're known for that.
Trice, MD of Dr Schär's UK arm, says own label "huge" competitive threat
just-food: With private label growing so quickly, have you considered moving into that part of the category?
A: Yes we have debated it. The outcome was we can't even keep pace with demand in our factories in Europe to supply our own brands. We have factories primarily in Italy and Germany that make most of our branded products throughout Europe and we are having to build factories and acquire businesses just to cope with demand from all of our various operations. If you have factories that have got some spare capacity and you're happy for retailers to come in audit and work with you on developing products, that's fine. The realisation for us is that you have to go one way or the another. You can't really dip your toe in. You have to say you are either a private-label supplier or a branded supplier and we have made that choice.
just-food: So Dr Schar's investment priorities will be building more factories and acquiring other businesses?
Trice: Yes. In November, we acquired a fresh pasta, frozen pasta and recipe meal manufacturer in Italy. That can supply the whole of Europe with products like lasagne and spaghetti bolognese so that's an interesting option for us. Last year, we acquired a pizza maker in Italy. The year before that, we built a brand new factory in the USA which is now at full capacity. We are a family-owned company and the guy that set the business up more than 30 years ago is still the owner and president of the company. He is still fully involved and ploughs all of the money we make back into the business and into R&D.
just-food: Fast-growing and fragmented sectors usually see consolidation. Will Dr Schar look to take part in that?
Trice: Yes, absolutely. As a global company, we definitely are looking at good opportunities to grow. Consolidation is inevitable at some point but I think there are still many, many opportunities for new companies coming in. I think the market will continue to grow for the foreseeable future and I think it will continue to be of interest for many, many companies.
just-food: Are there particular segments that Dr Schar could look at for acquisitions?
Trice: We cover all of the basic products ourselves. The company strategy recently has been to work with co-manufacturers and then take a majority stake in the co-manufacturer. The fresh and frozen pasta dish supplier was a co-manufacturer and we've now acquired that.
just-food: Are you seeing diagnosis rates increase or is the growth in the market from lifestyle consumers?
Trice: Diagnosis rates of coeliac disease are fairly stable. It's difficult to get the health service to spend more money on that as there are many other priorities for healthcare spending. If we put campaigns together to try and increase the diagnosis rates of coeliac disease, it is only going to cost the NHS more money longer term. It's a difficult balancing act. The average time a coeliac has between experiencing the first symptom and being diagnosed is 13 years. That's definitely we should as a society try to improve.
just-food: An NPD push, then, could help improve the brand's awareness among lifestyle consumers.
Trice: Coeliacs would only have access to staple foods on prescription so they would definitely be interested in new products. There is a group in the middle that we call gluten-sensitives. There may be six times as many gluten-sensitive as there are with coeliac disease. There could be six to ten million people in the UK.
just-food: How is gluten-sensitive defined?
Trice: It's not defined as it is a phrase we have come up with as a company to cover off several different medical conditions that are affected by gluten. We are into that group of people who are not lifestylers and need gluten-free products medically but are not diagnosed coeliac. We've been sponsoring an international panel of experienced gastroentrologists to try and come up with a patient pathway so GPs in the UK understand the condition and recommend treatments to affected people. It's a very interesting area. It's quite in its infancy but very exciting.
just-food: What kind of conditions?
Trice: They have very similar symptoms to people with coeliac disease - diarrohea, bloating, frequent headaches, most gut-related symptoms that come and go depending on things that they eat. Another group of people is IBS sufferers. Anybody that is presenting to a GP with gut-related symptoms could be gluten-sensitive but could also have other conditions that are more well known, such as IBS. Although there may not be fully-diagnosed coeliac, there's definitely with a lot of people symptoms that could be helped be avoiding gluten. We're not in that area where we just bring out new products for the sake of it, with colouful packaging to attract lifestylers. We're into really making products for people that really need the product.
just-food: As the sector grows, it is going to come under increased scrutiny. Some have said it is not gluten per se that is the problem; it could be yeast.
Trice: There's a very big group of people who currently don't know it but who do need to avoid gluten or who we feel better if they avoid gluten. There may be links with ingredients such as yeast - I've not heard that one in particular - but the medical evidence [on gluten] is very strong. It's not us as a manufacturer saying that. I would certainly want to dispute any articles from journalists that say there isn't a condition out there that needs to avoid gluten - there is.
just-food: It would help your top line if the lifestyle consumers choose your brand. If consumers start to question whether gluten-free products actually do what they set out to do, it could affect the category.
Trice: What I'm not saying is we stand in supermarkets and refuse to let lifestyles buy our products. The more the merrier! It's all around availability isn't it. If we've got a good presence in a particular supermarket and consumers are looking for gluten-free products, hopefully they'll pick ourselves up because we like to think our products are the best quality out there. By no means is 100% of our business in the medical area - maybe 30-40% is in the lifestyle area - but all I'm saying if we try to diffrentiate ourselves from Boulder Brands as an example that's how I would diffrentiate ourselves.
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