School nutrition a “great opportunity” for healthier brands

Right now, the US school-nutrition market may look forbidding because the whole programme has become a potential political football. Republicans are considering dismantling some of the nutrition standards for school-meals that were implemented by the Obama administration, as well as targeting the massive school-lunch programme on the grounds of excess food waste and runaway costs for feeding children who increasingly aren’t getting proper nutrition at home.

They’re being opposed by many in the school-nutrition community who want to see continued expansion of federal programmes as a government-granted entitlement, another way to battle the ravages of poverty and neglect on many of America’s children. One of the increasingly influential groups in the school-lunch nexus is the Urban School Food Alliance, founded by programme administrators in six major cities – New York, Los Angeles, Chicago, Miami, Dallas and Orlando. It is gaining support all along for expansionary propositions including that the US government should serve “school” meals in non-congregate areas such as homes so that “more meals can reach children who have limited access to nutritional meals” outside of school.

But as the politics continue to get sorted out, the US school-nutrition programme represents a tremendous market opportunity for better-for-you brands that already are plying the American consumer market. Each school day, more than 30 million students across America eat a school-served meal. And every entity involved, from the US Agriculture Department to state education bureaucracies to local school districts, is seeking innovative ways to serve kids healthier fare that they’ll also want to eat.

“Certainly brands are put off by everything they see unfolding with the school-nutrition programme, and they stay outside of it because of that,” David Just, professor in the Food & Brand Lab at Cornell University and an expert in school nutrition, told Kids Nutrition Report. “But it’s a great, great opportunity, where you’re going to have people see your brand and oftentimes it’ll be the most appealing thing on the menu.”
Here are five better-for-you brands that have been planning or are taking the plunge, and how they’re doing it:

Safe + Fair: Chicago-based The Safe + Fair Food Company is in the process of rolling up many “free-from” food startups into a corporate juggernaut that is aiming to aggregate companies that currently generate as much as $100 million a year in revenues. And CEO Will Holsworth told Kids Nutrition Report that the school-nutrition market is “really important” for his company’s business model.

“We started in that space because allergies are more important in school lunches than anywhere else,” he said. “Two kids per classroom, on average, have a peanut or tree-nut allergy, and it’s usually in school where families first find out if their kid has an allergy. If one kid in class has one, then every kid is dealing with that issue.

“So that issue has become more and more prevalent in schools: How to keep kids safe. There’s good business for us in fitting the needs that must be met. School districts are looking for answers.”

Safe + Fair’s Skeeters brand of snacks, for example, the product line that launched the company, is catching on with school districts. It’s a line of nut-free mini-cookies including Chocolate Chip, Shortbread and Double Chocolate varieties, as well as some SKUs of graham crackers.

“They’ll do a variety of things with Skeeters,” Holsworth said of lunch-programme administrators. “They’ll put it on their menus; they’ll include it in vending machines; and depending on how serious their rules are around nut allergies, they’ll [advantage Skeeters] by banning kids from bringing anything into the school that isn’t nut-free.”

As Holsworth has shared Safe + Fair’s business plan with school-lunch officials, he said, they’ve been urging him to hurry with his plans to acquire makers of better-for-you macaroni and cheese, cake mixes, and pasta and pizza sauces. “More of them are talking to us and saying, ‘What can you provide to us and when can you provide it?” he said. “A number of these products will end up in schools.”

The “fair” part of the company’s name, Holsworth said, alludes to the fact that parents must pay 20% to 25% more for nut-free products compared with their conventional equivalents. “We don’t think that’s right, and we want to make sure our products are fairly priced,” he said.

Overall, said Holsworth, the long-term goal of Safe + Fair is essentially to take over the school lunchroom for allergen-free eating.

“Kids are afraid of food, and some have to eat at nut-free tables because they’re ostracized from their friends,” he said. “Imagine the impact that has psychologically; they have enough things they already have to deal with in growing up, not to have to eat products that are weird and look different from what everyone else is eating. We’re trying to homogenize this with schools, to offer a large line of products that are fairly priced and look attractive to everyone.”

Sparkling Ice: The artificially-sweetened, zero-calorie, fruit-flavored sparkling-water brand owned by Talking Rain busted into the consumer-retail space over the last several years, generated an annual run rate of nearly $700 million (€622 million) in retail revenues, and literally has accelerated the decline of traditional carbonated soft-drink brands including Coca-Cola, Pepsi, Diet Coke and Diet Pepsi.

Now, to create another growth track, Sparkling Ice is turning to US schools. The brand is being helped by the ongoing expiration of many of the long-term contracts that school districts signed years ago for sales exclusivity with Coca-Cola and Pepsi, for all of the drink giants’ various types of beverages, Kevin Klock, former CEO of Talking Rain, told Kids Nutrition Report recently.

Sparkling Ice sold about 100,000 cases to US schools in 2015, but that grew to more than one million cases in 2016, and the brand had gotten a foothold in schools in 48 of the 50 United States. Klock believes Sparkling Ice easily could triple sales over last year’s levels.

“It’s the first crack we’ve been given to many school-foodservice operators,” said Klock, who was responsible for building Sparkling Ice into a heavyweight brand before his abrupt departure from the company in the spring, which hasn’t been fully explained in public. “We’re also probably at the point where the government is going to come in and require schools to remove sugar from their beverage programmes.”

A huge potential market beckons. “We could sell as much product in one school as we do in a supermarket in any given week,” Klock explained. “It’s also extending our brand awareness and an additional way to get household penetration as well as providing kids with an alternative that they’ve been looking for.”

Somma Food Group: The Dallas-based company sees increasing demand for clean-label poultry and meat in schools.

“There are regulations for what’s required now in meats, but we see an opportunity to go beyond what is required to what is being increasingly demanded by parents and students and, therefore, will be by schools: cleaner foods with shorter ingredient statements, and poultry and meats that are not raised on antibiotics and are only fed vegetable diets,” Michael Turley, Somma’s CEO, told Kids Nutrition Report. “It’s something we know the market is starting to look for.”

One indicator, Turley said, is that the Urban School Food Alliance is pushing its member schools to move only to chicken that isn’t fed with animal byproducts. “Those guys are very visible in the media, and everyone pays attention to what they do,” Turley said of the group. “But the very smallest school districts also want to do the same thing, and there are 14,000 of them out there: Their overwhelming desire is to serve better food.”

So Somma embarked on a plan to come up with chicken products “that have the cleanest ingredient statements in the school channel and in foodservice generally” and to partner with producers who would meet the company’s requisites. Its primary partner is Ozark Mountain Poultry.

Initial products included Chickentopia breaded chicken strips and other products, and fully cooked hamburgers consisting of beef that is from 100% grass-fed cattle. New products include a chicken-based hot dog that is an uncured frank, with no nitrates or nitrites. “It delivers the on-trend demand that’s out there for the raw materials, but it was also our mission to produce a really great hot dog, not just a really great chicken hot dog.”

Somma has become an eight-figure company in annual revenues, Turley said, after just two years. One reason is that, besides pushing the envelope with “free-from” products, Somma also is approaching the school-nutrition business with higher-level marketing than what the industry might be used to.

“We have a marketing team here that has worked with national restaurant-chain accounts, so they approach school-lunch directors like they’re a restaurant, and help them to drive traffic,” Turley explained. “You have to tell decision-makers – kids and parents – that their school is serving this great new product. We use point-of-sale materials in schools, social media and even print advertisements targeted in specific markets.”

AquaBall: The brand has been undergoing a huge transformation over the last couple of years as it switched from its original, eponymous ball-shaped package to one that’s slightly less round – but which accommodates hot-filling, in turn allowing the brand to eliminate preservatives and fit better into convenience-store refrigerated racks. AquaBall contains only water, fruit extracts, vitamins and stevia and posted 2015 sales of $5 million (€4.5 million).

Amid all the changes, CEO and founder Kevin Sherman wants to make another one: pursuing business in schools. Specifically, as a former public-school teacher and principal who understands schools as institutions, Sherman believes his brand can successfully target after-school “latchkey” programmes where millions of American children spend their late afternoons.

“Schools run these programmes and have open vending because it’s after school,” Sherman explained to Kids Nutrition Report. Late afternoon specifically is a time when kids’ hydration levels run low if not monitored.

“Our product is basically flavoured water, so it’s a great opportunity for these programmes and a bit different than the offerings they have. Also, when you get into the neural development of kids, they need to be hydrated; I saw that as a teacher: If kids are lethargic, you send them to the water fountain to get a drink. And sugar depletes water.”

Back to the Roots: The startup breakfast-cereal company has managed to get the New York City public-school system to quietly install two of its products in place of Kellogg-owned brands, which means that Back to the Roots cereals have become daily options for the 254,000 students who, on average, eat a free breakfast offered by America’s largest public-school system.

Back to the Roots cereal has just four ingredients, no preservatives and no added vitamins; is low in sugar and sodium and high in whole grains; and is certified organic. One 28g serving of Back to the Roots Cinnamon Clusters, for instance, has half as much sugar and four-fifths as many calories as the same amount of Kellogg Frosted Mini-Wheats, which are still offered in New York schools.

The New York City district was in play for tiny Back to the Roots only because last summer Kellogg’s Kashi healthy-cereal brand discontinued two varieties, Berry Blossoms and Honey Sunshine, that were on the schools’ breakfast menu. Back to the Roots had previous experience in supplying much smaller school districts in California and in Phoenix, and it had some personal connections with New York officials.

The New York school district pays a little more for Back to the Roots cereals, but it is more than satisfied because the new cereals are popular with students, are organic and provide less sugar. So the startup is looking for more inroads in New York and beyond.

“This will be a faster process now with the support of the district and proven brand acceptance by the kids,” Nikhil Arora, a co-founder of Back to the Roots, told the New York Times.