Fermentation is Bubbling Up!

Happy New Year, AAR Agency Growth Partner!

First – let’s hope that 2021 is full of peace, health and prosperity.

Second – welcome to year three of AAR Partners’ Agency Growth Program.

As part of your membership, I have been sharing with you sub-sectors who may need the help of outside agency expertise.  And to kick off 2021, here’s one sub-category that is truly exploding!

It’s been a while since kombucha and kefir hit the mainstream — but the fermentation space keeps rising.

A 2019 study reported a 149% YoY increase in US consumption of fermented foods. R/Fermentation subreddit subscribers doubled over the last year, to hit 100k this October. The global fermented food market is expected to swell by $58.15B in 2018-22.

Demand for alternative protein, which often relies on fermentation, is surging. Startup Solar Foods is set to launch their fermented protein, made using air, in 2021.

Interest in human microbiomes is also propelling market growth, as the r/Microbiome subreddit accelerates past the 20k subscriber milestone. The list of conditions affected by microbes is rising — from rosacea to autism — and the positive effect of probiotic-rich fermented foods on microbiota is well documented.

Companies focusing on fermentation technologies raised $435m over January-July 2020 — already outstripping the $274m for all of 2019. Funding has continued to flow in Q3 and Q4.

Let’s break down opportunities in all things fermented.

Hard Fermented Drinks 

Americans indulging in tipple are veering toward healthier options: fermented beverages that are low-cal and gluten-free. And the rise of hard kombucha, an alcoholic version is receiving soaring interest (with crazy margins).

Hard seltzer, also brewed using fermentation, has experienced a similar spike in demand. Last year saw sales soar 200%+, climbing past $1.2B.

And it’s not just a fad. The recent surge is forecast to be followed by healthy long-term growth: Market CAGRs of 16.2% (2020-2027) for hard seltzer and 42.4% (2021-2026) for hard kombucha are worth raising your glass to.

Entrepreneurs could develop offerings in this booming market. Take a look at the market leader, White Claw, and focus on gender-neutral marketing. The hard seltzer brand left competitors, with their ultra-feminine campaigns, in the dirt — and accounted for 54% of 2019 sales.

In line with the recent move of eastern trends to the West, entrepreneurs should take note of the spiking interest in Asian seltzer.

Chinese unicorn Genki Forest just tripled its worth in 9 months, and is now looking to export to 100 countries. You could provide hard seltzer (and kombucha) in a similar line, incorporating Asian flavors (Lunar just launched).

Fermented Products and Gut Health

Gut microbiome imbalances are linked to complaints like IBS, gastritis, and candidiasis — which are becoming increasingly common.

Interest in natural treatments is also rising. Pre- and probiotic pill supplements are leading the race, but fermented food and drinks are not far behind.

The opportunity could be leveraged by designing treatment lines beyond pills — think tonics, condiments, and meal plans.

There are also opportunities in personalized gut health. Startups like Viome and Thryve have launched microbiome test-kits for at-home use, and then deliver customized probiotic supplements.

Limited players leave room for competition, and value-adds, beyond the addition of fermented foodstuffs, might include:

• Relevance as a service: Monthly tests/surveys to keep up-to-date with consumer needs
• Focusing on the psychobiome, the next big thing as studies link mental and gut health (psychobiome-boosting stress tonic, anyone?)
• Leveraging the gut-skin connection and providing products to treat breakouts, eczema, and aging

Fermented Skin Care

 Studies now show imbalances in the skin microbiome can trigger conditions like acne and rosacea. The list of benefits associated with fermented skin care is seemingly endless — and firms are getting stuck in.

According to Mintel, 28% of “skin care products launched between December 2018 and November 2019 contained fermented ingredients.”

Mother Dirt, a probiotic skin care brand, has experienced double-digit sales and YoY growth since its launch in 2015. Azitra just raised $17m for the development of skin care products using fermented “wild-type bacteria.”

There is plenty of room to enter this nascent space and develop lines containing fermented ingredients: Think soybeans and mushrooms.

Following gut microbiome tests, skin microbiome tests might be next; and brands could offer a host of personalized follow-up products.

Product and Service Innovation

Demetrix has just announced their success in producing rare cannabinoid CBG via fermentation. This September, Bond Pets released the first faux-meat chicken. Perfect Day, creators of animal-free dairy, is considering an IPO.

There is massive opportunity for product development, or with suppliers to leverage their end products (e.g., using new cannabinoids in seltzers, or even creating fermentation-focused eateries).

Millennials in particular like to discover unusual foods, and new fermentation trends are continually popping up. A recent example is koji fermentation, which uses a specific bacteria to produce things like vegan charcuterie — and the trend is soaring.

Kits for consumers to make fermented products themselves is spiking too. Google search volume is high, according to Keywords Everywhere:

• “Kimchi recipe”: 135k searches/month
• “Kefir grains”: 27.1k
• “Cheesemaking”: 12.1k
• “Kombucha kit”: 6.6k
• “Tempeh starter”: 4.4k
• “Yogurt starter”: 1.6k

The Opportunity? 

There is nothing sour about digging deep into fermentation and reaching out to help rising brands add a little heat to this sub-sector that is truly brewing with no end in sight… 

Remember, don’t stalk!  Don’t hound.  Don’t send a myriad of messages about yourself.  What do you do?

Build trust fast by offering ideas to help with their operations, manufacturing and distribution dilemmas.  Share your expertise and show how it’s relevant.  Just… don’t… sell!

Prospect smAARt, pitch with passion and most importantly, with purpose.

Always remember to pitch with passion.

Have a wonderful first week to a brand new year and I hope it’s filled with lots of new business!