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Keying in on keto

Keto is expected to be a $15-billion business globally by 2027. Is your store on board?

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Jill Van Gyn launched her high-fat, low-sugar peanut butter company, Fatso, from the back of a Victoria, B.C. health food restaurant in November 2016, selling about $50,000 worth of product in the first year.

Three years later, Fatso is sold in more than 1,200 stores coast-to-coast, and includes three SKUs: Classic, Cocoa, and Crunchy Salted Caramel. Originally developed for the cross-fit community, Fatso has benefited from the skyrocketing popularity of the keto diet, whose followers eschew carbohydrates in favour of so-called “good fats” and protein.

“I didn’t realize I was on a keto wave until I was on it,” says Van Gyn. “I got really lucky because keto started to explode into the mainstream.” Van Gyn expects to do about $2.2 million in business this year, while a recent listing with Whole Foods Market stores in Washington and Oregon is expected to push sales to nearly $7 million by the end of 2020.

About 4% of Canadians responding to a recent Mintel survey said they were currently following a keto diet, while a recent report from Research and Markets is calling for the global keto market to grow by about 5.5% per year, reaching US$15.6 billion by 2027.

Joel Gregoire, associate director of food and drink at Mintel, says keto still remains “relatively niche,” but could have a lasting impact in terms of consumers continuing to question what foods are right for them.

“I know many people who have reached their goal [weight] and have decided to stay with the keto diet because they now consider it a lifestyle,” agrees Shakzod Khabibov, who founded the online health food store NaturaMarket.ca two years ago.

Keto-friendly products now account for between 500 and 800 of the approximately 2,000 SKUs sold through NaturaMarket.ca. The company currently has around 100,000 customers—with an average basket size of $91—and is adding between 3,000 and 5,000 new customers each month. About half of its business comes from repeat customers, says Khabibov. “This diet gives people a lot perspective about food,” he says. “They don’t want to go back, not because they don’t want to gain weight, but because they know what that food contains.”

Suzie Yorke, founder of Toronto-based keto-friendly snack bar company Love Good Fats, agrees. “We have noticed that more consumers have shifted to more health-conscious lifestyles; therefore, they are making more thoughtful choices when it comes to nutrition and being more mindful of what they eat,” she says. “With the number of health benefits that the ketogenic diet has, the popularity of the diet will only continue to grow as it has improved our lives and health in numerous ways.”

The keto diet works by depriving the body of carbs, placing it into a metabolic state called ketosis. Without carbs, the body adapts by burning stored fat reserves for energy, leading to weight loss. Studies have shown that keto may also have a number of ancillary benefits, including significant reductions in blood sugar and insulins, as well as improved brain health (it was actually started by doctors at the Mayo Clinic in 1923, as a way to treat childhood epilepsy).

It is part of the broader consumer trend towards healthier eating, says Jo-Ann McArthur, president of the Toronto food marketing agency Nourish. McArthur says there are now more “selective eaters” than true omnivores in Canada, while the number of people who are following a specific diet is doubling year-over-year.

Meanwhile, the most recent iteration of the “What’s Trending in Nutrition?” study from Pollock Communications and Today’s Dietitian—based on responses from more than 1,300 U.S. nutrition experts—identified keto as that country’s most popular consumer diet for 2019.

While trends like keto stem from a general desire to lose weight and eat better, they’re also growing exponentially because social media has enabled people to more easily find like-minded people and create communities. “You’re able to find your tribe,” says McArthur.

With predecessors like the Atkins diet and South Beach diet (both of which were low-carb in character), the keto diet is dismissed in some corners as merely the latest in a string of fad diets. Its proponents, meanwhile, counter that it is a gateway to healthier eating.

What’s not up for debate is the growing number of companies, including Canadian success stories like Toronto-based Love Good Fats, that have sprung up in recent years to meet the dietary needs of keto adherents. According to a recent U.S. Statista report, the number of new products making a keto claim rose from just 30 in 2015, to 300 in 2016 and 520 in 2017.

And keto-friendly products now span multiple categories—from tortilla substitutes (Flatout Flatbreads’ ProteinUP Carb Down) to ice cream (Halo Top) to candy (SmartSweets’ Sweet Fish and Sour Blast Buddies), to chocolate (Quebec-based artisan chocolate company Ketolat) and snack bars like Love Good Fats. Then there are the established brands jumping on the trend, such as SlimFast’s new line of keto meal bars, shakes and snacks. “You know it’s mainstream when you see products like that,” says McArthur.

This article appeared in Canadian Grocer’November issue.

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