The Ketogenic Diet, or Keto Diet for short, was one of the biggest diet trends of 2018, and has shown no sign of slowing down. The growth of the keto diet market segment is largely due to the shift in food consumption patterns from synthetic to natural, clean ingredients within the food and beverages industries, and changing public opinion on dietary fats.
The Ketogenic diet is a specialized low-carbohydrate, adequate protein, high-fat diet that is moving from niche to mainstream. The role of the ketogenic diet is to improve insulin resistance, weight loss, manage the symptoms of chronic conditions, and improve devastating neurological disorders such as epilepsy, GLUT1 deficiency, Manic Depressive Bipolar Disorder, and even Amyotrophic Lateral Sclerosis (ALS).
In this way, the Keto Diet is the new Paleo Diet, gaining a foothold among global health-conscious consumers because of its potential, and well-established benefits.
Keto Diet Market Drivers
The rising awareness among consumers regarding the benefits associated with the keto diet is driving the increasing demand for keto-friendly foods and driving the keto food market. According to industry analysts, the health and weight loss benefits of the keto diet are the major factors driving its growth. The burgeoning keto trend occurs at a time when consumers are questioning the roles refined carbohydrates and fat play in weight loss and disease management. And, as with many diet plans, following a ketogenic diet requires dedication, careful meal planning, and often high demands on the levels of nutrition knowledge in order to follow the keto diet correctly.
Even for brands whose primary products aren’t keto-friendly, extensions of product lines are appearing to meet this growing body of consumers. Globally, the demand for keto food products is increasing with the rapid shift in consumer demand toward clean, natural products to meet growing rates of obesity and diabetes worldwide as consumers are increasingly aware of the health benefits of higher-quality ingredients.
The booming popularity of the ketogenic diet will likely continue to increase consumer attention to products that are aligned with the ketogenic diet. These include products that feature medium-chain triglycerides (MCTs) which are lauded as a premier source of energy from fat, nootropics, exogenous ketones, pre-packaged meals, shakes, electrolyte beverages, and convenience foods that meet the macronutrient requirements for keto consumers.
2018 Keto Diet Market Forecast
Industry analysts expect the keto diet market to be accelerating, growing globally at a rate of 5% CAGR. Other estimations of the keto diet market expect an incremental growth of over $366 billion between 2017 and 2022.
The keto diet market is highly fragmented in nature, with few international and numerous local brands that are meeting keto consumer needs. However, the available keto products are largely undifferentiated, causing the keto diet market to be highly competitive. Further, because product differentiation is low, the switching cost for consumers is also low. As such, barriers to entry into the keto market are moderate for keto product producers. Thus, product differentiation for quality through keto certification may be a key strategy for keto diet market entry, but there are other important reasons to improve product differentiation.
>Why Product Differentiation Matters
Brands always know the quality of their own products in advance, while consumers do not. So when product differentiation is low in the market, as it is in the ketogenic product market, so is the price difference that causes a consumer to switch from one product to another. In the simplest terms, high-quality and low-quality products often appear the same to consumers, but the market prices are the same. If the consumer believes the products to be equal, the producer of the high-quality product is at a disadvantage if the prices differ too much. For this reason, it is imperative that high-quality brands make additional efforts to distinguish themselves on the shelves.
Without product differentiation, the market is simply not fair to the higher-quality product producer. To improve separating equilibrium between high-quality and low-quality products, high-quality product brands must first communicate product differentiation well. To gain a competitive edge, high-quality producers utilize four different signaling strategies: reputation, warranty, information disclosure, and third-party certification.
Product Differentiation Strategies
While reputation, warranty, and information disclosures are good strategies for improving long-term trust, these strategies are not great for product differentiation, in that they do not impact market price enough to offset the costs of producing quality prices and competing with low-quality products in the market. However, product differentiation and separating equilibrium studies  suggest that third-party certification sends the strongest signals among all of the strategies for product differentiation. In this way, third-party certification allows companies of greater quality to improve market equilibrium.
It was found that on average, certified products were sold for more than 50% otherwise equivalent products, and could have up to a 55% price differentiation impact between certified and non-certified products. This same study found that reputation only impacted price differentiation less than 3% and that warranties had no effect on the price of goods, whatsoever. In other words, the study found that the single-most effective signal to differentiate products and increase sales prices was from third-party certification. It further suggests and that brand reputation and warranties although important, may are not enough to substantiate higher prices.
Product differentiation offered by third-party certifications like Keto Certification is effective at sending strong signals of quality to consumers. In turn, this also improves product differentiation and consumer trust which can impact sales over the short term, and over the long-term for consumer retention. Therefore, third-party certification is a critical strategic asset for producers of high-quality brands in both getting new customers, keeping existing customers, improving price equilibrium, and garnering trust that improves reputation over the long term, as well.
Why Third-Party Keto Certification Matters
Another study suggests that consumers who show a distinct preference for social responsibility  tend to buy higher-quality, higher-priced products. In contrast, the consumers who pay less attention to social responsibility are more likely to purchase lower-priced, standard products. Consumers like these are often referred to as “Conscientious Consumers” while “Tribal Consumers” are on the rise.
A 2016 Nielsen report  indicated that local and regional companies that were focused on these consumer values were experiencing higher value growth compared to their multinational corporation counterparts: 13 percent and 23 percent from 2012 to 2014, and 5 percent respectively. In other words, the small-scale local company now has the upper-hand over the multinational corporations that were once at the top of the business food chain. In this new food landscape, product differentiation won’t just be a strategy; it will “separate the chaff from the wheat” so to speak.
For multinational businesses to battle or reverse the trend of dwindling value growth, a refocus towards capturing the interest of today’s emerging “Conscientious” and “Tribal” consumers should be of increasing interest. In other words, multinational businesses will need to improve trust signals in a way that allows them to continue to compete in our rapidly-changing food landscape that is driven by these new consumers.
And with both conscientious consumerism and “food tribalism” on the rise, smart brands of all sizes would do well to consider the benefits of product differentiation that can improve trust signaling and transparency or is aligned well-aligned with these growing demographics. And for these reasons, Keto Certification for products should also be well-considered.
How to Compete in the Trending Keto Diet Market
Brands that wish to take advantage of the burgeoning keto diet trend that want to align themselves with the growing “Keto Diet Tribe” can appeal to consumers by providing new products that meet the nutritional principles of keto dieters. However, potential avenues for product development include products that go beyond low-carbohydrate nutrient profiles.
Globally, products utilizing ‘free-from’ claims have been on the rise over the past ten years. As a lifestyle regime, today’s keto consumers also demand options that encompass aspects of ‘free-from’ and ‘clean-label’ diets such as plant-based, paleo, grain-free, grass-fed, and organic. As these words become synonymous with “healthy,” products for keto consumers will need to go beyond hitting macronutrient targets, and will need to incorporate other ‘clean-label’ attributes that signal higher-quality to compete.
Again, third-party certifications are instrumental in appealing to lifestyle members who see the Keto Diet as an extension of the Paleo Diet, and are demanding products with “free-from” and “clean” attributes. Thus, manufacturers of products for the keto diet market should consider using clean-label related certifications such as Non-GMO, Organic, Certified Grain-Free, Certified Paleo, and Keto Certified to appeal to lifestyle users. Further, these logos aid consumers in finding products that align with their lifestyle, tribe, consumer behaviors, and dietary goals. And, in doing so, help remove barriers to entry and improve trust signaling which directly contributes to improvements in the bottom line.
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