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Once-Sizzling Soy Category Suffering Serious Sales Slump

Rising Soybean Prices, New Alternatives and Fickle Fans Lead to 16% Drop From 2008 to 2010

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Soy -- a super food once so hot it got its own logo -- is looking a little pedestrian these days, with sales slumping on everything from soy milk to leading meatless-hamburger brands.

The $2.6 billion market for soy food and beverages plummeted 16% from 2008-10, according to a report from market researcher Mintel, which projects another 17% drop from 2010 to 2012. Analysts suspect a variety of factors are at play, including rising soybean prices, new alternatives and the fickleness of health-conscious consumers.

Soy has "lost a little of its luster," said Rick Shea, a food-marketing consultant and former Kraft marketing executive. "People are realizing there isn't necessarily one magic bullet ... so they are broadening their use of [health] foods."

Marketers are responding. Silk, long-known for its soy milk, now also sells almond milk and coconut milk. "Lighter users of soy milk ... are being drawn to the new varieties in the category, like almond and coconut," said Jennifer Hartley, marketing director for Silk, which is owned by Dean Foods., suggesting that taste is a motivating factor.

Regular variety Silk soy milk still leads the nondairy milk category with 35% share, but sales fell 14.6% to $206.6 million in the year ending March 20, according to SymphonyIRI. Meantime, almond milk sold by competitor Blue Diamond has made strong gains, moving up to third place with $70.2 million in sales. Silk's almond milk, introduced last year, and coconut milk, released in January, are also rising.

In the soy food sector, slumping categories include baby food, cookies, snack bars, soy cheese and frozen desserts, according to Mintel, whose report does not include sales from Whole Foods, Trader Joe's and Walmart because the figures were not available. The meat-substitute category has held its own, with frozen meat-substitute sales increasing 4.1% from 2008 to 2010 and refrigerated alternatives up 16.8%.

But as of late, sales for some biggest brands have flat-lined. Morningstar Farms' frozen meat substitutes, owned by Kellogg Co., fell 2.3% to $109.5 million in the year ending March 20, while Kraft Foods-owned Boca brand dropped 4.2% to $38 million, according to SymphonyIRI. New competition is also coming from companies such as England-based Quorn Foods, which markets frozen burgers, chicken and other products made from "mycoprotein," a fungus-based substance that the company touts as being high in fiber, low in calories and good for digestion.

"You're seeing a lot of innovation in the vegetarian and vegan category. Soy isn't the only alternative any longer," said Carlotta Mast, editor in chief of NewHope360.com, which covers the health-food market. Indeed, soy was missing from many of the hottest products at the recently held Natural Products Expo West, a leading natural and organic trade show. Among the favorites cited by NewHope360, which produced the show, included Kootenay Kitchen Vege Pates from North of 49 Naturals, touted as "dairy/egg/ soy free," and Food for Lover's Vegan Queso, made from nutritional yeast.

Soy gained momentum in the 1990s and broke through as a health-food darling in 1999 in the wake of an FDA decision that cleared the way for marketers to promote soy proteins as reducing the risk of heart disease. Soon after, commodity giant Archer Daniels Midland Co. formed alliances with food makers to mark soy products with a "NutriSoy" logo, which today still designates products with at least 6.25 grams of soy protein per serving.

"It became a catch-all that people couldn't get enough of ," said David Browne, author of the Mintel report. Mr. Browne worked at Whole Foods in the 1990s and remembers women buying soy nuts "almost like a medicine."

But in recent years, the soy industry has dealt with conflicting news reports about cancer risks. Because soy has estrogen-like chemicals, there's been some fear that it could increase the risk of breast-cancer recurrence in survivors, but research presented at recent meeting of the American Association for Cancer Research allayed those fears.

At the same time, soy innovations have slowed since peaking during the low-carbohydrate craze of the mid-2000s, according to Mintel. Now, gluten-free products are the rage, as marketers from General Mills to Anheuser-Busch introduce products catering to consumers with gluten intolerances.

"Gluten-free products are fueling their own growth through innovation," said Phil Lempert, who runs Supermarketguru.com. "Soy got lazy."

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