August 18, 2010
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Not since the post-war baby boom had birth rates been as high as they were in 2007. But more recently, it’s been a different story altogether as the economy tanked and disposable incomes decreased dramatically. Not only are birth rates down, but consumers have less to spend on the children they do have, and thus overall sales of baby care products have stumbled.

”While the U.S. economy was strong, parents eagerly overspent on their young children leading to historic value growth far ahead of live-birth growth,” reports Euromonitor International, Chicago, a market-research firm. “As the U.S. economy cooled, it forced parents to reconsider their spending.” 


 You’ve likely read ad nauseum how the recession has changed consumer buying habits, but one area where consumers around the globe largely seem unwilling to do without has been in the health and wellness category.
 “In recession-battered 2009, health-and-wellness products continued to be a strong growth driver in most regions,” according to London-based Euromonitor International Ltd. in a report that focuses on the global market and finds only North America floundering.
In Eastern Europe, health and wellness packaged foods reported a 17 percent increase in value sales compared to 8 percent overall for packaged foods, the report says. In the same region, soft drinks stagnated while health and wellness soft drinks grew 3 percent.
Latin America reported double-digit growth in health and wellness packaged foods (11 percent) and beverages (25 percent). And though it comes from a small base and accounts for only 2 percent of global health and wellness sales, the region of the world comprising Africa and the Middle East reported some remarkable growth. Foods generated 30 percent value growth and soft drinks 25 percent, compared with almost 10 percent growth for total foods and soft drinks, Euromonitor reports.

So globally, 2009 was strong for health and wellness packaged food and beverages - a growth of more than $22 million was reported. However, North America’s contribution actually slid almost 1 percent, Euromonitor reports. North America and Western Europe combined account for 60 percent of total sales, so analysts are not surprised that “these fairly mature regions’ growth was markedly less dynamic than other regions.” 



Some trends can be defined easily by specific markets and behaviors. Health and wellness, however, is more of a lifestyle choice that impacts purchasing decisions in food and beverage, as well as a host of other segments including cleaning supplies and personal care products.
“It seems that there has always been an interest in healthy living, but what constitutes ‘healthy’ is what changes, and that is based on new research, hence the term ‘trend,’” says Kim Blum, a Dallas-based registered dietitian and consultant. “Consumers who are health-conscious follow these trends and base their eating and buying habits on the latest fad.”

Blum points to organic and natural products, functional/fortified foods, locally produced products and “simple foods” with fewer ingredients as primary contributors to the health-and-wellness trend.

To help more clearly define the health-and-wellness trend, Euromonitor identified five components, including organic, fortified/functional, naturally healthy, food intolerance and better-for-you.
Food-intolerance products have been the “most dynamic,” Euromonitor reports, based on the category’s 9 percent sales increase in 2009. The segment is small relative to other health and wellness drivers with its $8.1 billion value accounting for only slightly more than 1 percent of total health and wellness sales. The growth in food-intolerance products is attributed to expanded private label, Euromonitor says, driven by retailers’ commitment to gluten-free products.
Gluten-free products are in demand given the increasing diagnosis of Celiac Disease, a genetic disorder that flames up due to a gluten intolerance. The Nielsen Co. reports sales of gluten-free products increased 74 percent from 2004 to 2009 and are expected to reach nearly $2.6 billion by 2012.
Also, many people “think that gluten-free foods are healthier than foods containing gluten, so they’ve jumped on the gluten-free bandwagon,” says Carol M. Shilson, executive director of the University of Chicago Celiac Disease Center in an interview with the New York Daily News.
A growing number of consumers are reporting digestion issues and that, too, has been a driver in new product introductions, says Ewa Hudson, head of health and wellness research at Euromonitor International.
“They eat probiotic yogurt or supplements, and they feel better because these work. And this encourages repetitive purchase - they eat them, feel better and buy them again,” she says.
In the past few years, gluten-free and probiotic products have been more prevalent in the mainstream market. Both giant and niche retailers have bolstered the health and wellness market and yet also have created some new challenges in the retail space.
“A segment of the population is following these food trends, some spending more money to purchase more expensive products. However, because of supply and demand, mass market retailers are selling some of these trendy products, causing a battle between them and specialty stores who were once the sole providers of such items,” Blum observes.

She adds, however, that despite supply challenges and fluctuating trends, “It is imperative for retailers to keep their customers satisfied and their company on track with current trends. To stay competitive and to meet consumer needs, it is critical for retailers to respond to health and wellness trends.”



It’s also critical for retailers to understand the performance of organics. According to Euromonitor, the organic category was probably the category that “most tipped to careen off the edge of the cliff during the recession. However, while the organic market posted the lowest growth of the firm’s health and wellness products, it showed remarkable growth over the five years prior (2003-2008) on its ledger - up a solid 79 percent in sales.
The recession hit the organic category hard, but Euromonitor predicts that “this does not change the fact that organic remains a key category in many markets.” Globally, Switzerland, Austria, the Netherlands and Denmark are solid markets, and the U.S. market continues to indicate a hankering for at least naturally derived - if not fully organic - products.
Hudson points to varying purchase drivers for consumers of organic products, including an interest in living “green,” reducing carbon footprints, healthier ingredients, actual (or perceived) improvements in flavor and overall taste and the baby market.
Blum adds that recent media coverage regarding the negative impact on pesticides will contribute to continued focus on organics.

However, given that organic foods often carry cost-prohibitive price points, those consumers that have to make sacrifices have more options today than ever. Food and beverage manufacturers offered line extensions, tweaked formulas and helped retailers build private label brands that are purer and simpler.

“Simple foods with fewer ingredients will also be popular,” Blum says.



Obviously, the rise in obesity rates is of serious concern to the health-conscious consumer. And according to Euromonitor’s Hudson, the market for weight-management and better-for-you (BFY) products is huge, accounting for $174 billion.

BFY products, she explains, are lower in fat or sugar and have a lower calorie count. 

According to Euromonitor data, the BFY category increased just a little more than 5 percent in 2009, an “admirable performance considering that BFY is a fairly mature category making up one quarter of health and wellness sales.”
The biggest performers within the segment were reduced-fat soup, reduced-sugar gum and reduced-salt soup.

“Salt reduction in packaged foods has recently become a major public health issue in the U.S.,” Euromonitor reports. Indeed, major food manufacturers including PepsiCo’s Frito-Lay division have made public commitments to cutting sodium from its products. The Plano, Texas-based division of the snack and beverage giant recently announced a commitment to what the industry calls “clean labels.” Products not only need to be lower in fat and calories, the company acknowledges, but also need to have purer ingredients by eliminating MSG, artificial flavors and colors and other processed ingredients.

While manufacturers set out to eliminate artificial ingredients, the market for “naturally healthy” products continues to thrive and serves as a “testimony to its unfaltering consumer appeal,” according to Euromonitor.

Naturally healthy is the largest health and wellness category, Euromonitor reports, and accounts for close to 40 percent of global sales. Soy milk and naturally healthy soy drinks are huge drivers here. Other category-strengthening “superfoods” that are considered highly nutritious and disease-fighting include fruit and vegetable juices, olive oil, nuts and green tea, Hudson says.



The market for these value-added foods is driven by consumers expecting more from once simple products. The expectation is pure and healthy products, though with something even more special to make consumers feel better, look better, perform better.
However, some think the segment has become near saturated. “With so much food industry focus on developing new and exciting value-added offerings, consumers suddenly - but understandably - became very cautious during 2009,” Euromonitor reports.
North America took the biggest hit as the market became nearly flooded. It fell 4 percent compared with Western Europe’s 4 percent growth. Much of the activity and the innovation came from Japan, a nation that has shown an unwavering committed to functional products, partly because of the fashion-driven nature of its market, Euromonitor reports.

Overall, the health and wellness market is, in fact, healthy and strong across the globe.

Globally, obesity is a leading contributor to disease, and there is opportunity for retailers to help offset this through overall assortment and private label, inust\/ry experts agree.

“Retailers are in a great position because often people who are on a lower budget buy private label products,” Hudson says. “Often these people are overweight or obese, and retailers are in a great position to help if they want to.” PLB


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