Adding value via health and wellness

by Keith Nunes
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The health and wellness trend that has blossomed during the past five years poses a different challenge for management, even though the approach is certainly not new. This trend is basically an extension of successful efforts by food companies to add value to products. While past value-added efforts focused mainly on enhancing convenience, current introductions primarily address better-for-you criteria. There is a difference, though, in the way that the benefits of convenience may be quantified by minutes saved during meal preparation. Determining the specific impact of better-for-you products is less quantifiable. It is that difference that will challenge food processors in the future.

The effect health and wellness is having on the global food industry may be seen in the way many of the largest companies are altering their business strategies to capitalize on consumer demand for products that have a functional benefit or, at the least, are deemed healthy. Two of the most notable examples include Nestle S.A. and Groupe Danone, companies that are shifting portions of their vast product portfolios toward items perceived to be better for consumers.

With the acquisition of Gerber this past April, Nestle continued its efforts to become what Peter Brabeck-Letmathe, Nestle’s chairman, calls a nutrition, health and wellness company. Nestle now has strong positions in infant formula, baby food, medical nutrition, weight management and performance nutrition, and it is clear Mr. Brabeck-Letmathe views the better-for-you category as a significant area of growth.

With the recent move to sell its Biscuits and Cereal Products business to Kraft Foods, Groupe Danone is following a path similar to Nestle. Shortly after Danone announced the sale to Kraft it entered into an agreement to acquire Royal Numico, a Dutch baby food manufacturer. Franck Riboud, chairman and chief executive officer of Groupe Danone, said that with the acquisition his company’s position would be reintroduced as a leader in health and wellness.

The fact that such large and successful companies are transforming their portfolios is not happening without widespread notice, particularly from the investment community and also by competitors. These moves signify how these companies view the category.

That consumers desire to live healthier lives is undeniable. The aging baby boomer population alone is a force driving the health and wellness trend. As people age, they tend to visit doctors on a more regular basis and get advice regarding improving their health. That translates into a well supported market for manufacturers to tap.

The challenge facing food manufacturers marketing better-for-you products is not to oversell the concept. While convenience products may be a boon for many consumers, there is not a personal connection between the buyer and the product. Consumers may appreciate the extra time less meal preparation affords them, but their focus always will be on what the extra time allows them to accomplish.

With health and wellness, the relationship is different, because it is personal. Whether the better-for-you ingredient is whole grain, omega-3, acai, a form of antioxidant, etc., consumers will expect results from the added value of the product. Promoting specific results will be tricky for processors given all of the variables that go into maintaining a healthy lifestyle.

The upside of the health and wellness trend is apparent as the food and beverage industry continues to develop new products targeting the segment. The downside will emerge if consumers start approaching the trend in the same manner they approach weight management — shifting constantly from one fad diet to the next.

Food processors must establish their better-for-you products as the foundations of a healthy diet and communicate to consumers the benefits of maintaining a healthy lifestyle. The added value of such a relationship may be seen in stronger brand awareness and a more loyal customer.

This article can also be found in the digital edition of Food Business News, August 21, 2007, starting on Page 9. Click here to search that archive.

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