Cracking the code

by Staff
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Despite all of the undeniable data that show the concept of health and wellness is more than a trend, food processors must not lose sight of the fact a majority of consumers are not willing to sacrifice taste and convenience for a product that is "better for them."

A study released by Yankelovich, Inc., last May revealed consumer personal accountability for health is at an all-time low. When asked to evaluate diet in terms of health and wellness, the average American rated their diet at home at 68.2 out of 100 and at 48.5 out of 100 away from home, according to the study. Though 44% of consumers believe they are solely responsible for the healthfulness of their diet, they remain apathetic to their unhealthy behaviors without convenient and enjoyable food options.

"We are obsessed with processed food, junk food and quick-service restaurants," said Steve Bodhaine, group president of Yankelovich. "When it comes to food preferences, taste and convenience trump nutritional balance. Consumers need food companies to offer tasteful, convenient foods that help make dieting more of a lifestyle and less of a punishment. With over onethird of the population saying ‘if it takes a lot of extra work to prepare it, I won’t eat it,’ and ‘I would have to totally revamp everything I do to eat well,’ it’s unrealistic to think any changes will be made without a strong push from food companies and restaurants."

Walker Smith, president of Yankelovich, added, "With competition for the food dollar heating up, marketers more than ever need to precisely target their key audiences with personally relevant products, services, messages and channels."

According to the study, consumers demonstrate an understanding for the kinds of behaviors involved in a healthy diet, but don’t apply the information personally. Though 82% of consumers said, "I am directly responsible for my health," 72% said, "If food doesn’t taste good, I won’t eat it, no matter how healthy and nutritious it is." Ironically, consumers’ responses to the study indicate all kinds of contradictions. • Freshness is rated the No.1 characteristic consumers look for in determining healthy foods; yet approximately 60% of the foods people buy for at-home meals are frozen, packaged/processed or prepared.

• When asked about healthy food preparation, steamed is ranked the healthiest cooking method (66%) with microwaved ranked at the bottom of the list (9%). Conversely, when asked how people actually prepare food, microwaved was cited as the second most frequent method of preparation (37%), with steamed coming in last at 13%.

• Though people identify fruit and vegetables as the top two foods that make a healthy diet, 60% said they eat too few fruits on a typical day and almost half (49%) said they eat too few vegetables. Yet, nearly half (45%) said they eat too much sugar/ junk food.

"The study indicates that over half of consumers don’t usually plan their menus for meals at home," Mr. Bodhaine said. "Rather, they follow their cravings or use whatever they have on hand. If this is true, there is a real cause for concern. If people only purchase food that is fast, cheap and easy, how does this reflect on other family member’s diet behaviors?"

According to the study, consumers believe food companies also contribute to their bad choices. Four-in-five consumers believe food companies should develop healthy foods that taste better, including almost 40% that believe "none of the restaurants I like serve the kinds of dishes who are supposed to be the healthiest or most nutritious." Additionally, about half reported that restaurant portions are too large and caused them to eat more than they normally would.

"There is a growing opportunity for restaurants and food companies to produce good tasting, nutritious foods," Mr. Bodhaine said. "Indeed, 44% of adults claim they are willing to pay up to 20% more for good tasting, healthy and nutritious food. Companies that help consumers make better food choices will win a loyal following."

Food processors respond

In response to the growing demand for healthier products that provide the same taste and convenience consumers have come to expect from the food industry, several major food companies are making significant investments in health and wellness product development. Kraft Foods Inc., Northfield, Ill., and PepsiCo, Inc., Purchase, N.Y., were two early adopters to developing health and wellness products and have experienced some financial success for their efforts.

"Building superior brand value is about anticipating and then meeting consumer needs and we focus on three mega-trends — health and wellness, taste and convenience," said Roger K. Deromedi, Kraft’s c.e.o. "We introduced our South Beach diet line of products a year ago. They deliver smart nutrition, they taste great and they’re convenient. The proof — more than $225 million in net revenues in the first year.

"Health experts are telling us to eat more whole grains and in 2005, we gave consumers more choices by introducing whole grain cookies and crackers. Consumer response has been excellent. Revenue exceeded $270 million, led by our Triscuit brand, which grew 17% last year. We also added more whole grain to our ready-to-eat cereals, where revenues were up 6% last year."

Mr. Deromedi added that consumers don’t just want naturally healthy products, they also want foodstuffs that feature added nutritional benefits. In the U.S., for example, the company has added calcium and vitamin C to its Kraft cheeses and Super Mac and Cheese dinner line. In other developing markets, Kraft has fortified its Tang beverages line with nutrients like vitamin A, vitamin C, iron, iodine and calcium.

"Health and wellness and the evergrowing demand for convenience often overlap," Mr. Deromedi said. "A great example is our pioneering Nabisco 100 calorie packs. They’re portion controlled, grab-and-go packages of consumer’s favorite snacks. This line generated $120 million in revenue last year and based on this success, we are extending the 100 calorie concept to other brands."

In early 2005, Kraft introduced Sensible Solution, a labeling program to help consumers identify "better-for-you" choices from among the company’s food and beverage products. By the end of the year, products carrying the Sensible Solutions logo accounted for more than 30% of Kraft’s U.S. retail food revenues.

PepsiCo also has embarked on an aggressive initiative to grow its share of the health and wellness market. However, Steve Reinemund, PepsiCo’s chairman and c.e.o., said the market is small compared to the rest of the food marketplace.

"We think this is a tremendous growth opportunity, and we are focused on developing all kinds of alternatives to get into healthier products," he said. "It is still a relatively small category, but we think it is the future, and we are all over it both with acquisitions as well as internal focus. All of our businesses are taking very seriously our challenge to have 50% of our new product introductions in the health and wellness focused area.

"Some of our brands may not extend as easily as others into the area of more healthy focused products. We are looking at ways to get in there with other brands or with brands we create. But I would remind you that probably the fastestgrowing piece of Frito-Lay right now — there’s many positive growth pieces of Frito — but Sun Chips, which has been around since the early ‘90s, is growing dramatically. It is right in the sweet spot of where the mainstream health oriented focused consumer is going. So we think we have a good portfolio, but we are not resting on our laurels in terms of what the future might be."

While both Kraft Foods and PepsiCo may have a head start, there are several other companies looking to expand their marketshare through the development of products targeted toward health and wellness, and are making significant investments in the category. This past February, A.D. David Mackay, president and chief operating officer of Kellogg Co., Battle Creek, Mich., announced his company had set up a business unit that will focus specifically on health and wellness products.

"It (Kellogg) was founded on the basis of health and wellness, and so I think it’s fitting in a 100th anniversary that we would establish a discrete health and wellness business unit," he said. "This business unit will be working on new growth platforms that target key demographic trends. We hope to launch late Q3, early Q4 this year for the first products."

Franck Riboud, the chairman and c.e.o. of Groupe Danone, Paris, also announced health and wellness has become an area of opportunity for his company.

"It’s clear that everyone is talking about health and wellness, especially in the food business," Mr. Riboud said. "The only thing of which we are convinced is our brand, Dannon, in our categories is the most fitting one with clear health positioning. We are going to leverage this advantage."

Kellogg’s and Groupe Danone’s announcements follow similar announcements by Nestle S.A., Vevey, Switzerland, and Mars, Inc., Hackettstown, N.J. Nestle has created a new investment fund called W. Health that will invest in companies active in health, well-being and nutrition as an external complement to Nestle’s own internal research and development competencies.

The investment, of which Nestle has committed approximately €500 million, is intended to reinforce the company’s competitive position in nutrition in strategic areas of food, beverages and pet care.

And this past July, Mars, Inc. launched a new business unit called Mars Nutrition for Health & Well-Being, which is designed to develop and introduce new foods, snacks and beverages to serve the nutritional and well-being needs of consumers.

"Our unit’s mission is to be a trusted partner in healthy lifestyles, enabling consumers to look, perform and feel their best everyday," said Michael Mars, president of the new business unit.

Mr. Mars said the move into health and nutrition for his company, which is primarily known for its confectionery products, was consistent with the company’s portfolio diversification.

This past December, during the GroceryManufacturersAssociation’s Future of Food Conference, health and wellness was a topic of significant discussion.

"The healthy products category has grown 15% per year while other food segments have remained flat," said Lance Friedmann, vice-president of global health and wellness at Kraft Foods. "The market opportunity is definitely there. The challenge is to crack the code and put the right bundle into the product."

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