Marketing Trends Fueling Healthful Foods Success

The definition is open to debate, but the success of healthful, or “healthy,” foods in the marketplace is clear: sales in virtually every category are up and show no signs of a hard landing. Are Americans getting the health message and taking it to heart or wallet? How about citizens of other countries?

Americans seem to be getting the message, but it’s a slow road to action. Statistics ironically show that while healthy food sales are expanding, so too are belt lines. According to the National Institutes of Health, more than half the adult population is overweight, and a quarter are clinically obese. These percentages are the highest recorded since tracking started in the early 1960s, triggering the formation of the first presidential commission charged with getting Americans back in shape. During a 1961 National Football Hall of Fame banquet, President Kennedy remarked, “We have become more and more not a nation of athletes but a nation of spectators.” European countries have kept the level of obesity under control, as have most other countries. But changing lifestyles have placed many members of traditionally svelte populations at risk.

Today’s spectators, wherever they live, have an unprecedented array of food to graze on while they’re surfing video channels and Web sites. About 96 million adults have high cholesterol, 70 million suffer digestive upsets, and 60 million are at risk from plaque and triglycerides, according to the American Heart Association. In addition, diabetes is on the upswing, with nearly a million new cases reported last year. It’s clear that more healthy foods in the marketplace doesn’t necessarily mean more healthy people in the population, just as more healthy food in the diet doesn’t necessarily create a healthier lifestyle. But it’s a start.

Many of the factors behind this bleak physiological profile are not primarily food related. A main driver is the relentless aging of the Baby Boomer generation, born between 1945 and 1964. For the first time in history, the U.S. median age topped 40 in 1989 and hit 45 in 1999. The median will advance to a gray-templed 50 within 14 years, according to the Census Bureau. By 2030, more than a third of Americans will be older than 55. This aging Boomer population has entered its peak income years, and an unprecedented economic expansion puts an array of food choices within easy reach. At the same time, advancing years intensify health concerns.

This has been good for the healthy foods industry, which by most definitions includes nutraceuticals, fortified foods, supplements, organics, and natural foods. During the 1990s, this roughly defined category racked up sales gains in the range of 10–20% per year, according to most industry estimates. Last year, total U.S. natural product sales were approximately $26 billion. Dietary supplement sales reached $1.8 billion through retail outlets and $7.1 billion through direct marketing. Organic food sales totaled $5.2 billion, and natural foods racked up $5.6 billion, according to Natural Business, a Boulder, Colo.–based newsletter that tracks the performance of the healthy living industry.

In addition, sales of vitamin and herbal supplements last year topped $12 billion, while energy bars, beverages, and powders hit $3.14 billion —increases of nearly 20%—according to Super-market Business. Antioxidant- and calcium-fortified juices have sales increases of twice the rate of their unfortified counterparts. But the change is fueled by more than demographics alone.

Here are 14 reasons to watch healthy foods:

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1. Consumer Knowledge
Today’s consumer has access to tons of information. While a torrent of advertising captures most of the attention and criticism, a by-product of this media age is that useful information has an easier time of finding its way to consumers, in ways that eclipse the food label as the source of nutrition information.

Consumers are better equipped to gain knowledge about diet, health, and nutrition, and health and nutrition organizations are better able to push information into the marketplace.

In addition, nutrition education is more pervasive in schools. While the nutritional offerings in school lunch programs often fail to reflect this, students are more aware of nutrition issues because of both public and privately funded initiatives.

Consumer-friendly Web portals such as Yahoo, MSNBC, and AOL can be customized to the individual preferences of the user, and for those interested in a little more knowledge, there is the Institute of Food Technologists’ food science portal, the National Institutes of Health site, and others. Consumers can fine-tune both their knowledge and preferences and locate alternative sources for their favorite foods.

Information sources in addition to food labels have an impact: nearly 20% of U.S. households reported that they are buying functional foods, or foods that offer a specific health benefit beyond basic nutrition, according to Natural Business. Smaller companies with limited distribution have benefited from this grass roots surge. Consumers have the ability to make better informed choices, creating demand for products that meet their needs and wants.

2. Consumer Burnout 
On the other hand, one major side effect of the media glut is consumer burnout. The saturation of news, information, opinion, and superfluous messages serves to overload the senses. More specifically, consumers have become jaded about reports regarding health claims, particularly those that are negative. Eggs and butter have alternately fallen out of and back into favor. Chocolate, wine, and now red meat all have experienced similar swings in study-based health claims. In 1998, a Harvard University study of male graduates indicated that those who eat chocolate and candy live almost a year longer than those who don’t. Researchers speculated that antioxidants present in chocolate may be the cause, and the media had a field day.

Last year, the Archives of Internal Medicine published a study with the arcane title: “Comparison of the Effects of Lean Red Meat vs. Lean White Meat on Serum Lipid Levels Among Free-Living Persons With Hypocholesterolemia.” It concluded that lean red meat is interchangeable with lean chicken and fish, with regard to their influence on blood cholesterol levels. Beef processors, supermarkets, and the media were quick to pick up on this new research to tout the “health food” characteristics of steaks and other cuts of beef. After 20 years of hearing that a limited intake of red meat is necessary to maintain a heart-healthy diet, consumers were met with yet another seeming contradiction.

The impact of reports of single studies creates burnout and jaded consumers who are less receptive to health messages. The frequency of new studies and the willingness of media to pick up on them with only superficial scrutiny buttress the trend. Overall, it’s one of the few significant impediments to the marketing of healthy foods.

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3. Consumer Demographics 
Boomers are only part of a complex demographic story. Generation Y, today’s teens, is a savvy, cynical, sophisticated—and very powerful—group. Women have special dietary needs, and an increasing array of fortified and specialized products is addressing them. Examples include Clif Bar Inc., one of the hot nutritional bar niche marketers. Its Luna Bar has 23 vitamins and minerals, including calcium and folic acid, specifically formulated for active women. Flavors are unique, too, including Chai Tea, Tropical Crisp, Sesame Raisin Crunch, S’mores, LemonZest, Chocolate Pecan Pie, Nutz Over Chocolate, and Toasted Nuts ‘n Cranberry.

The U.S. ethnic landscape continues to diversify, with Latin and Asian cultures flowing into the mainstream of the marketplace. The African-American demographic also continues to move upscale and increasingly middle and upper middle class.

The impact of diversified demographics underscores the importance of niche marketing. The health needs, lifestyles, and cuisine preferences of a diverse population are difficult to address with “one-size-fits-all” solutions.

4. Improved Taste 
According to Neil Stern, a partner with Chicago retail consulting firm McMillan/Doolittle, “Using words like ‘healthy’ in signs and ads has been the kiss of death in retail and in foodservice. Taste is still the number one reason for buying food.”

After years of trial and error, the efforts of both broad product line and niche food companies have resulted in foods with better taste and consumer appeal. In addition, the fusion of concepts, the movement upscale, and the availability of previously hard-to-attain flavors and sources has created a marketplace loaded with foods that are good tasting and healthy. The impact of generally improved taste is that old problems such as the “sawdust” or “rabbit food” image for healthy foods is being overcome. The first wave of mainstream healthy foods were based on removing and replacing ingredients like fat and sugar that were essential to a strong taste profile. Today’s healthy foods are far more appealing, based on putting good things—including good tasting “things”—into the formula.

5. New Sales and Marketing Channels in Retail and Foodservice 
The changing food distribution landscape offers relief for consumers trapped into the space-stressed supermarket. The new wave of Web home delivery companies, natural/organic supermarkets, and a rapidly growing emphasis on healthy foods within traditional supermarkets changes the marketing dynamic. While consumer interest in healthy fast food has ebbed, a return to mega burgers and shakes is counterbalanced by new healthy alternatives from other sources. In fact, most of the growth in healthy foods comes from the retail vs foodservice segment. While niche restaurants, particularly on the West Coast and in big cities, have pioneered new healthy food concepts and introduced exotic ingredients, healthy alternatives are moving into the mainstream far faster through the retail side, the source for most food eaten at home.

According to USDA’s Economic Research Service, the frequency of dining out has risen by more than two-thirds over the past two decades. It notes that while the nutritional quality of foods has improved overall, food prepared and consumed at home usually contains more fiber and calcium and less fat than foods eaten away from home. In addition, foods eaten in the home also typically have less saturated fat.

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Supermarkets also have found that adapting to changing demographics has been a boon to healthy food sales. “Baby boomers have an awakening desire to live forever and an awareness that they now have the money to try to do that, or at least to live longer and healthier,” states Bernie Rogan, spokesman for Shaw’s, a chain of 170 supermarkets throughout New England. To meet this need, the chain has initiated specialized in-store and independent Wild Harvest markets, specializing in “healthful, organic, and homeopathic products.” In addition, chains like Whole Foods base their entire concept around healthy foods.

The impact of the move away from traditional fast food is that retailers are in the lead when it comes to innovative marketing of healthy foods. As store formats continue to become more specialized and the Web expands as a shopping resource, foodservice—including fast food—will begin to discover successful healthy food options. This trend will continue to have a strong positive impact on healthy food sales.

6. Organic Foods and Fresh Foods
While food sales industry-wide are gaining at an average annual rate of about 2.5%, organic foods show sustained growth of approximately 20%. Behind the trend is a “back to nature, return to the way it was” desire coupled with a level of affluence that makes these more costly alternatives more affordable. While the nutritional profile of a specific organic food is not much different from that of a traditional food, some consumers prefer, and are able to afford, organic products. Among certain population groups, these foods are viewed as both healthy and upscale, appealing to both health and status-conscious consumers. The fact that price is not an impediment to special products dampens price as a major factor in foods.

7. Baby Food
Baby boomers and their kids are having kids. Many of the factors that are driving teen and adult healthy food decisions are driving the desire for more specialized, healthy alternatives for their infants and toddlers. Stony-field Farm, a dairy processor based in Londonderry, N.H., recently introduced yo baby certified organic whole milk yogurt for babies and toddlers, and Planet Protectors lowfat yogurt for older children. Flavors include peach and vanilla. In addition, restaurants are beginning to offer more than booster seats and kiddie meals—catering to the same desire to have healthy alternatives for infant diners. Affluent health/status-conscious parents want the same benefits for their young children.

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8. Portability and Car Dining
Back in the golden era of rail travel, the “dining car” was the place for freshly prepared food. Today it’s “car dining”—a symptom of a fast-paced, live-in-your-car lifestyle. “Twenty five percent of meals in America are eaten in the car, so I think we’re going in two directions at once—becoming increasingly sophisticated and eating more and more of our meals out and at fast-food restaurants,” observed John Willoughby, senior editor of Cook’s Magazine, on a recent broadcast of National Public Radio’s “Talk of the Nation” program.

Fast-food restaurants without a drive-up window are rare, and many high traffic locations have multiple windows. Automotive design is driven by the need for food storage, scores of cupholders, and spill-resistant seating material. Some vans have microwave ovens, while many luxury cars have navigation systems that feature pre-programmed restaurant locations.

Car dining isn’t just about fast food, it’s about all food. Everything from carrot sticks to homemade pasta is consumed in the car. Generally, what we eat behind the wheel is similar to what we eat at home or in a restaurant. So marketers of healthy portable foods will see expanding opportunities.

9. Ethnic and Exotic Ingredients
Americans’ taste for ethnic edibles continues to grow. A study by Promar International says that one of every seven food dollars over the next decade will be spent on ethnic foods. The study predicts that food manufacturers will compete for market share in the faster-growing ethnic cuisines like Thai, Caribbean, Mediterranean, and Indian.

Exotic “healthy” ingredients are finding their way into traditional food segments. In the snack food area, for instance, one new company is pinning its hopes for success on yucca chips, grown and processed in South America. Culinary diversity is highly compatible with the healthy food trend. Many ethnic varieties, such as Mediterranean and Asian, are considered inherently healthy.

10. Fad Diets
While statistics on diet fads are sketchy, it’s easy to conclude that they’re more popular today than ever before. Among the most popular are the Dr. Atkins protein diet, the Zone, Sugar Busters, Carbohydrate Addicts, Slim Fast, Scarsdale, and the venerable Weight Watchers. Often the popularity of diet programs is based on which celebrity lost weight without going hungry. For most Americans, dieting is a futile effort over the long term.

Impact: Fads diets generally don’t work, but they can lead to a pattern of healthier eating, creating more demand for mainstream healthy foods. Or not.

11. Cooking Shows, the Internet, and the Mass Media
More than 35 years ago, Julia Child, “the French Chef,” started it all with a PBS special. Soon after, Graham Kerr, “the Galloping Gourmet,” added fun and showmanship to the format. Today, with the omnipresent power of cable, satellite, and the Internet, cooking shows are well-established media fare. Television Food Network, for instance, runs food-related programming 24/7 through cable and its Internet site. Cooking shows and mass media continue to gain exposure and popularity. While most of the programming is meant to be entertaining, much of it implicitly supports healthy eating and provides nutrition education.

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12. On-Site Industrial Food Consultants
The average American works approximately 100 hours more a year than was the case 20 years ago, according to the International Labor Organization. That’s more than two workweeks. Labor-saving, productivity-enhancing technology has given us more time to do more things. All this activity strains both the body and eating habits, and this affects job performance. The result is an emerging effort by corporations to help their employees eat right.

Enter the on-site nutritional consultant. Companies like the Gap, 3M, and Intuit, the software giant, provide office space for these consultants who pass along their cost to the employees. Chief among their advice—smart snacking.

“If you’re too hungry, anything goes, and it’s hard to make healthy choices,” says on-site consulting nutritionist Gigi Acker. She steers her clients away from snack machines and candy jars and into healthy grazing alternatives. Snacking isn’t bad, she says, if the snack choices are healthy. As corporations begin to push the healthy eating agenda, it will have a significant ripple effect on eating habits throughout the day. The work environment is where most people spend most of their waking hours.

13. Personal Chefs
On the upscale fringe, the United States Personal Chef Association, based in Albuquerque, promotes healthy foods by training chefs to prepare meals in their clients’ homes. The emphasis is not strictly health—it combines convenience, freshness, custom menus, and the cachet of an on-site chef. These are not mere catered meals. A personal chef is also a cuisine consultant and menu designer.

Personal chefs are not for everyone. But the trend points the way to more personalized diets with an emphasis on individual nutritional needs and food preferences. While some early attempts at designed meals for individual diet needs failed to find a market, improvements by niche marketers in service, food quality, choice, and price keep the trend building.

14. Food Cosmetics
Last but not least, it appears that the healthy food trend isn’t just about the shape, it’s also about skin, according to trend spotter Diane Keeler Bruce of DKB Consulting. “Health-conscious consumers who have cared for their inner bodies with healthy foods look to cosmetics and beauty products made with fruits, grains, vegetables, and herbal essences for their outer bodies. Watch for soy-based moisturizers,” she says.

Collectively, these trends bode well for the expansion of the healthy foods market. This is reflected by the recent spate of acquisitions by big food companies seeking to stimulate growth and improve share value by snapping up successful niche players. Recent major deals include the H.J. Heinz purchase of Hain Food Group; Philip Morris Cos.’ buyout of Balance Bar and Boca Burger, a privately held firm; Kellogg Co.’s purchase of Worthington Foods; Nestlé USA’s purchase of Power Bar Inc., and General Mills’ acquisition of Small Planet Foods.

While a growing array of healthy foods in the marketplace may not directly correlate to a healthier public, the success of this market is a sign of concern, and marks subtle changes in the relationship between cost and quality. This is a major change: consumers who will pay for special, niche foods on an everyday basis can increase availability of products and broaden choices of foods.

by PIERCE HOLLINGSWORTH,
CONTRIBUTING EDITOR
The author is President, The Hollingsworth Group, P.O. Box 300, Wheaton, IL 60189.