Growth opportunities in the health and wellness market

THE Nielsen Global Health & Wellness Survey puts the number of overweight or obese individuals at 2.1 billion, or about 30% of world population. While the number is high, 50% of respondents said they are trying to lose weight, 80% choose to eat well to prevent lifestyle diseases, and 88% will pay more for healthier foods.

“There is a tremendous opportunity for food manufacturers and retailers to lead a healthy movement by providing the products and services that consumers want and need,” said Susan Dunn, executive vice president, Global Professional Services, Nielsen, a global provider of information and insights into what consumers watch and buy. “While diet fads come and go overtime, innovative, back-to-basics foods that taste good, are easy to prepare and provide healthful benefits will have staying power. The first step is knowing where to put your product development efforts.”

The survey asked 30,000 online respondents in 60 countries to identify how consumers feel about their body image and the steps they’re taking to get healthier.

Trends: Most consumers would pay more for products with health benefits; organic products remain popular; and fruit and water are growing in demand

Are consumers willing to pay more for foods with healthy attributes?

Consumers believe health attributes in the foods they eat are important, but are they willing to pay more for the benefits they provide? The answer is yes—to a degree. Dividing global respondents into four buckets of spending intent, the highest percentages are only moderately willing to pay a premium for health claims—an average of 38% across 27 attributes included in the study. About one-quarter of global respondents are very willing to pay a premium (27%), followed by 23% who are slightly willing and 12% who are not willing.

A willingness to pay a premium for health benefits is higher in developing markets than elsewhere. More than nine-in-10 respondents in Latin America (94%), Asia-Pacific (93%), and Africa/Middle East (92%) say they’re willing to pay more for foods with health attributes to some degree, compared to eight-in-10 in Europe (79%) and North America (80%).

There is also a gap between the percentage of respondents that say a health attribute is very important and the percentage that are very willing to pay a premium. For example, 43% of global respondents say the absence of GMOs is very important in the foods they purchase, but only 33% are very willing to pay a premium for these products—a 10-percentage point difference.

But 33% of respondents say organic foods are very important and the same percentage is also very willing to pay a premium for these products.

A willingness to pay a premium for health attributes declines with age. Generation Z (under 20) and Millennials (21-34) are more willing to pay a premium for all attributes, even those that are more important to Generation X (35-49) and Baby Boomers (50-64). Percentages believing they are very important are lowest among the Silent Generation (aged 65+) for all 27 attributes. Attributes gaining the most favor include products that are GMO-free, have no artificial coloring/flavors and are all natural.

While consumption of bread declined globally, specifically in developed countries, in the Middle East and Africa, it rose 3% between 2012 and 2014

Which healthy attributes are consumers looking for?

The top desirable attributes are foods that are fresh, natural and minimally processed. Foods with all natural ingredients and those without genetically modified organisms (GMOs) are each considered very important to 43% of global respondents. In addition, about four-in-10 global respondents say the absence of artificial colors (42%) and flavors (41%) and foods made from vegetables/fruits (40%) are very important.

Consumers are looking for functional foods that provide benefits that can either reduce their risk of disease and/or promote good health; 36% of respondents rate foods that are high in fiber as very important, and about three in 10 seek foods that are high in protein (32%), have whole grain (30%) or are fortified with calcium (30%), vitamins (30%) or minerals (29%) to fulfill their nutritional needs.

Less is more for about one-third of global respondents who say it’s very important that foods are low in cholesterol (38%), salt (33%), sugar (32%) and fat (30%). About one-quarter believe the absence of high fructose corn syrup (26%) and caffeine (23%) is very important, and one-fifth rate foods that are gluten free (21%) as very important.

Environmental and socioeconomic concerns also factor into purchase decisions. One-third think sustainably sourced (35%) and organic (33%) ingredients are very important in their purchasing decisions, and more than one- quarter (26%) say local herbs/ingredients are very desirable.

Beneficial ingredients are particularly important to Africa/Middle East respondents, with foods that are high in protein (43%) and fortified with calcium (44%), vitamin (43%) and minerals (40%) considered very important—all above the global average.

How are consumers losing weight?

Eating smaller portions is the diet method of choice for four-in-10 global respondents (41%) and nearly as many are choosing to consume fewer processed foods (37%). A low-carbohydrate diet has increased in popularity since 2011, rising seven percentage points to 25%. One-in-five (19%) respondents are following another non-specified diet plan, and one-in-10 (11%) are opting for commercial slimming programs like Weight Watchers.

Fat’s reputation as dietary enemy No. 1 is fading in North America. Between 2011 and 2014, the number of respondents (59%) saying they are cutting down on fats dropped by 14 percentage points. Over the same period, the number of North American respondents following a low-carb diet (23%) increased 10 percentage points. While the low-carb movement appears to be gaining momentum in North America, the region still trails Asia-Pacific in adoption, where 34% of respondents say they follow a low-carb diet to lose weight—the highest of any region.

Eating smaller portions to lose weight is most popular in North America (49%) and Latin America (48%), and the percentage of respondents eating fewer processed foods is highest in North America (46%). The use of commercial slimming programs in Asia-Pacific and Africa/Middle East (17% in each region) exceeds the global average (11%).

Do consumers practice what they preach?

While consumers may genuinely want to make healthier choices, intentions and actual behaviors aren’t always in alignment. Globally, sales of both selected healthy and indulgent categories grew between 2012 and 2014, but healthy categories outpaced indulgent categories (+5% and +2%, respectively). Over the same period, sales in semi-healthy categories fell 1%. Healthy categories include dairy-based shakes, fruit, sports drinks, tea, vegetables, water and yoghurt. Indulgent categories include carbonated soft drinks, chips, chocolate and cookies/biscuits. Semi- healthy categories include bread, cheese, cereal, granola bars, juice, popcorn and pretzels.

Around the world, healthy categories report the strongest growth in developing markets. Sales grew 20% in Africa/Middle East, 16% in Latin America and 15% in Asia-Pacific. Indulgent categories are also growing in developing markets, but at a slower rate than healthy categories (+11% in Africa/Middle East, +7% in Latin America, +5% in Asia-Pacific).

Sports drinks, water and fruit are among the strongest-growing healthy categories. Sales of sports drinks increased 8% globally, (rising in all regions except Europe [-6%]), but developing regions primarily drove growth. Over the past two years, sports drinks sales increased 51% in Asia-Pacific, 25% in Africa/Middle East and 10% in Latin America. Sales of water (+7% globally) also grew in all regions, particularly developing regions (+23% in Asia-Pacific, +18% in Africa/Middle East and +19% in Latin America).

Carbonated soft drinks sales were down 1% globally over the past two years. The largest declines were in North America (-8%), but Asia-Pacific was also down (-1%) and Europe was flat. Soft drink sales grew in Africa/Middle East and Latin America (16% and 6% respectively).

Chips, chocolate and cookies/biscuits all grew globally (6%, 4% and 1%, respectively), but carbohydrate staples like bread and cereal declined 3% and 8% respectively. It's not all bad news for these categories, however. While developed regions (North America and Europe) drove the global decline, sales in developing regions grew in the two-year time period. In Africa/Middle East, bread was up 3% and cereal was up 5%; in Asia-Pacific, bread grew 13% and cereal increased 8%; and in Latin America, bread sales were up 12%.

The power of the package label

A review of purchasing data indicates health claims are strongest when added to products already considered healthy. Healthy products with packaging callouts tended to outperform the category as a whole. The effectiveness of label claims for semi-healthy and indulgent categories, however, seems to depend on consumers’ perceptions of the product. Potato chips with whole-grain labeling, for example, decreased 11% in the two-year period, but potato chips with low or reduced sodium increased 18%. Consumers may think of potato chips as a salty snack, so a low-sodium option may be more appealing than whole grain.

Healthy products with packaging callouts tended to outperform the category as a whole; the effectiveness of label claims for semi-healthy and indulgent categories depend on consumers’ perceptions of the product

“When adding health and wellness claims to products, manufacturers must first understand how consumers perceive their products,” said Ms Dunn. “If the product is perceived as healthy, any claims regarding the health benefits of a product are likely to resonate with consumers. For semi-healthy and indulgence categories, however, manufacturers must be more selective and choose claims that address a particular product attribute. For example, while consumers may be skeptical of heart-health claims for potato chips, they may be more open to claims about low or reduced sodium because this is compatible with their view of chips as a salty indulgence.”

Sales of products with “natural” and “organic” claims have grown 24% and 28%, respectively, over the past two years. Also consistent with the interest in more pure/natural products, sales of artificially sweetened “diet/light” products declined -12%, while products naturally sweetened with Stevia grew 186%.

Sales of products with healthy ingredient claims are also growing across categories. Products with claims about salt content (low or reduced sodium) and the addition of real fruit to products both grew 7% over the past two years, while products with reduced or no fat content claims grew 4%.

What the future holds

“Good-for-you” products are strongly positioned for growth. Some 40% of respondents say they plan to buy more fruit (41%) and vegetables (39%) in the next six months. One-quarter plan to buy more fish and seafood (25%), yoghurt (24%) and water (23%), and one-fifth plan to buy more nuts and seeds (22%), cereal (20%), juices (20%) and meat and poultry (18%).

For indulgence categories, the biggest growth potential may come from the Africa/Middle East. Nearly one-fifth of respondents in Africa/Middle East plan to buy more chocolate candy (19% vs. 9% globally), ice cream (18% vs. 9%) and salty snacks and chips (18% vs. 9%).