Health boom good news mainly for big firms
Big names in food and drink manufacturing such as Danone, Nestlé, and US firms Campbell and Dean Foods were more likely than small rivals to reap the rewards of healthy eating trends as they had the resources to develop and prove the health claims for new functional products, claimed a new report.
Healthy food is said to be a “key growth engine”, argued Arnaud Langlois of investment bank JPMorgan, author of the report: Obesity: reshaping the food industry. However, forthcoming regulation in Europe - such as that covering nutrition and health claims - was likely to put further pressure on high fat and high sugar products and would add complexity and cost for all, he concluded.
“Research and development could become key to building sustainable competitive advantage within the sector,” said Langlois. “We believe that investment in research should continue to rise in the face of litigation risks, regulatory change and fast changing consumer demand.”
His report also claimed higher margin sectors such as hot drinks, carbonated soft drinks (CSDs), confectionery and biscuits/ snacks would have more difficulty in taking advantage of the healthy trend. But makers of these products also had the dilemma that they commanded higher average profit margins than categories generally regarded as healthy, such as water, dairy, soy and fruit.
The report noted the boom in consumption of water, canned fish and drinking yoghurts in the UK, while CSDs, sugar confectionery, salty snacks and frozen meals and pizzas had declined.
Faced with the obesity crisis and consumers’ growing desire to follow healthier diets, the options for manufacturers were to enter the healthier and faster-growing categories or improve the nutritional profile of existing products, said the report. Alternatively, they could improve margins by reducing portion and pack sizes, while maintaining retail price.
