Firms face challenge from health food fads
The current consumer enthusiasm for healthier eating is creating a challenge for food companies.
According to a new report from JPMorgan, firms are unsure whether to continue with high margin products that are not deemed so healthy as the narrow margin wellness foods.
A research report entitled Obesity: Re-shaping the food industry, says that profitability of most food products considered to be healthy, such as water, soy, fruit and vegetables, is well below average.
As a compromise, companies are tending to reformulate existing products by reducing fat, for example, with low calorie labelling to attract consumers.
The report, commissioned by United Nations asset managers, sets out three ways companies might make improvements, such as high pricing of products that can make health claims; lowering the cost of reformulated products; and reducing packaging size while keeping or slightly lowering the retail price.
However, the author Arnaud Langois expects new EU regulations on nutrition and health claims on food will make it more expensive to launch wellbeing products.
In addition, Langois says,“Makers of soft drinks, ice cream, confectionery and snacks will be unable to make health claims, while ready to eat cereals, fruit juice and medicated sweets may be excluded due to their high sugar content.
Companies will have to invest heavily in research and development to convince
legislators that product merits health food claims.
Langois predicts the associated expenses will favour a handful of large companies with matching budgets,such as Danone, Nestle, Campbell and Dean Foods.