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Health Food: Redefining an Industry

 5 min read / 

$1trn Expected global health food sales in 2017

An interesting phenomenon has been unfurling in the global food and beverage industry, with consumer preferences pivoting towards healthier options. According to Euromonitor, global sales of health food are expected to reach $1trn in 2017. Meanwhile, fast food outlets and carbonated drinks manufacturers, who were once consumer darlings, are feeling the pinch. Even people’s favourite Coca-Cola has suffered as revenues took a 7% hit in late 2016 (its sixth consecutive yearly decline), mainly due to falling demand.

Analysing the Health Craze

A major contributor to the surge in health awareness is social media. Facebook, Instagram and YouTube are avenues for health experts and nutritionists to spread the word about eating and living healthily. By posting mouth-watering recipes of things like vegan, gluten, and sugar-free food, they have enlightened consumers on the ease and benefits of consuming health food.

Moreover, consumers today are more aware of the dangers of obesity and diabetes, two major health concerns in developed countries. Many have started exercising regularly, while some opt for detox tea and sugar-free food to maintain an ideal weight. Informed consumers also study nutritional labels before purchase or use apps such as Fitbit to monitor calorie intake.

However, while the health craze is strong in developed economies, a weaker and sometimes reverse trend has been observed in developing economies. According to a study by Cambridge University, eating healthily is three times more expensive than consuming unhealthy food. Thus low-income populations in developing countries tend to incorporate more unhealthy food in their diets, as it is affordable and readily available against the backdrop of ongoing urbanisation.

The Winners

As with the emergence of any trend, there are bound to be winners and losers. In the food and beverage industry, sales of gluten-free, non-GMO and paleo products are on the rise. For example, in the UK, the organic grocery market growth is outperforming that of the non-organic grocery market in growth terms. Fully organic supermarkets such as Planet Organic and Whole Foods Market are also enjoying hikes in revenue from increasing demand.

In the startup scene, specialised organic food producers are gaining traction. A few years ago, being a successful startup in a food industry dominated by global retailers was near impossible. But today, there are many success stories. One notable story is that of Feel Good Foods, a startup producing gluten-free Asian dishes, which recently reported $3 million in revenue. These startups are receiving finance from venture capitalists and angel investors who have shown their confidence in the health food industry.

Healthy eating is now a way of life for many people. But there are times when one craves for a snack or needs a quick hunger fix. This realisation, together with the preference for healthy food, led to the emergence of healthy, guilt-free snacks such as protein bars and organic candy. Consumers’ reactions to these products have been overwhelming, even in Asia: Analysts at Allied Market Research claim the Asian healthy snacks segment is expected to grow at a CAGR (compound annual growth rate) of 14.5% over 2016-2022.

Another winner in the healthy eating trend is the sports nutrition industry. Research from Mintel has shown that UK consumers spent £66m on sports nutrition products in 2015, an impressive increase of 27% on 2013’s figures. Similar trends are observed in most developed countries, buoyed by rising gym memberships and fitness-related e-commerce.

The Losers

The main losers from the rise in healthy eating are fast food restaurants, carbonated drinks manufacturers and processed food manufacturers. McDonald’s and Coca-Cola are two of the big names battling this change, as more consumers switch to healthier alternatives.

Realising that the health food trend is here to stay, a number of ‘unhealthy’ food and beverage companies have diversified their product offerings to include seemingly healthy options. For instance, Coca-Cola introduced the zero-calorie Coke Zero while McDonald’s started adding healthier dishes to its usual menu of burgers and fried food. Nevertheless, some consumers are still sceptical of the degree of artificial sweetening and complexity of menus that comes from such fixes.

Fast food restaurants with chains around the world have also shifted their focus to developing markets, where the trend for healthy eating is weaker. This may be a good strategy in the short run but as these countries catch onto the trend of healthy eating, things will turn sour. For instance, Western fast food chains were loved by the Chinese in the 1990s for their clean interiors and novel menu choices, but the shift to healthier eating in some parts of China has caused these restaurants to suffer revenue losses.

What the Future Holds for Health Food

In a nutshell, healthy eating poses both an opportunity for and a threat to the food and beverage industry. Shifts in consumer demands to healthier alternatives have been observed in developed countries, and it will not be long before consumers in developing countries follow suit.

It would be rash to say that the losers among this trend will be wiped out completely. Consumers do enjoy diversity in options, so having the choice between healthy and unhealthy food in the market is important to cater to all needs. However, in order to maximise profits, it is wise for players in the food and beverage industry to restructure their operations towards healthier product offerings.

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