Health and wellness, arguably the most compelling trend in today’s consumer packaged goods (CPG) environment, is also among the hardest on which to capitalize, noted Chicago-based IRI Consulting’s new executive briefing, “What’s in Store for Health & Wellness.” Growth trends indicate that a number of products with individual health and wellness claims have recently experienced declining sales; however, there is evidence that products providing a holistic approach that advances general health and well being are gaining market traction.
While six of the top 20 products with health and wellness claims enjoyed a dollar sales growth rate higher than the food and beverage industry average in 2009-2012, just three maintained that growth momentum in 2012 alone, indicating a significant slowdown.
The report found that dollar sales’ compound annual growth rate (CAGR) of six health claims grew faster than the food and beverage industry average of 3.4%. However, when dividing these results into 2009-2011 and 2012, it becomes clear that growth for several of these is slowing substantially, and even turning negative for some. For example, products with natural claims achieved a CAGR of 8% in the combined 2009-2012 period, very impressive when compared to the industry average. However, in 2012 alone, this slipped to 3.9%. Even more revealing, dollar sales of products with natural sweetener claims grew 5.3% in 2009-2012, but when broken down into the two timeframes, sales grew 11.8% in 2009-2011, but had a negative CAGR of 6.5% in 2012.
How can marketers protect against the vulnerability of narrow health claims? “It is critical that manufacturers of health and wellness products peg their value proposition to comprehensive health and well being, an umbrella that covers multiple attributes like natural, low calories per serving and organic,” said Dr. Krishnakumar (KK) Davey, managing director, IRI Consulting. “Products with ‘one-off’ claims are much less likely to succeed. CPG marketers must focus on several factors that impact health and wellness to achieve long-term, sustainable success.”
IRI Consulting’s analysis identified the six success factors critical for long-term success. These include:
• Focus on Cohorts – The most successful health and wellness product portfolios are tightly aligned to the needs of key cohorts. For example, most products with health claims rely on sales to higher-income households for growth. Marketers must also pay attention to changing demographic profiles: income polarization, multi-cultural households and growth of the millennial generation.
• Ensure Message Clarity – Product messaging must be clear, overarching and impactful. Crowding product packaging with multiple health messages and logos can muddy the health and wellness value proposition.
• Champion Well Being – Brands should communicate a “well being” message versus a single, highly-specialized claim.
• Price Attractively – To make products accessible to a broad set of distinct consumer segments, marketers must pay extra attention to pricing. Many good-for-you products can command premium prices.
• Invest in Innovation – Compelling brand extensions, vivid new packaging, engaging promotions and value-added programs can lay a strong foundation for new product success. Using innovation to accelerate demand becomes even more vital, as dollar sales per new item is trending lower than in the past.
• Watch Regions – Regions act as microcosms for analyzing the potential success of health and wellness claims and for comparing the success of healthful products to other food and beverage offerings.
“To achieve greater levels of success, manufacturers and retailers should develop a cohesive brand strategy that addresses questions, such as whether the company should execute against an overarching claim of well being or implement a strategy that covers both mainstream and niche products,” Dr. Davey continued. “Marketers should also focus on being first to market, creating a multi-year innovation pipeline, developing a clear go-to-market and channel strategy that increases accessibility, and redefining pricing to increase affordability.”