While many consumers across the country were buying up the remaining stock of Ding Dongs, Ring Dings, Ho Hos and those beloved Twinkies after Hostess Brands went bankrupt amid a labor dispute, another group of consumers was at the local farmer’s market stocking up on root vegetables.
Recognizing the relative strength of the health and wellness industry, which Euromonitor International has predicted will reach $1 trillion in global sales by 2017, many large multinational companies have been actively buying other brands and businesses in this market.
In his “Word From Wall Street” column Adam Ismail said these big companies could change how the game is played. “They bring with them significant operational and branding expertise. As the industry continues to wrestle with Good Manufacturing Practice (GMP) compliance, these companies have very sophisticated manufacturing operations from the chemical and pharmaceutical industries that help make GMP compliance easy for them. In addition, brand loyalty in the supplement space does not really compare to other consumer product categories, so brand powerhouses coming into the category could lead to smaller companies being pushed off retail shelves if they don’t build brand equity.”
As the merger and acquisition train continues to gather steam it’s important for smaller companies to prepare themselves and evaluate current capabilities while considering strategic investments.
Innovation will be the only way forward. According to Ewa Hudson, global head of health and wellness research at Euromonitor, “Innovation and product reformulation are, in fact, the heart of health and wellness, with the challenge being to deliver healthier, and ideally naturally sourced, food and drink formats tasting just like the beloved fully sugarised and full fat non health and wellness ‘parents.’”
While Hostess Brands blamed its bankruptcy on a Bakers Union strike, the company’s failure mirrors a dying business model built around cheap, processed products devoid of nutrition. Companies that embrace a more healthful, positive portfolio of brands stand in better position to gain consumer confidence.