Health halo hovers over M.&A., product innovation trends
There has been an undeniable trend emerging as food and beverage companies look for acquisition opportunities that allow them greater access to the health and wellness space. In late August, the J.M. Smucker Co.’s acquisition of Enray, Inc., a Livermore, Calif.-based manufacturer and marketer of organic, gluten-free grain products, was the latest transaction in a string that extends back to the beginning of the year.
Enray’s products include sprouted and non-sprouted grains, pasta and cookies, most of which are sold under the truRoots brand, and Richard Smucker, chief executive officer of the company, said the acquisition of the truRoots brand and its organic quinoa and other ancient grain products provides an on-trend, compelling product platform across the rapidly growing gluten-free market.
“On-trend” has been an oft used phrase by chief executives as more acquisitions are announced.
Irwin Simon, president and chief executive officer of The Hain Celestial Group, Lake Success, N.Y., said Aug. 21 that on-trend innovation bolstered the company’s sales during fiscal 2012 with double-digit growth from such brands as Earth’s Best, MaraNatha, Spectrum, The Greek Gods and Garden of Eatin’. Hain Celestial launched more than 300 products during the year, including Garden of Eatin’ chia tortilla chips, MaraNatha coconut almond butter, Earth’s Best organic shelf-stable mini-meals and Earth’s Best organic veggie and protein pouches. A pipeline of 40 new product launches across Ella’s Kitchen and Earth’s Best baby food brands is planned for the remaining calendar year.
“When you look at the entire food industry, our organic and natural products outpace conventional products by three times,” Mr. Simon said. “Overall food consumption is not growing; consumers are seeking out more and more organic and natural products versus conventional products.”
He added that on a global basis, consumers are increasingly aware of what they consume with a focus on health and wellness.
“… In the U.S., the (Centers for Disease Control and Prevention) recently showed some stabilization in obesity rates in adults, the first time in a long time, and even a decline in obesity rates in children across several states, which is music to my ears,” Mr. Simon said. “So, we believe healthy eating is here to stay with a broader consumer focus on products that are organic, natural, gluten-free, non-G.M.O. and B.P.A.-free, just to name a few.”
Hain Celestial has been active in acquiring companies and brands that have a very specific health and wellness component. During the past year alone the company has acquired BluePrint and Ella’s Kitchen. BluePrint makes juice that the company said is “a fresh, pressed raw and organic juice used both for cleansing and regular juice consumption.”
Ella’s Kitchen makes organic baby food with 80 products offered in the United Kingdom, the United States and Scandinavia. It is seen as a high-growth complement to Hain’s Earth’s Best business, which manufactures and markets products for the infant and children’s market.
Other companies that have been busy acquiring businesses focused on health and wellness include Post Holdings, Inc., St. Louis, which acquired Premier Nutrition Corp. for $180 million in cash in August. Based in Emeryville, Calif., Premier Nutrition markets and distributes protein bars and shakes under the Premier Protein brand, high protein bars and cookies under the Titan brand, and nutritional supplements under the Joint Juice brand.
This past May, both Boulder Brands, Inc., Boulder, Colo., and Danone, Paris, extended their reach in health and wellness. Boulder Brands acquired Davies Bakery, a United Kingdom-based gluten-free bakery and bread manufacturer, and Danone acquired the Happy Family brand of organic baby food products.
“It seems to me with some of these acquisitions companies are trying to acquire ingredients, things like healthy juices and healthy grains,” said
Barbara Katz, president of HealthFocus International, St. Petersburg, Fla. “A lot of it is related to this general movement into healthy foods; this idea that we are looking at the food itself rather than the function that comes with the addition of an ingredient like omega-3.”
An evolving category
The market for health and wellness products has been evolving, said Shelley Balanko, senior vice-president of business development for the Hartman Group, Bellevue, Wash.
“The mid-80s is when health became mainstream,” Ms. Balanko said. “The focus then was on low-calorie products and diet sodas. For the most part, products were in the dietetic and weight management sections of supermarkets.
“Fast-forward to the ‘90s and wellness became more of a lifestyle. Consumers were focusing on wellness for prevention, and they realized their diet could help them prevent problems. Low fat was a focus, but products were still very processed.
“In 2010, this is where Dr. Oz and Oprah become our experts. Fresh food started to dominate, local was growing and organic was starting to be questioned. At the opposite end of the spectrum is where baby boomers started to think about the functional benefits of products and started to ask for their orange juice to be calcium fortified.”
The Hartman Group breaks health and wellness consumers into three segments: the core consumer, which makes up approximately 13% of the population, periphery consumers (25%), and mainstream consumers (62%).
“The three segments differ based on how they orient to health and wellness activities and products,” Ms. Balanko said. “Periphery consumers, for example, may not be that committed to health and wellness. They are more price sensitive; more oriented to wellness products that are convenient. Core consumers, on the other hand, are looking for authentic products. They want the real deal.”
Mainstream consumers are characterized by their thirst for knowledge, Ms. Balanko said.
“They are looking for information about health and wellness, but they are not as committed as the core,” she said. “They can also be swayed by expert opinion and that expert can be Dr. Oz, their yoga teacher or their neighbor.”
Current and future trends
Health and wellness trends that are gaining momentum today include demand for protein, ancient grains, gluten-free and products that feature reduced amounts of sodium or sugar.
Ms. Katz sees the focus on protein by product developers spreading to other categories. She noted that the ancient grains trend, in part, is related to protein.
“Protein is interesting to me, because in our research we ask consumers what ingredients they think they are getting enough of and protein is at the top of the list, it comes in at something like 70%,” she said. “This is why I find the resurgence of protein interesting. It may have to do with the ingredient driving the food or the food driving the ingredient.”
She speculated that the interest in protein may have less to do with consumer interest in getting more protein in their diet and more to do with the option of getting protein during different parts of the day.
“It’s not about having a chicken breast for dinner anymore,” she said. “Greek yogurt, for example, is an option for protein consumption during another day-part.”
Gluten-free is also an emerging component of the health and wellness category.
“What is at the bottom of gluten-free is consumers are interested in digestive health,” Ms. Balanko said. “Consumers relate it to immunity and inflammation in the body. This is a hot topic in social networks. A lot of folks may think they have gluten intolerance, and they are feeling better as they consume less gluten.”
Ms. Katz said equilibrium may be coming to the consumer focus on sodium and sugar reduction.
“We see a lot of concern about ingredients and sugar comes out on top,” she said. “But when you start looking at purchase influencers it hasn’t changed. Taste is top followed by price, convenience and then consumers start talking about an interest in an absence of negative ingredients.”
But one thing has changed, Ms. Katz said.
“In the beginning this was all about taking out the bad stuff,” she said. “Putting good stuff in like antioxidants and omega-3s may be a second iteration. Now we might be moving into a more normalized state where consumers start looking for products that have those ingredients naturally.
“We are starting to see numbers showing consumers looking for products that have specific ingredients. I can’t say it’s a trend, but I sense from what I see in the grocery store and hear from manufacturers that this may be a third iteration of the trend.”