Competitor Strategies in Health and Wellness Packaged Food

March 2022

Competition in the health and wellness market is more intense than ever, as the COVID-19 pandemic has increased e-commerce use and thus the availability of smaller brands. Meanwhile, economic uncertainty has strengthened demand for private label, which in some markets has seen strong innovation and taken share from global leaders. In addition, the localisation trend in China has improved the position of domestic manufacturers, bringing Feihe International into the top 10 players list.

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Key findings

Demand for alternative protein sources continues to increase, with motivated younger consumers welcoming innovations

With less attachment to traditional foods, young consumers are set to be the key target audience for brands exploring innovative ingredients. As this group’s purchasing power is anticipated to increase as they get older, demand for milk, meat and seafood alternatives is set to rise. Consequently, both large companies and small innovators are seeking to introduce affordable, multipurpose and tasty products. Free from is one of the smaller categories in the market, and offers growth opportunities as a key area for future investment.

Focus of health demand goes beyond immunity support, as the impact of COVID-19 begins to ease

Demand for immunity support is pivoting towards a more holistic approach to health. Prolonged periods of anxiety and isolation have led to difficulties sleeping, digestion issues, etc. New product launches are thus set to offer wider functionality and ingredients addressing multiple consumer concerns. Developed countries, in particular, will see the influence of this trend, as multiple benefits are perceived to be worth paying extra for, and thus higher profit margins will be secured by market players.

Products with short ingredient lists and reformulated recipes to reflect changing nutritional values are set to compete

Competition between naturally healthy and better for you products will continue. Consumers choosing naturally healthy products are searching for trusted food items with simple ingredient lists, and are motivated not just by health implications, but also by food safety. Meanwhile, the reduction of undesirable nutrients is intensifying among market players, offering balanced product versions not just for health-orientated consumers, but also for those concerned about extra weight gained due to less mobile life and work routines.

Innovations furthering sustainability are essential for top players to maintain their competitive edge

Sustainability through flagship products, such as Nestlé’s vegan Kit Kat or Yili’s organic Satine milk, with a recyclable, plant-based cap, are marking the direction for packaged food in the future. Consumers are increasingly selective, as e-commerce and local brands innovate, and private label organic offers are expanded. Thus, organic products from the market leaders need to offer additional sustainability values to reassure consumers that choosing well-known brands is a viable option not just personally but also environmentally.

White spaces in health and wellness are still plentiful within emerging markets

Emerging markets with growing populations and larger proportions of young consumer groups offer vast potential for foods with well perceived nutritional values. PepsiCo has stated that it is approaching some emerging regions from a perspective of social responsibility, with plans to provide more affordable and nutritious product variants. Meanwhile, growing purchasing power and interest in additional health qualities of packaged food in China encouraged Nestlé to describe China as its key business opportunity market.

Scope
Examining five trends shaping Health and Wellness Packaged Food
Traditional leaders are challenged by local players
Health and wellness market set to continue to be fragmented
Developed markets remain key sales segment
While the leaders remain in place, new players enter the top 10
Future portfolio diversification will be led by free from category
H&W trend anticipated to have the strongest influence on food and nutrition industry
Investigating the main health and wellness food categories and their trends globally
Chinese preference for local milk formula determines new growth winners within FF
Value growth to be driven by demand for hypoallergenic infant formula
Holistic approach to health supports demand for additional functionality
Better for you category decline briefly interrupted by pandemic-induced weight concerns
E-commerce to assist local brands’ expansion with low-sugar innovations
Sugar reduction claims are most frequently seen in Eastern Europe
In the wake of the pandemic naturally healthy innovations are springing up
Health concerns drive consumer interest in naturally healthy foods
Three Squirrels’ ambitions in China will affect category dynamics nationwide
Companies are seeking to benefit from the trend for free from products
North America and Western Europe drive free from sales
Fungi fermentation to further expand animal-free protein horizons
Free from growth expected to continue on the back of eager young generations
Private label offer expands within organic category
Sustainable product qualities to build up organic claim value
Top six HW packaged foods players in the spotlight
After the surge in immune support, Danone turns to protein fortification
Danone as trendsetter for milk alternatives development
Nestlé emphasises sales development in China
With intense innovation, Nestlé is competing to achieve its net zero goals
Consumer demand for healthier products drives Kellogg to innovate further
With stagnation in cereals, General Mills demonstrates versatility in its portfolio
PepsiCo’s growth driven by extensions of flagship brands
Mondelez CoLab and acquisitions continue to expand the company’s portfolio
Business strategies to win for leading HW market players
Examining five trends shaping Health and Wellness Packaged Food

Health and Wellness

Health and wellness is the aggregation of organic food and beverages, fortified/functional food and beverages, naturally healthy food and beverages, better for you food and beverages and food intolerance products.

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