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Consumers look to health and wellness in recession

By Caroline Scott-Thomas , 27-Feb-2009
Last updated the 27-Feb-2009 at 16:37 GMT

Focusing on health and wellness and building brand awareness are the most successful strategies for weathering the global economic storm, according to a Frost and Sullivan analyst.

Food industry research analyst Christopher Shanahan said that consumers are increasingly focused on ways to avoid becoming ill due to the economic downturn – and companies would do well to pay attention, in a web presentation on Frost and Sullivan’s global economic outlook for the food and beverage market on Thursday.

He said: “There is a growing interest in health and wellness products. …We are seeing a lot of fortification of products that have relatively low shelf live. Looking ahead, we will see more applications of omega-3 products with longer shelf life. Those that fortify their products with health and wellness usually have done well amongst consumers.”

He added that this trend could also be given a boost by President Obama’s pledge to focus on preventative healthcare.

“Not in a recession”

In general, Shanahan said that the food industry is well-positioned to survive the economic crisis. Despite saying that sales had shrunk in recent months, he said: “The food industry is not in a recession. …[But] we have seen a lot of impacts on supply chain availability.”

Shanahan said that total US revenue for food and beverage was currently 5.1 percent lower than the same time last year. However, he said he did not anticipate revenue to drop further as he expects consumers to make savings in other areas, before they make drastic cuts to food spending.

Meanwhile in the UK, retail food sales are actually 5.1 percent up on last year, despite higher consumer concern about cost, according to a report from the British Retail Consortium.

Fear and greed

With regard to what will convince shoppers to spend, Shanahan said: “There are two main motivations driving consumers: fear and greed.”

He said that companies are able to profit from consumer fear by reassuring them about familiar brands and recipes, ensuring that their brand has maximum exposure, and by emphasizing the health and wellness aspects of their products.

As for greed, Shanahan explained that this referred to consumers seeking “luxury and indulgence at affordable prices.”

This concept has most often been applied to the confectionery industry in recent months. The theory is that consumers who are being cautious with their spending in other areas feel they are still entitled to these small rewards.

Other strategies

Shanahan warned against responding to the crisis by pricing adjustments, saying: “Raising prices is no longer viable because demand is already flat.”

Although many companies are rejecting further investment in mergers and acquisitions, Shanahan said that manufacturers should be on the look out for opportunities to acquire companies that have been devalued, “but only if they are complementary to your product line.”

He also said that companies could do well by forming alliances, such as an ice cream brand, for example, pairing with a confectionery brand, to enhance sales for both companies.

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