Published by consultancy TSG, the report draws on different sources of market research and predicts the kid’s food and beverage category will grow to $26.8bn by 2011 from $16.4bn in 2007. Growth will continue at double digit rates beyond 2012, it predicts.
“As health becomes the focus of children’s products, the industry will continue to move forward and mirror the high-growth functional foods category,” said TSG.
Key health issues
With increasing obesity rates and other health problems among children, parents are starting to look towards diet as one way of addressing these.
The report identifies a number of key aspects of children’s health that are being addressed through diet. These are:
- Obesity: The number of overweight children aged 6-11 has more than doubled in the past 20 years. Current estimates suggest that 32 percent of US children are overweight, while 16 percent are obese.
- Hyperactivity: According to TSG, parents are increasingly looking at labels on food products to blame for hyperactivity in their children. And as studies start to look at ingredients – such as omega-3 and omega-6 – for their combative effects on hyperactivity in children, the category may soon gather speed in the food and supplement industry.
- Brain function: TSG highlights that children with learning and behavior problems improve focus, concentration and school grades when given essential fatty acid supplements; and IQ scores when given multivitamins.
- Gut health: According to a report by Julian Mellentin entitled 5 Key trends in Kids’ Nutrition 2008, digestion and immunity are two of the biggest concerns for mothers regarding their children’s health, and both of these are influenced by gut health. TSG highlights that ingredient firm ChrHansen is focusing its NPD on children’s probiotics, indicative of growing interest in this market
Beverages currently constitute the largest segment of the kids’ food and beverage market, accounting for 29 percent of total sales, said TSG.
This is primarily due to the versatility of the category. They are an easy carrier for vitamins and functional ingredients, and they are also flexible in time of consumption. In 2006, 134 kids’ beverages were launched in the US.
“Beverages encompass several popular categories such as dairy, juice, and water where incremental ingredient innovation warrants margin premiums,” noted TSG.
The second largest category is ice cream and frozen deserts, which makes up 17 percent of the total kids’ food and beverage market. Cereal accounts for 15 percent, lunch kits and sweet snack foods each take an 8 percent share, and cookies and crackers make up 7 percent. Dairy products currently hold 4 percent of the market, while fruits and vegetables hold only 1 percent.
“Fruits and vegetables are the smallest (although arguably the healthiest) segment, indicating a greater need for savvy marketing, packaging, innovation and increased availability,” said the report.
Health – being the main driver in the children’s food and beverage industry – is bolstered by innovations in four key areas, said the report. These are :
· Fortification: With vitamins and functional ingredients
· Taste: Which is “evolving and maturing”, and must be balanced with nutrition
· Packaging: Including portion size, convenience and shape
· Trust: Sought through organic, allergen free and additive free products
According to the report, over 15 companies have emerged in North America with a primary focus on providing healthy and fortified kids’ food and beverage products with less sugar and additives.
“Larger companies should take advantage of this landscape by leveraging the R&D and innovation capabilities of emerging companies who are focused on children’s health and seek selective investment and acquisition opportunities,” it said.
“Through strategic consolidation and select partnerships, companies with the proper vision and strategy can create quality, trustworthy products in this category.”