1. Bringing Health to the Bottom Line
Winning in the Lucrative but Complex Health and Wellness Market
OUTLOOK
Consumer Products
April 2015
2. At a Glance
How Can Companies Best Capitalize On Health and
Wellness Opportunities?
Mapping the health and wellness landscape is a savvy first step.
With map in hand, industry players can then navigate that
landscape—and come to understand:
}} what, exactly, consumers look for in products for which
they’ll pay a premium
}} how baby boomers’ and millennials’ preferences are
influencing that market
}} which developments consumers consider trends as
opposed to mere fads, and
}} where consumers are shopping most often for those
premium products.
At a Glance
3. OUTLOOK | Bringing Health to the Bottom Line
3
In the North American food and beverage industry, the health and wellness boom
continues, presenting alluring opportunities for industry players. But while
opportunities abound, AlixPartners’ latest food and beverage–focused consumer
survey suggests that companies may be leaving money on the table. Why?
Complicated dynamics and shifting consumer preferences are powerfully shaping
the health and wellness market, presenting new challenges for companies.
For example, companies seeking to play in this market face
increasing complexity on numerous fronts such as consumers
who are more fragmented—in terms of their segment
characteristics, more selective—because they consider more
than just price while shopping, and they are more educated.
Additional complexities include retailers’ higher expectations
regarding distribution and in-stock positions, as well as greater
channel diversity for health and wellness products.
The AlixPartners North American Health and Wellness Review
surveyed 1,107 consumers to learn the key drivers behind
consumers’ choices for food and beverage purchases with health
and wellness in mind. We also assessed respondents’ reactions
to current health trends, their views on healthy snacking, and
their levels of satisfaction with retailers and manufacturers when it
comes to health and wellness offerings. This report presents the
major themes that emerged from our findings.
The burning question we’re left with is, How can companies
best capitalize on health and wellness opportunities while also
surmounting the new challenges that are arising in this lucrative
but complex market? Mapping the health and wellness
landscape is a savvy first step. With map in hand, industry
players can then navigate that landscape—and come to
understand what, exactly, consumers look for in products for
which they’ll pay a premium, how baby boomers’ and
millennials’ preferences are influencing that market, which
developments consumers consider trends as opposed to mere
fads, and where consumers are shopping most often for those
premium products. Only then can industry players craft the
strategies needed to succeed in the health and wellness market.
Health and Wellness Landscape
The North American food and beverage industry overall stands
to benefit from recent improvements in important
macroeconomic and other factors such as modest growth in US
median household income and dramatically lower gasoline
prices. The more-positive outlook for the industry at large comes
at a time of recovery from the longest downturn in food-at-home
and beverage spending coupled with the lowest postrecession
growth rates since 1945 (figure 1).
If, as many economists predict, economic conditions and
consumers’ confidence and financial well-being continue to
improve, the industry’s health and wellness subsector will likely
see particularly substantial growth. During the past decade, that
subsector—dominated by sales of natural and organic products,
whose profit margins are often considerably higher than other
products’—has already enjoyed sales growth that’s three or four
times that of other food-at-home items.
Responses from our survey participants helped us begin
painting a picture of the people purchasing health and wellness
products today. Of those participants, 79% said they view
eating healthy as at least “somewhat important.” But healthy
eating apparently matters more to baby boomers—82% of
whom said eating healthy is “extremely important”—than it
does to millennials, 72% of whom said they view eating healthy
as either “extremely important” or just “somewhat important.”
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Source: BLS data, AlixPartners analysis
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Food and beverage spending: recession to postrecession period
(Recessions since 1945)
FIGURE 1: A long-awaited recovery
4. OUTLOOK | Bringing Health to the Bottom Line
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However, millennials are likely far ahead of where baby
boomer—and older—consumers were at their age in terms of
awareness of the connection between diet and health. Thus, we
expect that healthful eating will gain importance for this
younger age cohort. At the same time, we expect that older
millennials (those 25 to 44 years old), older baby boomers, and
other mature consumers (those older than 65) will account for
an ever-increasing share of income spent on food and
beverages in general as their shares of the overall population
grow and as the collective annual income of those two
otherwise disparate cohorts increases—from an estimated $5.3
billion in 2015 to more than $6.9 billion by 2035 (figure 2).
But we also looked at consumers’ ideas about what health and
wellness means to them, asking survey respondents such
questions as, What is your primary health and wellness goal?
and, What two aspects of your health and wellness program do
you consider most important? When it comes to goals, better
physical quality of life was the top goal cited by 46% of
respondents. No other goal they cited came even close to that
number, including living longer (20%), increasing balance in
one’s life (12%), improving one’s appearance (9%), and having a
more holistic life (2%). As for important aspects of their health
and wellness program, 59% of respondents ranked eating
healthy as their top priority, followed closely by exercise (54%).
Responses also suggested that consumers are taking a number of
steps to improve their diets: 37% said they plan to add more fruit
and vegetables into the mix, followed by 33% who said they aim
to consume less sugar and 30% who said they plan to eat less fast
food. Of our total survey sample, 23% of respondents said they’re
on formal diets, with Weight Watchers the most-often-cited
program of choice (6% of respondents are members of that
program). Finally, 59% of the consumers in our study said that
leading a healthy life is “very important,” so they take time to
understand what they’re eating and to make healthy choices.
Size of the Premium “Prize”
As recent history has taught the entire industry, consumers who
buy health and wellness offerings are usually willing to pay a
premium. But what, exactly, do they want to get in return for
their premium dollars? To truly understand which product
attributes consumers will pay a premium for, it helps to first
identify the most-important drivers of food purchase decisions
across all categories, not just health and wellness. To that end,
we asked our survey respondents to rate the importance of a
wide array of attributes: not only health and wellness benefits
but also price, convenience, availability across stores and
in-stock inventories, in-store service, name brand, and “works
as intended.” We found that 76% identified price as important,
down from 88% in our 2013 survey. Price was followed closely
by “works as intended” (74%, down from 81% in 2013),
“product convenience and ease of use” (71%, down from 78%
in 2013), and “in stock” (71%, up slightly from 70% in 2013).
We also asked survey respondents questions focused on the
health and wellness subsector, with an eye toward assessing
their willingness to pay a premium for specific health and
wellness product attributes. The consumers in our survey who
consider a health and wellness product attribute as most
important to them in selecting a product are willing to pay a
higher price premium than they indicated in a similar 2013
survey: 8.9% versus the 6.2% we saw in our 2013 survey.
In addition to a significant rise in the premium consumers are
willing to pay for grocery items with health and wellness
attributes that matter to them, we also saw a noticeable shift in
the specific health and wellness attributes that matter most to
consumers. When we asked respondents to rate attributes most
15 to 24 years 25 to 44 years
45 to 64 years 65 years or older
2015 2020 2025 2030 20352015 2020 2025 2030 2035
Indexedpopulation(2015total=1.0)
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Note: Total income projections are based on population projections, paired with 2013 US household income by cohort.
Source: US Census Bureau
Population Income ($B, 2013 dollars)
FIGURE 2: Population share and income for consumers age 25–44 and 65-plus
5. OUTLOOK | Bringing Health to the Bottom Line
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important to them when buying food and beverage products that
contribute to their overall health and wellness, 40% of them cited
taste, followed by fresh (not frozen) (31%), low sugar (26%), low
sodium (25%), known ingredients (23%), and high fiber and all
natural (21% each). We saw significant changes in several
categories—namely, all natural (which increased by 11 percentage
points over the results from our survey of a year ago, to 21% from
10%), organic (up by 10 points), trans-fat free (down by 21 points),
and fat free/low fat (down by 9 points). Some attributes received
surprisingly low rankings in our recent survey, including scientific
claims (4%), gluten free (6%), non–genetically modified
organisms (GMOs) (11%), and organic (15%).
But identifying an attribute as important doesn’t necessarily
correlate with the size of the premium consumers are willing to
pay for offerings that have those attributes. For example, we asked
respondents how much more they’d be willing to pay for food
and beverage products that have certain specific health and
wellness attributes. The attribute for which they’d be willing to pay
the biggest average premium was organic (a premium of 11%, up
from 9.3% in 2013). In terms of premium size, organic was
followed closely by scientific claims and consumer claims (10.6%,
up from 6.2% and 3.1%, respectively, in 2013). Next came gluten
free (10.4%, up from 8.4% in the previous year), all natural (9.9%,
up from 5.7%), and non-GMO (9.8%, up from 6.4%).
If we combine from the survey the importance of particular
health and wellness attributes with the size of the premium
consumers are willing to pay, we find that taste, fresh, and all
natural score high on both appeal and willingness to pay
more—a strong indicator that companies should focus not only
on ensuring that their offerings have those attributes but also
properly emphasizing the attributes in their marketing
campaigns (figure 3).
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
4%
6%
8%
10%
12%
% Importance of rating (top two)
Willingtopaymore-avg.pricepremium%
TasteFresh
Low sugar
Low sodium
Known ingredients
All natural
High fiber
Low calorie
Fat free/
low fat
High protein
Low or no preservatives
Low carbs
Organic
Trans-fat free
Non processed
Sugar
free
Locally sourcedNon-GMO
Short list
of ingredients
Vitamin
fortified
Gluten free
Allergen
free
Scientific/consumer claims
of product benefits and
performance
Lactose free
Kosher
Organic has
the highest
price premium
Average price premium
Market
FIGURE 3: Important and premium-worthy
Spotlight on Millennials (But Not Just Millennials)
Results from our new survey reveal the importance of both the
millennial and older-age cohorts in the health and wellness food
and beverage space. Share of income is growing among both of
those groups, and both show high levels of interest in health and
wellness. For those reasons, the two groups merit closer attention.
Our research shows that 36% of consumers aged 25 to 44 years
devote at least 20% of their total food and beverage spending
on health and wellness items, with 17% spending a whopping
40% or more of their budget on health and wellness. However,
for consumers aged 45 to 64, the comparable numbers are
39% and 20%; for those 65 or older, they’re 45% and 19%.
And, of course, older consumers generally have more
disposable income to spend to begin with.
Millennials and other cohorts also differ in terms of dietary
behaviors aimed at improving their health and wellness. For
instance, boomers in our survey said they’re adding more
seafood, fiber, and vitamins while reducing their consumption
of red meat, salt, and processed food. Millennials said they’re
adding more protein, counting calories more, and reducing
their consumption of fast food to be more healthy.
When it comes to health and wellness food preferences, taste
seems to be substantially more important to boomers (44% of
them in our survey cited taste as one of their top five factors
when buying a healthy product) than it is to millennials (30%).
Boomers also place more importance than millennials do on
food and beverage items that have had “bad things taken
out”—such as low-carb, trans-fat-free, sugar-free, non-GMOs,
and low-preservative or no-preservative offerings.
Millennials, on the other hand, consider all natural and organic
substantially more important attributes than baby boomers do
(28% versus 19%, and 44% versus 29%, respectively). Overall,
however, baby boomers are willing to pay higher premiums for
all health and wellness food and beverage items than millennials
are, including for attributes that are less important to them than
they are for millennials.
Companies across industries appear to be sharpening their
focus on how to reach specifically millennials, but baby
boomers remain an important demographic in the food and
beverage industry, particularly in health and wellness.
Therefore, companies will have to allocate as much attention to
boomers as they do millennials, especially given that those
millennials they’re chasing now will eventually reach the same
age range that boomers are in today.
6. OUTLOOK | Bringing Health to the Bottom Line
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Trend—or Fad?
To dig even more deeply into consumers’ thoughts about
healthy eating, we also asked survey respondents for their
impressions of which health and wellness developments they
view as long-term trends versus passing fancies or fads.
Non-GMO foods, probiotics, gluten free, and reduced
red-meat consumption were all identified by roughly half of our
study participants as fads. (Non-GMO foods came in first, at
54%; the others, at 53%, 52%, and 46%, respectively.)
Meanwhile, organic, reduced sugar, natural, and increased
fruits and vegetables received the fewest “fad” responses
among our survey sample. For instance, only 33% of
respondents identified organic as a fad; the numbers for the
remaining three were 28%, 25%, and 12%, respectively.
Developments that consumers view as long-term trends rather
than fads may represent health and wellness product attributes
that will remain attractive in the future, suggesting sustained
market potential for companies.
Interestingly, more of the boomers than the millennials in our
survey viewed multiple health and wellness developments as
long-term trends rather than fads—perhaps because focus on
health and wellness often sharpens with aging. The exceptions
were probiotics and high-protein content in foods—which more
millennials than boomers view as long-term trends.
We also found that income and education levels as well as
age-group correlated with the tendency to identify certain
health and wellness developments as trends or fads (figure 4).
For example, just 37% of the participants in our study who earn
annual incomes of more than $150,000 identified non-GMO
foods as a long-term trend. That compares with 59% of such
high earners, who said organic food is a long-lasting trend.
Obviously, a deep understanding of what consumers—
especially well-heeled ones—view as lasting can have lasting
benefit for players in the health and wellness space.
The Challenge of Channels
With an overwhelming number of product choices available for
health and wellness food and beverage products, determining
how best to earn their way into consumers’ minds and
pocketbooks has grown more challenging than ever for industry
players. To secure share of wallet from the consumers they’ve
targeted, companies will have to make the right health and
wellness bets on which products they should develop and how
best to market those offerings. But the diversity of channels
through which companies distribute the products is increasing
as well. Thus, industry players need to first learn which channels
consumers are using most and then take steps to distribute their
products through those channels. With those issues in mind, we
analyzed our survey findings to identify key drivers behind
consumers’ purchase decisions.
When it comes to the factors consumers consider when
selecting retailers from which to purchase health and wellness
products, we found that low prices, quality produce, and quality
125−149 150+75−99 100−12450−7440−4925−39<25
(US$, thousands)
High school
graduate or less
College
incomplete
College
graduate
40%
45%
50%
55%
60%
65%
70%
40%
45%
50%
55%
60%
(Responding “fad” by income %) (Responding “fad” by eductation %)
FIGURE 5: Higher income and more educated
Baby boomers Millennials
* Only categories where millennials see a long-term trend more than baby boomers
20% 40% 60% 80% 100%
Non-GMO foods
Gluten free
Probiotics*
Reduced consumption of red meat
Sustainability
High-protein-content foods*
Less artificial sweeteners
Heart-healthy product claims
Better certification of health benefit claims
More organic foods
Reduced sugar
More-natural foods
More fruits and vegetables
% Responding “long-term trend”, as opposed to “fad”
FIGURE 4: Fads versus long-term trends
7. OUTLOOK | Bringing Health to the Bottom Line
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fresh meat counted among the most important (identified by
49%, 45%, and 40% of our study participants, respectively).
Proximity also matters; 31% of the consumers we surveyed cited
“location nearby” as the most important factor.
As to the kinds of purveyors from which consumers buy health
and wellness offerings, 42% of study participants said they buy
from mass merchandisers, followed by 34% who buy from
traditional grocery stores (figure 5). Convenience stores and
community-supported-agriculture (CSA) programs were ranked
lowest (5% each). On the other hand, 55% of survey
respondents said they buy other grocery items at traditional
grocery stores; 40%, at mass merchandisers.
Still, consumers are shopping for food and beverage items—
including health and wellness products—at a decidedly wide
range of retailer types, ranging from drugstores, dollar stores,
and farmers markets to online retailers, convenience stores, and
CSA programs. All of those formats are thus competing with
mass merchandisers and traditional grocery stores for
consumers’ wallets. Indeed, nearly 25% of the consumers in our
study said they shop at multiple stores for their health and
wellness and traditional grocery items at least 61% of the time.
Just 21% of them reported loyalty to one store.
Moreover, in addition to willingness to patronize multiple
retailers, our latest study respondents are more willing to switch
product brands than they were in a study we conducted in
2012. For instance, 9% of the 2014 survey respondents
“strongly agree” with the statement “I change brands
frequently”—a decided increase over the 6% we saw in 2012.
Meanwhile, 28% “agree” with that same statement, up from
24% in the earlier study.
Wrapping It Up
Health and wellness remains a vibrant trend in the food and
beverage space—and shows no signs of slowing down. Yet a
number of forces are introducing complexities into this lucrative
market. Desires and demands among consumers in different
segments—such as groups defined by age, income level, or
education level—are more fragmented and diverse than ever.
Consumers have grown more discerning—and fickle, willing to
switch brands and retailers. Meanwhile, retailers and food
manufacturers alike are experiencing stiffer competition.
Capturing and holding consumers’ attention by distinguishing
one’s offerings from all the others has become more challenging.
And supply chains have grown more and more complicated.
To win in this profitable but complex market, companies will
have to craft and execute well-informed, focused strategies that
sharply differentiate them from rivals while they safeguard their
bottom lines. We maintain that strategies aimed at leveraging
customer segmentation, improving product development and
assortment, and maximizing the supply chain can pay big
dividends—especially if all of them are underpinned by modern-
day but business-informed data analytics
Regarding segmentation, companies should develop smarter
clustering schemes that deliver fresh insights into what
customers in each segment want and how they buy. As for
product assortment, manufacturers have to enhance their
product differentiation without busting their own pocketbooks,
and retailers must develop smarter marketing strategies—again,
underpinned in part by advanced data analytics—to drive traffic
to the moneymaking health and wellness offerings in their
stores. Finally, manufacturers and retailers alike must hone their
supply chains and, in some cases, develop new supply chains,
with an eye toward getting to market faster than rivals can the
products today’s consumers most want—and then making sure
the items are regularly in stock.
5%
5%
9%
11%
16%
22%
25%
27%
34%
42%
6%
6%
8%
11%
12%
15%
20%
27%
40%
55%
Community-supported-
agriculture program
Convenience stores
Online, internet retailers
Dollar stores
Farmers markets
Drugstores
Club stores
Specialty stores
Traditional grocery stores
Mass merchandiser
Online, internet retailers
Community-supported-
agriculture program
Convenience stores
Drugstores
Dollar stores
Farmers markets
Specialty stores
Club stores
Mass merchandiser
Traditional grocery stores
Health and wellness products
N=618, those polled selected one or more responses. Results representative of reported consumer traffic.
Other groceries
FIGURE 6: Consumers say they shop for health and wellness products more at mass merchandisers than at traditional grocery stores
