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Healthy or Indulgent: Customer Tastes are Becoming Increasingly Bifurcated

People of all ages appear to be choosing products that are either really good or really bad for them, presenting opportunities for a squeeze on prices.

GettyImages-1133902-compressorLast year wasn’t a great one for CEOs in the consumer packaged goods sector, as price deflation capped sales growth at a measly 1.4%.

As is usually the case though, a group of companies managed to handsomely outperform the market. In this instance, by catering to seemingly contradictory desires that could reflect a wider trend in American consumer preferences.

Purveyors of convenient nutritional products containing plant-based ingredients—such Blue Diamond, Bodyarmor, Califia Farms, Brag and The Wonderful Company—were among the best-performing CPG companies in 2016, according to a new analysis by the Boston Consulting Group and market researcher IRI.

Also performing well were companies offering indulgences, including Mars, Hershey’s, Hostess and Constellation Brands. Indeed, sales of ice cream, spirits, wine and salty snacks grew by a heart-straining 4%-5%.

“We expect these bifurcated trends—demand for health and wellness products, as well as for indulgence products—to continue, irrespective of whether they are bought in traditional stores or via an intelligent personal digital assistant like Alexa on Amazon,” BCG partner Jim Brennan said.

“WE EXPECT THIS DEMAND FOR HEALTH AND WELLNESS, AS WELL AS FOR INDULGENCE PRODUCTS, TO CONTINUE.”

The rise of gluten-free products shows that consumer tastes can be fickle. Yet the survey’s findings support a seemingly sustained tilt toward more natural products that has prompted some of the world’s biggest food companies to spend billions of dollars on acquisitions.

Unilever, for example, last year bought Seventh Generation, a maker of eco-friendly cleaning and personal care products, while Johnson & Johnson snapped up OGX, which makes beauty products packed with bamboo fiber, coconut and chestnuts. Doctor Pepper Snapple, meanwhile, recently acquired Bai Brands, which markets bottled water, coconut water and ready-to-drink teas.

Part of the explanation could be demographic in nature: America’s population is getting older and more health conscious as baby boomers enter their autumn years. Millennials, meanwhile, appear to have developed a more cynical attitude to product marketing and may crave more “genuine” products. A better scientific understanding of food’s impact on health could also be a driver of healthy foods’ appeal, according to James Russo of market research company Nielsen.

“While economic concerns remain in the forefront for consumers, health and wellness concerns continue to increase in importance,” Russo said. “The reasons vary from societal, demographic, technological, government and, most importantly, a shift in consumer focus on the role diets play in health.”

In 2015, a Nielsen survey of 30,000 people around the globe found that 88% were prepared to pay more for healthier foods. Around half thought they were overweight and around the same proportion were trying to lose weight.

To be sure, few things remain more tempting than a good old dose of fat, sugar or alcohol. Even tobacco, for all its purported evils, still holds appeal: Reynolds America topped BCG’s growth leader list of large companies for the second year in a row.

“Our research shows that the growing popularity of convenient nutrition and wellness remains one of the most powerful trends in the U.S. consumer packaged goods industry,” said BCG’s Brennan. “But this does not mean that American consumers’ craving for indulgences has diminished.”

About Ross Kelly

Ross Kelly
Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.