Better-for-you Foods
It’s Just Good Business
Hank Cardello
Senior Fellow & Director
Obesity Solutions Initiative
October 9, 2013
Mission
Drive win-win market solutions to obesity
www.hudson.org
The Issue: High Obesity Rates Persist and Are
Impacting Business Practices
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Is There a Business Case for Selling
Better-for-you Foods & Beverages?
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The CPG Case for Better-for-you Products
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BFY Items Drove a Disproportionate Share
of 5-Year Sales Growth
80,0%
71,8%
70,0%
61,4%
60,0%
50,0%
40,0%
38,6%
28,2%
30,0%
20,0%
10,0%
0,0%
Percent of $ Sales
Percent of $ Sales Growth
BFY
Traditional
Source: Nielsen Food, Drug and Mass Merchandiser sales tracking (2007-2011)
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Companies Growing Their BFY Products
Faster Than Traditional Ones Exhibited
Greater Overall Sales Gains
% Change in Dollar Sales
6,0%
5,0%
4,9%
BFY Growth > Traditional
Products
4,0%
3,0%
2,0%
2,2%
Traditional Growth > BFY
Products
1,0%
Declines in Both
0,0%
-1,0%
-2,0%
-1,5%
Source: Nielsen Food, Drug and Mass Merchandiser sales tracking (2007-2011)
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These Same Companies Demonstrated
Superior Operating Profit Growth
% Growth in Operating Profit
60,0%
50,0%
50,6%
40,0%
30,0%
21,2%
20,0%
10,0%
0,0%
Latest 5 Fiscal Years
BFY Growth > Traditional Products
Traditional Growth > BFY Products
Source: Nielsen Data & Company Annual Reports (2007-2011)
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Lower-calorie Products Drove HWCF
Company Sales Growth
100,0%
90,0%
82.0%
80,0%
70,0%
60,0%
50.5%
50,0%
40,0%
30,0%
20,0%
10,0%
0,0%
Lower Calorie Percent of Sales $
Source: Nielsen Food, Drug and Mass Merchandiser sales tracking (2006-2011)
Lower Calorie % of Growth
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Lower-calorie Products Accounted for 2/3 of
New Products Achieving Sales of $50+ Million
# New Products
15
15
13
10
10
8
5
5
3
0
Growth
Lower Calorie
10
Traditional
5
Source: Nielsen Food, Drug and Mass Merchandiser sales tracking (2006-2011)
All Products
15
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The Restaurant Case for Lower-calorie Products
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Lower Calorie Items Were the Key Growth
Engine Across Both Foods & Beverages
Change in Servings (2011 vs 2006)
(000s)
1 000 000
+2.5%
+1.8%
472 442
500 000
+4.5%
220 026
252 416
0
-1.6%
-4.2%
-2.3%
+0.1%
-4.9%
18 136
-2.3%
-201 890
-500 000
Total
-1 000 000
-832 563
Lower Calorie
-850 699
Traditional
-1 103 115
-1 500 000
-1 305 005
Total Food & Beverages
Source: NPD Group/Crest
Food Only
Beverages Only
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Lower Calorie Items Outperformed Traditional
Ones in Overwhelming Majority of Chains
# of Chains - Lower Calorie Growth Rate ˃ Traditional
17
20
15
10
4
5
0
Lower Calorie
Source: NPD Group/Crest
Traditional
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Critical Same Store Sales (“SSS”) Metric Superior for
Chains Growing Their Lower Calorie Servings
% Change In Same Store Sales
(2011 vs 2006)
8,0%
6,0%
5,5%
4,0%
2,0%
Chains With Lower
Calorie Servings Declines
Total 21 Chains
0,0%
-2,0%
-0,8%
Chains With Lower
Calorie Servings Growth
-4,0%
-6,0%
-8,0%
Sources: Nations Restaurant News, Trinity Capital, Company Annual Reports
-5,5%
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Better-for-you Case Studies
Health Improvement Model
Cumulative* Achievement of GMI Sales
Improved FY05-FY11 & F12-F16 Projection
80%
Over 600 products improved FY05-FY11
60%
40%
64%
67%
other*
2% whole grain
17%
0%
calorie/porti
on control
gluten
5%
2%
vitamins/mi
nerals
11%
45%
33%
16%
Key Drivers Nutritional Improvement
FY05-FY11
sodium
32%
fiber
5%
21%
trans fat
20%
Decreasing Limiters 66%
*On a cumulative basis: products that have been nutritionally
improved more than once are counted only one time
total fat/sat
fat
2%
sugar
4%
Increasing Positives 34%
Focused on doing the right thing to
make our products nutritionally better
16
*includes: serving veg/fruit, antioxidants, probiotic, protein, omega-3, GMI Better-for-You
Reducing Sugar in Cereal
Commitment to further
reduce sugar levels
KEY
2007 Sugar level
2008 Sugar level
2009 Sugar level
2010 Sugar level
Goal
13g
Sugar level
07
12g
08
11g
09
10g
10
≤9g
Goal
17
Fiber One a $400+ million Brand
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Company Leads Peers in Operating Profits
% Operating Profit Margin
18,0%
Average Operating Profit Margin
17,0%
16,0%
15,0%
14,0%
13,0%
12,0%
11,0%
10,0%
Source: Better-for-you Foods: It’s Just Good Business, Hudson Institute, 2011
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Corporate Social Responsibility Done Right
Leading the Way with CSR Metrics
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Company Reaping Benefits from Strategic Shifts
% Operating Profit Margin
18,0%
Average Operating Profit Margin
17,0%
16,0%
15,0%
14,0%
13,0%
12,0%
11,0%
10,0%
Source: Better-for-you Foods: It’s Just Good Business, Hudson Institute, 2011
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Iconic Products Under Assault
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Soda Consumption in Decline
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French Fries Declining
French Fry Trends (2006 to 2011)
Fries Share of Total Foods
25,0%
% Change in Servings
1,5%
24.8%
+1.2%
1,0%
0,5%
24,5%
0,0%
24.1%
Total
Food
-0,5%
-1,0%
24,0%
-1,5%
-2,0%
23,5%
-2,5%
2006
2011
Source: NPD Group/Crest – QSR chains ˃ $3 billion; Fries ˃20% of chain servings
-1.9%
French
Fries
Baked Goods Under Fire
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Mandate for Healthier Kid’s Products
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Traditional “Offenders” Heavily Targeted
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What Can You Do?
1. Understand where
your Better-for-you
growth will come from
©
Natural Marketing Institute
© 2012,
2012, NMI
31
“One-size-fits-all” Approach Doesn’t Work
WELL BEINGS®:
17%
FOOD ACTIVES®:
15%
FENCE SITTERS®:
20%
• Most health pro-active
• Mainstream healthy
• ‘Wannabe’ healthy
• Market leaders &
Influencers
• Basics, balance and
control
• Most likely to have kids
• Highest organic usage
• Desire inherently healthy
foods
• Use some supplements
• Use many health
modalities
• Most Green
• Most influenced by
physicians
• Least eco-friendly
• Price sensitive
Source: NMI’s 2011 Health and Wellness Trends Database (HWTD)®
• Stressed out, want help
and control
• More health kicks but no
clear goals
EAT, DRINK
MAGIC BULLETS®:
& BE MERRYS®:
23%
25%
• Conveniently healthy
• Heavy pill usage –
supplements OTC, Rx
• Health managers vs.
preventers
• Weight managers
• Receptive to eco-friendly
• Least likely to cook at
home
• Active weight loss
• Least likely to exercise
• Least health active
• Unconcerned about
prevention
• Focused on taste
• Most price driven
• Younger
• High social media usage
32
© Natural Marketing Institute (NMI), 2012. All Rights Reserved.
Growth Opportunity Segments
WELL BEINGS®:
17%
FOOD ACTIVES®:
15%
FENCE SITTERS®:
20%
• Most health pro-active
• Mainstream healthy
• ‘Wannabe’ healthy
• Market leaders &
Influencers
• Basics, balance and
control
• Most likely to have kids
• Highest organic usage
• Desire inherently healthy
foods
• Use some supplements
• Use many health
modalities
• Most Green
• Most influenced by
physicians
• Least eco-friendly
• Price sensitive
Source: NMI’s 2011 Health and Wellness Trends Database (HWTD)®
• Stressed out, want help
and control
• More health kicks but no
clear goals
EAT, DRINK
MAGIC BULLETS®:
& BE MERRYS®:
23%
25%
• Conveniently healthy
• Heavy pill usage –
supplements OTC, Rx
• Health managers vs.
preventers
• Weight managers
• Receptive to eco-friendly
• Least likely to cook at
home
• Active weight loss
• Least likely to exercise
• Least health active
• Unconcerned about
prevention
• Focused on taste
• Most price driven
• Younger
• High social media usage
33
© Natural Marketing Institute (NMI), 2012. All Rights Reserved.
www.Hudson.org
Example: Burger King “Satisfries”
 20% fewer calories
 25% less fat
 Kept “Classic” fries
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2. Incorporate Healthier Oils
Consumers Want Healthier Oils
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3. Make Changes to Your Mainstays Quietly
(“Stealth Health”)
Thank You!
HCardello@Hudson.org
www.Obesity-Solutions.org