Food & Beverage Perspectives
Consumers Will Pay Price Premiums for Healthy Foods

Consumers Will Pay Price Premiums for Healthy Foods

<p>The health-and-wellness trend in the food and beverage industry continues to surge and present new opportunities for companies in the sector. However, many companies may not fully understanding and harnessing current market dynamics and consumer preferences to grow their bottom lines.</p>

Consumers have an increasing desire to take a more proactive role in optimizing personal health and well-being, and foods with added ingredients for certain health benefits appeal to this desire. Food manufacturers and marketers rely on consumer demographics to successfully develop and market foods and beverages.

The health-and-wellness trend in the food and beverage industry continues to surge and present new opportunities for companies in the sector. However, many companies may not fully understanding and harnessing current market dynamics and consumer preferences to grow their bottom lines. At the same time, companies face more complexity from a more selective and educated customer, higher expectations for distribution and in-stock positions, greater retail-channel diversity and increased competition, according to results of a survey from AlixPartners.

David Garfield, managing director at AlixPartners and co-leader of the firm’s Consumer Products Practice said manufacturers, suppliers and retailers are leaving money on the table in health-and-wellness sector due to less-than-optimal actions in areas including pricing, innovation and supply chain.

According to survey results, 46 percent of consumers’ primary health and wellness goal is to have a better quality of life and 59 percent said “eating healthy" was on of the most important aspects of their health and wellness regimen. Specific to health and wellness-focused food and beverage products, consumers appear to be willing to pay a price premium for health and wellness product attributes they view as important. Consumers surveyed reported their willingness to pay a premium for products with such attributes has increased to an 8.9-percent price premium versus a 6.2-percent premium as reported in the survey in 2013.

There’s also been a significant shift in overall willingness to pay a premium for products with desirable health and wellness attributes. Twenty-one percent of consumers cited “all-natural" in the most recent survey as most important (up from 10 percent from 2013) and 15 percent cited “organic" as most important (up 10 percent). Consumers said they would pay up to an 11-percent premium for organic foods and up to a 9.9-percent premium for “all-natural" products.

With food and beverage makers and food retailers seeking growth among both the Baby Boomer and Millennial groups, the survey shows notable differences in these demographic groups’ food and beverage preferences and purchasing drivers and habits.

Baby Boomers are 83.7 million strong and account for 44 percent of the households with annual incomes of more than $75,000, representing a significant amount of disposable income and purchasing power. Millennials number 72 million and their view of food choices has been a driving factor in the functional foods market this year. Survey results found boomers planned to increase their intake of seafood, fiber and vitamins and reduce consumption of red meat, salt and processed food. Millennials reported plans to add more protein to their diets, count calories and reduce their consumption of fast food.

Taste is substantially more important to boomers (44 percent) than Millennials (29 percent). Interestingly, products that were low carb, trans-fat free, sugar free and non-GMO products are among the most appealing to boomers, while Millennials place greater importance on all-natural and organic attributes.

As consumers become more educated, it is imperative to keep consumer demographics in mind when developing and marketing better-for-you foods and beverages. Key is looking across the age continuum and surveying consumers to better understand what motivates their food purchases and what gaps exist in products on the market today.

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