Brand Matters

Growth Portfolios Positioned on Health and Wellness

Tuesday, July 12, 2016

Brand Matters is an Industry Report, published periodically, that addresses topical issues in the consumer products industry. In the second edition, following the inaugural report published in 2015, consumer analyst Jon Andersen attempts to identify who will drive the next phase of industry consumption growth; the health and wellness attributes valued by this cohort; the companies and brands best positioned to capitalize; and broad approaches that elder and on-trend businesses might employ to address the opportunities. More specific, the report seeks to illuminate demographic and lifestyle factors, purchase influencers and shopping behaviors, and brand-building and go-to-market strategies that have the potential to influence the absolute level and division of industry growth.

The millennial generation is the largest in U.S. history. Coupled with its sheer size, this cohort seems poised to drive a preponderance of industry consumption growth over the next decade, as they age and begin to form households and have children. While health and wellness is universally aspired to, millennials are especially attuned to it and seem to define it more broadly than prior generations. More specific, it is a lifestyle choice that directs behaviors such as purchasing habits and leisure activities. This holistic view extends beyond traditional notions of health to include transparency and sustainability.

Andersen found that those companies with the strongest health and wellness positioning also had the highest growth rates—approximately 10 times, on average—of all industry participants. Price points were also higher, seemingly revealing consumers’ willingness to pay a premium for such attributes, for these same top-quartile companies.

“Our analysis of major consumer products categories, which represent annual retail sales of nearly $45 billion,” stated Andersen, “indicates that on-trend consumer brands finely positioned on the aforementioned key attributes of health, transparency, and sustainability are increasing at multiples of their respective elder counterparts.” He continued, “These same on-trend portfolios seem to have abundant room for growth as they command a small fraction of their total addressable markets.”

Varying generational preferences suggest asymmetrical growth. On-trend brands have ample underpinnings for expansion, and new equities can emerge if positioned on similar dimensions. Elder portfolios may be renovated in the core and expanded into higher-growth segments or categories. One of the key strategies/actions Andersen highlights in the report is elder companies acquiring on-trend businesses and brands to enhance their portfolios and growth prospects—e.g., Danone recently agreed to acquire WhiteWave. Legacy businesses seeking growth also could facilitate portfolio restructuring by acquiring smaller companies with on-trend brands.

For a copy of this report or for more information on the consumer companies covered by Jon Andersen, CFA, please contact your William Blair representative.

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