Lower-Calorie Foods: It's Just Good Business
Food and beverage companies with a higher percentage of their sales coming from better-for-you foods and beverages perform better financially, according to a new report produced by the Hudson Institute with funding from the Robert Wood Johnson Foundation.
The report analyzed the sales of 15 major food and beverage companies and found that sales of better-for-you (BFY) products drove more than 70 percent of sales growth from 2007 to 2011. BFY products were defined as no-, low- and reduced-calorie items, such as flavored waters or diet sodas, as well as products that generally are perceived to be healthier, such as yogurts and whole-grain cereals.
Researchers also found that, compared with companies with lower-than-average sales of BFY items, those that sold a higher percentage of such items:
- showed a 50 percent growth in operating profit, as compared with just over 20 percent growth for the other companies;
- outperformed the S&P 500 Index by 60 points on average, compared with roughly 40 points for the other companies;
- delivered returns to their shareholders that were 15 percentage points higher than those generated by companies with lower sales of BFY items; and
- recorded reputation ratings that were more than 30 percent higher than those of companies with lower sales of BFY items.
According to lead author Hank Cardello, a former food company executive, the major findings of the report provide a roadmap for food and beverage companies to sell healthier products while increasing sales, profits, shareholder returns and reputation. Such strategies include:
- placing more emphasis on selling BFY foods and beverages;
- accelerating the development of more nutritious foods; and
- adopting the measurement of BFY sales as part of their annual assessment of company performance and progress.