CAPITALIZING ON HEALTH & WELLNESS TRENDS - AN OPPORTUNITY FOR FMCG COMPANIES TO PARTNER WITH CONSUMERS - Nielsen

 
CAPITALIZING ON HEALTH & WELLNESS TRENDS - AN OPPORTUNITY FOR FMCG COMPANIES TO PARTNER WITH CONSUMERS - Nielsen
C A P I TA L I Z I N G
                                       O N H E A LT H &
                                       WELLNESS
                                       TRENDS
                                       AN OPPORTUNIT Y FOR FMCG
                                       COMPANIES TO PARTNER WITH
                                       CONSUMERS

Copyright © 2017 The Nielsen Company                               1
WELCOME
    ANDREW MANDZY           The retail environment is especially challenging these days. Growth
    Director of Strategic   is stagnant and consumers have more choices than ever. Retailers
    Insights, Health &      and manufacturers are seeking pockets of growth in a tough business
    Wellness Growth &       environment. To do that, they need to differentiate themselves and
    Strategy                provide bottom-line value.

                            One way many are doing this is by tapping into health and wellness,
                            an area that has seen considerable growth and attention recently.
                            Sure, being healthy isn’t a new concept, but several macro factors have
                            changed how American consumers think about health:

                            •   The aging population
                            •   Increases in chronic diseases
                            •   Rising health care costs
                            •   Consumer demand for transparency
                            •   Technology as an enabler of our health and wellness

                            So when we think about “what’s next,” it’s critical to know what’s
                            happening today and how this will affect clients and consumers
                            tomorrow. That means being able to answer the most pressing and
                            critical health and wellness business questions that our clients face.

                            In order to answer these important questions, you need the right data,
                            and you need the right insights. Nielsen’s data in health and wellness
                            is comprehensive and backed by science. As for the insights, well, you’ll
                            have to read this report to see for yourself.

                            Be well.

                            ANDREW

2                                                                                    HEALTH AND WELLNESS 2020 REPORT
Sales growth for manufacturers and retailers has been sluggish over
                               the past few years. And when we look at prospects for 2017, we’re
                               forecasting that sales will grow just 0.9%. So what does this mean
                               heading into a new year and beyond? It means that companies need
                               to find ways to differentiate themselves and find growth. And for many
                               brands, health and wellness is just what the doctor ordered.

                               Being healthy isn’t a new trend. After all, no one wants to be unhealthy.
                               How consumers approach their health, however, is distinctly different
                               from how they did in the not-too-distant past. In fact, it wasn’t too
                               long ago that taking care of your health simply meant keeping your
                               regularly scheduled doctor’s visits, minding your diet and getting some
                               exercise. While these basic principles still serve as a loose overarching
                               framework for general health and wellness, they fall well short of what
                               the average American strives for today.

                               Given the more comprehensive health and wellness aspirations of
                               today, most consumers are more interested in staying out of the
                               doctor’s office than they are about scheduling their next physical. That’s
                               because they have all the tools they need to monitor, maintain and
                               improve their health on their own. The explosion of information and
                               easy access to it puts knowledge within a finger’s reach, the internet
                               of things lets us track our health with every step we take (or don’t
                               take), and label transparency provides clear insight into what’s in—
                               and not in—the foods and supplements we eat. With the abundance
                               of resources available to them, consumers are using nutrition,
                               information and fitness to meet their health goals in personal,
                               meaningful ways that annual check-ups never could.

                               So what sparked this shift? We believe several factors have pushed
                               health and wellness to the forefront in recent years, ranging from the
                               information boom to a rise in self-care to combat escalating health care
                               costs. With a sharper focus on health, Americans are also living longer.
                               This is good news overall, but a Baby Boomer has a different set of
                               health needs than a Millennial. Consumer health risks are also evolving.
                               In fact, the World Health Organization projects that chronic diseases
                               will cause 73% of deaths by 2020, up from just 60% in 2001.

                               By keeping abreast of the strategies consumers are using to stay fit and
                               healthy—across all demographics—manufacturers and retailers can do
                               much more than simply help them meet their goals. They can become
                               partners with them at every step of their journey.

Copyright © 2017 The Nielsen Company                                                                        3
TOTAL STORE GROWTH

                                                           2.20%
                                              1.60%
                                 1.40%
                                                                                   0.90%
                                                                       0.48%

                                  2013        2014        2015         2016        2017
                                                                                (Projected)
    Source: Nielsen Scantrack

                                CONSUMERS
                                ARE DEMANDING
                                TRANSPARENCY
                                Generally speaking, food is often the first lever consumers pull when
                                they think about getting healthier. Today, food plays a growing role in
                                health and wellness. Not only are consumers looking for healthy meals,
                                they’re also using food to manage ailments and to prevent health
                                problems in the future.

                                At mealtimes, many consumers have adopted a back-to-basics mind
                                set, opting for products that are simple, fresh and contain fewer (or
                                no) preservatives or unnatural elements. In a recent Nielsen Strategic
                                Health Perspectives survey, 63% of Americans said they’re trying to
                                eat healthier, with 49% saying they consciously eat more fruits and
                                vegetables. Organic plays a big role in consumption today, and the
                                companies and retailers offering organic products are reaping the
                                benefits. Growth is also healthy among products that have transparency
                                claims like “natural,” “GMO free,” “no artificial ingredients,” and sales
                                have outpaced the average for the rest of the store as a result.

4                                                                                               HEALTH AND WELLNESS 2020 REPORT
TOP ORGANIC FRESH CATEGORIES
                                                (RANKED BY DOLLAR SALES)

                                             TOMATOES                               PACKAGED SALAD
                                                $161.7M                             $886.6M
                                                    17%                             6%

                LETTUCE                                                                          BERRIES
              $164.9M                                                                            $479.5M
                   9%                                                                            25%

       BANANAS                                                                                       CHICKEN
                                                                DOLLAR SALES ($ mil.)
       $190.9M                                                                                       $295.5M
                                                         YEAR-OVER-YEAR CHANGE (%)
           26%                                                                                       15%

           BEVERAGES                                                                             APPLES
             $244.4M                                                                             $293.2M
                 14%                                                                             6%

                                                CARROTS                          HERBS, SPICES AND SEASONINGS
                                               $247.5M                           $259.5M
                                                    4%                           13%

 Source: Nielsen FreshFacts total U.S., 52 weeks ended Dec. 31, 2016

Copyright © 2017 The Nielsen Company                                                                            5
While the table above highlights the top-selling organic categories
    across the store, several categories with fewer dollar sales are
    experiencing even bigger growth percentages. For example, organic
    cookies garnered 1,075.3% growth on $852,000 in sales in the year
    ended Oct. 29, 2016, evidence that consumers love a good treat as
    much they like their greens. Organic avocados, which racked up $65
    million in sales last year, posted annual sales growth of nearly 40%,
    while deli salads ($6.9 million) and deli snacks ($8.7 million) racked up
    sales growth of 129% and 103%, respectively.

    It’s also worth noting that even though many consumers associate
    the word organic with fresh foods, it’s a term that isn’t bound to the
    perimeter of the store. An array of foods and products can be certified
    organic, and consumers aren’t limiting their organic purchasing to fresh
    foods. In fact, U.S. volume sales of products with an organic claim grew
    by 13.7% in the 52 weeks ended Nov. 26, 2016.

6                                                                    HEALTH AND WELLNESS 2020 REPORT
USING THE TOTAL
                              STORE TO MANAGE
                              AILMENTS
                              In addition to eating cleaner, consumers are eating smarter. And that
                              means they’re growing increasingly mindful of what’s in—and what’s
                              not in—the foods they eat. They’re doing this for an array of reasons,
                              such as to avoid artificial ingredients, stave off illness, strengthen their
                              immune systems, bolster the body as it ages and combat ailments.

                              In many ways, consumers are taking their everyday health care needs
                              into their own hands, and foods, personal care products, over-the-
                              counter (OTC) remedies and supplements play a big part of that,
                              especially in a country with a growing population of older consumers.
                              According to the Population Division of the U.S. Census Bureau, more
                              than 47 million Americans were 65 or older in 2015, representing about
                              15% of the U.S. population. By 2060, however, the U.S. Census Bureau
                              projects that number will grow to 98 million, which will represent
                              almost one-quarter of the country’s population. As the country’s older
                              generations (Baby Boomers and the Greatest Generation) look to stay
                              healthy, manufacturers and retailers will need to identify key health care
                              categories that meet their needs and focus on the ingredients they’re
                              looking for.

                                   NUTRITIONAL                        DIURETIC                       THROAT
                                    DIET AIDS                         REMEDIES                      LOZENGES

                                                          PAIN                         SLEEPING
                                                        REMEDIES                         AIDS

 FIVE OF THE TOP CATEGORIES
 FOR BABY BOOMERS
 Source: Nielsen Homescan panel, 52 week ended Dec. 3, 2016

Copyright © 2017 The Nielsen Company                                                                           7
But it’s not just older consumers who are looking for functional foods,
                                 greater transparency in product labels and foods with health benefits.
                                 Across the U.S., a Nielsen Homescan shopper panel in mid-2016
                                 found that 39% of Americans suffer from an ailment, many of whom
                                 manage their ailments with diet. Forty-seven million households have a
                                 consumer who manages their ailments with diet, and these households
                                 spend more than $268 billion at food and retail stores each year.

            ALMOST 4 IN 10 HOUSEHOLDS IN THE U.S. HAS AN AILMENT SUFFERER

                               % OF HOUSEHOLDS WITH AN AILMENT SUFFERER (BY CONDITION)

           43%
                             34%              33%               33%
                                                                                  28%            25%            23%        20%

      ALLERGIES          ACID     HIGH                    IMPERFECT           OBESITY CHOLESTEROL           JOINT     DEPRESSION
                       REFLUX/   BLOOD                      VISION                                          PAIRS
                      HEARTBURN PRESSURE

    Source: Nielsen Homescan Shopper Ailment Panel and TSV Panel, 52 weeks ended June 11, 2016

                                         AILMENT SHOPPERS RETAIL SPENDING

                                                                                   GLUTEN            LACTOSE
                          RANK                             DIABETIC                                                   OVERWEIGHT
                                                                                  NEGATIVE         INTOLERANT

         NO. OF HOUSEHOLDS                                   24.8M                    3.9M             10.3M             34.2M

         RETAIL SPEND                                        $154.1B                 $26.1B            $63.5B           $208.6B

         FOOD SPEND                                          $92.2B                  $16.7B            $38.9B            $127.0B

    Source: Nielsen

8                                                                                                      HEALTH AND WELLNESS 2020 REPORT
The more manufacturers and retailers know about distinct health
                                 topics, the better equipped they’ll be to help consumers meet all of
                                 their wellness goals. For example, Nielsen research has found that the
                                 average consumer with diabetes takes 5.4 prescription medications
                                 for this ailment. They also buy an assortment of specific health care
                                 items disproportionately from the general public, such as digestive aids
                                 and blood testing products. Sixty-five percent of these consumers also
                                 use diet to help manage their conditions, and many do so by buying
                                 items with reduced salt, sugar and fat. With a complete understanding
                                 of consumers with specific needs, it becomes that much easier for
                                 companies to become true partners with them.

                                 This is particularly relevant for meeting the needs of ailment shoppers,
                                 largely because they outspend the general population when it comes
                                 to other health care products. So if manufacturers and retailers do
                                 their part in connecting the front-end assortment to overall health and
                                 wellness, shoppers will get exactly what they need without ever having
                                 to stray elsewhere to find what they’re looking for.

                                  AILMENT SHOPPERS AND OTC RETAIL SPEND

                          150

                          120                                                             124
                                                                       123                               120
                                                     119
                          90      100
                  INDEX

                          60

                          30

                          0
                                AVERAGE          ALLERGY            ACID         CHOLESTEROL INSOMNIA
                                                                   REFLUX

 Read as: Households with allergy sufferers spend 19% more on OTC remedies than the average household.
 OTC—Over-the-counter.
 *OTC spend per household among sufferer group divided by total OTC spend per household x100.
 Source: Nielsen Health Survey 52 weeks ended June 2015.

                                 But ailment shoppers aren’t the only ones looking to use specific foods
                                 to stay healthy. On a larger scale, many Americans are looking to specific
                                 foods to bolster, strengthen and improve their overall health and wellness.
                                 For example, digestive health has become a sizable trend in the U.S.—one
                                 that many consumers are addressing with probiotics—a type of good
                                 bacteria that may help with digestion and offer protection from harmful
                                 bacteria. In fact, Nielsen’s Homescan shopper panel recently found that
                                 19.2% of U.S. households say that probiotics are important to them.
                                 And from a sales perspective, it’s clear that products with probiotics are
                                 winning at the register.

Copyright © 2017 The Nielsen Company                                                                           9
TOP CATEGORIES WITH PROBIOTIC CL AIMS

                                                      PROBIOTIC CLAIMS             SHARE OF CATEGORY
                                                       % SALES GROWTH                   SALES (%)

                        VITAMINS
                AND SUPPLEMENTS
                                                              +26%                           +12%

                                  YOGURT                      +3%                            +22%

              REFRIGERATED TEAS                               +80%                            +5%

     Source: Nielsen Scantrack 52 weeks ended Aug. 27, 2016

                                   For manufacturers and retailers looking for growth opportunity via
                                   products with probiotics, it’s important to have a comprehensive
                                   view of the landscape. Consumers are clearly using vitamins and
                                   supplements as a way to ensure that they are the getting the probiotics
                                   they need. The probiotic space is also expanding quickly, as the market
                                   share of supplements with probiotic claims has grown to 12%, up 26%
                                   in dollar sales from a year ago. As consumers look across the store to
                                   meet their health and wellness needs, food can help supply the right
                                   nutrients and digestive properties. Yogurt, for example, is a category
                                   with a high concentration of probiotics, and a category like refrigerated
                                   teas has also shown strong growth with products featuring probiotic
                                   claims.

                                   Fiber is another ingredient that consumers are looking for when
                                   thinking about digestive health. In fact, 57% of consumers in a recent
                                   Nielsen survey stated that fiber influences their decision making.
                                   Therefore, it’s important for retailers and manufacturers to understand
                                   this trend and to be able to communicate the health benefits of fiber
                                   with consumers. According to Nielsen Product Insider, the Federal Food
                                   and Drug Administration (FDA) has defined 60% of the products in the
                                   canned bean category as an excellent source of fiber. Only 28% of those
                                   products, however, include a fiber claim on the package. As consumers
                                   continue to look for specific ingredients and attributes to aid them in
                                   their overall health and wellness, communicating these benefits will
                                   become critical to success.

10                                                                                                  HEALTH AND WELLNESS 2020 REPORT
HOW CONSUMERS
                               ARE COPING WITH
                               RISING HEALTH
                               CARE COSTS
                               In addition to being proactive about their health, U.S. consumers
                               are growing increasingly aware of the rising costs associated with
                               traditional health care. According to the World Bank, U.S. health care
                               costs will amount to 20% of GDP by 2025 (up from 17.5% in 2014), the
                               highest in the world among industrialized countries.

                               While Americans’ drive to be independent, prevent disease/illness
                               and stay healthy has caused a spike in self-care, a recent Strategic
                               Health Perspectives survey found that health care costs remain the top
                               concern for consumers. While 19% of consumers said they’d like to
                               see improved quality of health care, 43% said reducing out-of-pocket
                               expenses is most important.

         AMERICANS ARE FEELING THE PINCH OF RISING HEALTH CARE COSTS

                             % OF CONSUMERS WHO SAID THAT THEIR OUT-OF-POCKETS COSTS
                                        INCREASED FROM THE PREVIOUS YEAR

                                                                                      53%
                                                                                               50%

                                                           41%      39%
                                  34%
                                                30%

                                         2014                    2015                       2016

                                                       DOCTOR VISITS           RX

 Source: Strategic Health Perspectives

Copyright © 2017 The Nielsen Company                                                                    11
As a result of rising health care costs, consumers are making
                                    adjustments in several ways: making trade-offs: taking less medicine;
                                    taking an OTC medication first; asking for cheaper alternatives; and
                                    side-stepping visits to the doctor altogether.

                        THE HEALTH CARE TRADE-OFFS CONSUMERS ARE MAKING

                                         27%

                                                                      21%                          20%

                                ASKED DOCTOR/                     TOOK A                    TOOK AN OTC
                                  PHARMACIST                   PRESCRIPTION                  MEDICATION
                                 ABOUT A LESS                   LESS OFTEN                BEFORE STARTING
                                   EXPENSIVE                       THAN                   A RECOMMENDED
                                  ALTERNATIVE                 RECOMMENDED                    MEDICATION
                                 PRESCRIPTION

     OTC—Over-the-counter
     Source: Strategic Health Perspectives

                                    Given the current environment, retail has a huge opportunity to affect
                                    consumer lives like never before by supporting the medical needs that
                                    influence purchasing. Retailers across all channels have already seized
                                    the opportunity by using health and wellness as a growth strategy.
                                    Initiatives include everything from prioritizing health foods in the
                                    center of the store to emphasizing fresh foods around the perimeter
                                    to training associates and hiring dieticians to be more knowledgeable
                                    about healthy products. At a more involved level, many have opened
                                    health clinics, a trend that has ramped up significantly over the past
                                    two years.

                                    Global consulting firm Accenture projects there will be more than
                                    2,800 in-store retail clinics in the U.S. by the end of this year, up
                                    47% from 2014, when there were just over 1,900. Given the ease of
                                    access and convenience of these clinics, consumer acceptance and
                                    use of them is growing. A Nielsen “Retail Health Care Services as
                                    Total Growth Opportunity” survey in the fall of 2016 found that one
                                    in five Americans visited a retail health clinic in the past year. Certain
                                    demographics are visiting more than the overall average, however,
                                    including Hispanics, Millennials and households with children.

12                                                                                                       HEALTH AND WELLNESS 2020 REPORT
RETAILERS ARE BECOMING HEALTH CARE PROVIDERS

                                                                                     35%

                                                              29%
                                                                                                  26%

                                   19%

                            U.S. AVERAGE              HOUSEHOLDS                  HISPANICS   MILLENNIALS
                                                         WITH
                                                       CHILDREN

 Source: ‘Retail Health Care Services as Total Store Growth Opportunity’ survey

                                In addition to offering consumers an alternative to heading to the
                                traditional doctor’s office, retailers that understand the influence
                                that trips to retail clinics have on additional in-store purchases will
                                be best positioned to capitalize on additional spend potential. More
                                importantly, retailers also have an opportunity to increase customer
                                spend and loyalty by leveraging retail clinic interactions to influence
                                what consumers purchase across the rest of the store during their visit.

                                Nielsen’s Retail Health Care Services as Total Growth Opportunity
                                survey found that 53% of the adults who visited a health care were
                                influenced to buy a retail product as a result of their visit. Thirty-
                                six percent were influenced to buy an OTC medication, 27% were
                                influenced to buy a personal care item, 24% were influenced to buy
                                food and 18% were influenced to buy household cleaners.

Copyright © 2017 The Nielsen Company                                                                        13
BECOMING HEALTH
     AND WELLNESS
     PARTNERS WITH
     CONSUMERS
     There’s no denying the rising importance of health and wellness among
     consumers. This presents significant opportunity for manufacturers and
     retailers to help them make better decisions about how and where they
     spend their dollars.

     Food remains a primary driver in health and wellness, but more than
     70% of survey respondents agree that “eating right” is a challenge. The
     upside for manufacturers and retailers, however, is that 70% agree that
     they can manage their health and wellness through proper nutrition,
     and that means they’re actively looking for an array of fresh items, clear
     ingredient listings and transparency about nutrition facts/benefits.

     Consumers also want simplicity and transparency, and sales of products
     with health and wellness claims are rising as a result. For example,
     products labeled “gluten free” experienced a combined average growth
     rate (CAGR) of more than 11% over the year-year period ending Oct.
     29, 2016, while products labeled “organic” saw CAGR of almost 15%.
     Products labeled “natural” and “GMO free” also experienced double-
     digit CAGRs.

     Above all, there is no one-size-fits-all approach to health and wellness.
     There are myriad circumstances motivating consumers, making health
     and wellness a personal quest that varies from individual to individual.
     Manufacturers and retailers have a true opportunity to partner with
     consumers as health and wellness is of growing importance in their
     lives, but generalized and ambiguous solutions won’t be helpful in
     traversing a path to success.

14                                                                    HEALTH AND WELLNESS 2020 REPORT
ABOUT NIELSEN
                               Nielsen Holdings plc (NYSE: NLSN) is a global performance
                               management company that provides a comprehensive understanding
                               of what consumers watch and buy. Nielsen’s Watch segment provides
                               media and advertising clients with Total Audience measurement services
                               for all devices on which content — video, audio and text — is consumed.
                               The Buy segment offers consumer packaged goods manufacturers
                               and retailers the industry’s only global view of retail performance
                               measurement. By integrating information from its Watch and Buy
                               segments and other data sources, Nielsen also provides its clients with
                               analytics that help improve performance. Nielsen, an S&P 500 company,
                               has operations in over 100 countries, covering more than 90% of the
                               world’s population.

                               For more information, visit www.nielsen.com.

                               Copyright © 2017 The Nielsen Company. All rights reserved. Nielsen and
                               the Nielsen logo are trademarks or registered trademarks of CZT/ACN
                               Trademarks, L.L.C. Other product and service names are trademarks or
                               registered trademarks of their respective companies. 17/10796

Copyright © 2017 The Nielsen Company                                                                     15
16   HEALTH AND WELLNESS 2020 REPORT
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