Food: “Better-For-You” Means Better for Brands

Big food and beverage companies argue they are fighting federal regulators so stiffly about new front-of-package labeling standards for the nutritional characteristics of their products for an important reason: the government doesn’t want producers to be able to highlight the amounts of fiber, omega-3s and other positive nutrients in them – just to summarize how little sodium and other “bad things” they contain.

The debate could get sharper in the wake of the release of a new report that dimensionalizes the financial advantages brought to companies by developing and marketing “better-for-you” foods. Companies with a higher percentage of sales from BFY products had a 50 percent increase in operating profit (compared to 20 percent at companies with a below-average percentage of sales of those items), outperformed the S&P 500 by an average of 60 points (vs. 40 points) and generated higher shareholder returns than the other companies, according to a new study by the Hudson Institute and the Robert Wood Johnson Foundation.

Of course, new products drive sales, and much of the better-for-you fare is the newest part of lineups, especially those offered by mainstream companies that came later to the development of nutritionally positioned fare than the start-up companies that launched a revolution in the diet of many Americans.

While providing encouragement about an overall better-for-you direction, this picture doesn’t translate into clean agendas for individual companies.

PepsiCo, for example, has been struggling with the transition of its brands to better-for-you positioning even though CEO Indra Nooyi is clearly committed to making the company a paragon of the burgeoning BFY segment. Gatorade has re-energized growth with a new approach to its product line-up, for instance, and Trop50 has become a big new hit for Tropicana. But Frito-Lay has had uneven performance from its push into healthier snacks, and the company’s mishandling of its traditional Pepsi brand has undercut much of the progress its beverages division has made with better-for-you brands.