Meal replacement products poised for revival
By Elena Ruiu | 6 April 2006
As slimmers lose interest in low-carb diets, meal replacement products are primed to benefit. Can Unilever's Slim-Fast flex quickly enough to capitalise or will its rivals conquer through innovation? Elena Ruiu reports.
US retail volume sales of meal replacement products (slimming and convalescence products) are forecast to increase by 6% in 2006, according to Euromonitor International's latest research. This is important news for the sector as 2006 marks a return to growth for meal replacement products, following a lacklustre 2005 and a difficult 2004. The low-carb fad, which started in 2002, had an enormous impact on meal replacement products, particularly slimming products. Dieters shifted away from products marketed as low-calorie (but often high in carbohydrates) and towards products positioned as high-protein and low-carb.
Few companies were well equipped to take advantage of this trend, which translated into volume sales of meal replacement products declining by 10% in 2003 and almost 12% in 2004. While Atkins meal replacement bars posted a 29.4% sales increase in 2004, Unilever's Slim-Fast Foods saw its sales go into freefall.
While there are clear signs that the low-carb diet trend has faded, it has changed the way many Americans think about weight loss. The shift has left Slim Fast a victim of its own success. Its domination of the slimming products category in the US meant the company was completely unprepared when the low-carb craze hit. In addition, Slim-Fast has come to exemplify a dieting philosophy many US consumers see as outmoded.
With Slim-Fast's leadership of slimming products under strain, a number of new brands appeared, for instance the Snapple-A-Day line within slimming drinks, Nestlé PRIA's nutrition brand targeted at women and the South Beach meal replacement bars launched by Kraft.
Against this backdrop of difficulties faced by the slimming products category, convalescence products were not affected by dieting trends as their consumer base is the ageing population and, in general, people with special nutritional needs.
Indeed, Euromonitor International forecasts that volume sales of convalescence products will increase constantly until 2010. Growth will be driven by new products, which will broaden the consumer base by appealing to needs beyond just age or health problems.
An example is the Ensure Healthy Mom range launched by Abbott Laboratories in 2005. This range, which includes meal replacement drinks and bars, is specifically designed for pregnant women. For this new range of nutrition products, Abbott Laboratories has sought a clear separation from its other, more geriatric-oriented Ensure branded products. Healthy Mom drinks and bars appear in retailers' baby care sections and are promoted through a dedicated website, distinct from other products marketed under the Ensure brand. In addition, innovation is also expected to take place through larger use of soy because of its natural benefits for overall health, as confirmed by a US study published in mid-2005.
Skyrocketing obesity rates and increased demand for convenience products are two long-term trends that strongly favour meal replacement products with Americans looking to healthy products that can be consumed on-the-go. Likewise, as many Americans in the baby boomer generation are approaching retirement age, the ageing population will continue to fuel demand for convalescence products.
According to the US Center for Disease Control, 27% of the US population is obese while a much larger proportion of Americans, 61%, are considered overweight. In spite of the rising awareness of the obesity problem, Americans continue to pile on the pounds. According to the American Journal of Clinical Nutrition Americans spend US$33bn annually on weight loss products and services. Yet, these trends can be a double-edged sword: the success of low-carb products warned manufacturers that not all Americans see meal replacement products as an ideal way to achieve their weight loss goals, while the steady demand for convalescence products among older Americans hampers attempts to broaden their appeal to a younger generation.
Manufacturers are thus seeking to alter consumer perceptions of what constitutes a meal replacement product. Makers of meal replacement drinks have begun to offer a variety of flavour options, with many new drinks closer to blended fruit drinks. Slim Fast markets a line of fruit Smoothies under its Optima line, which competes with Snapple Beverage Group's Snapple-A-Day brand, which is positioned as a fruit flavoured, lactose-free alternative to dairy-based drinks. For meal replacement bars, the trend is towards products that are not only nutritional, but also satiate consumers for longer, like Kashi's GoLean range, which features slow-release carbohydrates that prevent spikes or crashes in blood sugar level.
Unlike other packaged foods, only a very small percentage of meal replacement products sales come from impulse purchases. While consumers looking for a fast, low-calorie snack will on occasion stop at a convenience store for a single-serve bar or shake, the majority of Americans using meal replacement products view them as part of a long-term weight-loss or nutrition solution. Many slimming-product brands, Slim-Fast being the most obvious example, explicitly recommend dieters use their products every day - Slim-Fast's website contains a number of sample daily meal plans that recommend various combinations of bars and drinks throughout the day, followed by a "sensible dinner". In addition, meal replacements tend to be shelf-stable, allowing consumers to store large quantities for long periods of time. For all these reasons, meal replacements do especially well in retail channels with the capacity to sell large portions—snack bars in 36-count boxes, beverages in six-, 12- and 24-packs.
Warehouse stores such as Sam's Club and Costco, as well as direct marketers such as Amway, accounted for one third of value sales in 2005, which, although declining, is still larger than any single retail channel. The decline in share, though relatively small, reflects the expanding power of mass retailers such as Wal-Mart. With many mass retail outlets surpassing warehouse stores in terms of physical space, the traditional advantage of warehouse stores—the ability to sell large quantities of a product, in supersized containers or in multipacks, often at a sharply discounted price—is diluted. Many discounters now offer meal replacement products in sizes and multipacks similar to those found in warehouse stores, often at a comparable price.
While a significant percentage of meal replacement sales will continue to come from warehouse stores and direct marketers, Euromonitor expects the decline seen in the past years to continue, with mass retailers now giving consumers the opportunity to make both occasional bulk purchases as well as regular grocery purchases in the same location.
Related research from Euromonitor
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