The $725 billion global health and wellness category continues to outperform the overall food and drink industry, a new study by KPMG shows. 

The financial services company says that deepening consumer interest in health and wellness worldwide means the segment is set to continue to “outperform and capture share from other categories”.

Research collected in KPMG’s Many Healthy Returns report shows that since 2013 health and wellness products have outgrown overall food and beverages in nine out of 10 of the top countries by market size.

Superior pricing power
Driven by superior pricing power, health and wellness assets generate gross margins that are on average 750 to 950 base points higher than their peers. These dynamics have made health and wellness assets attractive strategic targets, says the report. 

KPMG analysis shows that health and wellness focused assets have doubled their penetration of deal volumes since 2012. They also command premium valuations – approximately 30% higher than those of the sector overall.

KPMG says a combination of drivers – growing awareness of health issues, greater access to information, R&D driven product differentiation and strong health and wellness pricing power among them – are stimulating high levels of M&A activity and premium valuations in the segment.

The report identifies the global top Five health and wellness subcategories (based on 2017 data) as:
• Fortified/functional
• Naturally healthy
• Better for you
• Free from
• Organic 

But it notes these rankings may well have changed in the last three years with explosion of interest in vegan and pant-based (google searches of the term plant-based, it observes, increased 22-fold between 2009-19). 

Top food attributes –  the need for nuance 
Turning to food attributes, KPMG says these vary considerably according to geography and age group, and understanding the nuances involved is important for brand owners and investors alike.

Globally, the most commonly preferred attribute in 2017 was ‘is all natural’ (49%), followed by ‘no artificial sweeteners’ (47%), ‘limited or no added sugar’ (47%), ‘no trans-fats’ (45%), ‘no GMOs’ (44%).

Considerable variation by country also is also shown. For example,  Italy, France and Russia both cite ‘no GMOs’ as their top attribute – while it doesn’t appear at all in the UK, USA, and Brazil top five attribute rankings. Similarly, in the UK ‘no added sugar’ is the number one attribute, but in Italy and China it doesn’t appear at all in the top five.