Feel-good sales for health food

Central and Eastern Europe (CEE) has been one of the fastest growing markets for health and wellness products in the past five years, according to a recent report by EuroMonitor International.

Overall, the CEE region registered a 17 percent increase in sales within the category from 2004-09, an impressive showing considering the entire packaged foods segment posted only an 8 percent increase. Domestically, the Czech Republic pulled even further into the lead with the segment growing 23.4 percent since 2009.

But the quick expansion has come to a near standstill after the recession dampened consumer spending, with sales only growing 1.5 percent in 2008 compared with 9.1 percent in 2007.

The impact of less consumer purchasing power has not meant a decline in demand for the products, but rather a change in buying habits. Instead of visiting independent stores that have higher prices, such as two-decade old Czech health-food chain Country Life, customers are buying private brand labels available at big chains like Tesco, DM and Albert, which are able to produce the products at lower prices.

"All the bigger hypermarkets like Tesco take away from the market share because they offer similar products for a lower price," said Otakar Jiránek, founder of Country Life. "But it's often lower quality, too. Just because they declare it a health food doesn't mean it's always good for you."

Šárka Konejlová, a buyer for Tesco's Healthy Living line, said the demand for healthy living products peaked before the crises but is currently stable.

"Our sales are the same as last year's," she said, adding that she expects the launch of new products from local suppliers in September will allow Tesco to gain a bigger share in a marketplace estimated to be worth $1.5 billion in 2009, according to EuroMonitor, compared with $1.2 billion in 2004.

Globally, the industry was worth $573 billion in 2009, a 4.4 percent year-on-year growth from 2008. The "Health and Wellness" label is a general one, encompassing organic foods and beverages, fortified/functional foods, natural health foods, better-for-you foods and also food-intolerance products.

For Jiránek, the main force behind the drive is increased knowledge and awareness among consumers, but there remains a long way to go.

"There's still a prejudice among people that health food means something that doesn't taste good. A lot of people equate 'healthy' with having this ascetic lifestyle and eliminating everything, which again, is not true," he said. "We've been breaking down these prejudices for 20 years, but it's a process, and we also need the official state support of health in programs oriented toward healthy and organic food."

Eva Špaková works at the Wellnessia Health Center, a personal weight-loss and nutrition consultancy that's made a business out of the growing trend toward healthier living in the Czech Republic.

"There are more health stores like Country Life. Plus, now you're also seeing restaurants offer a better choice for customers," Špaková said. "It's also a matter of fashion. Everybody's talking about health and fitness, and the idea is 'the slimmer, the better.' "

While acknowledging that Czechs "aren't the healthiest of people," Špaková did praise their cooking habits.

"The younger generation, unlike in the United States, doesn't buy cheap microwaveable food. ... While we may have more fat in our sauces, at least they are homemade and don't contain preservatives or chemicals," she said. "Microwavable frozen food is really horrible."

Demographically, the trend is picking up among younger generations while "older generations tend to be loyal to traditional Czech food," she added.

Elsewhere, the health buzz has been met with mixed success by some sub-industries in the food market that are finding it much harder to cash in.

In particular, the healthy snack industry has grown, but not at the same rate as the overall market, according to EuroMonitor. The problem may lie in the apparent paradox of eating a healthy potato chip. On a global level, reduced-fat snacks grew 30 percent during the same period, while potato chips grew 33 percent, showing that regular snacks outpace their healthier versions.

In 2009, global reduced-fat snack sales amounted to $2.8 billion, accounting for just 3 percent of total sweet-and-savory snack sales. The main problem, according to the report, is that "health-conscious consumers tend not to consume chips in great quantities or on a regular basis."

Increasing awareness

In the short term, the effects of the recent credit crunch are expected to continue to negatively affect consumer expenditure on more expensive nutrition products up to 2011. But once wages start rising, the segment will likely pick up where it left off in terms of growth.

"The fashionable trend of healthy nutrition will continue to play a major role in the Czech Republic in the next five years," EuroMonitor analyst Martin Stabel told The Prague Post. "The health-and-wellness food and beverage market is expected to continue to grow as a result of increasing consumer awareness of healthy nutrition."

As the domestic economy recovers and unemployment lowers to pre-recession levels, consumers will be able to spend higher amounts on products they equate with a healthy lifestyle, he added.

Global growth in the segment is expected to rise $140 billion between 2009 and 2014.

"In the next five years, I expect to see more synergy between packaged health-and-wellness foods and beverages together with nonprescription-based medication, namely nutritional and dietary supplements," Stabel said.

- Caroline Karosawe contributed to this report.

Cillian O'Donoghue can be reached at
codonoghue@praguepost.com