With obesity levels at an all time high, the healthy food movement has overflowed beyond grocery aisles to mass and drug stores, into school lunch offerings and even into vending machine territory, making the business of better-for-you foods (BFY) as profitable as it is healthy.

According to a new report titled “Better-For-You Foods: It’s Just Good Business,” produced by Washington, D.C.-based Hudson Institute, food and beverage companies with a higher percentage of their sales coming from healthy foods and beverages perform better financially. 

Using Nielsen sales data from grocery stores, drug stores and mass merchandisers, Hudson Institute researchers found these companies record stronger sales growth, higher operating profits, superior shareholder returns and better company reputations than companies that sell fewer BFY products, such as no-, low- and reduced-calorie items, like flavored waters or diet sodas, as well as products that generally are perceived to be healthier, such as yogurts and whole-grain cereals. During the five-year study period, BFY items drove more than 70% of sales growth.
 
The researchers studied sales and other financial metrics data, such as operating income, share price appreciation and return to shareholders; and company reputation and favorability rankings, from 15 major national and international food and beverage companies who made up the majority of the largest food and beverage purveyors. The companies included, among others, General Mills, Nestle, Campbell Soup and Kellogg’s. The data, spanning 2007 to 2011, showed that more companies grew the percentage of their sales coming from BFY products than decreased it.
 
Sales of foods and beverages were grouped into three categories. “Traditional” products like Pepsi, Kellogg’s Frosted Flakes, Tropicana Orange Juice and Hellmann’s Mayonnaise, were compared against “Lite” foods (i.e. Lean Cuisine, Tropicana 50, Coca-Cola Zero and Capri Sun Roarin’ Waters) and “Good” foods like Cheerios, Dannon Yogurt, Nabisco Wheat Thins and Campbell’s Tomato Soup. The researchers said Traditional foods represented 61% of sales, while Lite and Good foods represented a total of 39% (split evenly at 19%, respectively).
 
The study—which Hudson Institute said was the first of its kind—concluded that food and beverage companies that employ sound strategic planning with a commitment to growing sales of better-for-you foods just makes good business sense.
 
“For the first time we now have concrete evidence demonstrating that it’s just good business to sell better-for-you products,” commented Hank Cardello, lead author of the report and senior fellow and director of the Obesity Solutions Initiative at the Hudson Institute. “Companies’ bottom lines can benefit from selling these sorts of products.”
 
In addition to the impact on sales growth, Mr. Cardello and his colleagues found that, in comparison to companies with lower-than-average sales of BFY items, those with a higher percentage of BFY sales showed a 50% growth in operating profit, compared to roughly 20% growth for the other companies; and outperformed the S&P 500 Index by 60 points on average, compared with roughly 40 points for the other companies.
 
Those companies studied also delivered returns to their shareholders that were 15 percentage points higher than those generated by companies with lower sales of BFY items, while having recorded reputation ratings that were more than 30% higher than those of companies with lower sales of BFY items.
 
Mr. Cardello said that the major findings of the report highlight several strategies for companies that hope to follow the lead of the industry’s top BFY product sellers. They include placing more emphasis on selling BFY foods and beverages, accelerating the developmentof more nutritious foods, and adopting the measurement of BFY sales as part of an annual assessment of company performance and progress.
 
“We hope this report inspires companies to do more to create and sell truly healthy products,” said James Marks, senior vice president and director of the Health Group at the Robert Wood Johnson Foundation, which funded the report. “We still have a way to go, but we believe we can have healthy companies and a healthier country. We need both.”