Kids: The Changing Functional CPG Industry Landscape
How early did you start taking functional foods, functional beverages, or nutritional supplements? Since three-fourths of American babies receive at least some formula by six months old, it’s probably much earlier than you thought! After we chugged down bottles of Similac (essentially watered-down vitamin and mineral fortified meal replacement shakes), most of us chewed countless Flintstones vitamins. Additionally, we then settled into a routine of mixing up Carnation Instant Breakfast powders because that’s what kids of busy parents did in the 90s.
- Similac = owned by Abbott Labs
- Flintstones Vitamins = owned by Bayer
- Carnation Instant Breakfast = owned by Nestle
Do you notice a pattern? Every “supplement” we took growing up is owned by a billion-dollar consumer packaged good (CPG) or pharmaceutical brand portfolio.
Why is this the case?
When a brand manufacturer positions a product intended for children, it’s expected that they intend to take the highest road, where the cleanest ingredients and most stringent testing will be upheld. This might seem standard for any commercialized supplement regardless of age, but let’s just say the vitamins and mineral supplements (VMS) industry has had its share of issues over the years. Historically speaking, that’s why most entrepreneurs in the VMS industry (especially the sports nutrition sub-category) live by the unwritten rule that children are off limits.
Do those rules hold any weight anymore? Anecdotally, it seems rule breaking has risen over the last 5–7 years, with the market supporting an increasingly larger number of emerging brands and brand/product extensions. Why is this happening?
- Information Age. Gen X and Millennial parents grew up with more information on nutrition than previous generations. Comparing 1999 to 2016, a study found that diet quality modestly improved based on validated dietary quality scores. The estimated proportion of children with poor-quality diet significantly decreased (from 76.8% to 56.1%).
- Lower Barriers of Entry. Each year, the barriers of entry to enter the children’s supplement categories have become lower. You can find high-quality turnkey contract manufacturers much easier. You can market to well-informed parents much easier. You can get national distribution (through ecommerce) much easier.
You also have the “COVID-19 Effect” that has sped up this trend through numerous underlying drivers…
- Virtual Schooling — this lead to more micromanagement of children’s lives
- At-Home Meals — restricted living situations (or ongoing fear) has caused more meals and snacks to be eaten at home
- Out of Work Parents (Mostly Mothers) — looking to make a positive impact wherever possible, they used the extra time to discover emerging functional CPG brands that had targeted products for children
Silver Lining = a pandemic era survey found that 31 percent of parents said their child’s nutrition improved because of the ability to focus on healthier eating, making more meals at home, and being able to monitor their eating habits.
What does the data say?
The strongest growth in the general health focus area is in children’s general health. In a market still driven mostly by multivitamins, growth in 2020 was 13.6 percent (totaling $554 million) and predicted around 8 percent additional growth in 2021. Moreover, there has been a “COVID-19 Effect” aided expansion across specialty products like pre-and probiotics and fish oils. With access to vaccines still being rolled out for children (not saying I support it), growth in children’s supplements should remain strong.
Predictions for the Near Future?
With more attention being given to what kids eat and an overall shift toward healthier choices, it will inevitably create a battle of the ages between good and evil in the CPG industry. Large CPG conglomerates will have to pick a side, as emerging CPG brands will act aggressively to create erosion of market share leadership by making it their missions to rewrite the ultra-processed food and beverage playbooks.
While it was once considered an unwritten rule that children were off limits by most functional CPG brands, this changes big time in the 2020s. Just as it has done within adult nutrition, the “better for you” food and beverage CPG trend will start to turn functional, as parents seek to give their children the same health benefits. Type in “kids supplements” into the Amazon search bar and you’ll get a result that’s 1000s of listings deep. The normal multivitamins are already being joined by sleep supplements, plant-based protein powders, adaptogens for stress/anxiety, and endless others.
On the marketing-side of the equation, will we see “health influencers” that are children? I wouldn’t be surprised if it happens. With access to iPads and social media beginning earlier and earlier, marketers will want to make impressions quick. Regardless of those that say there’s no moral, ethical, or social justification for marketing any product to children, it doesn’t change the fact that advertisers spend around $15 billion annually to reach the youth market.
Final Thoughts
I’m a glass half full kind of guy, so I want to believe the answer is yes. We need to course correct what is happening with the health of American adults. It’s also unacceptable that two-thirds of calories consumed by U.S. children and teens are from ultra-processed foods like chips, cookies, microwaveable meals and frozen pizza. There is no doubt that parents have long struggled to figure out what to put on their child’s plate that is healthy, convenient, and acceptable to their taste buds. This won’t be solved easily with normalized routines starting up again. That means leaning on processed packaged foods and beverages aren’t going away, but maybe a few broader happenings within the CPG industry could help lessen the effect.
- Due to improving food and flavor science, it has become easier to hide undesirable (albeit healthy) ingredients inside classic snacks
- The further convergence of “better for you” and product format convenience trends is creating more options with ubiquitous placement on retail shelves
- Founders have gotten more advanced in usage of proper health-centric packaging callouts
