Natural Foods Merchandiser

New FTC guidelines will drive growth of healthy kids' products

About 40 percent, or $4 billion, of the kids' food market has a "better-for-you element," according to Packaged Facts. But that's about to change as new FTC guidelines will drive product development and growth.

Retailers, it's time to make room on your shelves for an explosion of meals, treats and drinks for kids. That's the message from market research firm Packaged Facts, which predicts that the market for children's foods and beverages will grow 40 percent during the next five years.

A combination of government policy and mounting health issues will drive this increase and will challenge food and beverage manufacturers to reformulate unhealthy products.

Currently, only about 40 percent, or $4 billion, of the kids' food market has a "better-for-you element," according to Packaged Facts. This includes products with claims such as "made with whole wheat" and "lower sugar."

The other 60 percent, or $6 billion of products, make no health claim. Perhaps this explains why frozen foods for children, including ice cream—a kids' favorite—is the biggest seller, accounting for $2 billion, or 23 percent, of retail sales. Beverages are second, followed by dairy products, Packaged Facts reported.

"Generally, foods that are made and marketed for kids are of poorer nutritional value than the adult counterparts," said Margo Wooton, director of nutrition policy at the Washington, D.C.-based advocacy group Center for the Science of Public Interest.

Yet, Wooton is cautiously optimistic. "I think we're beginning to see some changes," she said. "Five years ago companies weren't paying attention to the nutritional quality of what they market to kids. Now they are."

Carolyn Cozad, president of Bounce Enterprises, a holistic food and business consulting company in Henderson, Nev., shares Wooton's hope, believing that the "good-for-you" sector of kids' foods will ultimately rule as the majority. "The focus from a governmental level and community level are both strong winds helping to move the food industry in that direction," Cozad said. "However, how long change will take is a concern for many. Changing habits and belief systems is difficult to do, and since so much of the manufacturer's existence depends on demand, it will be a race to see whether the acceptance of healthier options can also take the lead on demand."

New advertising guidelines grow healthier products

In an attempt to thwart childhood obesity, the U.S. Federal Trade Commission recently released proposed guidelines for foods marketed toward children. According to the U.S. Centers for Disease Control, almost one in five children and adolescents (17 percent, or 12.5 million) aged 2 to 19 years old are obese.

The government's voluntary guidelines, which apply to television, in-store and Internet ads and which are up for public comment until this summer, would urge companies to market foods to children ages 2 through 17 only if they are low in fats, added sugars and sodium, and if they contain specified healthy ingredients, such as fruits, vegetables, whole grains, fat-free or low-fat milk products, fish, extra lean meat or poultry, eggs, beans or nuts and seeds. As public policy, the rules will likely motivate manufacturers to develop healthier kids' products, according to Wooton.

That's because a large percentage of children's food and beverages on store shelves—that 60 percent cited by Packaged Facts—do not meet the proposed principles. Could this mean an end to ads featuring popular cartoon characters like Shrek or Dora the Explorer that are irresistible to children? To be in compliance, the advertiser would have to make sure its products are healthy enough to meet the government's standards. The rules would be phased in over five years, allowing companies time to reformulate products.

Some product revamping and advertising improvements already are underway because several large food companies, including General Mills, Kellogg Company, Kraft Foods, The Coca-Cola Company and PepsiCo, signed onto the Children's Food and Beverage Advertising Initiative, sponsored by the Better Business Bureau. This self-regulation program, which launched in 2006, encourages advertising of healthy products to kids under age 12, but the standards are not as strict as the government's proposed recommendations, according to Wooton.

Even some natural foods companies may have to reformulate their kids' products to conform to government rules. "I see a lot of natural foods that aren't truly nutritious," Wooton said, noting that some also use cartoon characters on packaging to entice kids. "Companies that position themselves as natural or healthful have an added responsibility to make sure that products they market are actually healthy."

But what if these companies don't do television or Internet advertising? It turns out that product packaging—and even in-store displays—can fall under the umbrella of marketing, and, thus, FTC regulations.

Of course, according to Cozad, packaging also can be a "great communication tool," especially for kids' food and beverage manufacturers who sell authentically healthy products. Tony the Tiger doesn't have to be pushing sugar-coated cereal. The Canada-based natural cereal and snack company Nature's Path, for example, shows animals—instead of popular cartoon characters—on its organic, low-sodium Envirokidz cereal boxes to educate and attract children—and parents. "People are making eco-conscious choices," said Maria Emmer-Aanes, director of marketing and communications for Nature's Path. Emmer-Aanes said that 1 percent of EnviroKidz sales are donated to species and habitat conservation or education programs for kids. "Consumers are looking to support more than just food that they put on their shelves."

Thinking outside of the box, Wooton also would like to see a boost in marketing that promotes naturally nutritious products in kid-friendly ways. Think Bolthouse's campaign that markets carrots like potato chips.

"I wish fruit and vegetable companies had more money to market products the way McDonald's and sugary cereal companies do," Wooton said. "Marketing shapes the whole way kids think about food and what they're willing to eat at home, at daycare, at school. If not done right, it makes everyone's job of feeding children healthy food near impossible."

The future of kids' products and packaging

The products most likely to be affected by the government's proposed marketing guidelines include breakfast cereals; snack foods; candy; dairy products; baked goods; carbonated beverages; fruit juice and non-carbonated beverages; prepared foods and meals; frozen and chilled deserts; and restaurant foods. These foods represent the lion's share of marketing dollars spent to woo children, according to the government working group's proposal.

Reduced-sodium and low-sugar products are obvious winners under the fed's new guidelines. But Emmer-Aanes thinks the rules will also "accentuate the positive—what's good in products versus what's missing from products," she said. For example, Emmer-Aanes predicts that manufacturers of gluten-free kids' foods will get creative with ancient grains, such as quinoa, amaranth and buckwheat, to make the products a bit healthier.

As well as recipe changes, manufacturing and packaging innovations can enhance the healthfulness of kids' foods as well. "Some new techniques I see that I like include freeze drying, vacuum packaging and alternative canning," Cozad said.

Retailers need to prepare for competition

As healthier kids' products gain momentum in the marketplace, brands that were once carried only by independent natural products stores may move over to conventional chains. Nature's Path, for example, has co-branded some of its products with Costco.

Such efforts could mean heavy competition for smaller retailers. "If healthier kids' options go more than 50 to 60 percent mainstream, [natural products stores] will be forced to compete on price," Cozad said. One way to stay competitive: Band together through industry groups that act as cooperatives for smaller retailers. "This can hopefully help them to increase their purchasing power," Cozad said.

Another strategy, according to Cozad, is for retailers to capitalize on their health missions. "They can tout the benefits of getting the whole family to eat healthier, so that it's not just about buying healthier kids' products, but buying healthier in general."

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