Study: Consumers Willing to Pay ‘Healthy Tax’

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Study: Consumers Willing to Pay ‘Healthy Tax’

02/16/2015

Consumer interest in healthy foods is stronger than ever, to the point where they are increasingly willing to pay a premium for it, according to a survey by AlixPartners, a business advisory firm.

AlixPartners’ “North American Health & Wellness Review” reports the results of a survey of 1,100 consumers about their attitudes toward healthy eating. Among the conclusions: Many retailers and their trading partners are not fully understanding and harnessing to their benefit the interest consumers have in eating healthy.

“While the health and wellness trend has been strong for more than a decade, we believe consumers’ interest in this space is still in the early stages due in part to very favorable demographics,” says David Garfield, managing director at AlixPartners and co-leader of the firm’s Consumer Products Practice. “At the same time, however, manufacturers, suppliers and retailers are leaving money on the table in health and wellness, due to less-than-optimal actions in areas including pricing, innovation and supply chain.”

Demographics gets attention in the report through an examination of the similarities, and differences, in attitudes among baby boomers and millennials. While both generational groups are interested in healthy foods and beverages, their specific interests diverge in several respects:

Strategy. Boomers plan to add more seafood, fiber and vitamins to their diet and reduce consumption of red meat, salt and processed food. Millennials, for their part, intend to add more protein to their diets and reduce calories and fast food. More generally, boomers are more likely to respond to products that have removed “bad” nutrients like fat and sugar, while millennials are more likely to find appeal in products labeled “organic” or “all-natural.”

Taste. Baby boomers were more likely to care about this, with 44 percent naming it as an important attribute, compared with 29 percent of millennials.

Willingness to pay extra. The survey gauged how much of a premium different generations were willing to pay for various food and beverage attributes. Boomers were willing to pay more across the board, which may be attributable simply to their having more money. The greatest disparities included trans-fat free (boomers willing to pay 12.3 percent more, millennials 6.4 percent); lactose free (boomers willing to pay 10 percent more, millennials 6.4 percent); and all-natural (boomers 11.8 percent, millennials 7.9 percent).

In general, the survey found that consumers were more willing than a year ago to pay for what they perceived as healthier products. In the 2013 survey, 88 percent said price was “somewhat” or “extremely important” in the decision to buy products perceived as healthy; in the 2014 survey, that number dropped to 76 percent. In 2013, respondents said they would be willing to pay an overall premium of 6.2 percent for healthy products; in 2014, that rose to 8.9 percent.

The survey also looked at where consumers buy healthy foods. The most popular channel was mass merchandisers like Walmart, at 42 percent, with traditional grocery stores second at 34 percent. By contrast, when it comes to other groceries, traditional stores were the most popular at 55 percent, followed by mass merchandisers at 40 percent.

Supporting this finding, the survey also showed that only 21 percent of consumers are loyal to one grocery retailer for their health and wellness groceries. By contrast, 25 percent of consumers shop at one retailer for health and wellness and at another for traditional grocery items at least 61 percent of the time.