- Medical foods could be the new frontier for packaged foods companies, and Nestle is currently leading the way to tap into this estimated $15 billion market.
- Medical foods, including prescription-based powders and drinks, provide nutritional value needed to treat chronic diseases and will become increasingly important as the global population continues to age. Manufacturers with effective medical foods on the market could offset losses in other segments.
- Nestle set a $500 million budget through 2021 to undertake research into medical foods, which includes a lab in Lausanne, Switzerland that houses $1 million of machinery. These machines analyze human DNA to create customized treatment regimens for various diseases.
By researching medical foods now, Nestle is anticipating the needs of future consumers. The percentage of people over 60, who would be the target market for these products, is expected to increase from 12% of the global population today to 22% by 2050, according to the WHO.
This strategy is critical for Nestle as it searches for new food and beverage territory that can carry the company into the future. Nestle has reported sales growth that fell below its 5% to 6% target for the past three consecutive years. In 2015, that growth rate was 4.2%, which was the company's lowest in six years.
Functional foods and nutritional supplements have been a bright spot for Nestle sales-wise, as Nestle's health business grew faster than the company's operations overall in 2015. After reaching sales of about 2 billion Swiss francs ($2.1 billion) last year, the company's goal is to boost those sales to 10 billion francs in the next few years.
Though they must be monitored by the FDA, medical foods don't have to undergo the same trial and approval process as drugs do, which removes certain barriers to entry for manufacturers. But these products face their own set of challenges and must be based on "sound medical and nutritional principles," according to Nestle.
Positioning these foods as legitimate medical alternatives means making carefully crafted health claims that must be backed by science. Manufacturers must also separate these foods from traditional medication to sway consumers to buy the foods. The line here is blurring as more consumers believe in the connection between their diet and their health, which could skew in manufacturers' favor.