NEW YORK: Companies could derive major benefits from ramping up their focus on the health and wellness sector, a category that may ultimately be worth over $1tr, a study by McKinsey has argued.
"The trends all point in a single direction - more and more consumer spending on health and wellness. In fact, we believe that wellness is the next trillion-dollar industry," the consultancy said.
Functional nutrition products are one large segment open to brands. Even using McKinsey's conservative valuation and growth estimates, this category delivers at least $225bn annually at present, and is pegged to expand by 5% per year to 2020.
Health-related beauty and hygiene lines both yield approximately $200bn per annum, and will enjoy a 6% sales lift each year. On the same terms, personal healthcare generates $85bn, and will improve by a minimum of 3%.
Consumer devices will grow by 3% at worst from a starting point of $85bn, and this pace of acceleration could reach 15%, the analysis revealed.
McKinsey's study named firms as diverse as Nestlé, the packaged food expert, Philips, the electronics specialist, Google, the online giant, and Procter & Gamble, the FMCG group, as making clear moves in these fields.
Rising wealth is a key driver of the expansion overall, with almost 70% of growth for over-the-counter drugs set to come from emerging markets. Of these, Brazil, Russia, India and China are expected to provide half of all gains.
In India alone, the number of households earning over $22,000 a year has quadrupled in a decade to nearly 4m. The amount claiming $4,400 annually has also trebled to 28.4m. In sum, this equates to the population of Germany joining the target audience.
Similarly, shoppers in China only spent $60 each on health and wellness lines in 2006, versus $580 in Canada. These figures should jump by 13% and 3% in turn by 2015, closing the ratio to four-to-one.
Older customers are a further key target, as the number of people aged 70 years old and above rises from 269m in 2000 to 1bn in 2050. The average age worldwide will increase from 25 to 40 years old in this period.
Elsewhere, herbal remedies are due to see sales double in ten years. Alternative remedies already take $16.4bn of revenue in North America today, and $30bn in Asia, according to McKinsey.
An additional 17% of consumers also switched to generic over-the-counter drugs last year. Of this group, 93% picked store brands, 75% now "no longer" prefer national brands and 55% had a "better than expected" experience.
The web may also play a central role, with 96% of American users seeking health information online. A further 70% of their Chinese peers research brands in this way and half of France's internet population buy health and beauty goods via the net.
Data sourced from McKinsey; additional content by Warc staff