Financial Schools Reviews

Nobody can accuse these companies of thinking short term.Along with its third-quarter earnings report Oct. 7, PepsiCo () announced it was creating the Global Nutrition Group “to deliver breakthrough innovation in the areas of fruits and vegetables, grains, dairy and functional nutrition.” The goal is to grow PepsiCo’s nutrition business from $10 billion in revenue now to $30 billion by 2020.

Yes, only 10 years from now.

A few days before, on Sept. 27, Nestlé () announced the creation of Nestlé Health Science, a wholly owned subsidiary that will incorporate the company’s existing nutrition business, and the Nestlé Institute of Health Sciences, which will conduct research into nutritional strategies for improving health and longevity. Nestlé said it will invest hundreds of millions of Swiss francs in the institute over the next decade.

There’s that 10-year thing again.

I don’t know exactly what to call this food trend, but it’s big. Food companies such as PepsiCo and Nestlé and drug companies such as Abbott Laboratories () and Bristol-Myers Squibb () are targeting it.

This has traditionally been called the “nutritionals” market. But that doesn’t seem adequate anymore.

The old name better fits the days of nutritional supplements being sold only through health food stores or products designed to supply nutrition in a liquid, powder or concentrated form to the old (Ensure) or the very young (Similac).

The new market — and it’s still in the early stages of taking shape — has been termed the “nutriceuticals” market to emphasize the greater degree of interaction between the processed-food and drug industries, and the ramping up of spending on designing specific nutritional enhancements into traditional foods or food products.

Better than natural?

You can see that evolution in PepsiCo’s Tropicana orange juice line. The company has gone from advertising the basic health benefits of orange juice to enhancing those benefits by adding extra vitamin C, vitamin D and calcium to CEO Indra Nooyi citing the Tropicana line as one of the stable of enhanced products that fits within its Global Nutrition Group strategy.

The fact that the definition of the market is a little fuzzy hasn’t prevented market research groups from projecting its potential size. Does the market include what are called functional foods, for instance? (A functional food is any food aimed at having a health-promoting or disease-preventing property beyond supplying nutrients. It includes such things as vitamin-enriched Froot Loops and yogurts with live cultures.) How about organic foods? Some organics? All organics? Only processed organics?

With all those caveats, here are projections of future market size:

3 ways to grab this market

So how do you invest in this growing market, whatever it’s called? You’ve got three alternatives.

First, you can go with the food companies that are building out their nutritional businesses. The strengths here:

Second, you can go with the drug companies that have major nutritional businesses now. The strengths here:

And third, you can recognize there’s a sizable and increasing number of people who think the claims of nutritionals and nutriceuticals are bunk. And who are appalled at the thought of engineering food. You can find these people shopping at farmers markets and at organic-oriented stores such as Whole Foods Market (). The strengths here:

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