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Thursday, August 11, 2022

How wellness has become big business

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This week Mondelez International – the owner of confectionary brands like Cadbury’s, Oreo and Toblerone – agreed to pay $2.9 billion to acquire energy bar maker Clif Bar & Company.


It’s the latest example of a company making a big-money move in an attempt to stake a claim in the growing wellness industry.

In 2020, Mars Inc spent $5 billion to acquire the North American business of snack bar brand KIND. In 2021, Nestlé spent $5.75 billion to take control of some vitamin and supplement brands from The Bountiful Company.


And earlier this year Italy’s Ferrero – best known for chocolate-heavy foods like Nutella and Kinder – acquired Irish protein bar brand Fulfil in a deal reported to be worth more than €150m.

But what exactly is the wellness industry, and why are companies spending big money to get involved in it?

What counts as a wellness business?


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Wellness is extremely hard to define – it essentially it covers anything that’s focused on physical or mental health.

But that doesn’t just cover what you would traditionally consider health, but also areas like fitness, beauty and even people’s hobbies.

Obvious examples of that would include the likes of personal trainers, gym instructors, nutritionists, or therapists. But you could also reasonably include physios, masseuses, life-coaches, beauticians, self-help gurus – not to mention those in the so-called alternative areas like reflexology or acupuncture.

And of course we now have the influencers – who might not quite fit into any of those categories, but are still making a living by publishing content to social media – and selling products – relating to health and well-being.

Then there are the places where a lot of these wellness services are accessed – gyms, health spas and studios.

Not to mention all of the accessories and add-ons – that includes the health foods, supplements and medicines that big companies are buying into, but also the cook-books, apps, the fitness wearables like smart-watches, and the clothing.

So, as you can see, the term ‘wellness’ covers a multitude. Basically, if it’s something you can claim makes someone feel better – physically or mentally – you can make a reasonable case for it being part of the wellness industry.

How big is it in money-terms?

Because wellness is so hard to define, it’s hard to put an exact value on it.

One estimate from McKinsey put its global value at $1.5 trillion, while the Global Wellness Institute (which exists to promote the industry) says it was worth $4.4 trillion in 2020.

But even if you take that lower figure, that’s still massive – for context it’s about three times the size of Ireland’s GDP last year. If the wellness industry were a country its economy would be the fourth biggest in the European Union.

And it’s growing at a phenomenal rate – that McKinsey report says it’s expanding by 5-10% each year.

In Ireland specifically, a report by Euromonitor put the industry’s value at € 2.3 billion for 2020. However that does seem to come with a broad definition – and a lot of that money came from healthy foods, which might not be actively sold as part of the wellness industry.

However it’s clear that there is a lot of Irish money flowing into very specific areas of wellness – for example there’s an estimated €300m being spent on fitness clubs in the country each year.

And because of that, a lot of big companies are trying to get involved…

Yes; there are of course plenty of companies out there that are very much fitness or wellness-focused – just think of the health food brands, sports-wear companies and gym chains.

But what’s interesting now is that there are a lot of companies that you wouldn’t think of as being in the wellness game, but they’re actually making big money in the area.

Glanbia is a great Irish example – people probably still think of it as a dairy firm, with brands like Avonmore or GAIN Nutrition coming to mind.

But in actual fact, Glanbia sold those brands on to the Glanbia Co-Op last year, in part because it wanted to focus on the fitness industry. That’s because it’s making far more than it ever could have dreamed of from dairy and grain.

Last year it had revenues of €1.3 billion of revenue from what it calls Performance Nutrition – that’s the likes of protein supplements and energy bars.

It owns the biggest sports nutrition brand in the world – Optimum Nutrition – as well as some other well-known brands like Slim Fast.

And if you’re wondering how an Irish dairy firm could find itself as a world-leader in sports nutrition – the answer is whey. That’s of course a by-product of cheese production, and at one stage it would only really have been fed to the pigs.

But it’s extremely high in protein, and it eventually became the go-to supplement for the growing fitness and body-building industry. Nearly two decades ago, Glanbia realised it was sitting on somewhat of a gold-mine and started to put more focus in the area. Now it’s the biggest producer of whey protein in the US.

Another good example of an unexpected beneficiary of the wellness boom is Apple.

We’d best know it for the iPhone or iPad, or maybe the Mac; but its Apple Watch is very much positioned as a wellness device, and it’s bringing in somewhere in the region of $12-14 billion in sales for the firm each year.

If it was a standalone firm, it would be something like the third biggest sports company in the world.

It’s estimated that they sold more than 30.7 million watches last year – that’s nearly 10 million more than the entire Swiss watch industry.

And Apple is also now making money through a Fitness-focused subscription service – people pay €10 a month to get access to an online library of workouts that sync up with the watch, so they can track their heartrate and so on while they’re working out.

That kind of online workout has really come into its own since the pandemic, hasn’t it?

Yes; like a lot of sectors, the wellness industry was changed utterly by the pandemic.

Gyms and fitness classes weren’t possible during the height of Covid – but at the same time a lot of people probably started giving more thought to their physical and mental health while they were in lockdown.

So the industry actually continued to grow in the pandemic, despite the challenges, and it showed just how adaptable it could be.

We saw online fitness classes becoming the norm, the rise of so-called telehealth – where you consult medical professionals over phone or video, and more people started to dip into the likes of wearable fitness devices, as well as wellness-focused apps.

A good example of that is the app Calm – it’s a meditation app, it also gets famous people to read bedtime stories to help people get to sleep, which you can access in return for a monthly fee.

It became extremely popular, particularly in the early stages of the pandemic, so much so that it was valued at $2 billion by the end of 2020.

Another example is Peleton – which sells what is essentially a stationary bike or a treadmill, with a screen attached, that lets you live-stream exercise classes.

It’s not available here, but in Germany the cheapest bike costs about €1,500– and then to get the full use out of it you need to pay €39 a month for its premium subscription service.

So a huge outlay – but sales boomed in the pandemic, because it was a way of people to get close to the fitness class experience, even though they couldn’t go to an actual class.

Things have things have taken a turn for Peloton in recent month, though. Sales have tanked, because it turns out there are only so many people who will spend that much on a stationary bike. It also suffered from some bad publicity thanks to the Sex and The City revival, of all things…

So it’s popular – but is it always reliable?

No.

Humans have always been susceptible to promises of better health and happiness – and when there’s money to be made, unfortunately some will exploit that.

It’s not a new problem, either – you can go all the way back through human history and find examples of promises of cure-alls or wonder drugs. In fact a lot of the terms we’d still use today have a long history to them.

The ‘elixir of life’, for example, is first referenced in a poem from Mesopotamia from 2100 BC.

‘Panacea’ was originally the name of a Greek goddess of the universal remedy.

The term ‘snake oil salesman’ goes back as far as the 18th Century, to reference the kinds of hucksters that would sell miracle cures for all sorts of ailments.

The big trick with those scams was that the salesman would arrive in a town, make all sorts of claims about the product, sell it to the locals and then hit the road before people realised it was useless.

And in a way that’s how these things still work today – because there’s always a new diet fad, or a new exercise regime, or detox, or whatever, that is claimed to be the solution to everyone’s problems. But it takes time for science to rebut that, and by the time the studies have been done – the money has been made and people have moved on.

The problem nowadays is that the internet has allowed for anyone to claim to be a wellness expert and, if they’re convincing enough, it’s not just a town that they can get to buy into their useless products – it’s millions of people.

And they may never have anything substantial that backs up the claims they’re making.

What do modern wellness scams look like?

Well some of them might offer legitimate services or products, but they’re set up in a way that squeezes money out of people.

Maybe it’s a free trial that you forget about, and suddenly find your being charged a monthly fee. Or the gym membership that’s really hard to cancel.

Some of the nastier ones might boil down to products or services that over-promise and under-deliver, and maybe prey on people’s insecurities to get them on board. It might be a diet or an exercise regime that guarantees the impossible, or a herbal remedy that doesn’t actually do anything to help, other than offer maybe a Placebo effect.

But there are examples that are really insidious, too, especially where large amounts of money are extracted from people – often people in very vulnerable situations – on the promise that it will solve a problem.

And in the worst examples, they’re also putting people’s lives at risk too – either by convincing them to do something that could cause direct harm, or by convincing them to avoid mainstream medicine in favour of whatever alternative they offer.

A few years ago RTÉ Prime Time reported on a cult claiming that industrial bleach could cure autism, for example.

Or there was the wellness influencer in Australia, Belle Gibson, who claimed to be managing several cancers, including a malignant brain tumor, through diet, exercise and alternative treatments.

She’s estimated to have made $1m through sales of a cook book, and she claimed $300,000 of that was being donated to charity. And she encouraged others to forego traditional cancer treatments in favour of her methods.

But in the end it turned out that she’d lied about pretty much everything – she’d never had cancer, she’d never given any of the money to charity; even details of her age and personal life were lies.

So what’s the advice for those looking to avoid getting snared by a scam?

The gold standard of shopping applies here – if it seems too good to be true, it probably is.

So if someone is suggesting this product or service is going to be the silver bullet in helping you – you need to scrutinise what is actually being offered.

In some cases the product or service is actually relatively sound – but it’s not actually worth paying for, or paying what you’re being asked for.

Just think of the amount of fad diets that come and go that essentially boil down to the same thing – eat less junk, cut your calories – but they package it in different ways to make it seem like it’s some new innovation that will change everything.

Another golden rule of shopping is to be careful who you give your credit card details to – and to read the small print of what you’re signing up to.

As yourself – is it a reputable seller, and are you paying securely? Is it a one-off fee, or are you going to be charged that amount every month?

If you do end up getting ripped off, you can go to your bank and ask for a chargeback – essentially they refund the money that was taken from your account. It can take a bit of time, but if you’ve been defrauded or duped it’s a way of minimising the damage.

And if you find yourself locked into a subscription service that you don’t want, and you can’t get the company to cancel it, you can ask your bank to block that too.

But that’s all money – which is important, of course – but people also need to be mindful of their health, and be careful of what wellness products they might buy, especially online.

At the very least they could end up with something useless – but they could also end up with something that’s dangerous.

There have been lots of examples of unregulated products being sold as supplements or vitamins.

There have also been plenty of examples of people buying DIY beauty products like fillers, which can be extremely dangerous. Meanwhile Europol last year shut down a group “male enhancement” products, which were also found to be dangerous.

So you need to tread really carefully and be aware of who you’re buying from, and what you’re buying.

Given the cost of living and a possible recession – could the wellness industry be in trouble?

It’s hard to say.

In the past a lot of this would have been considered discretionary spending. So when people have to tighten the purse-strings, the gym membership or trip to the spa would have been first things the chopping block.

If you think back to the financial crisis a decade ago, a number of high-profile fitness chains hit the wall, because people just couldn’t or wouldn’t pay hundreds of euro a year to get access.

But things have changed in the last few years – and a lot of these products and services have become far more important to people. It’s part of their lifestyle, and – while there are some dodgy practitioners – there are also a lot of elements of the wellness industry that bring benefits to people, especially in terms of mental health.

So while we probably will see spending in the industry fall in the next few months and even years, it probably isn’t something that’s going to collapse in the same way it did in the last recession.





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