For all of us here in Upstate NY, mid-June brings with it the first glimpses of summertime; a few warm, sunshine filled days dispersed throughout the normal gloomy, rainy, gray blanket that covers us through the winter into spring. These scattered beautiful days find lake-goers taking their kayaks out of storage, pools being opened, and ice cream shop owners removing their “closed for the season” signs. Personally, one of my favorite parts about summertime is indulging the post-dinner sweet cravings with rich ice cream. It appears that I am not alone in this feeling, as ice cream has long been an American family summer tradition. For this month’s indicator, we explore how this tradition and others are evolving in the context of today’s economic and social environment, and what dietary trends can tell us about the greater economy.
Growing health concerns throughout the US are having a profound effect on preferences towards snack, dessert, and general food consumption. For example, the ice cream industry, already largely affected by seasonal ebbs and flows, is evolving to reflect demand for healthier options to satisfy summer sweet cravings. The performance of the ice cream industry is indicative of changing perceptions of the ideal diet, which is changing how consumers make decisions regarding all food purchases.
Disposable income has been on the rise in recent history. According to The Organisation for Economic Cooperation and Development (OECD), household disposable income rose by 3.39% from 2015 to 2016 to an average of $58,342 nationally. As noted by IBISWorld, a key external driver for the ice cream industry is disposable income, such that when disposable income rises, ice cream consumption also rises. Makes sense, right? But, despite such increases in disposable income, overall demand for ice cream has fallen. So, why is this? Well, Americans seem to be starting to prioritize health over indulgent treats, and this is shown by trends in a metric called the Healthy Eating Index. How does this metric relate to economic development? Healthy Eating Index trends are something for economic developers to keep in mind as they consider their use options for development because it’s not unusual for eating habits, and public health in general, to influence our economic development needs. As America becomes more health-conscious, food products and the ways in which consumers access them will need to evolve to reflect these preferences.
What does the Healthy Eating Index Tell Us?
The Healthy Eating Index (HEI) measures the average quality of dietary habits by aggregating individual adherence to the Dietary Guidelines for Americans, put forth by the US Department of Agriculture and the Department of Health and Human Services. Conformance to the guidelines is determined through conducting surveys that provide insight into the diet over a 24-hour period. The index is measured separately for three age groups: 2-17 years, 18-64 years, and above 64 years of age. The dietary guidelines match different food categories with a score depending on an individual’s quantity of consumption in that category. The most recent HEI data available utilizes the HEI-2010, which is the second update to the original HEI. The USDA has recently released the HEI-2015, which will be used to evaluate healthy eating conformance in more recent years.
The categories used for the HEI-2010 are: Total Fruit, Whole Fruit, Total Vegetables, Greens and Beans, Whole Grains, Dairy, Total Protein Foods, Seafood and Plant Proteins, Fatty Acids, Refined Grains, Sodium, and Empty Calories. Nine of these categories are graded based on adequacy. Basically, the more the merrier. Three of these categories are scored on moderation, meaning the lower the intake, the higher the score. These components are then combined such that the total index is scored on a maximum of 100 total points.
The HEI index has a multitude of interesting uses such as evaluating relationships between diet quality and cost and success of nutrition programs, as well as assessing the US food supply. In the case of the ice cream industry, we see that the rise in the Healthy Eating Index has posed a challenge to the industry since increased awareness of the detriment of high-sugar and high-fat foods has caused a downward shift in demand for traditional ice cream. The rise in the HEI is threatening to thwart all improvements generated by increased disposable income that would usually boost industry sales. However, changing tastes will present an opportunity for new niche market entrants satisfying demand for healthier frozen treats, as well as for local producers and organic farmers who will be able to tap into new demand for health foods.
Index Trends: Past, Present and Future
The Healthy Eating Index has seen its ups and downs since it was created by the Center for Nutrition Policy and Promotion in 1995. The HEI climbed across all age groups for the 2005-2012 period, which is the most recent data set available from the USDA. The youngest age group saw the most pervasive surge, with an 11.3% growth rate.
Aggregate scores ascended from 54.1 in 2005-2006 to 59.0 in 2011-2012. This is a 9% increase! And this growth isn’t expected to subside in the near future. According to IBISWorld, the Healthy Eating Index is expected to be on the rise in the near future, putting continued downward pressure on demand for ice cream. This means that there may be hope for the future of American health, which presents opportunity for retailers to tap into emerging trends such as local produce, farm shares, co-ops, and organic foods. See the graph below for a visual of HEI trends over the 2005-2012 period.
We are becoming more educated about the looming effects of diseases triggered by a poor diet. This shows in the products that are filling our stores. Organic, natural, gluten free and dairy free products have begun to stack our shelves. These movements have spurred innovative reactions in food production. For example, ice cream shops and manufacturers have started to offer healthier frozen treats such as frozen fruit bars, frozen yogurt, and others utilizing milk substitutes such as almond and coconut milk.
However, despite these changing perceptions, we do know that this delicious treat isn’t going away any time soon. Ninety-two percent of American households purchase ice cream for at-home consumption annually, while the average American consumes 22 pounds of ice cream each year. What we may see, however, is a continuing shift from traditional ice cream novelty products to premium ice creams, which contain higher milk fat content and fewer added sugars such as corn syrup.
This shift in consumer habits can also be expected to cause gradual decline for the industry over the years leading to 2021, as its annual growth rate is projected to fall to -0.3%. For a summary of ice cream industry trends, check out this infographic.
The HEI and Economic Development
While the rise in HEI may prove to be detrimental to the ice cream industry, the changing consumer landscape does provide potential opportunity for growth in sectors such as health food markets, farmer’s markets, local and urban agriculture, and fitness products. This index can inform economic developers about possible future shifts in demand and assist them in preparing to capture this demand in their communities. For instance, check out this paper discussing the huge impact that co-ops are having on local economies. According to the paper, co-ops provide more jobs per square foot when compared to conventional grocery stores, not to mention that the average wages for these jobs are higher by almost $1 per hour. By definition, co-ops are community-oriented; they give much needed support to local businesses, while achieving the goal of providing healthier food options to the community. The average co-op spends 12% of every dollar in revenue on locally sourced inventory, which is triple what the typical grocer spends locally. In addition, co-ops and farmer’s markets encourage entrepreneurial activity in a community, according to a PolicyLink paper, titled “Economic and Community Development Outcomes of Healthy Food Retail.” Economic developers can help create a better sense of place for residents by connecting local farmers and producers with local retailers to form these partnerships that increase business for both parties.
Co-ops are one of the many trends quickly growing due to changing food preferences, and economic development professionals can help to stimulate local economies by tapping into these trends. Economic strategies going forward should encompass healthy-eating preferences by offering assistance to business owners who are potentially negatively affected by changing diets. For instance, some may need to shift their target markets towards tourists who are much more likely to indulge in a sweet treat while on vacation. Encouraging local businesses to be transparent with nutritional values and calorie information in their marketing efforts is also of the utmost importance when catering to the newfound healthy eating priority.
Changing diets are going to be an important aspect to consider when approaching planning processes for the future of our communities, meaning that ensuring that communities have access to healthy options nearby will be essential to creating a desirable living environment.
- Link to downloadable reports by the USDA: https://www.cnpp.usda.gov/healthyeatingindex/reports
- Link to downloadable 2015-2020 Dietary Guidelines for Americans: https://health.gov/dietaryguidelines/2015/
- Healthy Eating Index Fact Sheet: https://www.cnpp.usda.gov/sites/default/files/healthy_eating_index/CNPPFactSheetNo2.pdf
- Article: “The Healthy Eating Index, How is America Doing?”: https://www.usda.gov/media/blog/2016/03/16/healthy-eating-index-how-america-doing
- 2010 HEI Update: https://www.cnpp.usda.gov/sites/default/files/healthy_eating_index/HEI2010-UpdatePaper.pdf
- Paper: “The Healthy Eating Index-2010 Is a Valid and Reliable Measure of Diet Quality According to the 2010 Dietary Guidelines for Americans”: http://jn.nutrition.org/content/144/3/399.long
- Ice Cream Sales and Trends: http://www.idfa.org/news-views/media-kits/ice-cream/ice-cream-sales-trends
- IBISWorld Report, Ice Cream Production in the US, NAICS 31152, May 2017
- Disposable Income Data: https://data.oecd.org/hha/household-disposable-income.htm