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    Routine healthcare took a back seat during the COVID-19 pandemic as the medical sector prioritised the virus. However, as the pandemic subsides, the rise of digital and a renewed focus on preventing rather than treating illness could present a significant opportunity for consumer packaged goods (CPG) companies selling products with health attributes.

    Heading into COVID-19, 60% of adults suffered from chronic illness. In the aftermath of the pandemic, people could take a more active role – and spend more – on their health as they find that the cost of investing today is likely to be far lower than the cost of living with chronic disease tomorrow. Meanwhile, digital health solutions, such as health apps, wearable devices, teleconsultations and personalised medicine, are proliferating and unlocking new ways of addressing healthcare.

    Where rising consumer demand for enhanced chronic disease prevention intersects with digital health lies a potential CPG market opportunity, which our Research analysts found could be worth up to $40bn. If the CPG sector captured just one-third, it could represent $13bn in growth1.

    People with chronic illness often have a disjointed experience when it comes to marrying doctor recommendations with their everyday choices. Digital health can give them a connected healthcare approach that is data-driven and continuous.

    Disconnected experience via traditional patient journeys
    Connected experience via Digital Health

    Source: Barclays Research

    Here are five ways digital health could unlock incremental growth opportunities for CPG companies.

    Consumer health portfolios

    Many CPG companies have “consumer health” portfolios, with products ranging from over-the-counter medicines to vitamins and supplements, sports nutrition, weight management and wellbeing.  This market is poised for expansion post-pandemic as there is likely to be a surge in demand for products that treat lifestyle conditions such as sleep, stress and energy.  Digital health can help kick into high gear consumer awareness of these conditions, how they can be tied to chronic disease, and connect to the types of products that can help. And importantly, digital health brings hyper-personalisation.

    Prevention rather than cure: consumers are increadingly buying vitamins and other dietary supplements

    Source: Euromonitor

    Broader product range: Renovation and innovation

    The range of products that are considered health-oriented is likely to broaden.  Take gut health: digital health platforms can help people make the connection between chronic illnesses and the gut by offering or recommending probiotics, plant-based foods, lean proteins and fibre. For CPG companies, capturing market share could be a matter of highlighting what is already inherent to a product, such as fibre; the addition of novel ingredients, such as probiotics; or the creation of products specifically to address the health objective, such as cereal for gut health. Some CPG companies have already piloted wearable devices which test for risk factors and connect the consumer to products that help.

    Expanded reach: Digital marketing

    As consumers increasingly focus on chronic disease prevention and management, an opportunity for marketing CPG products presents itself in the form of rising health-related web traffic and advertising solutions within digital platforms. For example, increased consumer focus on wellbeing could lead to an expanded range of health-related search terms (such as “colon health”).

    Chadwick Boseman's death in August 2020 created interest in prevention of colon cancer

    Source: Google Trends, Barclays Research

    While still uncommon, brands could eventually advertise directly on digital health platforms – much like some non-prescription products are advertised in physicians’ waiting rooms. While consumer trust and confidentiality are major priorities in digital health, down the line CPG companies could potentially also advertise on platforms without accessing sensitive patient data.

    Building alliances: Partnerships and distribution

    Our analysts also expect CPG manufacturers to increasingly partner with digital health companies, for example in ensuring their barcodes are tagged so that they pop up in a consumer’s personalised nutrition plan and are funnelled into an online grocery order. Digital platforms and physicians could also distribute CPG products through digital health apps. And online prescription providers could increase sales by adding curated CPG products.

    Such initiatives are already underway. One tele-nutrition provider, for example, works with a registered dietician to determine a personalised healthcare plan that feeds into the consumer’s online grocery and food orders. Our analysts also point to large retailers teaming up with genetics specialists to produce personalised DNA reports, which link to apps that can be used to scan food and drink products suitable to users’ personal genetic profiles.

    Investment in digital: Corporate venture capital and M&A

    For the most part, CPG companies are still in the early stages of direct investments in digital health. Rather, many CPG producers have recently invested in brands that fit squarely into consumer health or have health attributes. The consumer health market is highly fragmented and so our analysts expect more activity in this space. And down the line CPG companies can outright invest in companies connected with the digital health ecosystem, either through mergers and acquisitions or minority investments via their corporate venture capital portfolios.

    Digital could mean a win-win for consumers and CPG brands

    A digital health renaissance, combined with greater consumer awareness of chronic disease prevention, can have far-reaching implications for how consumers take control of their health. Greater CPG access to people’s DNA profiles and health data could help democratise hyperpersonalisation for consumers and give them greater powers to scrutinise what constitutes healthy products. It could also open opportunities for CPG brands to boost subscription-based revenues, where scale could become a strategic advantage, and encourage more research and development.

    Post-pandemic – with a new appreciation for the benefits of big data and advanced science – our analysts envisage a paradigm shift in which the end-to-end consumer health experience is ultimately embraced, albeit with some guardrails to prevent data misuse and misinterpretation.

    1 World Health Organization, Barclays Research

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    About the analyst

    Galya Laskar joined Barclays' Equity Research department in 2014 and covers U.S. Thematic Research, focusing on Consumer and Healthcare. From 2014 to 2019, she supported coverage of the Packaged Food sector. Prior to joining Barclays, Galya was a Senior Associate at a boutique TMT investment banking firm. Galya started her finance career in 2011 at Nomura where she worked in investment banking. Galya received her B.A. from the University of California, San Diego, where she majored in Urban Studies & Planning and Political Science. She received her M.B.A. from Columbia Business School.

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