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CHICAGO - Food makers have an opportunity to fatten up their profits by offering leaner products to capitalize on the growing market for healthier diets, according to a new Merrill Lynch investment analysis. However, a balance of those products with indulgent foods customers still crave makes for the best portfolio, the report said.
Companies ranging from Kraft to Hershey can take advantage of some $1.5 billion in revenue as consumers shift about 1 percent of their purchases from high-calorie frozen desserts and beverages to juice, low-sugar cereals, yogurt and foods made without trans fats, Merrill Lynch said.
"It is unclear about how long it will take for obesity as an issue to impact food multiples, but it is clear that those companies able to adapt to this trend will likely garner premium multiples," Merrill Lynch analyst Leonard Teitelbaum said in the report.
Still, despite all the hype surrounding over-eating, U.S. consumers still try to have it both ways, demanding healthier choices while filling shopping carts with ice cream, candy and chips and dips, the report noted.
"Consumers will still purchase the indulgent food items they like to eat because of the ultimate factor -- taste," Teitelbaum wrote, noting lighter products that failed.
The brokerage said companies that strike a balance between healthy, good-tasting foods and indulgent choices are apt to be well positioned as winners as consumer tastes change, Merrill Lynch said.