Product nutrition, innovation, advertising, and firm’s financial gains

Improving product nutrition has become an increasingly important area of innovation in the food and beverage industry. However, the contribution made by a product’s nutritional quality to the firm’s bottom line has been little studied. To fill this gap, we first developed an analytical model to study the relationship between a product’s nutritional quality and the firm’s profit, and then investigated the role of package innovation and advertising in this relationship. The results show that a product’s nutritional quality has a concave relationship with the firm’s profit, and that the relationship is influenced positively by both package innovation and advertising. Finally, we empirically examined product nutrition across a wide range of product categories and corresponding firms’ profits over multiple years to test if the results derived from our analytical models hold for empirical data from real businesses. Furthermore, we empirically investigated how a new product’s nutritional quality impacts the firm’s stock return after the product’s introduction.