LAUSR

In recent years, big food companies, such as Kellogg, PepsiCo, and Kraft have been under increasing pressure to introduce more healthful offerings to their existing product portfolio. Our research seeks to understand if such announcements are viewed favorably by the stock market. Are firms rewarded for introducing healthy new products? Using established methodologies, we are able to isolate what percent of an increase or decrease in a firm’s stock price can be attributed from such an announcement. Our analysis reveals some interesting results on how healthy new product announcements impact shareholder value. Findings suggest that big food companies are indeed rewarded financially for introducing healthy new products into the marketplace, and this increase is higher than when introducing less healthy products. We also find that positive ingredient additions (e.g., added fiber) are more highly valued than negative ingredient reductions (e.g., reduced sugar). We discuss the significant implications of our findings and provide managerial recommendations.