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Food Allergy Business Booms

Elizabeth Alterman,|Special to CNBC.com
Monday, 8 Oct 2012 | 8:08 AM ET
Strawberry Shortcakes
Source: Cakes for Occasions
Strawberry Shortcakes

With the prevalence of food allergies and intolerances spreading faster than a case of hives, providing proper diagnoses and safe food options is keeping allergists and food manufacturers busier than ever.

According to data from the Centers for Disease Control and Prevention, the occurrence of food allergies and associated anaphylaxis — a life-threatening rapid onset reaction — increased 18 percent between 1997 and 2007.

Proteins from these top eight offenders are responsible for 90 percent of allergic reactions from foods: milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat and soybeans, according to the Food and Drug Administration.

“We are definitely seeing more patients with food allergies in the last few years,” said Dr. Stanley Fineman, president of the American College of Allergy, Asthma and Immunology. “It’s hard to quantify in our practice, but years ago we would see about one new patient with food allergies every two to four weeks. Now we are seeing a new patient with food allergies about two to three times per week.”

Some 12 million Americans now suffer from food allergies, according to Foodallergy.org. Eight percent of all children are allergic to some kind of food, based on a 2011 study by the Food Allergy Initiative.

Shock to the System

According to the FDA, each year in the U.S., it is estimated that food-related anaphylaxis events resulted in:

• 30,000 emergency room visits

• 2,000 hospitalizations

• 150 deaths

The cost of visits to the ER or doctor’s office can really add up.

David Holdford, an associate professor of pharmacy at Virginia Commonwealth University, co-authored a study that estimated the annual cost of treating food allergyreactions at $340 million to $510 million per year.

Depending on the allergy, risk and treatment are a lifetime issue.

Of three top food allergies — milk, eggs, peanuts — most people outgrow the first two by school age, but 80 percent remain at risk with peanuts, according to Fineman.

While most food allergies aren’t considered deal breakers when it comes to obtaining medical coverage, eHealthInsurance specialist Keith Mendonsa recommends examining plans carefully to keep costs to a minimum.

To begin with, diagnosing allergies can be expensive and tedious, with physicians administering a battery of tests.

When food allergies are severe, they can cause an anaphylactic reaction, which can be treated by administering epinephrine, sometimes obtained by prescription from the doctor. Use of an EpiPen (self-injectable epinephrine) can potentially ward off a trip to the hospital but the pen isn’t cheap.

Based on a small sample size of regional pharmacy pricing for the generic form of the EpiPen, a person without insurance would pay full retail price — around $200, Mendonsa said.

Those who have health insurance with prescription coverage and a deductible are likely pay a lower negotiated rate — closer to $75 — until the drug plan's deductible limit is reached, at which point it would be based on the plan's co-pay, which can range from $2 to $65 depending on the plan and the specific drugs prescribed. But because this drug likely falls under the "non-formulary" category, co-pay costs could be more volatile, Mendonsa noted.

Enjoy Life Crunchy Flax
Enjoy Life Crunchy Flax

Big Market for Food Manufacturers

Offering safe and savory food alternatives to those affected has turned into big business for food marketers and manufacturers.

Whole Foods , a leader in providing allergen- and gluten-free products and in catering to an upscale clientele,saw sales top $10 billion in 2011, up more than 12 percent from the previous year.

The natural food retailer, boasting its own gluten-free bake house, is opening a record nine new stores in the third quarter of fiscal 2012 and plans 27 to 32 others in fiscal 2013.

Yet it isn’t just large corporations that have watched how the rise in food allergies has sent sales soaring.

Big Opportunity for Small Firms

Kelly Delaney, owner of Cakes for Occasions, decided to take her Danvers, Mass.-based bakery 100 percent nut-free in 2006 and saw sales increase 39 percent that year. In March 2012, the bakery not only doubled its size, going from 2,000 to 4,000 square feet, but also its offerings.

“We are now able to provide our customers not only with nut-free gourmet cakes and pastries but also round out that offering with newer product lines, including a variety of nut-free cookies, chocolates and candies as well as party supplies and paper goods,” said Mikki Wilson, marketing coordinator forCakes for Occasions.

“Aside from providing nut-free products to our customers, we also offer a limited, but growing selection of sugar-free, gluten-free and egg-free cakes and desserts for any individual who suffers from food allergies, sensitivities or dietary restrictions.”

While managing food sensitivities is no picnic, sufferers can take comfort in knowing that manufacturers are cooking up more options than ever.

Enjoy Life products
Enjoy Life products

Enjoy Life Foods, for instance, has a product line that is free of the eight most common allergens, as well as gluten, and was named to Inc. magazine’s list of the fastest-growing private companies for four consecutive years. Since the company launched with five items in 2001, the menu has swelled to some 40 offerings, 14 of which hit the market within the last year.

Among the latest is a high-in-protein lentil chip that is dairy-flavored yet dairy-free.

"We created these dairy flavors out of non-dairy natural ingredients,” said Joel Warady, chief sales and marketing officer at Enjoy Life. “There’s 50 million Americans that have lactose intolerance or dairy allergies and they haven’t been able to eat snacks that have a dairy flavor. We now allow them to eat that."

What’s made the biggest difference in terms of the company’s growth over the last few years is that most of the conventional supermarkets are not only including “free from” products among their offerings but are rapidly expanding those sections. What used to be a 4- to 8-foot section has now taken over 16 to 24 feet, Warady said.

“Today, which we never could’ve anticipated five years ago, you’ll see our and our competitors’ products at Wal-Mart Stores and Target ," he said.

While the need for allergen- and gluten-free foods brings in big bucks for businesses, it also means more money out of the pockets of those burdened by sensitivities.

Gluten-Free Market Explodes

Anna Luke, diagnosed with celiac disease, writes about her gluten-free journey onher blog ‘Gluten Free? Gimme Three!’ Luke estimates that she spends between $900 and $1,200 more per year on her groceries than the average 19- to 50-year-old single woman, based on USDAstatistics.

“My gluten-free friends said that I had probably underestimated that amount,” said Luke. “I try more and more to steer away from gluten-free specialty products nowadays because I know how overpriced they are."

Eating safe and tasty doesn’t come cheap. A study published in the U.S. National Library of Medicine found that on average gluten-free products were 242 percent more expensive than regular products.

Familiar food companies are focused on meeting the demand and the budget of the allergy-suffering consumer.

General Mills recognized the growing need for gluten-free products in 2008 when it reformulated its popular Rice Chex by replacing the existing malt syrup made from barley with a non-barley version, making it the first mainstream gluten-free cereal on the market, according to Liz Abate Mascolo, associate director, Big G, General Mills.

At an average retail price of $3.39 per box, Chex gluten-free cereals are available in grocery stores nationwide for a cost that is in line with non-gluten-free counterparts.

“The response was overwhelmingly positive, and we decided to reformulate our other corn- and rice-based Chex varieties to become gluten-free,” Mascolo said.

Sales of gluten-free items hit $2.6 billion in 2010 and will double by 2015, according to Marketresearch.com.

Though suffering from food allergies is both uncomfortable and costly, as the population expands, so do the offerings that can make eating a little safer and a lot more delicious.