A Healthy Start

Blame junk food or video games or greasy school lunches, but there's no denying that America's children are packing on extra pounds. The percentage of overweight kids has tripled since 1980, to 16%, according to the Centers for Disease Control and Prevention. Worse, chubby children tend to become overweight adults with health problems from diabetes to depression.

No one is more concerned about kids' health than parents, and now some with an entrepreneurial bent are doing something about it. "It's important that kids eat the right foods from the very beginning," says Cheryl Tallman. In 2002 she founded Fresh Baby in Petoskey, Mich., which sells kits for making baby food at home.

So it's not surprising that food companies with an emphasis on kids' health are taking off. Ian's Natural Foods, a Lawrence (Mass.) company, sold $5 million worth of all-natural, kid-friendly food last year. Burlington (Mass.)-based Mac Farms is selling its flavored milks in school cafeterias. More unusual businesses are also thriving. CATZ, a gym just for kids, has grown from a single gym in California to 8 locations. Type 1 and Type 2 Tools, a Minneapolis company started in 2004 to help children with diabetes, is already expanding to new audiences.

Their timing is spot-on. Sales of natural and organic foods rose 14.5%, to $24.8 billion, in 2004, according to the Nutrition Business Journal and SPINS.

The corporate world is well aware of those numbers, too. Kraft Foods now packages snacks in smaller servings, McDonald's puts fresh fruit in Happy Meals, and PepsiCo's Quaker Oats sells reduced-calorie flavored milks. But the big players are not likely to shift fully into healthy fare, which leaves the door open for entrepreneurs. "The health message is much more credible when it comes from a small company with an unspoiled identity," says Julian Mellentin, editor of Kids Nutrition Report, a food industry newsletter.

Feeling inspired? Here are four companies doing healthy business shaping up kids:

STEVE GELERMAN is among the pioneers. Frustrated by the lack of healthy convenience foods for busy parents, he founded Ian's Natural Foods in 1997. "When we started, we were tree-hugging weirdos," says Gelerman. "But look who's laughing now!"

Although the company first made meals for the entire family, Gelerman trained his eyes on kids about six years ago. His 35-employee Ian's, named after his son, now has 30 products, from chicken nuggets and pizza to French toast sticks. The nuggets don't use chicken skin, and none of Ian's products contain refined sugars, preservatives, or artificial flavors. Gluten-free chicken nuggets and fish sticks appeared last year.

The refocused company's first product was Gelerman's own favorite, chicken pot pie. But the sweet potato fries Ian's introduced in 2001 shifted the company into high gear. Made without hydrogenated oils, the fries were the first of their kind in retail stores. Gelerman and Jeff Canner, Ian's vice-president of marketing, made more than 500 phone calls pitching them to buyers. "It was a different enough product, and had the health benefits, that enough retailers took us up on it," Canner says. The fries were picked up by 200 stores around the country, turning the New England niche company into a national brand.

JIM LISTON, a strength and conditioning coach, was running a training center for professional soccer players when he realized his young daughter wasn't getting much exercise in school. "It got me to focus on teaching kids and putting them in an environment where they would embrace physical activity for a lifetime," says Liston.

In 1997 he partnered with physical therapist Kevin Wentz to open the first CATZ in Pasadena, Calif. They soon found two partners in Boston and opened four locations there. CATZ now has revenues of about $2 million.

CATZ's focus has changed, too. The acronym that once stood for Competitive Athlete Training Zone now does double duty as Completely Active Training Zone. While CATZ still caters to its share of athletes, it's growing by inspiring young couch potatoes to get moving. "It's on the 'completely active' side where we're seeing demand boom," says partner and co-Chief Executive Lars Hem. Certified instructors train groups of kids of similar age and ability in specific sports and general fitness. Parents pay $30 an hour for activity instruction for their kids and $20 an hour for nutrition seminars. The partners want to turn CATZ into a hangout for kids, much like Starbucks is for adults."Our ultimate goal," says Hem, "is to have hundreds of centers in communities across the country."

BIOCHEMIST George Clark and his wife, Mary Ann, a former school nurse, thought they could make milk more appealing to kids by making it seem more like, well, soda. With the help of George's alma mater, Cornell University, they developed eMoo, a lightly carbonated flavored milk drink. With their savings and an investment from a local creamery, they launched Mac Farms in 1996 to produce and sell it. Next came a similar drink for teenagers called RPM, or Refreshing Power Milk.

The Clarks' break didn't come until the fall of 2003, when a handful of school milk programs started including eMoo. Revenues jumped to $500,000 that year. EMoo is now available in 31 school districts, and the company is poised for more growth. "We're going to identify, create, and solidify our broader market and distribution," says George. While both Bravo! Foods and Quaker Oats have similar beverages, he's not worried. Neither brand, he says, can break into the big-bucks school market because their beverages don't contain enough milk solids to meet the government's definition of milk. His drinks do -- even the ones called Orange Sparkle and Bubble Gum.

THE MARKET for Lisa and Doug Powell's company turned out to be far bigger than they thought. In 2004 the Powells' daughter, Maya, was diagnosed with Type 1 diabetes, the genetic form of the disease. The Powells, both graphic designers, started a new venture: producing boldly colored flash cards and refrigerator magnets displaying the carbohydrate content of various foods, making it easier for young diabetics to embrace healthy eating habits.

Minneapolis-based Type 1 Tools began selling products on their Web site and on that of the American Diabetes Assn. But strong demand from people with Type 2 diabetes, traditionally known as adult onset diabetes, encouraged the Powells to refocus their company and rename it Type 1 and Type 2 Tools. Revenues reached $500,000 last year.

The Powells are expanding their sales channels. In addition to Internet sales, they're making a push to reach pharmacies, health-care providers, and, they hope, retail stores. They've hired their first full-time employee to develop a new umbrella brand, Health Simple, which will make products for kids with other conditions, such as allergies and asthma. "It's time to spruce up what people are seeing in terms of health education," says Lisa Powell. Not to mention what they're seeing on their dinner plates.

By Dale Buss

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