Are diet foods the real thing or just good buzz?

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A major challenge is improving nutrition without sacrificing taste. "The best way to make people eat well is to make sure it tastes good," Baynes says. But it's hard to successfully modify a well-loved product, as Kellogg did when it introduced low-sugar versions of Frosted Flakes and Froot Loops in 2004. "Sugar doesn't just add taste," Baynes says. "Sugar actually affects bowl life, in terms of how long a cereal lasts before it gets soggy in milk."

And there's plenty of money on the line when a company tinkers with a major brand, such as Frito-Lay — a subsidiary of PepsiCo — did last year with its $2 billion Lay's chips line. "When you decide to touch a brand like that, it's a significant decision," says Frito-Lay's director of nutrition, Robert Brown. After research continued to reveal the dangers of trans fats, Frito-Lay began phasing them out of its products in 2002. Last year, the company managed to remove 60 to 70 million pounds of saturated fat from the total U.S. diet per year by moving to a new type of sunflower seed oil for Lays and Ruffles chips.

Many advancements are tied to scientific developments such as artificial sweeteners. Kraft launched a sugar-free version of its Kool-Aid drink mix in 1983 after the approval of aspartame as an artificial sweetener. Advertising regulations — some created by law, others self-imposed — have also prompted product changes. Kellogg pledged in June to either reformulate popular brands like Pop-Tarts and Apple Jacks to comply with higher nutritional standards or stop marketing to children under 12 if the same taste can't be matched.

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Paying for packaging
Of course, Hindshaw says, tweaking an existing product doesn't always cut it. That's when companies have to acquire or introduce completely new brands to keep up with customer demand. One expensive example is Vitamin Water. With sales of carbonated beverages stagnating, Coca-Cola paid more than $4 billion for the maker of the flavored water drink, Energy Brands.

Another recent Kraft product is Nabisco's 100 Calorie Packs, which debuted in 2004. Essentially no more than smaller portions of classic Nabisco products such as Oreos, the product line pulled in more than $100 million in its first 12 months.

Since then, other companies have taken a stab at portion control, including Frito-Lay. In February the company introduced its own new brand—Flat Earth, a line of fruit and vegetable crisps. Consumers seem to be buying it: Flat Earth has racked up more than $12 million in sales according to data provided by Information Resources.

Will the new focus on health foods curb American obesity? So far it hasn't. According to a study by the Centers for Disease Control, between 1985 and 2006, childhood obesity has more than doubled in the U.S., and two-thirds of U.S. adults qualify as overweight or obese.

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