The east European nation has the third highest obesity rate in the region (20 per cent) and by 2020 almost 62 per cent of the population is expected to be overweight or obese, just a little less than the UK.
Changing the traditional diet of red meat, pork fat and potatoes will be challenging, warns the Euromonitor report, particularly given the price sensitivity of consumers.
But an increasing number of foreign players are benefiting from growing awareness of dietary habits, higher incomes and government campaigns to improve healthy eating.
"The demand for a lifestyle incorporating health and wellness is more intensive among the well-educated and young consumers, who are willing to change their lifestyle. On the other hand, consumers with diabetes or other illnesses is another main group that is demanding health and wellness products," says the report.
But the analysts note that despite this twofold demand, "there is not a great availability of health and wellness products, particularly in the confectionery and oils and fats sectors".
Hungarian lifestyles have changed significantly in the last decade, as former state-owned companies demand longer working hours and people have less time to cook, driving an increase in fast-food consumption. Others have lost jobs during this time and have to live off smaller budgets.
It has taken the government some time to recognise the healthcare problems ahead but it has recently taken steps to change poor eating habits and obesity in children by focussing on food available in schools.
From next month, it plans to make healthier ingredients in school food and vending machine products mandatory. According to current legislation on competition, it is not in the government's power to prohibit the offering of certain food products but it can forbid the use of certain ingredients in the food products offered.
Increasing income levels and growing health awareness in Hungary means that individuals are also starting to change their eating habits, albeit at a slow rate.
"Over the next ten years, Euromonitor expects demand for health and wellness food and drink products to increase, which is expected to encourage production and push down prices, thereby making healthier products more accessible," said the report.
Functional yoghurt sales already increased about 8 per cent during 2004 and functional dairy is expected to reach Hu640 million by 2009, particularly boosted by probiotic products targeting young adults.
Fortified and functional drinks are expected to grow by 17 per cent this year, while fortified and functional packaged food in general is expected to grow by 10.5 per cent.
In bakery and cereals however there has been little health development, with a handful of muesli products offering a high fibre option.
Overall reduced fat foods are expected to be one of the biggest segments of the health and wellness category although these products will reach saturation.