Healthier Returns: U.S. food firms lag global norms on nutrition, and that’s bad for both the waistline and the bottom line
By Lauren Compere, Managing Director, Boston Common Asset Management
For investors hungry to get a piece of the pie in the food and beverage sector it’s clear that health and nutrition will be among the most important drivers of growth. Food companies who anticipate and respond to these factors will be best-positioned to deliver more sustainable financial performance. They will also help achieve the second and third UN Sustainable Development Goals — to end hunger, and to improve health and wellbeing through better nutrition over time.
That is why we should be concerned that the first-ever U.S. Access to Nutrition Index released on November 15th reveals that the 10 largest U.S. food and beverage manufacturers — which generate an estimated $160 billion in domestic sales — lack the policies and action needed to tackle the high levels of obesity and diet-related diseases in the United States. This was supported by the most compelling finding under the new Product Profile that only 30% of products assessed are healthy, contributing to less than a quarter of 2016 sales across the companies.
Based on their total U.S. sales in 2016, the 10 companies included in the Index are Coca-Cola, ConAgra, Dr Pepper Snapple, General Mills, Kellogg, Kraft Heinz, Mars, Nestlé, PepsiCo and Unilever.
The Index’s ranking of the 10 companies has Nestlé at the top of the table in the Corporate Profile with a score of 5.3 out of 10. Nestlé earned its top ranking for being the most transparent about its progress to help consumers eat healthier through commitments focused on making its product portfolio healthier, better informing consumers and using more responsible marketing approaches. Unilever came in second place and PepsiCo in third. Meanwhile, ConAgra had the highest relative score under the Product Profile with a score of 5.8 out of 10 for carrying the healthiest product portfolio, followed by Kraft Heinz in second place and General Mills in third.
One of the key findings from the US Index is that practices to improve consumers’ health and nutrition are more widely adopted globally than in the United States. Specifically, companies are not doing enough to improve the nutritional quality, pricing and distribution of their products nor to improve their practices related to responsible and transparent product marketing and labeling. For example, if you compare the results of this year’s U.S. Spotlight Index and the Global version, it shows that the nine food and beverage companies included in both Indexes are less transparent about their efforts in the U.S. than globally.
What should be of particular concern to investors is that none of the 10 companies have formal policies or concrete, measurable targets to make their healthy products more accessible and affordable. They do not set specific targets for lowering the price difference between healthy and other products. While the majority of the companies commit to responsible marketing, their voluntary advertising commitments do not cover all forms of media, particularly mobile and digital media and companies. Of greatest concern is that none have made specific commitments to market healthier products to populations in the United States whose ability to maintain nutritious diets is constrained by low income or geographic factors.
Given the U.S. market is such a critical one for these companies, I urge them to focus on demonstrating clearly to investors, and other stakeholders, that they are delivering a stronger performance on nutrition and that this is translating into more positive results in terms of sales, category and market shares, and profitability. Board members need to become more involved, because this is a long-term performance and sustainability issue, and senior executive pay needs to be linked to hitting targets. If these changes are put on the menu it will be good for business, and good for global health: a double win.
The information in this document should not be considered a recommendation to buy or sell any security.