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TRANSCRIPT
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Hank CardelloOctober 10, 2011
The Role of the Food Industry in Improving Public Health:“It’s Just Good Business”
Outline
I. The Forces Derailing Solutions to Obesity
II. Keys to Effecting Positive Change
III. Bridging the Gap
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Obesity Now a Serious ProblemObesity Now a Serious Problem
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A Losing Battle Despite Significant EffortA Losing Battle Despite Significant Effort
vNothing has worked to reverse obesity ratesq Consumers haven’t changed
q Corporations defend their practices
q Regulations have proven ineffective
33--Way TugWay Tug--ofof--War Hindering Progress War Hindering Progress
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The Way Situation Is DepictedThe Way Situation Is Depicted
Motivations Are DifferentMotivations Are Different
v SalesvMarket Sharev Profitv Customer loyaltyv Reputation
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Motivations Are DifferentMotivations Are Different
v SalesvMarket Sharev Profitv Customer loyaltyv Reputation
v The Public Healthv Advocacy
Motivations Are DifferentMotivations Are Different
v SalesvMarket Sharev Profitv Customer loyaltyv Reputation
v The Public Healthv Advocacy
v TASTEv Valuev Conveniencev Health
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Personalities Are DifferentPersonalities Are Different
v “Show Me”v PracticalvOperators (QSR)v Strategic (CPG)v Short term focus
Food Industry PositionFood Industry Position
v We offer healthier options
v Consumers are responsible for their choices
v “Calorie Balance” is the key
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Personalities Are DifferentPersonalities Are Different
v “Show Me”v PracticalvOperators (QSR)v Strategic (CPG)v Short term focus
v Intellectual/conceptualv “Purists”v Anti-capitalist sentimentv Ideas vs. implementers
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Advocate/Academic PositionAdvocate/Academic Position
v Food industry is the perpetrator
v Unfettered capitalism is perpetuating obesity
v Entire categories are inherently “bad”
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Consumers Not Aligned With Fixing ObesityConsumers Not Aligned With Fixing Obesity
Walking Their Talk
(26%)
Source: Hudson analysis;
Only ¼ of adults pursuing a healthy lifestyleØ Active baby boomers Ø Fitness buffs Ø Conscientious moms
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OneOne--SizeSize--FitsFits--All Approach Won’t WorkAll Approach Won’t Work
Walking Their Talk
(26%)
Dazed and Confused
(39%)
“Later”(35%)
Source: Hudson analysis;
Implications Implications
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Why Would Food Corporations Change?
Why Would Food Corporations Change?
“It’s just good business”“It’s just good business”- Steve Sanger, former CEO
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Why Change?Why Change?
1. Retention of consumer loyalty
Emergence of New Consumer Emergence of New Consumer Demanding ResponsibilityDemanding Responsibility
Environment
RegulationsWellness
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Purchases Used to Influence CompaniesPurchases Used to Influence Companies
0%
20%
40%
60%
80%
100%
Today
% Population
“I consider my purchases to be a way to send a message and influence companies’ business practices for the better”
Source:
% Population
0%
10%
20%
30%
40%
50%
“I switched brands at least once last year because the company I purchased from did not act responsibly in my opinion.”
Source:
Willingness to Switch BrandsWillingness to Switch Brands
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Support for Regulations Support for Regulations
0%5%
10%15%
20%25%30%35%40%45%50%
Soda Tax Fast Food Tax Snack Food Tax
(% S
uppo
rtin
g)
Source: Thomson Reuters April, 2010
Why Change?Why Change?
1. Retention of consumer loyalty
2. Competitive Advantage
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The Reasons for Walmart's Healthy Foods InitiativeFeb 10 2011
By pushing produce and healthier foods, Walmart's“Cuddle Capitalism" could slim us down and bloat the company's profits.
The Reasons for Walmart’s Healthy Foods Initiative
1. A means to gain access to inner cities
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The Reasons for Walmart’s Healthy Foods Initiative
2. A strategy to build the Great Value megabrand
vReduce sodium by 25%
vReduce added sugars by 10 %
vRemove all trans fats
The Reasons for Walmart’s Healthy Foods Initiative
3. Boxes in Competitors
High Price/QualityLow Price/Quality
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The Reasons for Walmart’s Healthy Foods Initiative
3. Boxes in Competitors
High Price/QualityLow Price/Quality
Why Change?Why Change?
1. Retention of consumer loyalty
2. Competitive Advantage
3. Improved profits, sales, market share and/or reputation
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Company has revamped entire portfolio to focus entirely on healthier productsq 1994-2004Ø Stripped out all non-food, plus beer and confectionary businesses
q 2007Ø Sold Biscuit division to KraftØ Purchased Royal Numico
Portfolio ProfilePortfolio Profile
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“Healthier” Companies Performing Better “Healthier” Companies Performing Better
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
(Earnings as % of Net Sales)
Source: Hudson Institute analysis
BetterBetter--ForFor--You Foods: It's Just Good BusinessYou Foods: It's Just Good BusinessOctober 13, 2011
Washington, DC
vCan selling better-for-you foods be better for bottom lines?
vDo shareholders benefit when better-for-you products are emphasized?
vCan industry and public health goals align?
Funding provided by the Robert Wood Johnson Foundation
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Policy InitiativesPolicy Initiatives
v Hudson developing 2 policy proposals to engage industry to:
1. Rapidly reduce calories sold
2. Educate consumers about nutrition/portion control
#1: Don’t tax….incent
(e.g.) Soda tax
vSales of CSD’s will decline with a tax, BUT…
vStudies indicate negligible impact on obesity rates due to “substitution effect”
v Strong industry resistance
Policy InitiativesPolicy Initiatives
Incentive System
Reduction in Calories
Increase in Ad Deductions
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#2: Don’t cut marketing…reward for educatingv Industry ad spending ~ $15 billion
v Pushes to curtail marketing, especially to children
v Opportunity for win-win:q Consumer education re: nutrition/portion controlq Marketers gain incentives for piggy-backing ads
Policy InitiativesPolicy Initiatives
Incentive System
% of Ad $’s to Educate
Increase in Ad Deductions
Will Industry Go For This?Will Industry Go For This?
They have a lot to gain!v Avoids harsher regulatory actions
v Positive PR to consumers, analysts and investors
v New opportunities to improve the bottom line
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Thank You
For more information on October 13 event:
www.obesity-solutions.org