Strategies to respond to global health themes, such as rising obesity rates and aging populations, are now central to how food companies can handle emerging regulatory-related risks and create greater market opportunities. The UN reports that population ageing is taking place in nearly all the countries of the world (1). This is combined with rising consumer understanding of the role of a healthy diet in extending their active years. Cognitive health also remains a top concern for aging populations and an increasing number of products are promoted with an emphasis on ingredients that reportedly respond to this age-related concern. A related growth area is in diabetic food products, with a recent report by Research and Markets stating: “The analysts forecast the global diabetic food market to grow at a compound annual growth rate (CAGR) of 10.43% over the period 2013-2018. One of the key factors contributing to this market growth is the increasing aging population around the globe”(2). Meanwhile, overconsumption patterns are weighing heavily on the economic and human health of many nations, with obesity levels at such record highs that the World Health Organisation classifies the situation as a “global epidemic” (3). Thus, some food (and soft drinks) companies are taking clear steps to be better placed to respond to a so-called “fat tax” or potential regulation on the health content of food products. One of the key findings of Vigeo’s research is that only a handful of companies across all regions have set related targets (six companies out of 58 companies reviewed). For investors and other stakeholders, clear targets can be considered a strength because they indicate a more strategic approach to addressing the issue. We also found that the North American food and soft drinks sectors are leading the way on this topic (compared to overall sector performances in Asia Pacific, Europe and emerging markets). In particular, the vast majority of North American companies under review make commitments to combat health problems linked to food consumption and three quarters report changes in the composition of their products (such as reducing levels of sugar, salt and saturated fat). In comparison, emerging markets and Asia Pacific food and soft drinks companies appear to be lagging behind with less than one third making relevant commitments and only 14% reporting changes in the composition of products. This is despite the fact that these companies operate in countries that are also facing growing weight problems.
The food sector is also identified as one that has a huge potential market at the base of the pyramid (lower income and potentially malnourished groups). By identifying the needs of this population (for example, byassessing nutrient deficit areas) and then adapting products, marketing and delivery systems to meet these needs, some food companies are seizing opportunities to test out new business models and build brand knowledge in new markets. It is worth noting that malnutrition (the unhealthy condition that results from not eating enough food or not eating enough healthy food) is not just an issue in less economically developed countries. For instance, Feeding America recently released its new ‘Map the Meal Gap’ report, with its latest figures showing that an estimated 49 million Americans are ‘food insecure’ and almost one third of these are children(4). In our recently published North American food sector report, some positive initiatives to increase food security for vulnerable populations were found, with almost half of the sector going beyond pure charity to a more customer-driven approach (such as developing adapted products with fortified nutritional content to meet certain needs). Furthermore, as a whole on this topic we found that the North American sector was outperforming its counterparts in other regions of the world (compared to overall performance in Asia Pacific, Europe, emerging markets). However, the North American food sector has a long way to go on the issue. For example, only one third of the sector reports on basic measures such as food donations. Taking such small steps may narrow the opportunities for companies to enhance their reputation and capture potential market growth. It is clear that some companies are now expanding their customer base by responding to consumers’ health-related choices (for instance, in the diverse and expanding non-GMO, organic, and supplements markets), whilst others are keeping consumers interested by reducing the salt, sugar and fat content of existing products. A few are already tapping into the needs and interests of older age groups. In this context, understanding and examining which food companies are best positioned to create and sustain market growth linked to these global health themes can be key to seizing investment opportunities. These themes and companies’ related approaches will be the topic under discussion at the Responsible Investor Europe Conference, in the panel: ‘The future of food products: exploring companies’ responses to global health themes’, on June 5th.
Nikki Gwilliam-Beeharee is Food and Health Research Manager at Vigeo Rating, and will be speaking at RI Europe 2014.
1) World Population Aging 2013, 2013, UN Social and Economic Affairs
2) Global Diabetic Food Market 2014-2018, February 2014, Research and Markets
3) Controlling the global obesity epidemic, March 2013, WHO Press release
4) Map the Meal Gap 2014, Feeding America, April 2014
5) Vigeo Rating’s latest Review of North American, Asia Pacific, European and Emerging Market Food and Soft Drinks Companies