Last updated: 19:52 / Monday, 21 October 2013
Engagement Study by RobecoSAM

Obesity Puts a Spotlight in Food Companies

Obesity Puts a Spotlight in Food Companies

Obesity rates and related chronic diseases have risen at an alarming rate, straining healthcare systems. To help address this problem, RobecoSAM’s Governance & Active Ownership team launched an engagement initiative to encourage food producers and retailers to offer healthier products. Engagement Specialist Michiel van Esch and Analyst Peter van der Werf discuss some of the key findings from the past year of shareholder dialogue, and looks ahead to the improvements they anticipate in the coming years.

Obesity puts a spotlight on food companies

Though obesity is caused by a combination of factors: an unbalanced diet, a lack of physical activity and genetics, food companies have borne the brunt of the blame as many stakeholders link obesity to the widespread availability of unhealthy processed foods and sugary drinks. Food companies that fail to respond to regulatory and consumer pressures aimed at tackling obesity face reputational risks and a negative impact on sales. But by being fully transparent about their products’ ingredients and nutritional value, companies can play an important role in providing consumers with healthier food options while benefitting from market opportunities related to the desire for a healthier lifestyle.

Solutions begin with awareness

RobecoSAM kicked off their engagement efforts by determining whether companies recognize obesity – and childhood obesity in particular – as a challenge that requires their attention. They found that all targeted companies publicly acknowledged the obesity challenge in their sustainability reports, annual reports or websites and were already taking steps towards developing healthier food products. Examples include Coca­Cola, which has been innovating with natural sweeteners and Unilever, which has been gradually reducing the amount of fat, sugar and other unhealthy ingredients from its products.

Their discussions with companies revealed that in many cases, management is keenly aware that health concerns may reduce demand for products considered to be unhealthy. More importantly, companies understand that reducing fats, sugars and salts without compromising on taste can create a competitive advantage.

Engagement focus on company-wide obesity strategy

RobecoSAM focused its engagement efforts on broader objectives such as encouraging food producers to establish and disclose a company­wide strategy to tackle obesity, set quantitative targets for developing healthier products, and commit to responsible marketing practices. Some companies are already taking steps in this direction. H. J. Heinz is developing an internal database to enable it to quantify and report on its global progress toward reducing unhealthy fat and calories and increasing nutrients such as calcium and fiber. Such an initiative as goes beyond focusing on a small a selection of the company’s healthiest products and truly allows the company to measure its progress on developing healthier foods across all product lines.

What next? Marketing practices offer room for improvement

RobecoSAM’s preliminary assessment is that most companies are taking some steps in the right direction, but there is a grey area between box ticking and a true commitment to improving the nutritional quality of food products.

But how are companies promoting their product lines? Children, in particular, are easily influenced by advertising, especially when popular cartoon characters and toys are used as a marketing tool. By adopting responsible marketing practices, companies have the opportunity to demonstrate their true commitment to tackling obesity, thereby avoiding reputational risks that can affect long term shareholder returns. Therefore, for the remainder of RobecoSAM’s engagement efforts over the next year and a half, they will focus on just that: the scope and relevance of companies’ strategies for tackling obesity and their commitment to responsible marketing practices.