Special Obesity Report: Food companies’ ambivalence in the obesity battle

For food and drinks companies, rising obesity rates present a conundrum.

Companies have a duty to their shareholders to make money. All big food companies are working hard to sell more products to more of the world. Many unhealthy products are very profitable. But companies do not want to be vilified for helping to make people fatter. The spectre of government regulation looms large. Many firms are now conflicted, continuing to hawk unhealthy products yet also touting elaborate plans to improve nutrition. They insist they will help lower obesity rates, not raise them, but there is room for doubt.

Over the past decade sales of packaged foods around the world have jumped by 92%, to $2.2 trillion this year, estimates Euromonitor, a research outfit. In Brazil, China and Russia sales are three to four times their level in 2002. Many food companies offer both indulgent products and healthy ones such as Nestlé’s Greek yogurts.

Soft drinks are another matter. Coca-Cola and PepsiCo control nearly 40% of the world’s fizzy-drinks market between them. Sales of soft drinks across the world have more than doubled in the past decade, to $532 billion; in India, Brazil and China sales of fizzy drinks have more than quadrupled. This is troubling, given that sugary drinks accounted for at least 20% of America’s weight gain between 1977 and 2007, according to Gail Woodward-Lopez and her colleagues at the University of California, Berkeley.

These impressive sales figures look set to rise further. Nestlé is buying local companies in China and adapting its own portfolio for the Chinese market. Many Chinese find coffee too bitter for their liking, so Nestlé is offering Smoovlatte, a coffee drink that tastes like melted ice cream.

Kraft, a food mammoth, split itself in two in October. Mondelez International, the new company that now makes the hallowed Oreo biscuit, is pushing for global domination of the snack market. It plans to increase its investment in emerging markets, which already account for 44% of its revenue.

Fast-food chains, too, have spread far into developing markets. McDonald’s is now in 119 countries (see box at the end of this section). Yum! Brands, owner of KFC, Taco Bell and Pizza Hut, derives 60% of its profit from the developing world, and there is plenty of growth potential left. Yum!’s chief executive, David Novak, explains that the company has 58 restaurants for every 1m Americans, compared with just two restaurants for every 1m people in emerging markets.

But even as they are expanding, food companies are keen to show that they take the obesity problem seriously.

The International Food and Beverage Alliance (IFBA), a trade group of ten giants including Coca-Cola, Mondelez and Nestlé, has given global promises to make healthier products, advertise food responsibly and promote exercise. More specific pledges are being made in rich countries, where obesity rates are higher and scrutiny is more thorough.

In England 21 companies have struck a “Responsibility Deal” with the Department of Health which commits them to helping people consume fewer calories. In America, the biggest and most closely watched market, 16 companies have promised to cut 1.5 trillion calories from their offerings by 2015 (an amount based on a rough calculation of how much the average American should cut from his or her diet to be healthy). And virtually every company has a plan of its own to improve nutrition, some more robust than others.

There are three general approaches: cut out bad ingredients, add good ones or introduce new products…..

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