Processed foods - from cost advantage to competitive disadvantage
(Image by Franki Chamaki on Unsplash)

Processed foods - from cost advantage to competitive disadvantage

High Fat, salt or sugar content ultra-processed foods have been a major contributor to the growing obesity pandemic. Calls are growing to shift to healthier options.

Summary: The growing calls to incentivise the shift from high fat, salt or sugar foods and drinks to healthier options has been joined by Danone from the food industry itself. Ultra-processed foods manufacturing born out of a desire to produce cheaply and at high volumes and driven by a desire for convenience has dominated the industry. With the link to obesity and associated conditions, increased awareness and demand for more sustainable options from consumers could accelerate that shift.

Why this is important: The impact of obesity / overweight on the world could hit 3% of global GDP annually in the next 10-12 years or $4.3 trillion. The health foods market could reach $1 trillion over the next 5-8 years. As an investor or industry participant, understanding the shift to healthier options and particularly the velocity of that shift will be key.

The big theme: There are real concerns about our ability to feed the world, while at the same time trying to reduce the impacts on our natural world. Agriculture and the food and beverage industries sit at the intersection of a number of UN Sustainable Development Goals. The goals are either directly relevant (for example, goal 2: zero hunger) or have a causal relationship (for example, education improving with better nutrition and less pollution). Reforming these industries is going to require massive social and economic change and disruption to production methods, to supply chains and to employment.

The details

Summary of a story published in The Observer:

The President of Danone UK & Ireland, James Mayer, has called on the UK government to tax products that are high in fat, sugar or salt (HFSS) to incentivise the UK food industry to speed up the pivot towards healthier products. This is the first time that a major food company has called for action in this way to tackle rising obesity rates in the country. Currently most groceries are exempt from Value Added Tax (VAT) with the exception of products including soft drinks, ice cream and certain biscuits. Mayer is suggesting VAT be imposed on HFSS products too.

The Observer article highlighted that the call from Danone comes the week after a £40m pilot scheme was launched by UK Ministers to trial wider access to the appetite suppressant drug Semaglutide (branded in the UK as 'Wegovy') manufactured by Novo Nordisk. Prime Minister Rishi Sunak hailed these latest drugs to combat obesity as a "game-changer."

The chair of campaign group Action on Sugar, Professor Graham MacGregor was quoted as saying that it was crazy that the government was preparing to spend what may turn out to be vast sums on new drugs to combat obesity but failing to effectively regulate the food industry.

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