Consumers

The phrase 'nanny state' has become a favourite piece of political ammunition for opposition parties. Nobody likes being told what to do, especially by meddling politicians or overbearing bureaucrats - and few things are as personal as what we eat and drink.

For most people, food is a matter for personal choice and not for political interference. The Department of Health recognises this in its 2004 White Paper, which says: "People believe that in a market economy it is not a matter for government to dictate to them what they can and cannot consume."

But the 'obesity epidemic' has forced a fundamental rethink of this attitude. The government has moved away from seeing it as a matter of personal responsibility, towards emphasising the 'environmental factors' which shape the choices people make. NGOs, the media, personalities such as Jamie Oliver, and even fund managers have gathered round in support of the new consensus. The implications for the food and drink industry are vast.

Whose responsibility?

Several factors have led the government to put concerns over 'nanny-statism' to one side.

First, there is the scale of the problem. In 2004, 24% of the UK adult population was classed as obese, compared with 13% for men and 16% for women in 1994. Medical researchers have established strong links between obesity and heart disease, type II diabetes, and some types of cancer. According to an NHS survey released in April, the number of obese 11-15 year olds in England has almost doubled in a decade. Between 1995 and 2004, the number of obese children in this age band rose to 24% for boys from 14% and to 26% for girls from 15%.

Second, there is a growing recognition of the cost. The National Audit Office estimates that dealing with these conditions costs the NHS at least £500m a year, with overall costs to the economy of £2bn.

Third, there is growing evidence on the causes of obesity. Proof of the effects of advertising to children has been difficult to find, but in 2003 a study commissioned by the Food Standards Agency drew some firm conclusions. It found that: "Food promotion is having an effect, particularly on children's preferences, purchase behaviour and consumption," and that: "This effect is independent of other factors and operates at both a brand and a category level."

There is a growing consensus that factors which shape the decisions people make are an important cause of obesity, and that this justifies greater intervention by governments in how the food and drink industry operates. It is summed up in a neat phrase from the Department of Health: "making the healthy choice the easy choice." This idea may sound simple but it has far-reaching consequences.

All change
Food companies have influence over people's lifestyle choices at almost every stage of activity, from production to packaging, marketing to distribution. Governments are taking aim at each one of these with new laws and regulations. In parallel, companies are taking their own steps in response to the changing norms and views of a wider set of stakeholders.

On production, the UK's Food Standards Agency (FSA) has pushed companies to reduce the salt content of products such as pizzas, ready meals and soups. It has backed up the message with a consumer advertising campaign, stressing the harmful effects of a salty diet. Companies which have lagged behind its targets have been publicly named, exposing them further to the sanction of public opinion.

On packaging, the FSA is pushing for a radical new labeling system that would give each product a red, amber or green 'traffic light' according to its place in a healthy diet. With their position on the front-of-pack, the traffic lights are hard to ignore, giving an instantaneous signal: green means 'eat plenty', amber means 'eat in moderation' and red means 'eat sparingly'.

The system has divided opinion. Some consumer groups have praised it for giving the information people need to make decisions in their busy lives. But others are critical.

Todd Stitzer, CEO of Cadbury Schweppes, recently described it as "an unscientific nutrient profiling system that consumers don't understand", and says that it does not recognise the difference between full-fat butter, reduced fat margarine, wholemeal bread and olive oil - which can all receive a red light.

On advertising, the media regulator Ofcom has come up with plans to clamp down on the advertising of products which are high in sugar, salt or fat. It has proposed four options for the future of TV ads. Each one would cut advertising during times when children are likely to be watching. The more extreme options would extend as far as the 9pm watershed, catching adult shows which many children nonetheless see.

The distribution of products has come under fire from government measures regarding school vending machines. In France, all vending machines were removed from schools last year. Under threat from a similar move, Coca-Cola, Cadbury Schweppes and PepsiCo have agreed to remove sugary drinks from US vending machines by 2009.

Former UK education secretary Ruth Kelly followed suit in September 2005, announcing plans for a ban on 'junk food' in schools - in vending machines and also cafeterias - from late 2006. The trend has been taken furthest in Germany, where kiosks are barred from selling unhealthy products if they are situated near a school.

View from the city

In May 2004, 192 countries voted to adopt the WHO Global Strategy on Diet, Physical Activity and Health, an international plan which calls for co-ordinated action by nation states to tackle the rising burden of ill-health caused by non-communicable diseases.

The strategy is based on the fact that the major killers of the past: diseases like tuberculosis, measles, and influenza, have largely been brought under control, shifting the main public health challenges to conditions which are aggravated by poor diet and lack of physical activity. It calls for states to adopt plans of action to tackle both sides of the 'energy equation' (consumption through food and drink, expenditure through exercise), and describes the private sector as "a significant player in promoting healthy diets and physical activity."

The obesity issue is here to stay. Arnaud Langlois, an analyst at JP Morgan, describes it as a long-term challenge which companies cannot ignore. As he recently told a roundtable at the United Nations: "The food manufacturers must embrace change and not to try to fight an overwhelming structural trend."

What has really brought the obesity issue home to the City is a strong impact on the profitability of companies and product categories. Research by AC Nielsen finds that 18 of the 24 fastest growing food and drink categories are in healthier categories, and the fastest growing of all includes smoothies, yogurt drinks, and other healthy choices. Meanwhile fizzy drinks and some fatty foods (such as, of course, the Turkey Twizzler) have seen their sales fall dramatically.

Words and deeds
Companies such as Danone, Coca-Cola, Cadbury Schweppes and Nestlé have concluded that they can no longer give customers what they want while remaining oblivious to the health consequences. To this end, each company is taking steps to address these new expectations, over and above compliance with new legislation.

Danone has adopted a comprehensive Health and Nutrition Charter and has reformulated its Lu biscuit range to reduce its fat and sugar content. Cadbury Schweppes recently introduced Treatwise, a labeling scheme that aims to inform customers about the place of its products in a balanced diet.

Coca-Cola is one of a number of firms that recently announced a ban on advertising directly to under-12s in Europe. And both Unilever and Nestlé have repositioned their corporate brands to reflect growing priority placed on health: Unilever's describes its corporate purpose as "Vitality", while Nestlé has positioned itself as a "health and wellness" company.

To say that "food is the new tobacco" is surely going to far. But as with tobacco, food companies are coming to terms with a change in public opinion, which could undermine the social and political consensus around the legal framework which their business relies on.

Obesity poses a long-term challenge for the food industry. It all comes down to the implications of that deceptively simple phrase: "Making healthy choices easier."

More info:

Choosing Health
Department of Health White Paper (November 2004)
Obesity
House of Commons Health Select Committee (May 2004)
Television Advertising of Food and Drink to Children
OFCOM (March 2006)
Global Strategy on Diet, Physical Activity and Health
World Health Organisation (May 2004)

Corporate Citizenship Briefing issue number 87: April/May 2006