Our experiences with the coronavirus pandemic has heightened awareness of the link between personal health and diet. The food industry is under increasing pressure to be part of the solution, not part of the problem! But, getting consumers to change their entrenched eating behaviours is more difficult than meets the eye. Ask governmental departments of health around the world who have tried to nudge us into healthier habits and largely failed!
Getting consumers to choose the “healthy product option” can be initiated by grocers and/or manufacturers. Why?: because it’s the socially-responsible thing to do and gives them a healthy image edge in the marketplace; or to anticipate a change in the regulatory framework – e.g. manufacturers reducing sugar content in soft drinks prior to the government introducing a sugar tax. The former is preferable for a company as it helps in improving image on health, rather than being seen as reluctantly reducing sugar content with unseemly haste immediately prior to the introduction of reduced sugar regulations! Then, as Tesco recently found out, pressure for a company to have healthier food products can come from activist shareholders.
Tesco is the leader in the UK grocery market, with a 27% market share. Any change implemented in the Tesco offer or commercial strategy can have an impact on all British food shoppers and, of course, on Tesco’s competitors! In early-February, Tesco came under pressure from “anti-obesity activists” from ShareAction to set itself public targets to sell healthier foods. One month later, Tesco has pledged to lift the proportion of healthy products from 58% of total and quadruple sales of plant-based alternatives to meat by 2025 (for health and cutting carbon impact reasons). The definition of “healthy” uses a Department of Health nutrient profiling model that categorises foods according to levels of fat, sugar and salt.
ShareAction assembles and orchestrates private shareholders to buy 1 share each in the companies it targets and this gives it the power under English Company Law to force a company to put a resolution to all shareholders – in this case one on selling more healthy products. Seven substantial institutional investors supported this initiative, too. This is the first action on health taken by ShareAction who’ve used this approach before on climate change (e.g. with HSBC). It’s in line with the UK Government’s intent to reduce obesity of which the first step is to place restrictions on the advertising and promotion of high fat, sugar and salt products (aka “junk food”) by April, 2022.
Tesco is also promising to make products healthier through: reformulation – e.g. increasing the percentage of ready meals that contain at least one of the recommended 5-a-Day to 66% by 2025 (currently, 50%, up from 26% in 2018); increasing the number of promotions on healthy products; offering healthy alternatives to family favourites at the same price; and the launch of new super healthy product ranges.
Tesco has substantial latitude in determining the “healthiness” of its product mix because of the high proportion of Tesco label products (50% of total) and, currently, it has particular influence on the national diet because of Lock Down in the food service sector, leading Britons to buy most of their food from supermarkets. The retailer points out that it was already on the road to providing a healthier food offer, as identified in its Tesco Little Helps Plan, which it will use annually to present progress against its targets. The Plan is focused on serving customers with affordable, healthy, sustainable products that are planet-friendly and nudging them towards healthier diets. In part, this increasing emphasis on health is a defensive move – Marks & Spencer and Sainsbury’s (2 major competitors) have been particularly active promoting themselves on healthy foods over the past 12 months.
If the action of activist shareholders isn’t enough, the food industry in the UK and many other countries is nervously bracing itself for much more rigorous action by governments to accelerate healthier eating by their citizens. The move from “nudging” to taxing and introducing legislation on food merchandising activity – e.g. banning “Buy 1 Get 1 Free”, aisle end/check out placement for confectionery and salty snacks, advertising to children of “unhealthy” products, scary “tobacco-type”, front-of-pack labelling on fat/sugar/salt – is coming soon. This harder core government action was on the way prior to the pandemic to fight the obesity crisis but, now, it’s “Covid-fuelled” as the daily death toll shows us the additional risk to unhealthy (particularly diabetic) citizens of the virus. Pre-Covid, there was significant push back in liberal democracies to perceived “nanny state” interventions. As the costs to the taxpayer of financing national health systems increases and becomes more transparent, governments will become bolder and more forthright in intervening in food markets to influence the direction of national diets.