Healthy Eating - Four impacts for the food & beverage industry
Food & beverage producers are under immense pressure to reform, both from stricter regulations and consumers demanding healthier choices
The world is keeping a closer eye than ever before on its
diet. Obesity has trebled since the 1970s, conditions such as
diabetes and heart disease are rising, and in some high-income
countries life expectancy is flattening out.
Food & beverage producers are under immense pressure
to reform, both from stricter regulations and consumers
demanding healthier choices. As we consider how shifting
health & nutrition trends impact business models, we see four
outcomes which present both risk and opportunities:
1) Making food healthier
Taxation aimed at promoting better standards of nutrition has
been introduced by dozens of national governments, states
and individual cities – more than 20 have been introduced since
2015, when a damning World Health Organisation report was
Much of the focus is on sugar. In Mexico, for example, the world’s
second-most obese country and where diabetes is the leading
cause of death, a levy is placed on all sugary drinks except milk.
In the UK, meanwhile, where a new tax on sugar levels was
introduced in 2018, more than 50% of manufacturers reduced the
sugar content of drinks ahead of its implementation.
Some leading companies have already made big commitments
in this area. Britvic, for example, has promised to reformulate
its drinks in most countries, cutting sugar content and reducing
average calories per 250ml by 20%. Meanwhile, Pepsico pledges
to reduce sugar, saturated fat and sodium across many of its food
& beverage products as part of its 2025 goals.
2) Right-sizing the product
Where reformulation is not possible, companies are instead
focusing on portion size. Drinks manufacturers like Coca Cola
(which notably had to reverse plans to introduce a new sweeter
Coke recipe in the 1980s) has introduced slimline cans, meaning
sugar content for the consumer is reduced, with no reformulation
However, companies that go down this route have to
exercise caution, as such a move could be damaging from
a consumer perception point of view if it is simply viewed
as protecting margins via ‘shrinkflation’ (where the product
shrinks in size but remains at the same price). Confectionary
giant Mondelez tried to change the shape of its iconic
Toblerone brand in order to guard against rising cocoa
prices, but was forced to change it back and put up prices
after a public outcry.
3) Transparency for consumers
A key factor for consumers is wanting more control over
the choices they make, meaning that transparency from
companies over what their products contain is paramount.
Making more information available on the nutritional value
of products can be an important factor in retaining their
licence to operate.
Voluntary ‘traffic-light’ schemes, displaying levels of
calories, fat, sugar and salt have been introduced in many
countries, including the UK. Some companies are preempting
the changes, such as Danone which is rolling out
its ‘Nutri-Score’ colour-coding system in countries across
Europe, even those where there is no labelling system in
4) Product change
Finally, many businesses are making wholesale changes
to their product lines to reflect the new environment. As
consumers begin to view ultra-processed food in the same
vein as smoking, companies are either simply cutting unhealthy
products, or switching their focus to healthier alternatives.
Britvic, for example, now says 70% of its innovation pipeline is
focused on developing low or no-sugar drinks (less than 5g per
100ml). Meanwhile, Kerry Foods has developed four ‘consumer
nutrition pillars’ consisting of ‘free-from’ foods, diet brands,
natural foods, and products tailored to particular nutritional
needs (such as infants, or individuals with specific medical
conditions like diabetes).
The investment view
The scale of opportunity from an investment perspective
goes further than simply food & drink manufacturers. Food
technology plays an increasingly important role, and the trend
of health & wellness involves science-based companies like
the developers of supplements (such as vitamins or flavour
enhancers), and probiotics – live bacteria which can help reduce
gastrointestinal problems and strengthen the body’s immune
The food and beverage sector is fiercely competitive and it is
clear there are many companies which are sensitive to both
the increasing large shifts in consumer sentiment towards
healthy eating, as well as the heightened focus from politicians
on nutrition and wellness. This requires us to look carefully
at which companies are successfully tackling the challenge,
as well as those that are not. ESG analysis in this sense is
vital, providing an invaluable future view on the impacts for
companies in this sector: the opportunities and the threats, and
by extension, the winners and the losers.
This information is issued and approved by Martin Currie
Investment Management Limited (‘MCIM’). It does not
constitute investment advice.
Market and currency movements may cause the capital value
of shares, and the income from them, to fall as well as rise and
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named manager(s). They may not necessarily represent the
views of other Martin Currie managers, strategies or funds.
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be assumed that any of the security transactions discussed here were or will prove to be profitable.