Big Food may have found a way to have its cake and eat it too. Coca-Cola, Kraft, General Mills, Nestlé and other food and beverage giants have grown big and powerful on products laden with fat, sugar and/or sodium. But recent corporate decisions suggest they're keenly aware that what's good for their bottom line (snacks like Kit Kat bars) isn't necessarily good for your butt (although they are a godsend for the stretch denim industry).
Big Food is plowing money into health research. It's experimenting with medicinal ingredients that could suppress appetites or help people suffering from obesity-related diseases. It's pledging to limit levels of saturated fats, salts and other nasties in its manufactured food, as well as to restrict ads aimed at kids.
A few companies are doing much more. Take Nestlé, the Swiss food juggernaut (including Nescafé, Häagen-Dazs and Kit Kat bars-regular, snack-size and ChunKy M.A.X.). Its stock market value isn't far short of Wal-Mart's. Last autumn, it launched Nestlé Health Science and the Nestlé Institute of Health Sciences. The first will straddle the line between food and pharmaceuticals. The second will fund about $500 million (all currency in U.S. dollars) of research into nutritional science over the next decade.
Analysts say Nestlé's enormous marketing and R&D firepower-its annual research spending exceeds $2 billion-will potentially make Nestlé Health Science an enormous business. The subsidiary will develop nutrition brands, supplements and "personalized health science nutrition" to help treat obesity, cardiovascular-related diseases, inflammation, Alzheimer's and other conditions that are swamping health-care systems.
Entering the nutraceuticals business is a smart move for Nestlé in more ways than one. Besides opening up a new source of revenue by competing with pharmaceutical companies, like nutrition specialist Abbott Laboratories, it sends a signal to consumers and health authorities that it's willing to bear some of the blame, and to provide some solutions to problems related to obesity and dubious nutrition. That's the good news.
The danger is the potential for "wellness" washing, where the friendly PR generated by the new generation of health products allows Big Food to avoid what it really should be doing: making its existing products-breakfast cereals, ice cream, soda pop, frozen pizza and lots more-less fattening and more nutritious. Big Food will argue that it's already lowering levels of sugar, saturated fats and sodium in heavily processed food. But obesity rates suggest those levels could and should come down faster. At the same time, advertising aimed at children, while somewhat restrained from the bad old days, continues. Sealing toys in cereal boxes is still standard marketing procedure in many countries.
Another potential problem with the new wave of nutraceuticals and other nutritional products is their intended audience. Those offerings will no doubt be niche, high-margin items. The cheap processed food-made tasty by all that fat, sugar and sodium-will continue to be sold en masse to lower-income customers. Big Food is global, and the growth opportunities are in the developing world, in countries like Brazil, where Nestlé is doing a booming business through door-to-door sales. Wouldn't local diets be better served by lightly processed, locally produced foods instead of factory offerings?
Big Food isn't just getting into high-end nutraceuticals; it's also making an appearance down on the farm. In January, at the World Economic Forum in Davos, Nestlé presented itself as the leader of the 17-company project (including Wal-Mart, Monsanto and DuPont) called "A New Vision for Agriculture." Nestlé executive vice-president Frits van Dijk called the initiative "a strong message that the private sector is ready to work with public sector leaders to realize agriculture's potential as a positive driver of food security, environmental sustainability and worldwide economic growth."
Sounds good. Nestlé already works with farmers in some countries. Linking them to the global farm-to-supermarket value chain can only improve the growers' wealth-creation potential. Nestlé is a leader in other agriculture-related endeavours too. Its bosses have long warned that the world is getting close to a water crisis and that turning crops into biofuels is folly when food prices are soaring and triggering social unrest.
The potential problem with the food processors' elevated interest in farming is that, through sheer bulk, they can shape local economies and environments in their favour. Strong demand for a single crop could lead to the loss of crop diversity. Local regulations designed to protect the public interest, such as non-privatized water supplies, could be compromised, particularly in developing countries with weak governments. And Big Food could use its clout with farmers and retailers to displace locally grown foods with its own processed foods.
Big Food is going to get bigger as it exploits every inch of the value chain, from farm to pharmacy. Just don't take its word that the world will be a healthier place for it.