A number of studies suggest that people who are overweight or obese are at greater risk of serious illness, even death, as a result of Covid-19.
In response, the UK government has set forth a raft of measures aimed at curbing obesity. The National Food Strategy’s first recommendations have also been submitted to government. Both target healthy and affordable food.
We asked sustainability analyst Louise Wihlborn about what these initiatives aim to achieve and how they might impact food and hospitality-related businesses.
What are the anti-obesity measures?
“The government plans to:
– ban the advertising of foods high in fat, sugar or salt (HFSS) before 9pm on television channels and online (potentially extended to all times of the day)
– Make calorie labelling mandatory on menus for the hospitality sector
– Review the current ‘traffic light’ labelling system on food packaging
– Restrict promotions for HFSS foods including “buy one get one free” offers”
Which companies will be most affected in your view?
“Food manufacturers, retailers and food service businesses that have a high proportion of revenues derived from “HFSS” foods face potentially lower margins on account of lower sales and higher R&D requirements and costs to reformulate products and ensure compliance with stricter legal standards on composition, labelling, claims and marketing.
“The roll out of calorie labelling, for example, will likely influence consumers to make healthier food choices and could trigger a decline in sales. The introduction of traffic light labels in the UK in 2013 has been blamed for a 14% drop in sales of Parma ham.
“Companies with clear commitments to shift sales towards healthier options and that provide transparent nutritional labelling will be best placed to deal with these changes.”
– Learn: What could a Biden presidency mean for climate change investing?
– Read: Sustainability: six ways the corporate world will have to change
– Visit: Schroders’ Sustainability home page to find out more
The National Food Strategy: What is it and what are its recommendations?
“The government-commissioned report represents the first phase of a year-long review of the UK’s food network. It offers recommendations for the future of food policy and trade. Notable measures that it suggests to government include:
– Extending free school meals eligibility to all children (age seven to 16), with one parent in receipt of universal credit
– Increasing Healthy Start vouchers for food retailers (Healthy Start vouchers are an NHS initiative to help pregnant women or parents with children between the ages of one and four buy some basic food).
– Incorporating food production standards into trade tariffs
The government is set to produce a white paper on the recommendations following the publication of the National Food Strategy Part Two in 2021.”
What are the risks or opportunities for UK food companies?
“As food producers and retailers have already been addressing these challenges since the sugar tax was first introduced, the food service and hospitality industry will face the biggest risks and opportunities from the proposed measures. There is a clear opportunity for early movers who orient their offering around healthy and sustainable food, notably contract caterers with the recommendation to extend free school meals eligibility to all children.
“On the flipside, interventionist measures around mandatory calorie labelling on food and alcoholic drinks at out-of-home venues and the costs of implementation could cause additional financial pressures. This is particularly material as most companies in the food service/hospitality sector are reliant on the “unhealthy” products being targeted (e.g. sugary food and drinks). Comprehensive public targets to rectify this e.g. improving healthy food sales have not been set.
“If food production standards around animal welfare and environmental and climate concerns are incorporated into trade tariffs, all businesses will need to pay greater attention to how their food has been produced or sourced to protect themselves legally and commercially. They may even consider redesigning supply chains around these issues.
“For example, companies may be exposed to deforestation risks on account of their dependence on ‘forest-risk’ commodities such as beef, palm oil and soy in animal feed. Businesses that fail to adapt, risk seeing supply and price issues disrupt their business models.”
Are there more regulations to come?
“We do. We expect stronger government measures to be introduced globally over the next decade to control obesity as its social and financial costs increase.
The focus is likely to be threefold:
– Reducing fat, sugar and salt content of processed foods. The focus is on sugar but a few countries (Hungary, Mexico and Denmark) have been experimenting with broader taxes on “junk food”
– The continued roll out of front-of-pack traffic light nutritional labelling
– Restricting marketing of foods high in sugars, salt and fats, especially those foods aimed at children and teenagers. New research shows that seeing 4.4 minutes of food advertising can lead to children eating 60 more calories a day.”
What are the risks of companies not acting?
“With growing scrutiny from regulators and consumers, failure to address nutritional challenges is not only likely to have reputational consequences but financial ones too. Companies that fail to capitalise on growing consumer demand for healthier food or pre-empt further regulatory changes to improve diets could face significant business risks.”
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.