tamarian
Sat, Apr-19-03, 08:31
Obesity could sour business for sweetmakers
By John Mason and Neil
BuckleyPublished: April 18 2003
When Robert Atkins died this week, the latest of a string of diet books he authored was once again top of the best-seller lists. An estimated 30m Americans have followed the New York cardiologist's formula of eating plenty of steak, eggs and butter while cutting out pasta and potatoes.
The death of the 72-year-old diet guru - from head injuries after he slipped on ice while walking to his Manhattan office - comes as demand for weight-loss solutions has never been higher. Expanding waistlines across the western world have become a big issue not just for individuals, but for food manufacturers - which could find themselves being held to blame.
Obesity is beginning to attract the political attention long sought by health campaigners. The World Health Organisation has warned recently that obesity has reached epidemic proportions worldwide, and McDonald's has become the subject of US litigation reminiscent of tobacco suits.
Now the financial community is telling food companies they should mend their ways. The day before Dr Atkins' death, London-based analysts at JP Morgan, the investment bank, issued a warning that food-makers' share prices could be at risk if they do not.
"The rise in obesity to epidemic proportions is a serious concern for the food industry. Food manufacturers face the risk of increased regulation, particularly in Europe, in labelling, advertising and distribution, some of their key growth levers," it said.
The financial implications were stark, it added. "We also believe litigation risks and their impact on sector sentiment should not be underestimated."
Confectionery and soft drinks makers have most to fear, the bank's analysts warned. Top of their danger list, in terms of exposure of its total business to obesity risk, was Hershey Foods of the US, followed by Cadbury Schweppes of the UK, Coca-Cola and PepsiCo.
The Atkins diet also indirectly pointed the finger at manufacturers of sweets and soft drinks. Its premise - turning conventional nutritional advice on its head - is that the prime cause of obesity is not eating lots of fat, but excessive intake of carbohydrates, especially in highly refined forms such as white sugar and white flour. People on the diet can eat protein and fat, but have to cut back on carbohydrates.
The theory was initially dismissed by the medical mainstream, and many doctors argued that the Atkins diet could even be dangerous. It is still controversial, but has begun to gain acceptance in the medical establishment as the scale of the obesity issue becomes more pressing.
The problem is most acute in the US, where obesity rates have risen to almost 28 per cent among men and 34 per cent among women. In Europe, the UK is the worst offender, with 21 per cent of men and 23 per cent of women.
The financial costs of an increasingly obese population are gradually dawning on governments. In the US, the surgeon-general estimated the direct and indirect cost at $117bn (£75bn) in 2000, fast approaching the $140bn costs associated with smoking. There is no similar data for Europe, although in the UK the direct costs are forecast to rise to at least £3.5bn a year in less than a decade. Indirect costs, such as lost work days, are thought to be even higher. Such figures could prompt governments to step up regulation, analysts fear.
Food and drink companies remain on the defensive. Cadbury said on Friday it agreed that obesity was a serious issue but wanted to study the JP Morgan report before commenting. Many US food companies are reluctant to comment on obesity litigation. But industry bodies such as the Grocery Manufacturers of America and the National Restaurant Association say it is wrong to blame food manufacturers.
Obesity results from complex factors, they say, and companies cannot be held responsible for individual consumers' choices. The National Confectioners' Association says the industry has long pointed out the need for balance and moderation.
Companies such as Kraft Foods, Coca-Cola, Pepsi and McDonald's are sufficiently concerned about the issue to be taking action to promote healthier lifestyles.
Government action on issues such as labelling has been mild, said Deirdre Hutton, head of the UK's National Conusmer Council. But the political momentum is growing for bans or restrictions on advertising, stiffer labelling requirements and restricting distribution. Any such moves could erode profitability.
As the analysts point out, however, the obesity problem creates opportunities for food companies focusing on "healthy segments" of the industry. Already, many are moving away from the "low fat" products that were considered healthy for 30 years to a new generation of "low carb" goodies. Dr Atkins would have approved.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1048313875024
By John Mason and Neil
BuckleyPublished: April 18 2003
When Robert Atkins died this week, the latest of a string of diet books he authored was once again top of the best-seller lists. An estimated 30m Americans have followed the New York cardiologist's formula of eating plenty of steak, eggs and butter while cutting out pasta and potatoes.
The death of the 72-year-old diet guru - from head injuries after he slipped on ice while walking to his Manhattan office - comes as demand for weight-loss solutions has never been higher. Expanding waistlines across the western world have become a big issue not just for individuals, but for food manufacturers - which could find themselves being held to blame.
Obesity is beginning to attract the political attention long sought by health campaigners. The World Health Organisation has warned recently that obesity has reached epidemic proportions worldwide, and McDonald's has become the subject of US litigation reminiscent of tobacco suits.
Now the financial community is telling food companies they should mend their ways. The day before Dr Atkins' death, London-based analysts at JP Morgan, the investment bank, issued a warning that food-makers' share prices could be at risk if they do not.
"The rise in obesity to epidemic proportions is a serious concern for the food industry. Food manufacturers face the risk of increased regulation, particularly in Europe, in labelling, advertising and distribution, some of their key growth levers," it said.
The financial implications were stark, it added. "We also believe litigation risks and their impact on sector sentiment should not be underestimated."
Confectionery and soft drinks makers have most to fear, the bank's analysts warned. Top of their danger list, in terms of exposure of its total business to obesity risk, was Hershey Foods of the US, followed by Cadbury Schweppes of the UK, Coca-Cola and PepsiCo.
The Atkins diet also indirectly pointed the finger at manufacturers of sweets and soft drinks. Its premise - turning conventional nutritional advice on its head - is that the prime cause of obesity is not eating lots of fat, but excessive intake of carbohydrates, especially in highly refined forms such as white sugar and white flour. People on the diet can eat protein and fat, but have to cut back on carbohydrates.
The theory was initially dismissed by the medical mainstream, and many doctors argued that the Atkins diet could even be dangerous. It is still controversial, but has begun to gain acceptance in the medical establishment as the scale of the obesity issue becomes more pressing.
The problem is most acute in the US, where obesity rates have risen to almost 28 per cent among men and 34 per cent among women. In Europe, the UK is the worst offender, with 21 per cent of men and 23 per cent of women.
The financial costs of an increasingly obese population are gradually dawning on governments. In the US, the surgeon-general estimated the direct and indirect cost at $117bn (£75bn) in 2000, fast approaching the $140bn costs associated with smoking. There is no similar data for Europe, although in the UK the direct costs are forecast to rise to at least £3.5bn a year in less than a decade. Indirect costs, such as lost work days, are thought to be even higher. Such figures could prompt governments to step up regulation, analysts fear.
Food and drink companies remain on the defensive. Cadbury said on Friday it agreed that obesity was a serious issue but wanted to study the JP Morgan report before commenting. Many US food companies are reluctant to comment on obesity litigation. But industry bodies such as the Grocery Manufacturers of America and the National Restaurant Association say it is wrong to blame food manufacturers.
Obesity results from complex factors, they say, and companies cannot be held responsible for individual consumers' choices. The National Confectioners' Association says the industry has long pointed out the need for balance and moderation.
Companies such as Kraft Foods, Coca-Cola, Pepsi and McDonald's are sufficiently concerned about the issue to be taking action to promote healthier lifestyles.
Government action on issues such as labelling has been mild, said Deirdre Hutton, head of the UK's National Conusmer Council. But the political momentum is growing for bans or restrictions on advertising, stiffer labelling requirements and restricting distribution. Any such moves could erode profitability.
As the analysts point out, however, the obesity problem creates opportunities for food companies focusing on "healthy segments" of the industry. Already, many are moving away from the "low fat" products that were considered healthy for 30 years to a new generation of "low carb" goodies. Dr Atkins would have approved.
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1048313875024