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Sugar high

Sugar high

The food industry isn’t used to thinking of itself as a “sin industry”. But these are not easy times for companies whose business is built around snacks and convenience foods.

Long stories short

  • Microsoft said Britain was “closed for business” after the UK competition regulator made its own call of duty, blocking the tech giant’s acquisition of Activision. (More below)
  • Former UK chancellors Ed Balls and George Osborne called for the Bank of England to scrap its climate goals.
  • Comcast fired Jeff Shell, CEO of NBCUniversal, after corroborating a female employee’s allegations of sexual harassment.

Sugar high

The food industry isn’t used to thinking of itself as a “sin industry” – that’s cigarettes and alcohol. But these are not easy times for companies whose business is built around snacks and convenience foods.

During the AGM season, investors including Legal & General Investment Management and BMO Global Asset Management are now pushing Nestlé, Danone, Kelloggs and Kraft Heinz for a) detailed data about the healthiness of their portfolios and b) a change in the proportion of healthy vs unhealthy products they sell. The investors’ push was coordinated by ShareAction, a responsible investment non-profit group. 

So what?  

The health lobby is taking a leaf out of the climate playbook. Campaigners, teaming up with institutional investors, are demanding changes not just to the behaviour of companies, but the nature of the business.   

Healthy investing

In its latest annual report, Nestlé disclosed the nutritional profile of its global product portfolio for the first time. Over a third of net sales were from food and beverages deemed less healthy, while just 30 per cent got a rating of at least 3.5 (out of 5) under the health star rating system, developed by the Australian government. The remaining 35 per cent came from pet food and specialised medical nutrition. Other food companies have been reluctant to report on their portfolios using independent nutrition metrics.  

The scientific community is zeroing in on ultraprocessed foods. Imperial’s School of Public Health warned of the increased risk of cancers – particularly ovarian and brain cancers – as well as diabetes and cardiovascular disease associated with ultraprocessed foods. Governments are beginning to step in: Brazil has banned the marketing of ultraprocessed foods in schools.  For a few years now, the US’ big public sector asset managers, such as CalPERS, have set public health ambitions alongside climate targets for the food industry.  

Faber’s fall. Danone is the cautionary tale. Emmanuel Faber, a high-profile advocate of a more responsible purpose-driven capitalism, was ousted as chair and chief executive of the French food business two years ago after pressure from activist investors led by Bluebell Capital Partners.

By the numbers

38 – per cent. Proportion of food company portfolios that have “red” sugar levels, weighted by revenue, according to the Tortoise Better Food Index.

50 –  the number of countries with sugar taxes (more than double the number that have carbon taxes).

£113 million – in a failed legal challenge, Kelloggs said this would be the cost of lost sales from a proposed UK government ban on the promotion of foods high in fat, sugar and salt.

Sweet and sour.  Food businesses, like energy companies, are having to contend with mixed messages from investors.  They want more healthy foods; they also want higher returns.  The food industry, like the fossil fuel business, provides affordable energy to billions of people.  

Campaigners say there are plenty of levers business leaders can pull. Jessica Attard, programme director for health at ShareAction, said: “Companies can meet ambitious targets through reformulation, shifting R&D spend to healthier alternatives, and shifting marketing spend – if they do have healthier products, they can drive the growth of those.”

Nestlé’s Mark Schneider insisted the Swiss business isn’t giving up on KitKats though. He told analysts: “We’re not interested in a target on how the healthier parts of the portfolio would outperform the other parts of the portfolio. We want to succeed in both.”

Politicians’ willingness to act on the obesity crisis appears to have receded because of sharply rising food prices. But the high cost of obesity-related disease is likely to bring junk food restrictions back on the agenda as soon as food price inflation is curbed.

Final thought: if regulation doesn’t spook the food industry, perhaps medicine will. Could widespread use of anti-obesity medication lead to a slump in sales for the least healthy products?

capital economy, business and finance

Cloud competition

Microsoft unleashed a broadside against the UK competition regulator yesterday after the CMAit struck down the company’s $70 billion takeover bid of gaming giant Activision. Brad Smith, Microsoft’s president, called it “the darkest day in our four decades in Britain” and said the EU was a better place to start a business. Was it warranted? The CMA’s grounds for blocking the deal argue Microsoft is trying to corner a large slice of the nascent cloud gaming market. It marks a change from its previous concern that Microsoft would make the Call of Duty gaming empire exclusive to Xbox. Bobby Kotick, chief executive of Activision, said the CMA had co-opted the “ideology” of the FTC, its US counterpart. The UK’s swift action has effectively scuppered chances of a deal in either the US or EU, due to Activision’s entwinement in all three jurisdictions. It’s unlikely to harm the UK’s chances of becoming a “Unicorn Kingdom”.



JPMorgan Chase has created an AI model that will trawl through 25 years of central bank statements in an attempt to predict future changes in monetary policy. The bank’s economists employed a ChatGPT-based language model to go through Fed and central-banker speeches in order to determine how hawkish or dovish the next interest rate announcement might be. The Hawk-Dove Score is also available for the European Central Bank and the Bank of England and there are plans to expand the tool to cover more than 30 central banks. Researchers at the Fed assessed its performance and found it did better at analysing Fedspeak than other natural language processing models – but may still miss nuances that a human with subject expertise might grasp. 

The 100-Year life Health, education and government

Paying for sick days

The UK lost a record number of working days to sickness last year. Figures from the ONS show that daily absences due to illness or injury have risen by 47 million since before the pandemic to an all-time high. The ONS also noted that respiratory conditions have overtaken mental health problems to become the fourth most common reason to take a day off. Businesses are rightly concerned, but worker earnings are also being hit hard by the UK’s poor health record: the IPPR think tank found that, since 2020, someone with a new physical illness has experienced an average fall of about £1,400 in their annual salary. The onset of a mental illness cut earnings by roughly £1,700.

culture society, identity and belonging

Safe bet

In the same week that India claimed the title of the world’s most populous country, investors put their faith in the country’s largest condom maker. Mankind Pharma, which controls 30 per cent of the country’s contraceptive market, is due to float on the Mumbai stock exchange next month and has received 15 times as many bids from investors as there were shares available. Morgan Stanley and several sovereign wealth funds all bought. The company makes drugs for everything from heart conditions to indigestion but is best known for its Manforce brand condoms. Analysts tell the FT its flotation will “bring life” to India’s stagnant IPO market.

our planet climate and geopolitics

Banking on anti-woke

The battle over BP’s net zero goals has been the must-watch event of this shareholder meeting  season. Much less attention has been paid however to the future of the fossil fuel lenders. A series of climate activist proposals have been roundly rebuffed by shareholders at Bank of America, Wells Fargo and Citigroup. At both BofA and Citi, less than 10 per cent voted in favour of a timed phaseout of lending towards oil and gas exploration. Experts predict mixed success for climate activist demands this season, after they garnered 40 per cent support on average last year. Part of the reason is that the Big Three asset managers – BlackRock, Vanguard, and State Street – are becoming increasingly wary of Republican attempts to punish ESG investing at a state level.

And finally… China’s taste for “cheese lollipops” – a gastronomical quirk that combines cheese with sweet flavours such as chocolate and banana – is waning. Goldman Sachs has changed its “buy” recommendation for Chinese cheese industry leader Milkground to a “sell”.

Thanks for reading.

Jeevan Vasagar

Additional reporting by Barney Macintyre.

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