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Fighting Obesity: The Corporate Dilemma

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Infographic: the Wall Street Journal

Yesterday’s post on the extent of obesity in the US led to an outpouring of comments an tweets by many of you. No doubt we were all bamboozled by the stats. We’re pretty sure that managers and executives at junk food companies are aware of the numbers. And although they can’t publicly admit that they are contributing to obesity, some may actually want to produce and sell better, healthier food to the public.

Such are the soft drink behemoths, Coca Cola and Pepsi. Their core products – sugary drinks – account for most of their revenue.Trying to redesign a company that’s raking in billions from selling sugar water is far from easy though:

Hailed as a strategic visionary since taking PepsiCo’s reins nearly five years ago, Mrs. Nooyi is facing doubts from investors and industry insiders concerned that her push into healthier brands have distracted the company from some core products. Emphasizing fruit juice, oatmeal and Gatorade, she has set an ambitious goal of more than doubling revenue of nutritious products to $30 billion by 2020 while cultivating a corporate image tuned in to health and global social responsibility. Read more from WSJ…

Not that Gatorade is a healthy product, but Ms Nooyi has definitely been minded to the fact her company sells slow release poison to the masses. She was given a chance to re-invent PepsiCo through new and “healthier” products. But as you can see, the analysts on Wall-Street, as well as the large institutional investors, couldn’t care less about health. They want to see a bottom line of revenue and profit that grows from quarter to quarter. If 100% of the US will be obese in a decade in order to achieve this, so be it.

So while cola consumption is declining in the US, it still accounts for 25% of sales of ready to drink beverages. In marketing, Coke and Pepsi are considered “milking cows”, established brands that make billions for their owners. Not so simple to give up the easy money. Especially when the “rising stars” (another marketing term for promising product lines) are not delivering on their potential.

Pepsi seems to have given up on finding healthy things to sell. After dropping points to rivals, it is increasing spending on its Cola. This after 6 years of steady decline in cola advertising. Bad news.

What can be done?

Although many people are against soda tax, there is one thing nobody can argue about – junk food companies are externalizing many of the costs associated with their products. If there was a realistic way to incorporate these costs into the price of junk foods and beverages, perhaps they wouldn’t be so abundant and popular.

Got additional ideas besides “personal responsibility”?

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  • Potsyweber200

    BS. The majority of profits at this point come from taking tap water, putting it into toxic bottles, and then selling it back to the region they took it from at a 600% mark up to the people they took it from in the first place.
    That doesn’t sound like civic concern to me.

  • http://www.kofflerventures.com Richard Koffler

    You miss the point that investors aren’t static. If current shareholders disagree with the CEO’s direction, they will sell their shares to buyers who agree with the CEO’s long-term vision of the value of nutritious products (…not that fruit juice or gatorade are nutritious…).

    • Alexander Gee

      People invest to make money not to do public good. Is there long term profit in healthier food? Not really at the moment, it is a small market that is saturated by too many big players.

  • Dee Rhodes

    The downside of using punitive taxation is will those taxes be used to further better health agendas or used for other governmental programs? Monies collected for health costs related to smoking in California have gone into the state’s “general fund”, not to help with health costs to the state from smoking. Better to buy Pepsi stock, and vote with your dollars for the healthier options.

  • LeaG

    It is so not their responsibility. They offer a product, consumer chooses to buy or not buy and consume or not consume said product. All prepackaged foods are junk foods even organics or whole grains or whatever. And the other thing is, if they have tried to release and promote ‘healthy’ junk foods and it isn’t taking off, there is no market for it. The morons who buy and consume those junk foods often are the target market for these companies. People who know about nutrition and care about health rarely if ever buy those product and are not the target market. They aren’t fooled by ‘healthy’ junk food.

    Bottom line, not the corporation or the governments responsibility. Period. They make it and sell it, we decide what to put in our bodies.

  • Ray Claude

    The war on obesity can not be won by fighting isolated skirmishes.  It can not be won by relying on absurdities (on notions that there exist healthy and unhealthy foods, for example; consult any reliable dictionary) to wage a campaign. It can be won by eaters themselves, once they are rid of corrupted understandings of nutrition as modernly provided by commerce and media. People rule, and do it well when correctly informed.

    • Alexander Gee

      Modernly should not be a word it sounds far too clunky.
      I don’t believe that many people don’t understand nutrition they just don’t care. Short term gain (tasty,cheap,easy food) over long term loss (health) it is nearly always the problem with humans.

  • Michelle Schulp

    I don’t see why personal responsibility *isn’t* a viable idea. The government’s role should be mainly to cut back all of its ridiculous subsidies and policies that enabled us to make really cheap junk food with really cheap corn sugar. Just by leveling the playing field so that all foods are actually competing in a closer-to-free market, prices will end up actually reflecting the health of the item (because we won’t be subsidizing all the “processing” anymore). There could also possibly be an education role, but education and taxes haven’t stopped people from smoking, drinking to excess, or any number of other things that are bad for you. People are still going to do what they want to do.

    But the flip side of personal responsibility is that people should also be personally responsible for their healthcare, should they choose to lead an unhealthy lifestyle. You can’t have it both ways.

  • http://twitter.com/Sk88queen Sk88queen

    Companies aren’t in business to watch our for our health. They are there to make money. It is up to the individual to watch out for his own/his family’s health. Just because that swill is sitting on the shelves or being pushed on radio and TV doesn’t mean I have to drink it. I do not drink it. At the end of the day, I am not mad at Coke, Pepsi, Frito-Lay, McDonald’s or any other company. I know these “food like products” are not good for me and I don’t partake of any of their products or several others I didn’t mention. There is nothing that says Coke has to be a part of my diet. If I want good blood pressure, cholesterol or weight levels, it’s 100% up to me and not Ms Nooyi at Pepsico.

    • Guest

      Some transparency is still in place. If you would have stickers like “drinking cola increases your chances of diabetes”  on every bottle (like they have of cigarette packs), maybe people will drink less of it