Food Fight
By Donna Green
“The obesity epidemic is the only epidemic that can be cured by walking and keeping your mouth shut,” said Rick Berman, Washington lobbyist and founder of The Center for Consumer Freedom. He objects to obesity being called an epidemic and he disparages “food scolds” who would use legislation to constrain consumers’ food choices.
Berman could be fighting a losing battle, however, and it may be just a matter of time before the scolds turn their eye to convenience retailers, a group that sells a great deal of so-called bad-for-you foods.
Coming to Your Stores?
There is no disputing that we are becoming a nation of fatsoes. The U.S. Centers for Disease Control and Prevention report that 34 percent of adult Americans are obese and more than 60 percent are overweight or obese. And it’s not just the United States. The World Health Organization says “once considered a problem only in high-income countries, overweight and [obese people] are now dramatically on the rise in low- and middle-income countries.”
While adult obesity may be dismissed as an issue of personal choice, children are imitating our overfed, sedentary lifestyle to the detriment of their health and lifespan. “For the first time ever,” says Professor Richard George, “children may not outlive their parents.”
George is a food-marketing expert and a professor at Saint Joseph’s Erivan K. Haub School of Business in Philadelphia. In a recent study, George compiled information that led him to report that half of American children will be overweight in 2010. That means more than just larger jeans; insulin may soon become a refrigerator staple. His research projects one in three children born in 2000 will get Type 2 diabetes in their lifetime.
Although George says our society still “talks skinny but eats fat,” he warns that no industry can afford to be seen as a cause or enabler of childhood obesity. Unless convenience stores are proactive on this issue, he believes, “the spotlight is going to shine on them just as it has on quick serve restaurants.”
Even enlightened convenience retailers may find, however, that market forces are being hurried along by government action with popular support. The Trust for America’s Health, a nonprofit and nonpartisan organization, commissioned a national survey in July 2007. One of its key findings should put convenience store retailers on alert: “Eighty-one percent of Americans believe that the government should have a role in addressing the obesity crisis. Majorities strongly support government working on proposals to expand education programs about healthy living, provide low-cost access to exercise programs and reduce the marketing of unhealthy foods.”
The First Battleground
Kevin Smartt, founder and president of Kwik Chek Stores, a 32-store chain in Texas and Oklahoma, has a number of stores near schools. He says government-imposed restrictions on food and beverages sold in schools have increased his business — especially in the mornings.
Students “load up” on energy drinks and vitamin waters, breakfast sandwiches and sweet and sour candy. “I think the move the schools have made in time will change consumption habits,” he says, “but in the short term, kids are going to find it if it is nearby and accessible, which is what they’re doing.”
Texas, with one of the highest rates of adult and childhood obesity in the country, was the first to implement a statewide public school nutrition policy focusing on drinks and food of minimal nutritional value (FMNV). Although some cities and school districts already had similar policies in place prior to the Texas initiative, 18 states now have some sort of statewide policy or legislation with respect to the nutritional quality of school foods and beverages. Twenty more states have legislation under consideration. If these policies have not already affected your business, they almost certainly will in the future.
U.S. Department of Agriculture standards have already prohibited soft drinks in elementary schools and restricted the sale of foods of minimal nutritional value to times when they wouldn’t compete with the school lunch program. In 2003, Texas Agriculture Commissioner Susan Combs pushed the prohibition on soft drinks into the middle-school level and prohibited the sale of FMNV in elementary schools at all times — as well as restricting the time FMNV foods can be sold in middle schools to after-school hours only. Since 2004, the program has restricted the fat, sugar content and portion sizes of all foods available in schools and required soft drink manufacturers to offer drinks no larger than 12 ounces in high schools.
Vending machines have been removed entirely from elementary schools in Texas and timers have been installed in machines in middle and high schools. To comply with calorie and portion restrictions, manufacturers of vending machine snacks had to rethink their offerings. Some companies repackaged, reformulated or re-invented their products to comply. Mars, for instance, developed a 10-item line of wholesome snacks called Generation Max, available exclusively through school vending machines.
School superintendents were initially resistant to the policy because they feared losing the lucrative beverage contracts. “We found out they were making $50 million off these contracts, but they were losing about $25 million in federal subsidies due to lost cafeteria sales,” Combs recounts. Gaining subsidies could offset any loss in beverage contract income.
Combs believes the changes have been a win for everybody since beverage manufacturers are selling more water, milk and juices. Snack manufacturers are still selling snacks, but kids are eating more nutritious and less fattening food.
In 2009, the federal Child Nutritional Reauthorization Act is set to come under review by Congress and may result in the redefinition of foods of minimal nutritional value, something the snack food industry is keeping its eye on — and so should you. What gets tossed out of schools could become your next big seller, which is a situation that may come back to bite retailers.
Manufacturers Respond, Retailers Follow?
“Manufacturers of indulgent foods have all been working on lower portion size, reduced fat content, zero trans-fat, reduced sugar and reduced overall caloric count,” observes Kim Trowbridge, vice president of the Western Division at Mac’s Convenience Stores Inc., a subsidiary of Alimentation Couche-Tard. “It’s incumbent on our industry to stay with consumer trends and make sure we have those healthier alternatives.”
Trowbridge says that based on his customers’ appetite for fresh fruit, he thinks people “are living the speak.”
If people are making better choices, manufacturers are certainly working to provide better-for-you products. According to David Bishop, managing partner of Balvor, a marketing and sales consultancy specializing in convenience retailing, leading manufacturers have responded in three general ways:
- Reformulating the package size for fewer calories per serving
- Highlighting products that are better for you using their own proprietary symbols
- Developing new better-for-you products
Even with all this, as Bishop points out, “There is a natural tension between socially responsible retailing and profitability. Just because a store doesn’t stock these products doesn’t mean they are being irresponsible. It may be they are just responding to their local customers’ needs. There should be no guilt in being profitable.”
Tax Threat
Bishop notes that retailers and suppliers have a growing concern about the future consequences of obesity to their businesses. Obesity increases health-care costs, and the fear is that politicians will use this as a politically convenient justification for the imposition of an excise tax on indulgent foods. Tobacco and alcohol beverages are, of course, the prime examples of this kind of tax.
Some jurisdictions have already tinkered with the blunt tool of taxation. A number of states have long had taxes on soft drinks. San Francisco’s mayor recently proposed a tax on drinks high in fructose corn syrup. Sixteen states currently single out candy for special taxation, and taxes singling out savory snacks have been tried but ultimately repealed — so far.
Jim McCarthy, president of the Snack Food Association, says discriminatory taxes on food products are arbitrary and unfair; they’re often difficult for retailers to administer and they’re regressive in that they have the biggest impact on lower-income people.
They’re also widely unpopular with voters, he says. Even the American Medical Association, which in 2006 gave Susan Combs a prestigious award for her work in Texas, has withdrawn its call for special taxes on soft drinks. Instead it is promoting a more collaborative effort with food and beverage manufacturers to fund anti-obesity programs.
Nevertheless, fiscal pressure could push politicians into ill-advised but philosophically defensible revenue grabs.
Next Step for Retailers
Legislation has a way of creeping into unexpected places. Rules made for food manufacturers or restaurants could end up applying to the convenience channel. A few should be watched.
New York City now requires restaurants with at least 15 outlets nationwide to identify the calorie content of their items on the menu. California recently passed legislation requiring fast-food and chain restaurants to have nutritional information at the point of purchase.
Menu labeling laws may seem intrusive but they are hardly a hiccup compared to efforts by various municipalities to place zoning restrictions or all-out bans on fast-food restaurants. Last year, a controversial two-year moratorium on new fast-food outlets in south and southeast Los Angeles was proposed to slow down the climbing rate of obesity in those neighborhoods. The proposal has not yet been passed.
A proposed bill in the California Senate would require vending machine offerings in state government buildings to conform to certain minimum nutritional requirements. “This,” says Steve Lodge of the National Confectioners Association, “is the first step beyond the schools.” It may be just a matter of time before these baby steps beyond the schools come tripping into your store. A proposed bill in the California Senate would require vending machine offerings in state government buildings to conform to certain minimum nutritional requirements. “This,” says Steve Lodge of the National Confectioners Association, “is the first step beyond the schools.”
It may be just a matter of time before these baby steps beyond the schools come tripping into your store.
What Retailers Can Do
Bishop says retailers should respond to obesity concerns responsibly while staying attuned to their own markets. He cites a parallel with in-store alcohol merchandising. Single cans of beer can be sold in an ice bin near the counter or they can be restricted to the cooler, a decision that gives retailers a more socially responsible image, as they are not seen by some as promoting drinking and driving.
Retailers, Bishop continues, can help customers make the better-for-you purchase by judiciously stocking choices that have proved popular in many markets, such as individual servings of fresh fruit, cereal to go and whole-grain fresh sandwiches.
Rather than segregate better-for-you products in one area of your store, he suggests integrating these products into the normal category merchandising mix and highlighting the more wholesome products with a shelf dangler or other communication. Even categories like candy can be managed in a way that can position a retailer as more health-conscious.
Take king-sized candy bars as an example. Although the economics of the products are compelling for both retailers and consumers, Bishop suggests that retailers might promote the visibility of smaller sized bars and highlight the dark chocolate selection. You don’t even have to forego an upsale. Mars’ Cocoavia dark chocolate bars, for example, come in (approximately) 100-calorie portions but are merchandized in boxes of five.
With some creativity and judgment, responsible retailing doesn’t necessarily mean decreased profits, but it just may help keep the food scolds’ spotlight from shining into your windows a little longer.
Donna Green is a freelance business writer and a contributing editor to Toronto-based YCM Magazine. She recently moved to rural New Hampshire (adult obesity rate: 20.2%) and has spent all of her adult life trying to avoid potato chips.
Doing Their Part
MANUFACTURERS PLEDGE ALLIANCE…
Although they believe that obesity is to be blamed more on an inactive lifestyle than the enjoyment of their products, many manufacturers of soft drinks, candy, chocolate and salty snacks have agreed collectively to change their practices and, in some cases, their product offering.
The Alliance for a Healthier Generation has spearheaded an agreement among the large soft drink manufacturers to phase out “…the sale of full calorie beverages in all schools, introducing smaller bottles for certain drinks, and accelerating the shift to lower calorie and more nutritious beverages that children consume during the regular and extended school day.” This should be fully implemented by the beginning of the 2010 school year. The dairy industry has also pledged to develop lower sugar-flavored milks and make them more widely available.
The American Beverage Association reports “calories from beverages shipped to schools have dropped 41 percent from 2004 to 2006-07, shipments of full-calorie soft drinks decreased by 45 percent from 2004 to 2006-07.” Its June 2007 progress report says the average high school student is purchasing just 5.9 ounces of carbonated soft drinks per week compared to 12.5 ounces per week in 2004.
Many companies also sponsor their own youth exercise program. As an extension of their S.M.A.R.T Spot program, Pepsi builds playgrounds; Hershey sponsors track and field games.
…AND REGULATE THEIR ADVERTISING
Childhood obesity has a multitude of causes, but advertising likely plays some role.
Britain forbids advertising of foods high in sugar, fat and salt on programs aimed at children under the age of 16. All children’s advertising is banned in the province of Quebec in Canada, and in Sweden and Norway. Calls have begun in Canada for a national ban on food and beverage advertising to children.
Although such bans are likely not possible under the U.S. Constitution, a large number of major food and drink companies have pledged to abide by the advertising guidelines of the Children’s Advertising Review Unit of the Council of Better Business Bureaus, a self-regulatory body for children’s advertising.
Thirteen food and beverage companies have also pledged to abide by the Children’s Food and Beverage Advertising Initiative, which was launched in late 2006 to combat childhood obesity. The goal: to direct more children’s advertising to healthier food and lifestyle choices. The Coca-Cola Company, The Hershey Company and Mars Inc. have pledged to stop advertising directed to children under age 12. Other members have pledged to devote at least half of their children’s advertising to better-for-you products and healthy lifestyles.