the role of the food industry in obesity...

Better-For-You Foods “It’s Just Good Business”

October 13, 2011

High Obesity Rates Persist Despite Efforts to Reverse the Epidemic

Better-For-You Foods: "It's Just Good Business" www.hudson.org

The Project

• The first effort to examine whether there is a business case to be made for selling better-for-you (BFY) products

Project Goals

• To determine if consumer packaged goods (CPG) food and beverage corporations that emphasize BFY products enjoy superior sales, financial and reputational benefits

• To accelerate CPG company conversion to lower-calorie, healthier product versions

• Ultimately to serve as an impetus to help reverse obesity rates among children and their families

The 15 Food & Beverage Companies Analyzed

Objectives Categories Data Sources

Conclusions

• Companies with higher than average sales of BFY products demonstrate superior:

• Sales growth • Operating profits • Returns to shareholders • Company reputation

Product Portfolio Snapshot

Product Categorizations

• “Lite” – No-/low-/reduced-calorie foods • “Good”

• Wholesome products • Traditional products made healthier • Perceived by consumers as healthier

• Better-for-You (BFY) = “Lite” + “Good” • Traditional – Non BFY products

NOT a set of new nutritional standards

Example Brands by Category Kraft Foods PepsiCo Unilever

Lite Crystal Light Aquafina Breyer’s Light Maxwell House Pepsi Max Lipton Tea (unsweetened) Roarin’ Waters Tropicana 50 Slim-Fast

Good Boca Burgers Baked Lay’s Dijonnaise Oscar Mayer Lean Turkey

Quaker Oatmeal Lipton Dry Soups

Wheat Thins SoBe Life Water Ragu Old World Style

Traditional Oreos Doritos Klondike Bar Kraft Mayonnaise Pepsi Lipton RTD Teas Kraft Mac n Cheese Tropicana OJ Skippy Peanut Butter

BFY Products Comprise Almost 40% of Composite Company Sales

Lite Foods 19.3%

Good Foods 19.3%

Traditional Foods 61.4%

Total Better-For-You 38.6%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

% o

f Sal

es

Above Avg. BFY

Below Avg. BFY

% of BFY Sales by Company

Several Companies Making BFY Products a More Important Part of Their Portfolios

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Kellogg's Campbell's Danone Sara Lee Hormel General Mills

Chan

ge in

% B

FY

Impact of BFY Products on Sales Growth

BFY Items Drove a Disproportionate Share of 5-Year Sales Growth

38.6%

71.8%

61.4%

28.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Percent of $ Sales Percent of $ Sales Growth

Share of Dollar Sales & Growth, 2007 - 2011

BFY Traditional

Source: Nielsen Food, Drug and Mass Merchandiser sales tracking

Companies Growing Their BFY Products Faster Than Traditional Ones Exhibited Greater Overall Sales Gains

4.9%

2.2%

-1.5% -2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

% C

hang

e in

Dol

lar

Sale

s

Impact of BFY on Total Company Growth, 2007-2011

BFY Growth > TraditionalProducts (7 Companies)

Traditional Growth > BFYProducts (6 Companies)

Declines in Both (2Companies)

Source: Nielsen Food, Drug and Mass Merchandiser sales tracking

Impact of BFY Products on Operating Profits

Companies Emphasizing Better-for-you Products Recorded Superior Operating Profits

15.3%

9.5%

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%16.0%18.0%

Latest 5 fiscal years

Average Operating Profit Margin

Above Average % Sales in BFY products (8companies)

% O

pera

ting

Pro

fit M

argi

n

Source: Nielsen Data & Company Annual Reports (Excludes beverage companies due to higher margin structure)

All Companies Emphasizing BFY Products Reported Operating Profits > 14%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

% O

pera

ting

Pro

fit M

argi

n

Source: Nielsen Data & Company Annual Reports (latest 5 fiscal years) (Excludes beverage companies due to higher margin structure)

All Companies with Below Average % of BFY Sales Delivered Lower Returns

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Kraft Sara Lee ConAgra Hormel

% O

pera

ting

Pro

fit M

argi

n

Source: Nielsen Data & Company Annual Reports (latest 5 fiscal years) (Excludes beverage companies due to higher margin structure)

BFY–Operating Profit Link Also Holds for High Margin Soft Drink Companies

39.8%

25.6% 28.2%

16.9%

26.5%

14.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

% of Sales in BFY Products Average Operating Profit Margin

Coca-Cola

PepsiCo

Dr. Pepper

Source: Nielsen Data & Company Annual Reports (latest 5 fiscal years)

Companies Emphasizing BFY Products Recorded Superior Operating Profit Growth

50.6%

21.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Latest 5 Fiscal Years

Growth in Operating Profits

BFY Growth > Traditional Products (7 Companies)

Traditional Growth > BFY Products (6 Companies)

% G

row

th in

Ope

rati

ng P

rofit

Source: Nielsen Data & Company Annual Reports

Impact of BFY Products on Shareholder Returns

Companies Emphasizing BFY Products Outperformed the S&P 500 Index by a Larger Margin

60.6

39.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Above Average % of Sales in BFY Below Average % of Sales in BFY

Poin

t Diff

eren

ce v

s. S

&P

Performance vs. S&P 500

Source: S&P Index daily figures; Yahoo Finance (latest 5 fiscal years)

Companies with Stronger Better-for-you Portfolios Deliver Superior Total Returns to Investors

49.9%

34.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Tota

l Ret

urn

%

Total Return

Above Average % of Sales in BFY Below Average % of Sales in BFY

Source: Yahoo Finance, Ycharts and Annual Reports (Nestle & Danone); latest 5 fiscal years

Impact of BFY Products on Reputation

BrandPowerTM

• BrandPowerTM metric is a proven predictor of market value for CPG and beverage companies

• Tracks 5 important success measures: • Reputation • Familiarity • Favorability • Management • Investment Potential

Companies Focusing on Better-for-you Portfolios Exhibit Superior Reputation & Favorability Scores

69.5

53.2

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Above Average % of Sales in BFY Below Average BFY Portfolios

BrandPowerTM RATING

Source: CoreBrand BrandPowerTM ratings Data not available for Dr. Pepper, Danone and Smuckers. Coca-Cola and Unilever excluded as they are outliers: Coca-Cola rating = 84.6; Unilever = 9.9 .

Case History

• 1994-2004 • Stripped out all non-food, plus beer and confectionary businesses

• 2007 • Sold Biscuit division to Kraft • Purchased Royal Numico

Company has revamped entire portfolio to focus entirely on better-for-you products

Presenter

Presentation Notes

The category average for the sugar content of all major branded cereals is 10 gm/serving. This has dropped from 11 gm a serving just two years ago. [Speaker’s Note: General Mills has a total of 72 cereals] 33 of General Mills cereals have 9 gm sugar or less per labeled serving (this includes 1 ounce and 2 ounce cereals) This equates to 10% or more less sugar than the category average. The sugar levels in Disney cereals (Mickey Mouse, Little Einsteins, & Princess Flakes) were developed in conjunction with Disney’s nutrition criteria. These cereals are value-priced, contain 9 gm sugar/serving, and have been very successful. Fruity Cheerios, at 9 gm sugar/serving, has also been very successful. Clifford Crunch is an organic food offering that has 6 gm of sugar/serving and has been successful. DORA the Explorer cereal, with 6 gm of sugar/serving, has had difficulty. Our reduced sugar versions of popular pre-sweet cereals have had only had moderate success. Cocoa Puffs and Trix Reduced sugar are being discontinued in the retail market because of low volume. However, they are being moved to foodservice (though not quite at the same low sugar level). Reduced sugar CTC will continue to be offered in retail.

Portfolio Profile

Presenter

Presentation Notes

The category average for the sugar content of all major branded cereals is 10 gm/serving. This has dropped from 11 gm a serving just two years ago. [Speaker’s Note: General Mills has a total of 72 cereals] 33 of General Mills cereals have 9 gm sugar or less per labeled serving (this includes 1 ounce and 2 ounce cereals) This equates to 10% or more less sugar than the category average. The sugar levels in Disney cereals (Mickey Mouse, Little Einsteins, & Princess Flakes) were developed in conjunction with Disney’s nutrition criteria. These cereals are value-priced, contain 9 gm sugar/serving, and have been very successful. Fruity Cheerios, at 9 gm sugar/serving, has also been very successful. Clifford Crunch is an organic food offering that has 6 gm of sugar/serving and has been successful. DORA the Explorer cereal, with 6 gm of sugar/serving, has had difficulty. Our reduced sugar versions of popular pre-sweet cereals have had only had moderate success. Cocoa Puffs and Trix Reduced sugar are being discontinued in the retail market because of low volume. However, they are being moved to foodservice (though not quite at the same low sugar level). Reduced sugar CTC will continue to be offered in retail.

Financial Performance Metrics % BFY Sales

Growth

Operating Profit Growth

Performance vs. S&P 500

Stock Price Appreciation

Danone 99.6% +6.9% +61.4% +94.9 +83.5%

15 Company Composite 38.6% +2.1% +34.9% +51.9 +43.5%

INDEX 258 329 176 183 192

Exceptional 5-year Performance

Implications for Action• This study provides powerful evidence that investing in

developing and selling better-for-you products is good for business

• Food companies and analysts should adopt the % BFY metric to gauge improvements to product portfolios

• Public health officials and policymakers must be aware of and understand core food company goals in order to work more effectively with them to address the obesity epidemic.

Nestlé Infant Nutrition

Rick Klauser Marketing Head, Nestlé Infant Nutrition

36

Pregnancy Preschool

Our Mission: Our unwavering commitment to nourish a healthier generation, one baby at a time

The nutrition a child receives in the first five years can affect their health forever

37

Start Healthy, Stay Healthy ™ is Gerber’s Commitment to Early Childhood Nutrition

SCIENCE Elevate the nutrition conversation through scientific leadership

PRODUCT INNOVATION

Integrate developmental and nutrition science

for advanced product design

EDUCATION Translate complex nutrition science for all stakeholders

38

Start Healthy, Stay Healthy ™ : Science

2002 Key Findings • Lack of fruits and vegetables • Sweets introduced very early • Snacks are critical • Infant and Toddler dietary gaps

• Groundbreaking dietary survey of 3,000 infants & toddlers

• Snapshot of nutrient intakes and dietary patterns

• Fills an important information gap

• Published in 25+ peer-reviewed journal articles

2008 Key Findings • Improvements in breastfeeding and

introduction of sweets • Continuing lack of fruits and vegetables • Infant and Toddler dietary gaps • Preschooler data reveals similar issues to

Toddler

39

Gerber Innovation:

Start Healthy, Stay Healthy ™ : Innovation

FITS Insight:

Lack of fruits and vegetables

Inadequate intake of essential fats/high sat fat

Whole grain gap

Too many sweets and 25% of calories from snacks

Lil’ Entrees – one serving of vegetables; cheese sauce made with squash

Graduates Grabbers - fruit puree in self-feeding package

Dairy products with healthier fats – Omega 3 from canola oil

Snacks and pasta made with whole grains

Healthier snack alternatives – such as Yogurt melts, fruit and whole grain products

Start Healthy, Stay Healthy ™ : Education

40

Sharing with Research Community Informing Public Health Policy

Educating Health Professionals Customizing Resources for Families

41

Customizing Resources for Families Educating Health Professionals

Informing Public Health Policy

42

Customizing Resources for Families Educating Health Professionals

Sharing with Research Community

43

Educating Health Professionals

Customizing Resources for Families

44

Customizing Resources for Families

Educating Health Professionals

Interactive Nutrition Tool

• Generates nutritionally-appropriate menus – Interactive and

customizable by developmental stage

• Valued by consumers

– 600,000 gerber.com visits per month

– 60,000 Menu Planner downloads per month

Healthy Products Yield Healthy Profits

46

9 out of 10 Moms say Gerber is their

“most trusted brand”

Strong Sales Results

TOTAL Gerber & Good Start

+10%

‘07 ‘08 ‘09 ‘10 ‘11

47

General Mills Health Initiatives

48

Susan Crockett, PhD, RD Vice President

Senior Technology Officer, Health & Nutrition

October 2011

Presenter

Presentation Notes

General Mills Overview

•World’s 6th largest food company

•$14.9 billion in FY11 global net sales

•35,000 employees

•Marketed in more than 100 countries

49

Presenter

Presentation Notes

First, a little bit about General Mills to give you some context about our place in the food industry.

Our Strategy

50

Deliver health to meet

consumer needs

Taste, Convenience, Nutrition

• Reduce limiters • Increase positives • Food groups of need

Address healthfulness of our total

portfolio

• Educate about exercise • Energy density & portion

control

Address energy balance —

calories eaten and calories

burned

General Mills’ Product Improvement Model

• Avoid taste compromise

• Maintain product safety, performance & functionality

• Inch down—help

consumers change

Stealth Health

• Must be appealing enough so consumers will buy it

• So product can stay on shelf

Sustainable in the Market

• Bell Institute dietary intake database

• Understand impact on diet & role of individual foods

• Authoritative nutrition guidance—informs product development

Research

51

http://www.fiberone.com/Product/Default.aspx

Cumulative* Achievement of GMI Sales Improved FY05-FY11 & F12-F16 Projection

Continuous Health Improvement

Key Drivers Nutritional Improvement FY05-FY11

Increasing Positives 34% Decreasing Limiters 66%

Focused on doing the right thing to make our products nutritionally better

52

calorie/portion control

5% gluten 2%

sodium 32%

sugar 4% total fat/sat

fat 2%

trans fat 20%

fiber 5%

vitamins/minerals 11%

other* 2% whole grain

17%

*includes: serving veg/fruit, antioxidants, probiotic, protein, omega-3, GMI Better-for-You

*On a cumulative basis: products that have been nutritionally improved more than once are counted only one time

16% 21%

33% 40%

45%

60% 64% 67%

80% Over 600 products improved FY05-FY11

Presenter

Presentation Notes

Just as we are innovating to drive incremental sales via new products we are also bringing new ideas and technology breakthroughs to improve the health profile of our established products. Since 2005, we have improved the health profile of over 600 skus globally and have made huge strides in advancing public health.

Whole Grain Conversion

• 95% of Americans are not getting the recommended amount of whole grains

• All Big G cereals provide at least 8 grams of whole grain per serving*

*48 grams recommended daily

Presenter

Presentation Notes

General Mills was the1st manufacturer to convert all cereals to Whole Grain renovating the entire Big G portfolio to contain at least 8 grams of whole grain per serving. General Mills Big G cereals are the largest source of whole grain at breakfast in the United Sates providing over 13 Billion Servings in 2010. But we are not finished. We continue to add whole grain to our Big G cereals as well as across the globe. In a consumer survey (fielded by General Mills), consumers cited taste, price, and convenience as barriers to getting whole grain in their diets. Ready-to-eat cereal delivers on all these points and helps consumers meets them where they are at to get whole grain.

Improving Yogurt

54

Calcium & Vitamin D

• Yoplait is the only leading yogurt with a good source of vitamin D in every serving

• Original Yoplait NOW contains both 50% DV calcium & vitamin D

Sugar Reduction

• Over the years, Yoplait has steadily reduced sugar content of kids’ yogurts

• 20% sugar reduction in Yoplait Trix & Yoplait Kids products, with a corresponding decrease in calories

Presenter

Presentation Notes

While low fat yogurt products have always been a good source of calcium, delivering about 10% of the recommended daily value in each serving, over 80% of American woman do not consume enough calcium. In 2010, we reformulated our Yoplait Original Style Yogurt to provide 50% of the recommended daily value of calcium and vitamin D in each serving. We believe consuming Yoplait daily can provide a meaningful solution to close the calcium gap. Sugar reduction efforts in kids’ yogurts (Notes from Yoplait/Lisa Schroeder): If asked questions about the sugar reduction successes/plans for adult, and yogurt more generally. Key points from R&D would be: 1) Yoplait offers a wide range of products that vary in sugar & calorie content, and in the types of sweeteners used and 2) we always are working to improve products to meet consumer preferences

Sodium Reduction

Reduce sodium by 20% in Top 10 key product categories by 2015

• Canned Vegetables • Cereals • Dry Dinners • Frozen Pizza • Mexican Dinners

• Refrigerated Dough • Savory Snacks • Side Dishes • Soups • Variety Baking Mixes

55

Presenter

Presentation Notes

GMI is committed to public health via continuous improvement and small step change approach & will continue to reduce sodium even beyond 2015 Our sodium reduction efforts are quite broad and span across our entire portfolio. Over 400 products will be reformulated, which translates to over 600 SKUs. We have a total of around 1400 SKU, about a 100 or so SKUs are yogurt with inherent sodium so 600 out of 1300 SKUs ≈ 46 % of our portfolio will be undergoing sodium reduction.

KEY

2007 Sugar level

2008 Sugar level

2009 Sugar level

2010 Sugar level

Goal Sugar level

13g

07

12g

08

11g

09

≤9g

Goal 10

10g

Commitment to further reduce sugar levels

Reducing Sugar in Cereal

56

Presenter

Presentation Notes

We are also focused on reducing sugar in our cereals. Since 2007, we’ve lowered sugar levels in our kid cereals by more than 14 percent on average, and all cereals advertised to children have been reduced to 10 grams of sugar or less per serving.

Fiber That Tastes Great!

Over $400 Million in Global Sales in 2011

Presenter

Presentation Notes

One of our best success examples is our Fiber One brand expansions. Although there were many fiber products available in the marketplace at that time, we were able to deliver a substantial level of fiber content in a superior tasting product at an affordable cost – a first to market innovation. We have been able to reapply our formulation technology as well as the brand and consumer insights across multiple product categories around the globe to deliver sustainable marketplace leadership. Additional: 9 of 10 Americans do not get recommended amount of fiber Consumers want taste – even with fiber Sought advice from best external fiber experts Evaluated hundreds of possible fiber sources Optimized processing to achieve desired performance at an affordable cost Added 12 billion grams of fiber to the American diet last year

Bell Institute of Health & Nutrition

Clinical Studies

Dietary Intake Research

Link to Existing Science

Government Nutrition Policy

Health Professional Education

Promote Science Based Decisions

Nutrition Science & Research External Education & Advocacy

WIC, Health Professionals, Foodservice

FREE nutrition education materials

CME Programs

Distributed 2+ million samples/materials

Bellinstitute.com

Presenter

Presentation Notes

One last key asset to mention that we have at General Mills is the BIHN It is part of the infrastructure that supports our health efforts at General Mills A few talking points: BIHN -11 Years in existence, world-class talent, passionate health advocates Initiatives based in fundamental, proven science Collaborative approach both internally and externally Bellinstitute.com is the hub of our communication outreach to Health Professionals Houses FREE nutrition education materials for both HPs and their clients

• In 2010, General Mills provided:

59

*based on FY10 data and U.S. retail products;

½ cup = full serving of vegetables; 1 cup = serving of dairy; 16 grams = 1 WG serving

Improving Health in America

> 1 billion full servings of vegetables

~ 2.4 billion servings of low-fat / non-fat dairy

> 61.6 billion grams of fiber

~13.2 billion servings of Whole Grain

Presenter

Presentation Notes

Here are a few examples of why we believe we can make a positive difference in the health profile of America. [Make comparison to DGs and how our foods fit in to delivering on identified nutrition shortfalls of Americans.] (Note: WG statement updated 4.28.11 and based off of FY2010 data. Full statement is…” In FY10, GMI shipped more than 212 trillion grams of whole grain to American consumers via its U.S. Big G cereals. That's a total of 13.2 billion 16 gram "servings" over the course of the year, or 36.3 billion 16 gram "servings" each day.”)

Summary

General Mills is dedicated to Nourishing Lives:

– By delivering healthy options in the products we create,

– By advancing public health via continuous improvement

– By setting aggressive goals for product improvement

– By making and measuring progress year over year

60

Presenter

Presentation Notes

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