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Gross profits

Junk food is now responsible for more death and illness in the West than tobacco, but don't expect business-compromised governments to do anything about it. Reform of the food industry is more likely to be driven by financial institutions.

December 1, 2003
8 min read

It’s official. Eating is more dangerous to our health than smoking. The World Health Organisation’s World Health Report 2002 details the causes of human disease and death. The modern Western diet, consisting of foods rich in fat, salt, sugar and refined starch, and with insufficient fruit and vegetables, is responsible for more illness and is killing more people than tobacco. It’s responsible for one third of heart disease and is a significant cause of cancer.

The inadequacies of modern diet were highlighted in greater length in another WHO report called Diet, Nutrition and the Prevention of Chronic Diseases. The WHO not only fingered our fatty, sugary diet and soft-drink consumption, but also warned of the increased risks of disease resulting from “the heavy marketing of energy-dense foods and fast-food outlets”.

Food industry lobbying groups like the US National Soft Drink Association and the World Sugar Research Organisation were furious. The US industry lobby the Sugar Association demanded that the report be withdrawn and urged the US government to cease funding the WHO.

The advertising industry was also alarmed by the WHO’s view of marketing. Ad agencies went through a series of traumas in the 1990s because of the restriction of tobacco and alcohol advertising, and now their biggest single sector, food, is under attack. Food products are promoted in most TV advertising breaks in the UK, and feature in the majority of adverts on children’s TV. Indeed, children can easily watch more than a dozen food adverts per hour. Sadly, less than 10 per cent of the food products being promoted so heavily can be called “healthy”; some 70 per cent are particularly high in sugar, salt or fat.

This autumn the UK government’s Food Standards Agency published a report showing that repeated exposure to advertising leads to children demanding not only the products advertised but also foods of a similar type. The advertisers’ oft-repeated defence that advertising encourages brand switching but does not increase overall consumption is not sustainable. The agency is now busy trying to soften the impact of its report by staging several months of “wide-ranging stakeholder consultations”, after which it will “discuss the options available”.

Several countries in Europe have controls over the advertising of food to children: Sweden bans advertising to children under 12, and other countries restrict what can be promoted or the methods that can be used. In the UK there is no regulation, although a voluntary code recommends that adverts should not encourage children to eat or drink at bedtime or to replace meals with snacks. A private member’s bill proposed last summer by the Labour MP for Stourbridge Debra Shipley called for a ban on advertising to children under five. This was resisted by the secretary of state for culture, media and sport Tessa Jowell, although it might yet be picked up by children’s minister Margaret Hodge.

If it is, Hodge will face a tough fight. The advertising industry and the media that depend on advertising revenue for their survival are well represented in the government. Blair’s close links to the Murdoch empire are well-known. His senior adviser Jonathan Powell has family ties to the advertising industry through his brother Chris, who is chairman of top-rank ad agency BMP-DDB. Chris Powell has been New Labour’s advertising adviser through two general elections. He is also the chair of the Labour-associated think-tank the Institute of Public Policy Research.

Then there is the connection with Silvio Berlusconi. The Italian premier is a holiday friend of the Blairs and owner of Europe’s second-largest media empire. He also owns Pubitalia, an ad agency he has nurtured since the 1970s and which by 1990 was responsible for 70 per cent of Italy’s TV advertising. The majority of the channels on which that advertising is shown also belong to Berlusconi. For 20 years the mastermind behind Berlusconi’s complex financial affairs has been a British accountant called David Mills. And Mills’s links to the UK cabinet and the minister responsible for regulating the media could hardly be closer; he is Jowell’s husband.

Mills was also involved in the Bernie Ecclestone affair; the Formula One motor-racing boss donated £1m to New Labour, and his sport was exempted from a proposed Europe-wide ban on tobacco advertising. At the time Mills was a director of one of Ecclestone’s companies, Jowell was the minister for public health – simultaneously responsible for pushing through the ban on tobacco ads and arguing for Formula One’s permanent exemption.

Jowell took over at the Department of Culture, Media and Sport from Chris Smith, who, in turn, recently admitted that he had taken up a consultancy for Disney – the world’s fifth-largest advertiser, and which is now licensing its cartoon characters to companies including fast-food chain McDonald’s.

But the news isn”t all bad. There is new pressure for reforming the food industry from an unexpected source: the investment banks.

In New York earlier this year McDonald’s was sued by a group of US teenagers who claimed the fast-food chain was responsible for their obesity. The case was rejected, but the judge ruled that a similar action might succeed if the plaintiffs could show that McDonald’s had acted deceptively to encourage greater consumption – by using undeclared additives, for example. As most fast food is sold without ingredient lists on the labels, McDonald’s may yet find itself liable. And even if it does not, the publicity has been immensely damaging.

This has been noted by financial analysts. The investment banks UBS and JP Morgan have issued reports highlighting the potential risk to shareholders should the big food companies be exposed to litigation or regulation because of their promotion of obesity-encouraging foods.

UBS urged investors to consider “obesity-hedging” their portfolios, and went on to name the companies whose incomes depended most on “less good” food products. Not surprisingly, confectionery, fast-food and soft-drink manufacturers featured strongly, with Hershey’s, McDonald’s, Tate & Lyle, Cadbury, Pepsi and Coca-Cola leading the pack.

UBS warned investors that even if legal suits failed, the cost of defending them would be high and the surrounding publicity damaging to sales. Insurance premiums might also rise significantly.

The companies have started to protect themselves. McDonald’s, already struggling with declining profits, has been trying out new food lines that include a fresh-fruit pack and various “Mediterranean” dishes. In the UK it has diversified by purchasing a 33 per cent share in the healthy-looking Pret A Manger.

Coca-Cola has sacked most of its advertising agencies in order to run a single campaign emphasising the company’s full product range, which includes fruit drinks. Even the BBC, whose trading arm BBC Worldwide has been licensing children’s characters such as the Tweenies and Fimbles to confectionery companies and McDonald’s, has conceded that it should review its nutritional policy.

But perhaps most interesting of all is Kraft Foods, which owns the Dairylea, Birds, Terry’s and Toblerone brands. Kraft announced this summer that it would henceforth ban advertising in schools, review its vending-machine policies, improve nutrition labelling and limit the calories in its single portions. The announcement was made in a press release headlined “Initiatives to help address the rise in obesity”.

The food industry has fiercely denied any link between marketing and the obesity epidemic, yet Kraft’s statement amounts to an admission that its practices may indeed have caused excessive weight gain. Kraft is not naive; it is a subsidiary of Altria, which also owns Philip Morris – the tobacco manufacturer fined an extraordinary $10.7 billion in a class action for mis-selling Marlboro Lights as healthier than regular Marlboros. Perhaps by acting now and admitting a possible link between its past commercial activities and child obesity, Kraft may hope to reduce its own liability while rival companies get off less lightly.

At some $40 billion, the food companies” global advertising budget exceeds most countries” GDP. While smaller countries have little chance of challenging the companies, larger ones are too compromised by their own industrial and political interests to act. The WHO can speak out, but its budget is controlled by its member states. Besides, it has barely $1 to spend on chronic disease for every $500 the food companies spend globally promoting poor diets.

So it might be in the courts, where consumers express their grievances, and then in the investment banks, where the profit and loss accounts are analysed, that we may see at work the forces that could eventually reform our food supply.Dr Tim Lobstein is director of the independent watchdog the Food Commission (www.foodcomm.org.uk).

Visit the site to read –Broadcasting Bad Health-, a report on the global marketing of food to children

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