Markets

Is sugar turning Big Food into the next Big Tobacco?

Elly Irving discusses the three catalysts that could result in Big Food becoming the next Big Tobacco, potentially resulting in lower sales growth, higher costs and large scale litigation for food and beverage companies.

03/11/2015

Elly Irving

ESG analyst

Big Food, big trouble?

A link to the full research note can be found below but in summary, this note assesses the emerging trends that we think will create headwinds for the food and beverage sector.

We believe that sugar consumption and its contribution to a wide range of health problems, such as diabetes, high blood pressure and obesity (which collectively are known as metabolic syndrome), are central to this risk.

Our research suggests that there are a number of similarities between major food and beverage companies (“Big Food”) and major tobacco companies (“Big Tobacco”) and we believe there are three catalysts that could result in Big Food becoming the next Big Tobacco: 

  1. Increased awareness of the health implications of sugar for consumers and public health bodies.
  2. The rapidly increasing rates of people suffering from metabolic syndrome and subsequent rise in healthcare costs.
  3. The publication of independent scientific research that can provide evidence that excessive sugar is the primary cause of metabolic syndrome.

Our research suggests that the triggering of these catalysts could potentially result in lower sales growth, higher costs and large scale litigation for the sector and that in fact, the first two catalysts have already been triggered.

We believe that investors need to better understand this headwind for Big Food and future growth rates for the sector should reflect these risks.