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.
3 November 2015
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:
- Increased awareness of the health implications of sugar for consumers and public health bodies.
- The rapidly increasing rates of people suffering from metabolic syndrome and subsequent rise in healthcare costs.
- 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.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.