I’ve given speeches around this topic, I’ve written before about it.
Sugar is now being demonised like tobacco, and the same tactics are being used against producers as those used against Big Tobacco.
Two years ago at a food conference I told the packed room that they were next in the health battle. Food manufacturers giggled as I explained how they were next in the firing line. The only people in the room who weren’t giggling were the tobacco companies.
It turns out that I was right and they were wrong. They are now in a fight for the life of their business.
If sugar is the new smoking, then the makers of fizzy drinks and fattening cakes need to learn some lessons from big tobacco.
Big food companies have achieved pariah status, with sugar taxes already implemented in Mexico and France and a levy planned for the U.K. in two years’ time. Last week, sugar producer Associated British Foods accused the government of trying to demonize the product and questioned whether that strategy would help reduce obesity rates.
But it is just that outsider status that has helped lift tobacco companies’ performance. Over the past five years, big tobacco has handed investors a 101 percent total return, according to Bloomberg Intelligence’s Global Tobacco Product Manufacturing index, well ahead of the MSCI World Index’s 42 percent. That is a phenomenal performance for a class of securities shunned by some investors on ethical grounds.
Slapping taxes on cigarettes has hurt the volume of sales. But it also made it easier for tobacco companies to slip through price increases. Food companies need to use emerging sugar taxes to take control of pricing. Big tobacco has traditionally been reluctant to engage in price wars. Not so the food sector, which often gets dragged into supermarket price skirmishes.
And while the initial going will be tough for food companies, the inevitable industry turmoil that will arise from tough regulation will pick off weaker players and make for a stronger group of survivors. That has worked for big tobacco.
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