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Take the Money and Run

October 27, 2011
 

 

Hank Cardello isn’t your typical obesity prevention advocate.
 
For one, he’s a former soda company executive — an industry often lambasted by those working to reverse childhood obesity. He also spent time at major food companies such as General Mills, which frequently come under fire from the health advocacy community.
 
But Cardello, now the director of the Hudson Institute’s Obesity Solutions Initiative, thinks that working to solve the obesity epidemic makes good business sense. And now he says he has the evidence to back this up.
 
The Hudson Institute released Cardello’s report “Better-for-you Foods: It’s Just Good Business” last week, which shows food and beverage companies whose product lines include more “better-for-you foods” (BFYs) have higher profits overall. BFYs are roughly defined as those foods and beverages that have fewer calories or are otherwise healthier than more traditional options.
 
Already there’s been a response from the industry. Cardello tells The Inside Track that he’s received calls from several companies and industry groups asking if he’ll share more about the report’s findings with them in person. “Obviously, if they believe us, we can move them to into action,” he says.
 
To come up with the findings, Cardello and his team examined sales data from grocery and drug stores, financial metrics, return to shareholders, company reputation and favorability rankings to analyze whether BFYs affected key business performance measures. They found that companies with a higher percentage of product sales in BFY category perform better financially.
 
As the report puts it, healthier products equal healthier profits.
 
The numbers are convincing. BFYs accounted for just under 40 percent of sales, the report finds, but contributed to more than 70 percent in sales growth in the past five years. Companies that grew their BFYs more than traditional ones shows 2 ½ times the operating profit growth, the report finds, while shareholder returns were 1 ½ times higher for companies selling above-average levels of BFYs.
 
But Cardello admits his report isn’t without some controversy. Both industry officials and health advocates have expressed concern about the BFY formula used in the report. Industry folks have called the definition of BFYs too strict, while the advocacy community expressed worry it doesn’t go far enough. 
 
With criticism coming from all sides, Cardello jokes that he must have gotten something right. “You understand what it's like to run for office as a centrist,” Cardello says, laughing.
 
Cardello plans to conduct similar research in the restaurant industry, working to see whether chains that offer healthy menu items also bring in higher profits. 
 
Above all, Cardello says he thinks the report shows that advocacy and industry can be partners in working to reduce obesity. Advocates should keep in mind that business leaders are driven to bring in profits for their companies. It’s vital “to demonstrate to them it’s worth their while” to introduce healthier items.
 
“It’s so important to understand how business makes their decisions,” Cardello says. “You have to know what the other party wants, and what their needs are, and then you can work from there.”
 
Full disclosure: The report was partly funded by the Robert Wood Johnson Foundation (RWJF). PreventObesity.net is a project of RWJF.
 
Food Marketing Issue - Healthy Food Access