One of the concerns people in the health industry have is the growing obesity problem because an overweight person as they age will tend to have more health related problems or be more expenses to the system. We all know the baby boom generation is getting older and there are plenty of baby boomers who are overweight. How did we arrive at this destination? At some point we will be told of the high levels of salt, sugar and fat in our diets. Well this did not happen overnight and although there is always individual responsibility and we all have some level of discretion of how we spend our after tax money, the food giants played a role. In the book Salt Sugar Fat – How the Food Giants Hooked Us by Michael Moss, published by Signal part o the Penguin Group, New York, 2013.

The other aspect of the book is the selling of products. The food giants are successful in making profits, in returning a high return on investment dollars and not being concerned about the science, but the selling of the food products. Every year  thousands of new products are invented and they need shelf space. Most of these products will not last longer than 2 or 3 months, a few will be a success – selling $25 million in annual sales. One or two will break out and become a billion dollar product.  When that happens the concern will be to maximum profit and then lowering the costs of the ingredients while keeping the quality which made the consumers buy it in the first place, what typically happens is the fat, salt and sugar content goes up.

In terms of shelf space all the large food companies want to have the best shelf space possible – where it is easily reachable by the average consumer. The new products will go to the top or the bottom of the shelf partly because supermarkets want to sell proven winners. Partly because the food giants rent the space or pay higher rents than new companies can. In the convenience store particularly in areas of town where there are fewer grocery stores – the convenience food companies aim at small buyers but very regular buyers to make their money. The other dynamic is adults who miss meals because of their time commitments who want something to satisfy their cravings.

The biggest change in the processed food industry is with two income families with commuting times they do not have the time or make the effort to prepare meals from scratch. There was growth in convenience foods and the size of the serving. The growth of the convenience foods is highlighted by the Lunchables brand. In 1985, the people at Oscar Mayer were considering what to do about bologna sales? After doing focus groups, it was decided to focus on the lunch meal and in the 1950’s it was 2 slices of bread and bologna; now it was the parent’s did not have the time to do it. What to do now? after going through months of research it was decided to try the idea where the kids could make their own lunch. Then it was all the consideration of what should the meat look like? what should be in the tray? how long does the food last or stay fresh? would the kids eat it if their parents bought it? From a corporation point of view how do you combine all the ingredients in a cost effective manner and what should the price point of the product be? Many decisions go into a food product and that means many things could go wrong or be better. The Lunchables was successful and this led to other companies copying and extension themes.

In the senior levels of the food industry, while people know about the concerns of salt, sugar and fat the most important consideration is does the product sell and how do you protect your market share and try to grow it. Millions of dollars are at stake if the brand share falls. The marketing program is designed to push or edge you to make a decision on food and there are many choices. Why do you pick the one you did is continuing research and many hours of trying to understand the consumer. In many ways, the idea is to lead you on the right path.

Linking to dividend paying stocks, in the food industry the food giants have the built in advantage but the consumer makes the decision. The decision is highly influence by the companies from ensuring the item is on the correct place on the shelf, to the marketing dollars aimed at your decision, to what is inside to be a continuing repeat consumer. People change and over the years analysis of the data is to change from the general targeting to the very specific demographic targeting to ensure you become a repeat consumer. If you are an investor, you want the company to continue to focus on how to sell the products, as a consumer you want to know the food is good for you.

There are more questions than answers, till the next time – to raising questions.