Food and beverage companies with a higher percentage of their sales coming from better-for-you foods and beverages perform better financially, according to a new report from the Hudson Institute.
Food and beverage companies with a higher percentage of their sales coming from better-for-you (BFY) foods and beverages perform better financially, according to a new report from the Hudson Institute, Washington, DC. These companies record stronger sales growth, higher operating profits, superior shareholder returns and better company reputations than companies that sell fewer BFY products.
Researchers examined sales and other financial metrics for 15 major national and international food and beverage companies, including General Mills, Nestlé, Campbell Soup and Kellogg’s, from 2007-11. These companies were selected because they make up the majority of the largest food and beverage purveyors.
During the five-year study period, BFY items drove more than 70% of sales growth.
“For the first time, we now have concrete evidence demonstrating that it’s just good business to sell better-for-you products,” says Hank Cardello, lead author of the report and senior fellow and director of the Obesity Solutions Initiative at the Hudson Institute. “Companies’ bottom lines can benefit from selling these sorts of products.” Cardello is a former executive with Coca-Cola, General Mills, Anheuser-Busch and Cadbury-Schweppes.
The analysis included Nielsen sales data from grocery stores, drug stores and mass merchandisers; financial metrics, such as operating income, share price appreciation and return to shareholders; and company reputation and favorability rankings. It assessed whether or not sales of BFY foods and beverages-defined as no-, low- and reduced-calorie items-affect these key business performance measures.
In addition to the impact on sales growth, Cardello and colleagues found that, compared with companies with lower-than-average sales of BFY items, those with a higher percentage of BFY sales:
• Showed a 50% growth in operating profit, as compared with just over 20% growth for the other companies;
• Outperformed the S&P 500 Index by 60 points on average, compared with roughly 40 points for the other companies;
• Delivered returns to their shareholders that were 15% points higher than those generated by companies with lower sales of BFY items; and
• Recorded reputation ratings that were more than 30% higher than those of companies with lower sales of BFY items.
Over the last several years, many industry members have made commitments to help address the nation’s obesity epidemic through individual efforts and in collaboration with organizations like the Partnership for a Healthier America, a non-partisan, non-profit organization designed to ensure the health of today’s youth, and the Healthy Weight Commitment Foundation, a CEO-led organization that created to help reduce obesity. Data in the new report indicate that companies now have compelling business reasons to make and sell healthier foods and beverages to American consumers.
“We hope this report inspires companies to do more to create and sell truly healthy products,” says James S. Marks, senior vice president and director of the Health Group at the Robert Wood Johnson Foundation, Princeton, N.J., which funded the report. “We still have a way to go, but we believe we can have healthy companies and a healthier country. We need both.”
New Study Shows Healthier Products Yield Healthier Profits
October 20, 2011