Eat fats, die young...

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Fat is a financial issue

Litigation over obesity could consign Big Mac, large fries and

bucket-sized Coke to the waste bin

Richard Adams

Thursday December 26 2002

The Guardian

 

 

It is not an appetising thought while the Christmas turkey and pudding

are still being digested, but a legal battle about obesity, and with

potentially hundreds of milllions of dollars at stake, now looks likely

to follow asbestos and tobacco into the law courts.

 

Fat, it seems, is now a financial issue - and the food and drink

companies whose products have helped us pile on the pounds are the

target.

 

A new report published today, which calls for strict controls on the

marketing of calorie-laden snacks direct to children, will not be

welcome reading for food company executives, their shareholders or

insurers.

 

The Fabian Society wants a complete ban on the advertising of sweets and

fizzy drinks near schools and on pre-watershed TV. It also wants a halt

to all new food stores which cannot be reached on foot and retailers to

be given tax credits if they open new stores in what they call

" food-poor " areas.

 

The think-tank's report has been written by Labour MP Dr Howard Stoate,

who believes that, without action, obestity will continue to increase

and have a significant health impact. " We, that is, the government,

parents and companies, have a responsibility to act now if we are to

avoid this timebomb, " he says.

 

Two teenagers from New York started the ball rolling in November, when

they went to court against fast food group McDonald's. Jazlyn Bradley

and Ashley Perman said the hamburger chain had failed to provide clear

warnings that excessive consumption of its products could lead to

obesity. The pair's case followed a suit filed in July, against not just

McDonald's but also Burger King, KFC and US burger chain Wendy's, on the

grounds that the food sold was unhealthy and failed to carry appropriate

warnings.

 

While it is tempting to poke fun at such suits as peculiar examples of

American litigiousness, that was exactly the reaction to the first suits

filed against tobacco companies over the health consequences of

smoking.

 

Warren Buffet, the " sage of Omaha " famed for his investment wisdom,

wasn't laughing when he ruled himself out of the purchase of Burger

King, the rival fast food retailer owned by Diageo, which is up for

sale.

 

Unconscionable

 

 

Buffet's decision came after an advertisement, placed in a local Omaha

newspaper, strenuously urged him not to invest in an operation such as

Burger King. " Buying a mammoth business whose incredibly high-calorie,

horribly high-fat foods lead to obesity, diabetes and heart disease

would be unconscionable for a man of your stature, " read the ad

addressed to Buffet, from Phil Sokolof, president of the national heart

savers association.

 

Whether Buffet heeded the advice is unknown - although, as an investor

in Coca-Cola and McDonald's, as well as being a member of Coca-Cola's

board, he could also be worried about his existing exposure. Like

tobacco, the fast food industry is a huge business, with deep pockets.

And the reality of obesity is that it is a worrying problem, not just in

the US but in Europe and other parts of the developed world.

 

In the US alone, the number of children classified as overweight has

doubled since 1980, while the number of overweight adolescents has

trebled. One of the McDonald's litigants, Ashley Pelman, is 14 years old

but weighs nearly 20 stone.

 

The knock-on effects from increased obesity include higher spending on

health care. In the US, spending on health care as a direct result of

obesity had reached $70bn by 2001 - or 7% of total spending.

 

The situation within the European Union is little better. The

International Obesity Taskforce, which published a report on the

situation in the European Union in September, called obesity " the

biggest single European public health challenge of the 21st century. "

 

Even at the other end of the scale - so to speak - the diet industry is

under attack from a different direction. Susie Orbach, the author and

therapist, is organising legal action against the US arm of Weight

Watchers.

 

" If the plans actually worked, members would have to sign up only once, "

said Orbach this year. " Instead, they find themselves returning to its

products and promises time and time again. "

 

Fat is increasingly taken seriously as a factor in the financial

markets.

 

In November, analysts at UBS Warburg investment bank wrote a detailed

report on the likely effects of a more hostile legal and political

climate towards foodstuffs high in fat and sugar.

 

" There is a clear long-term risk to producers of fast foods, soft

drinks, confectionery and snacks that anti-obesity mea sures will curb

their ability to grow revenues in the future, " the report concluded.

 

" We believe that initiatives to curb the sale of 'unhealthy' foodstuffs

are likely to be introduced at some stage. If they do not have an impact

on consumption, then stronger measures may be considered, " is the

author's chilling warning.

 

The irony is that in stock market terms, food and drink companies such

as Coca-Cola and Diageo have always been regarded as " defensive stocks "

- safe shares to buy in adverse market conditions such as recessions.

 

The UBS Warburg report suggests that several so-called " blue-chip "

defensive stocks could be exposed to high levels of litigation - and

that even a marginal cut in their revenue as a result of increased

legislation or changing social attitudes towards obesity could harm

their balance sheets.

 

" A reduction of just 3% in cash growth rates over the medium term

equates to an 18% fall in value, " the study calculates.

 

The most exposed, according to UBS, are those with the heaviest output

of sugar and fat-based products: US chocolate maker Hershey, McDonald's,

British sugar maker Tate & Lyle, Cadbury Schweppes, Pepsi, Coca-Cola,

Diageo and Nestlé.

 

The bank also constructs an alternative safe portfolio of defensive

stocks - including Compass, the British food supplier, along with

consumer products companies Procter & Gamble and Kimberley-Clark.

 

Of these, McDonald's may find itself in the toughest position. Chocolate

makers such as Hershey do not sell their products as complete meals in

the way the fast food chain does.

 

McDonald's competitors, such as Wendy's, have been much quicker in

adopting lighter, healthier food. Burger King launched a record number

of new food products this year across its 11,000 outlets, including new

styles of chilli, veggie burgers, and salads.

 

McDonald's moves have been less successful. Its purchase of a 50% stake

in Britain's Pret a Manger chain signals its desire to move away from

its traditional " burger and fries " market.

 

Other experiments, such as setting up coffee-bar style " McCafe's "

selling lattes and cappuccinos, failed to catch on with consumers.

 

At the same time it faces increased competition in its home market and

has launched a price war with a $1 menu in the US. But the problem is

that there is the danger that making its high fat and sugar staples

cheaper could increase McDonald's vulnerablity to future obesity

litigation.

 

In California - which was at the forefront of introducing statutes

prohibiting public smoking - legislators are showing increasing concern

about obesity.

 

State officials have agreed to limit soft drink sales at schools, and a

California state senator has proposed a bill to tax sugary soft drinks -

using cash raised to fund school health programmes.

 

Other countries are ahead of the US - in several Nordic countries the

aggressive advertising of fast food targeted at children is severely

curtailed.

 

A change in the climate in Europe and the US towards fat and sugar could

make a huge dent in the profits of those companies which trade in them.

 

After all, only 20 years ago one in three US adults was a regular

cigarette smoker. Now, that proportion is one in five. By 2023, the Big

Mac, large fries and bucket-sized Coke may have gone the same way.

 

Calorie counter

 

Daily requirement:

Man 3,000 calories Woman 2,300

 

Food: 4oz cheeseburger

Calories: 525

 

Food: Chicken chow mein

Calories: 750

 

Food: Kebab and chips

Calories: 1,000

 

Food: Pack of crisps

Calories: 130

 

Food: 1 croissant

Calories: 235

 

Food: 1 cup popcorn

Calories: 135

 

Food: 1 oz roast peanuts

Calories: 165

 

Food: 12 fl oz regular cola

Calories: 160

 

Food: Slice pizza

Calories: 290

 

Food: 1 oz raisin bran

Calories: 90

 

Food: 1 oz chocolate

Calories: 150

 

Source: caloriecountercharts.com and caloriecounter.co.uk

 

Copyright Guardian Newspapers Limited