Are you investing in ultra-processed foods?

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Nutrition experts from Brazil and Canada published a disturbing report in 2017 on the impending world health crisis arising from ultra-processed foods. These foods now account for more than half of all food purchases in developed countries including the UK and the US.

The report addresses the quality of diets and the sustainability of food systems, defined in four groups with diminishing nutritional value:

  • unprocessed (natural) foods such as seeds, fruit, meat and eggs
  • processed ingredients such as oils and butter
  • processed foods such as bottled vegetables and canned fish
  • ultra-processed foods such as sweet or savoury packaged snacks, reconstituted meat products and soft drinks.

Ultra-processed foods: worse than bad taste

It is this latter category that caused the researchers the most concern.

“These are not modified foods, but formulations of mostly cheap industrial sources of dietary energy plus additives, high in unhealthy types of fat and poor sources of protein and fibre,” according to the research team, led by Professor Carlos Monteiro from the University of Sao Paulo in Brazil.

In terms of their potential to worsen the already-critical levels of human obesity, ultra-processed foods, the report’s authors say, “are made to be hyper-palatable and often marketed to promote overconsumption”.  They contain “little or even no intact food”.

Ultra-processed foods are high in trans-fats and low in dietary fibre. They increase glucose levels in the blood which can disturb the nervous system’s appetite-control processes and thus increase the risk of obesity and diabetes. Worse still, according to the researchers, ultra-processed foods are often formulated to be habit-forming or even quasi-addictive.

The stakes for human health are enormous. The UN Food and Agriculture Organization’s director general wrote in a 2016 Foresight report on food systems and diets that, unless government policies change, the number of overweight and obese people will rocket to over three billion – a third of the total population – by 2030. The strain on health provision systems already confronted by ageing populations, and by extension on public finances, will be massive.

Is ‘Big Food’ to blame?

The researchers suggest that ‘Big Food’ – the largest transnational food conglomerates – have for decades been driving huge changes in global food production, purchasing and consumption patterns, including the world’s burgeoning love of ultra-processed foods.

OECD data shows that ‘Big Food’s’ foreign direct investment rose from USD 61 million in 1985 to more than USD 1.7 trillion in 2015.

According to the nutritionists, this “has dramatically changed food supplies in middle and low-income countries”. Just two of the leading Big Food companies spend over USD 6 billion in advertising. In addition, food marketing in high-income countries is being geared towards “cheaper, bigger and tastier calorie-dense foods.”

Ultra-processed foods and the environment

The production of ultra-processed products is damaging the environment. In the US, it accounts for almost two-thirds of total packaging waste by volume.

The report concludes that the ever-increasing production and consumption of ultra-processed foods and drinks should be regarded as one of the human activities leading to sustainability crises such as the degradation of land and water resources, waste caused by mass animal husbandry, and food and nutrition insecurity.

As such, the authors say, the impact of ultra-processed food on human health is itself a world crisis to be confronted.

Identifying those players employing sustainability in their business

In our sustainable food investment strategy, the objective is to identify those companies committed to healthier food and sustainability in their operations.

Here are three examples:

Sprouts Farmers Markets

Sprouts is committed to inspiring consumers to live a healthier lives. Its approach is based on the idea that with every meal comes a choice of what you put into your body. Sprouts stores are filled with fresh produce, with 90% of their over 19,000 healthy products being natural or organic, and a substantial offering of gluten-free, plant-based, grass-fed, non-GMO and raw items. Sprouts operates on a zero waste basis – food no longer fit for sale is donated to local hunger relief agencies; if it is no longer edible, it is donated as cattle feed to support local ranches and dairy farms, or alternatively donated as compost to divert it from landfills.

Campbell Soup Company

Campbell Soup strives to promote transparency in ingredient labelling. It has removed artificial ingredients and colours from products and in 2016 became the first major food company to announce that it would include the presence of GMOs on its product labels. Furthermore, it was one of the first canned food companies to remove BPA (Bisphenol A) and operate What’s In My Food, a website dedicated to educating consumers.

M&S

Businesses such as M&S focus more on sustainability of food operations as opposed to just the content of products. M&S believes that to be a successful business, you must be environmentally and socially sustainable. In 2007, it launched “Plan A”, an initiative aimed at moving towards a more holistic approach that addresses all sustainability issues affecting the business and supply chains. For example, as part of the 2025 update to Plan A, M&S will ensure that 100% of its products (3 billion annually) address 100% of their material social and environmental impacts, covering the raw materials, factory, use and disposal stages. The overarching idea is to become a truly sustainable business that is low on carbon emissions, circular, restorative, committed to wellbeing, equality and fairness in all that it does.

The mindful consumer

It’s not too late. The data for the UK used in the report was drawn from the Living Costs and Food Survey 2008 and is now a decade old. As such, it represents food-buying habits in the middle of a financial crisis.

Furthermore, the trend is not uniform. Eastern Europe can still escape: Slovakia, Hungary and Croatia all had much lower rates of ultra-processed food consumption of around 20%, the report showed.

Even in the UK and Germany, which are Europe’s blackspots, many consumers now insist on higher levels of quality assurance when they shop for food. Sooner or later, people who have been eating ultra-processed foods will want something better and will be able to pay for it.

According to research firm Innova Market Insights, a new kind of thoughtful consumer will continue to trigger changes in how companies produce, package and label their products. Innova points to a 44% annual growth rate in ethical claims made by food producers between 2010 and 2016.

Such claims may or may not be justified, but the direction is clear. This countervailing trend to greater discrimination in food purchasing has created new markets which many innovative companies are smart enough to exploit.

Finding ways to gain exposure to them is not just a sound, long-term investment strategy. It is also a way of contributing to better public health and to global sustainability.


Please note that the above-mentioned companies are for illustrative purpose only. Their mention is  intended neither as any form of solicitation to the purchase of such securities, nor does it constitute any an investment advice or recommendation.

 

Alexandre Jeanblanc

Investment Specialist, SRI

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