October 13th, 2011
12:01 AM ET

Healthier foods earn healthier profits

Foods that are good for the waistline are also good for the bottom line.  That’s the conclusion of a report out Thursday from the Hudson Institute, a non-partisan policy research organization.

The Hudson Institute’s Obesity Solutions Initiative found the food and beverage companies with the most “better for you” products grew faster, had higher profits and superior shareholder returns over the last five years.

Hank Cardello, a former food company executive and lead author, said the report was the first to look at profitability of healthier products in terms CEOs can understand.

“It’s always been a moral argument as opposed to a business argument why it makes sense to move in that direction,” Cardello said.

The report analyzed 15 of the largest food and beverage companies, including Coke, Pepsi, General Mills, Kellogg’s, General Mills, Nestle, Dannon, Nabisco and Campbell Soup.

On average, 38.6 percent of the sales were from foods and beverages deemed “better for you.” The remaining foods and beverages were classified as “traditional.”

Companies with above-average sales were compared with those below average. The companies that sold more “better for you” products reported almost double the profit margin and stock performance. “Better for you” products also accounted for almost three-quarters of sales growth.

But  Michele Simon, author of "Appetite for Profit: How the Food Industry Undermines Our Health and How to Fight Back," said the growth figures give a false impression.

“The higher growth is usually because these are newer products, which tend to do better in growth figures, so it’s somewhat misleading to even say ‘better for you’ products are growing faster when they may just be newer,” Simon said in an e-mail.

The report categorized  “better for you” products as “lite foods” such as Nestle’s Lean Cuisine, Coca-Cola Zero and Tropicana 50 and “good foods,” such as General Mills’ Cheerios, Dannon Yogurt and Campbell’s Tomato Soup.

“Traditional foods” included Kellogg’s Frosted Flakes, Hellmann’s Mayonnaise, Coke and Tropicana orange juice.

Marion Nestle, a New York University professor and author of "Food Politics," said “better for you” is a relative term.

“Just because it’s better for you doesn’t mean it’s good for you,” she said. “What people should really be eating is real foods, not packaged foods, from a nutritional standpoint.”

Cardello said he hopes the report, underwritten by the Robert Wood Johnson Foundation,  will prompt companies to place more emphasis on “better for you” foods and beverages and accelerate development of more nutritious products.

“I certainly think it gives ammunition to C suites and their boards to move in this direction,” said Cardello, director of the Obesity Solutions Initiative. “We’re not saying walk away from what you have. We’re just saying as a growth mechanism, this is very enticing.”

The mission of the Obesity Solutions Initiative is to come up with practical, market-based solutions to the world's obesity epidemic.

The Hudson Institute did not release rankings of how the individual companies fared in terms of sales of “better for you” versus “traditional” foods and beverages.

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