I watched Food, Inc. over the holiday weekend, a documentary about US food companies whose products fill grocery store shelves and bins and supply our numerous restaurant chains. I’m a pragmatic independent, so I’m able to see through the one-sided nature of the filmmaker’s criticisms of food companies. But there’s significant merit in the film as well.
The filmmakers argue that the application of factory methods to our food system in the last two decades – with its relentless drive to reduce costs – has stripped food of its nutritional value and safety. The catalyst to the change was the emergence of super-sized buyers the likes of McDonalds and Walmart. Even if you are not a McDonalds or Walmart customer, your food choices are being driven by their demands on suppliers.
One net result, the film claims, is that we are a far more obese society. (In 2009, only two states had an obesity rate of less than 20%.) The implications of the rise in obesity are terrible, especially in poorer demographic groups where obesity rates are higher, imposing significant personal and national costs. About 9% (and rising) of national health care costs arise from obesity, half of that paid for by our tax dollars supporting Medicare and Medicaid. (For a somewhat dissenting view, listen to this Freakonomics podcast.)
Why is there such little true innovation in mainstream food companies surrounding this problem of massive significance to consumers and our nation? The gap is confusing in light of food companies like Kraft facing declining returns on new product innovation in today’s copycat economy with growing store brand market shares. Tackling a big challenge in a way not easily copied by the store brands would do wonders for the packaged food companies.
It’s time for food companies to own the obesity problem and define their scope more broadly with solutions that include and go beyond their specific manufactured products. There are signs of change.
- Walmart carries Stonyfield and other organic daily products and has made a visible commitment to supplying more organic products.
- The Healthy Weight Commitment Foundation, a “national, multi-year CEO-led effort designed to help reduce obesity–especially childhood obesity–by 2015…. brings together more than 130 retailers, food and beverage manufacturers, restaurants, sporting goods and insurance companies, trade associations and non-governmental organizations (NGOs), and professional sports organizations.”
- There’s less trans fat in packaged foods.
- Our national budget crisis will likely reduce the farm subsidies that have brought way too much corn and sugar into the American diet.
But how serious is the drive for change relative to the magnitude of the problem? How much existing change was motivated by legal concerns, versus companies truly driving for change? Are large food companies like Kodak, who waited too long to change to digital because it cannibalized their existing film leadership position?
Michael Porter, in this month’s Harvard Business Review makes a compelling case for why companies should stop focusing solely on profits and broaden their purpose to increasing social value. Social value includes profits as well as the benefit to society of solving its needs and challenges. The end result would be a value promise that customers and society would cheer.
In Porter and co-author Mark Kramer’s words:
“A big part of the problem lies with companies themselves, which remain trapped in an outdated approach to value creation that has emerged over the past few decades. They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success. How else could companies overlook the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, or the economic distress of the communities in which they produce and sell?
Success accrues to businesses that solve problems more effectively and efficiently than customers can do on their own. Solve the problem by deploying some hard-to-copy advantages and you have the makings for longer term profits. The success of many organic food companies (as measured by premiums the mainstream food companies paid to acquire them) is testimony to this fact.
Oscar Mayer owns a brand that is memorable for kids and parents alike. (Admit it, didn’t the tune “I wish I were an Oscar Mayer wiener” come into your head? If you’re like me a picture of the Wiener-mobile also came into my head. ) There’s a huge opportunity for the brand to rethink what its business is all about and own the market space: “Helping parents raise kids with healthy eating habits.” The alternative, I’d argue, is far worse not just for society but for an iconic American brand.