Turning threats into opportunities: Can food companies successfully attack in all directions?

For most of the past 20 years, the food and agriculture industry’s biggest external challenge came in the form of demands to change the way it does business to help solve the global obesity crisis, principally by making food healthier by reducing sugar, fat and salt. 

That was then and this is now. In 2022, food companies are confronting multiple external threats that represent the most difficult issues-management landscape they have faced in the post-World War era.

Some items on the agenda, like environmental sustainability, have been smoldering for a decade or more, while others, like diversity and supply chain disruption, burst onto the scene more recently. 

Whether they have been urged to engage by their stakeholders or are driven by enlightened self-interest, most companies have chosen to confront a wide swath of these emerging issues, some of which are not directly related to market share and profit objectives. In a significant departure from the past, they have decided to use their brands, influence and resources to tackle the world’s most pressing societal problems.

Thus, this cornucopia of challenges, collectively known as environmental, social, corporate governance (ESG) issues, has moved from supporting cast to starring role at most food companies. 

Beyond the obvious impetus that these companies want to do the right thing, they are also responding to consumer demands that they plow their profits into making the world a better place. They also know that activist investors, venture capitalists and Wall Street analysts reward companies that pursue a progressive agenda.

This expanded worldview is made possible in part by pandemic-related windfall profits. Most organizations involved in retail grocery food production were pandemic winners, as consumers bought more groceries and cooked and ate more meals at home.

Packaged food companies that were mired in market share contraction or low-single-digit annual growth prior to COVID found their brands were back in vogue, as families sought comfort and value during the pandemic. Double-digit sales growth in 2020 and 2021 made it easier for companies to fund an expanded ESG agenda. 

Now it appears COVID-19 is reaching an endemic phase, away-from-home dining is making a comeback and grocery shopping patterns are returning to pre-pandemic levels. As a consequence, most packaged food companies are telling Wall Street analysts they expect single-digit growth in 2022. As the new normal sets in, there will be a natural retraction in the cash reserves companies can tap into to tackle ESG, supply chain disruption, labor shortages and food inflation, resulting in hard choices in the months ahead.

Recent trends in packaged food have also produced an unintended consequence. The anti-obesity agenda at many packaged food companies has slowed. These days, companies spend more time brainstorming COVID-19 mitigation, carbon reduction, diversity, equity and inclusion, input costs, logistics touchpoints and net-zero-emissions agriculture than they spend thinking about obesity. 

But companies don’t have the luxury of keeping obesity on the back burner. The recent hiatus in society’s battle against the issue is poised to make a strong comeback in the months ahead, and the government is going to lead the charge. 

For starters, the pandemic highlighted the overall cost of obesity in terms of healthcare and loss of life. Obese people are at a significantly higher risk of hospitalization and death while battling COVID. That is the public health community’s new rallying cry as it seeks to breathe new life into the battle against obesity. 

Separately, policymakers in Washington, D.C., are starting to refocus on the anti-obesity agenda again after a lull during the pandemic. The Biden administration and key members of Congress are planning a White House Conference on Food, Nutrition, Hunger and Health in September. It is anticipated the conference will conclude with sweeping recommendations that will impact the way food is grown, processed, marketed, taxed and labeled in the hope of addressing obesity, hunger, climate change and equity. 

In addition, the Biden Administration, the FDA and the USDA are under pressure from non-governmental organizations and influential members of Congress to move forward with new rules, regulations and guidelines impacting salt and sugar, front-of-pack nutrition labeling, ultra-processed foods, as well as radical changes to the Dietary Guidelines for Americans. 

The resurgence of the health and wellness agenda, combined with initiatives currently underway on climate change, food inflation, social justice, ethical sourcing and supply chain disruption create a formidable threat matrix — or opportunities — for packaged food companies. 

So, what is a food company to do?

U.S. World War II General Anthony McAuliffe famously told his troops when they were encircled by the German Army in Bastogne, France, in the winter of 1944-45, “Men, we are surrounded by the enemy. We have the greatest opportunity ever presented an army. We can attack in any direction.” 

It will take similar bravado for food and agriculture organizations to successfully tackle the challenges facing them in 2022. But unlike McAuliff, they do not have the luxury of picking just one axis of attack. They must attack in all directions, including the battle against obesity.

The excitement that accompanied former first lady Michelle Obama’s goal of solving childhood obesity within a generation has clearly ebbed. Despite the creation of a healthier food supply and billions of dollars spent on nutrition education by the private and public sectors, obesity rates have remained consistent or gotten worse among virtually every age group over the last 20 years. The same is true for diabetes and hypertension.

The organizations and individuals that blame Big Food as the principal cause of obesity — arguing for government taxes, bans, restrictions and labeling mandates — are poised to shine their formidable spotlight once again on packaged food companies.