Bulcke details Nestles investment plans for Mexico in Davos

Bulcke details Nestle's investment plans for Mexico in Davos

The link between a nation's economic health and the health of its population - "health is wealth" - was a key message coming out of a round table event at the World Economic Forum this weekend.

During the discussion in the Swiss resort of Davos, the spotlight was once again on obesity and its accompanying non-communicable diseases, a double burden that threatens to overwhelm health services worldwide.

The growing global scale of the obesity crisis is alarming. If obesity levels continue to rise at their current rate, in another 20 years as much as 50-60% of the world population could be classed as overweight. While the pandemic has its roots in the richer economies of the US and Europe, obesity has taken on a truly global dimension and now penetrates the world's poorest countries.

There is still no consensus on how to tackle the issue and stakeholders have yet to develop a comprehensive collective understanding of the role that business and government has in combating this most modern of public health issues.

As Nestle CEO Paul Bulcke told the audience at Davos, the food industry is resistant to the type of regulatory oversight that public health activists frequently clamour for. "As a company, we don't like to hear about too much regulation," Bulcke observed.

The food industry has often come into the firing line over obesity, with the suggestion that a significant contributing factor is the willingness of multinational companies to provide cheap, highly refined fats, oils and carbohydrates. However, the Nestle chief executive was quick to emphasise that this assessment fails to recognise the complex nature of the crisis, which encompasses myriad issues from poverty to our now prevalent sedentary lifestyles.

"I don't think that society is served if we have obesity, and there is only one actor that is responsible for that. You cannot solve that with regulation," he insisted.

During the round table, Colombian Minister of Finance and Public Credit, Mauricio Cárdenas, expressed interest in Mexico's recent implementation of a tax on sugary drinks and high calorie foods. The Colombian Congress has proposed ways to restrict the influence exerted by the pharmaceutical industry Cárdenas said, hinting that the country might consider further moves to restrict the influence of industry through regulation.

According to UN data, Mexico's adult obesity rate was 32.8% in 2008, the second-highest rate in the Americas - and higher than the US. The government has looked to reduce consumption of high calorie foods - and boost the national purse - by imposing a tax on products with at least 275 kilocalories per 100 grams.

The move has been a controversial one. But it would seem that it has not deterred food multinationals from investing in the country, where the potential for growth has apparently trumped higher taxes. Indeed, the world's largest food companies - Nestle and PepsiCo - both announced plans to increase investment in Mexico last week.

Bulcke revealed that Nestle will invest US$1bn to beef up its production capabilities in Mexico, a market that he said has "high growth potential". 

Meanwhile, PepsiCo will invest $5bn in Mexico over the next five years in order to capitalise on what CEO Indra Nooyi termed "tremendous opportunities" for growth in the country. PepsiCo, which sells products including Quaker cereals and Sabritas crisps in Mexico, will invest in areas including innovation, brand building and production.

Speaking earlier in the week at the World Economic Forum, Nooyi also emphasised the role that business has to play in shaping society. Like Bulcke, Nooyi appeared opposed to the prospect of increased regulation governing the sector. "Businesses are really the only functioning entities around the world," she suggested, adding that governments cannot heal economies alone. "If you don't put your trust in business, who will you?"

In order to conduct socially-responsible business, Nooyi insisted that companies must remain focused on the long-term. "There is a difference between running a business for the duration of the chief executive or running a business for the duration of the company," she said.

In what could be viewed as a thinly disguised swipe at activist-investor Nelson Peltz and the media frenzy that he has stirred up, Nooyi took aim at what she characterised as a tendency to "amplify short term investors' bully pulpit".

Peltz last week abandoned calls for PepsiCo to split its drinks and snacks business and merge the latter with Mondelez International, instead taking a seat on the Mondelez board.

However, Peltz's investment vehicle Trian Fund Management told just-food the US billionaire remains focused on pushing for PepsiCo to be spun-off into two business units.

Trian has argued that the slow-growth beverages business and higher-growth snacks units would perform more effectively and provide more value to shareholders on an independent basis.

PepsiCo has to date resisted Peltz's calls to split in two. In an interview this month with CNBC, Nooyi said: "These two categories are better together, not just in the United States, but around the world."

However, with PepsiCo still in the sights of the vociferous investor, it seems likely that Peltz will continue to make waves in the year to come.