“If we do not deal ourselves with the important issues of our sector, other people will do it for us.” Thus opened last week’s CIES World Food Business Summit, attended by delegates from 42 countries representing the world’s major food manufacturers and retailers. Covering issues from obesity to globalisation and ethical responsibility, Catherine Sleep reports back on an exciting and motivating 2004 Summit.

“If we do not deal ourselves with the important issues of our sector, other people will do it for us.” These were the words with which Pierre-Olivier Beckers, president and CEO of Belgian retailer Delhaize and CIES chairman, opened the 2004 CIES World Food Business Summit in Rome last week.

How right he is. As well as the ever looming threat of tighter regulation from government, the challenges posed by increasingly powerful advocacy groups are firmly on the food industry’s radar. This was hammered home by Greenpeace, the environmental organisation which conspired to undermine the opening day of the conference by parking a truck with supersized speakers outside the conference room, blaring out anti-GM slogans and phrases all day long. Beckers adroitly reassured delegates and focused the room’s attention on the agenda to come, but the incident reinforced one of his own key points: food is a sensitive issue and the activities of all the companies represented by the delegates in the room are very much in the spotlight. Accepting responsibility for their actions, their employees and their products is no longer an option but a cast-iron obligation.

The 900 delegates at the summit were drawn from 42 countries, with most major food manufacturers and retailers represented along with many smaller players and allied enterprises. This year’s theme was “The Meaning of Value,” which left speakers plenty of room for interpretation, whether they focused on value creation, consumer value, shareholder value or indeed tried to pin down the very definition of value.

Managing the democratisation of data

Mike Moore, former director general of the World Trade Organisation and former prime minister of New Zealand, argued that the current wave of globalisation has democratised information. Citizens have hitherto inconceivable access to corporate data and market intelligence, and are well able to expose countries and companies indulging in bad practice. In a free world, he said, what nations do with their wealth is their own responsibility; but successful countries spend and govern wisely. People demand better outcomes, which drives improvements in society and politics. In other words, open societies and globalisation drive choice, competition and transparency. The problem as he sees it is not that there is too much globalisation, but that there is not enough of it. “If Africa can get half the growth that China and India are getting, the world will be a much happier place,” he insisted.

Ultimately, free trade, not aid, is the only long-term path to progress in the developing world. Moore emphasised that it is vital that people own their problems, and at least part of the solutions. “Nobody in the history of the world ever cleaned a rented car,” he said, implying that only people who have a stake in the outcome of a business or initiative will give of their best.

Controversially, Moore called for western subsidies on commodity products to be slashed, citing the plight of coffee farmers in the developing world. Ten years ago the coffee market was worth US$30bn, and farmers saw $10bn of this. Now the market is worth $60bn and farmers earn just $5.5bn. Agricultural reform is the fastest and most effective way to give jobs to farmers in Africa, and it’s time that western nations bit the bullet. “We need to live up to our own ideals on trade, corporate governance and property rights,” he said, throwing down the gauntlet to the powerful organisations represented at the Summit.

Before closing, Moore encouraged companies to interact more effectively with those advocacy groups that are serious about doing good, and going about it in a sensible way. “Think about funding NGOs. It is not unusual for businesses to fund their assessors. Build trust. We are interdependent; embrace it”. That said, he couldn’t resist a sideways swipe at Greenpeace, still noisily protesting outside the room, saying that although he’d been a member of both Amnesty International and Greenpeace, he’d never been invited to a meeting, he’d only been asked for money.

It’s about more than the bottom line

Moore was not the only speaker on the podium to argue for a broader measure of success than the balance sheet. Several retailers explained how their businesses look way beyond the bottom line when deciding strategy. Claude Hauser, chairman of leading Swiss retailer Migros, demonstrated that it is possible for retailers to adhere to a strict ethical code of conduct and nevertheless have a successful business. Migros is almost unique in refusing to sell alcohol, tobacco, porn magazines or war toys, despite the high margins achievable in these categories. Founded in 1925, the cooperative group funnels 1% of sales into its non-business cultural scheme and was an early retail adopter of organic products. Hauser encouraged other retailers to work with Migros on developing and implementing a common code of conduct on fairtrade issues.

Ahold president and CEO Anders Moberg understandably conceded that right now his main job is to ensure that each of the unsettled Dutch company’s subsidiaries is individually sustainable, but he agreed that while consumers must be educated to accept that fairtrade goods come at a higher cost, retailers too “owe it to our customers to pay at least some of the price of fair and sustainable trade”.

Wal-Mart International president and CEO John Menzer declined to respond in detail to Moore’s invitation to retailers to think more about the developing world. He confirmed that Wal-Mart was committed to the ethical treatment of suppliers and associates [employees], and that the company supports initiatives to cut tariffs in sectors such as textiles and food products, for example sugar. He went on to stress that for Wal-Mart, being a good corporate citizen involved offering low prices to customers and “trying to support and engage in activities that are important to consumers in the communities where we have stores”. For Wal-Mart, charity evidently begins at home.

“It’s obesity, stupid”

Inevitably, one of the hottest topics at the Summit was obesity. CIES had shrewdly invited nutrition expert and fat tax advocate Marion Nestle to take the floor just before McDonald’s Ventures MD Mats Lederhausen, ensuring a lively start to proceedings on the second day of the Summit. Nestle argued that responsibility for food consumption had shifted over the last few years from the family to society in general and the food industry in particular. In passing, she lamented the decline in physical activity that had contributed to overweight and obesity, perhaps to clear that particular argument from the table before anybody else brought it up.

Warming to her topic, Nestle painted a picture of an overabundant US food supply, where an average 3900 kcal/day are available per person, roughly twice what we need. Food has also become more affordable, corresponding to just 10% of average income, down from approximately 50% in 1950. This is a positive change in that everyone has enough to eat, but negative in that it encourages overeating. She added that food has got cheaper in almost direct proportion to the availability of calories in the food supply. She argued that today’s food marketers have two choices: namely to persuade people to choose their products instead of those of their rivals, or to persuade them to eat more. In this context, she said, obesity is no more than collateral damage.

Nestle said that the $1.3trn food industry spends $34bn on marketing, most of which is focused on foods that are only recommended in small quantities by the government’s “Food Pyramid”. Advertising has delivered “eat more” messages by using health claims, such as sweetened breakfast cereals marketed as helping against heart disease. In this context, “it is extremely difficult for consumers to make healthy choices,” she stressed.

Portion size and pricing are two other important factors determining food consumption. “Portion size alone is sufficient to account for rising levels of obesity,” Nestle insisted, noting the example of a 64oz, 800kcal soft drink sold by a US cinema, while it is often impossible to find the ‘old-fashioned’ 6.5oz version. Government agriculture policies have at the same time contributed to make certain foods cheap, bringing a situation where $5 buys one salad but five hamburgers at McDonald’s. “Eat more” messages have also been directed at children, through targeted advertising that seeks to create loyalty to special kids’ foods. “This is where the food industry crosses an ethical line,” she argued, “and it is an enormous point of vulnerability.”

However, all was not doom and gloom. The example of Whole Foods, the first national organic grocer in the US, shows how the industry can be part of the solution to nutrition and obesity. Ruby Tuesday also garnered an honourable mention for offering healthier options and smaller portions as standard. The most important thing for food companies to do, Marion Nestle concluded, is to give people real choices, by offering at reasonable prices products that are genuinely healthy, in appropriate portion sizes.

McDonald’s getting healthy – and lovin’ it

“Conversations about responsibility always seem to be about someone else’s responsibility,” McDonald’s Lederhausen commented as he took to the podium. To counter this “abdication of personal responsibility,” businesses need to recognise that they are among the most powerful institutions on the planet and so have an enormous responsibility of care. And with legislative bodies and advocacy groups taking an interest like never before, there is no time like the present. He described how the fastfood giant had drawn on its experience in operating a ‘multi-local system’ that adapts a core concept to local customs and cultures. The company last year organised the individual work of its country operations into a global effort called “Eat Smart, Go Active” and formed a Global Advisory Council including a panel of nutrition experts. Through this initiative McDonald’s has identified three major areas of action: menu choice, education and physical activity.

When overhauling menus, McDonald’s focused on Happy Meals, including healthier options such as fruit bags, low-fat and -sugar yoghurts, or even carrots instead of fries in Sweden. The saladsplus programme is an example of a major initiative aimed at providing customers with healthier options. Another example is the introduction of nutritional info tray liners, which are scheduled to be available worldwide by the end of the year, ensuring that customers can easily inform themselves about the nutritional content of all menu items.

Helping customers stay healthy is one of McDonald’s goals, but as Lederhausen commented, there is a thin line between providing information to customers and patronising them, and that is not a line that any company can afford to cross. He reminded delegates that it is vital to find positive reasons why people should change their behaviour rather than negative ones. For example, how often do parents offer their children broccoli rather than candy as a reward for good behaviour? Vegetables are more likely to be presented as a punishment than a reward – what kind of message does that send out to children? While business must at least share responsibility for social health, personal freedom of choice cannot be discounted. “If I’m faced with a tiramisu or a carrot,” Lederhausen laughed, “sometimes I take the tiramisu. We live in a real world!”

Neville Isdell, newly appointed chairman and CEO of Coca-Cola, argued that the fact that we were having a debate about obesity was testimony to the sector’s success at managing food resources efficiently and creating value. The food industry’s adoption of advanced production and distribution technologies meant it could offer consumers lower prices and improved variety and quality of goods. “This has been a major public service, a major force for good,” he insisted, adding that the fact that levels of malnourishment have not fallen faster has more to do with bad government policies, particularly agriculture policies in Europe and America.

A question of balance

tegut chairman Wolfgang Gutberlet discussed the question of responsibility with reference to his company, a family-owned chain of 300 natural food stores in Germany. At a general level, the responsibility of business can be broken down into economic, social and cultural areas, he argued. Such responsibility is complex and you have to be ready to communicate it to others in society. Health in particular is a complex issue because it goes beyond medical definitions to cover subjective notions like well-being. The food sector has a responsibility for meeting consumers’ basic needs, giving them information and guaranteeing quality. However, the advent of nutraceuticals has blurred the boundary between food and medicine, so here companies have to be careful about how they communicate.

Referring to Moore’s speech earlier in the day, Gutberlet agreed that companies also have a responsibility regarding hunger in the developing world but their first responsibility is to provide quality products in their own country, which can then serve as a model elsewhere. Many people once predicted that tegut would not survive, Gutberlet noted, but its family-owned model has continued growing over 50 years. He agreed that tegut was not among the largest retailers in Germany, having invested little energy in expanding, but then, he pointed out, “maybe that wasn’t our aim”. This would have made easy listening for Nestle, who had earlier posed the confrontational question: “Why do companies have to grow? If you are a company that makes $20bn, isn’t that enough?”

While few listeners in the room might have agreed with her, she’d have doubtless found a raft of support from the Greenpeace kids making all the noise outside.

For more observation from the fringes of the Summit, check the blog for mid-June 2004.