Food companies with broader, healthier food portfolios generate higher profit margins (15.2%) than those with largely unhealthy portfolios (13.4%), a new study by the Access to Nutrition Initiative (ATNI) and Planet Tracker, in association with the Global Alliance for Improved Nutrition (GAIN), has found.
However, the study also found that a subset of firms that specialise in segments such as soft drinks, display even higher margins (16.7%), highlighting the complexity of the market.
The Materiality of Nutrition Report analysed the healthiness of product portfolios of the 20 largest global food manufacturers, along with their profits and market valuations.
While in general, the findings revealed a link between healthier food product portfolios and higher profitability, this is somewhat obscured by poor company disclosures.
In addition, given the small sample size, ATNI and Planet Tracker are positioning this report as a discussion paper to stimulate further debate, rather than an overall assessment of the food industry.
Product Portfolios
“This report is part of a small but critical and growing body of evidence showing that food companies should improve the healthiness of their portfolios and disclosures," commented Greg S Garrett, executive director, Access to Nutrition Initiative. "By not doing so, they increase their own risk and miss the opportunity to improve societal outcomes."
The study also suggests that investors could benefit from a switch to healthier foods. If companies with unhealthy portfolios switched to healthier products and achieved similar margins, profits could rise by nearly $350 million (€327.3 million) and valuations by $60 billion (€56.1 billion).
However, the report indicates that it is often difficult for investors to assess the impact of nutrition on their valuations due to a lack of transparency in this area, which is a significant shortcoming given potential regulations on the horizon.
'Incentive For Change'
“Unhealthy food products are costing society and employers, but the issue is being overlooked by financial institutions," added Peter Elwin, head of the Food and Land Use programme at Planet Tracker. "Regulation presents an increasing threat to companies profiting from producing unhealthy foods, but poor disclosure is hiding the risks.
"Our analysis shows that there could be investment opportunities associated with producing healthy food, so there’s an incentive for investors to ask for change”.
The full report can be found here.
