by Marion Nestle
Jul 26 2011

Thanks to emerging markets, U.S. food companies grow profits

The second quarter financial results are in and food companies are doing great, thanks to sales in developing countries. For example:

McDonald’s: Meatandpoultry.com reports (July 22) a 15% increase in income “boosted by strong sales throughout the world.”  Total revenue for the quarter was $6.9 billion, up 16% from $5.9 billion during the same quarter last year.

PepsiCo: Food Navigator reports an increase in net income to $1.88 billion up 18% from $1.6 billion last year. Despite “challenging conditions in the North American beverage market”… worldwide beverage and snacks businesses accounted for growth along with the acquisition of Russian dairy and juice company Wimm-Bill-Dann.  Sales in emerging markets increased 4% in beverages and 9% in snacks:  “We continue to enjoy robust top-line growth in key emerging markets,” said PepsiCo chairman and CEO Indra Nooyi.

Coca-Cola: Although its North American sales were sluggish, sales increased “due to growth in emerging markets such as China, Russia and Mexico.”  Income rose 18% to $2.8 billion from $2.4 billion last year.  Sales rose 6% in Latin America, 5% in Europe, 7% in Eurasia and Africa, and 7 in the Pacific region.   Growth in China ws 24%, in Russia 17%, and in Mexico 7%.  In contrast, North American volume recorded a growth of a measly 1%.

Americans are turning away from these products.  We already have plenty of obesity.  Now it’s time to export it.

  • Charlie L

    It’s more accurate to interpret the relatively sluggish sales in North America (NA) for these companies not as proof that “Americans are turning away from these products,” but that NA is a saturated market already with little room for growth. That leaves emerging countries left in order to grow revenue, which has been anticipated for some time now.

    That being said, I do agree with Professor Nestle that we are exporting our obesity problems abroad, much like cigarettes (which have the same revenue pattern in emerging markets). Outside of entertainment and manufacturing/call center jobs, the commercial conditions ripe for contributing to obesity has to be America’s largest global export. The so-called Standard American Diet (SAD), which is highly industrialized and processed, is quickly supplanting the traditional and cultural diets of many emerging market countries. See http://www.hsph.harvard.edu/obesity-program/resources/globalization-and-obesity/index.html

    Maybe consumers abroad, like in the US, freely choose to become obese, but at the same time, we also have a fairly good idea by now what commercial conditions correlate or give rise to such obesigenic choices. If native populations didn’t have obesity problems prior to McDonald’s/Coke, et al arriving and then say, 10+ years later, they are starting to have an obesity problem in those areas with a McDonald’s restaurant, we can conclude that McDonald’s (just as an example) has something to do with this change in health.

  • Ben

    I personally think coke is a really brilliant occational treat. Isn’t the issue the quantity? Maybe a more even global distribution could be a good outcome for shareholders and waistlines?

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  • Trish Murphy

    The headline talked about “food companies” yet most of the companies actually mentioned in the article sell, not food, but non-food calories. Honestly, Dr. Nestle, I admire you greatly, but it is passed time we all stopped calling soda food. I am not exactly what level of nutritional impoverishment a calorie source would have to reach to no longer be called food, but clearly soda is there.

  • http://loveknowledgezeal.wordpress.com/ Maya

    The more I read/learn/observe about the business of food, the more I think that food needs to be taken out of Wall Street. Maybe if food companies were not-for-profit companies, not driven by the need to return profits to shareholders, we’d get a healthier system.