Dec 12 2011

Food companies expand sales in emerging markets

Publicly traded companies cannot simply make a profit.  They must grow profits and report growth to Wall Street every 90 days.  This requirement is tough on all corporations, but especially tough on those selling food.  People can only eat so much.

To expand sales, food companies desperately seek new markets.  Last week, The Guardian and the Wall Street Journal described how food corporations are marketing processed foods to the poorest inhabitants of developing countries.

According to The Guardian,

Nestlé is using a floating supermarket to take its products to remote communities in the Amazon. Unilever has a small army of door-to-door vendors selling to low-income villages in India and west and east Africa. The brewer SABMiller has developed cheap beers in some African countries as part of a “price ladder” to its premium lager brands, and, as a leading Coca-Cola bottler and distributor, is aiming to double fizzy drinks sales in South African townships.

Last year 39% of acquisition deals by consumer goods companies were in emerging markets, compared with just 1% in 2008, according to the Grocer’s OC&C Global 50 league table.

The Wall Street Journal follows a salesman in South Africa who is “digging for his gold” in poor neighborhoods:

While Nestlé’s usual sales staff focus on filling shelves of big supermarkets, Mr. Mugwambane and 80 other salespeople like him hunt for tiny shops across South Africa that will buy such Nestlé products as baby food and nondairy creamers, often in single-serving packages that appeal to Africa’s price-sensitive customers.

…Nestlé says it expects 45% of its sales to come from emerging markets by 2020, up from roughly 30% now.

From the standpoint of food companies, says The Guardian, this is about “finding innovative ways to give isolated people the kind of choices the rich have enjoyed for years and are providing valuable jobs and incomes to some of the most marginalised.”

Baby food and nondairy creamers?

Maybe selling items like these brings jobs to some people, but it also brings nutrient-poor diets, obesity, and the resulting chronic diseases to those populations.

The ultimate costs will be high.

  • http://www.muchmorethanfood.com Bonnie Modugno, MS, RD

    When I worked in public health 30 years ago infant formulas were linked to devastating malnutrition in third world counties as people were hoodwinked into thinking progressive first world formulas were better than breastfeeding their babies. More of the same…..

  • Bobbi

    Scary!

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  • http://www.phaionline.org Cara

    Coca-cola is seeking to double its global revenues by 2020 as part of its “20/20 Vision” strategy. It goes well beyond a South African township as they are focusing particular attention on China and India. A tragic irony of the whole thing is Coke’s branding of its campaign as “20/20 Vision.” As the American Optometrist Association notes: diabetes is the leading cause of new cases of U.S. blindness among adults ages 20 to 74; people with diabetes are 40 percent more likely to develop glaucoma; and people with diabetes are 60 percent more likely to develop cataracts.

  • http://www.tableforonecookbook.com Christopher Brooks

    I woke up this morning thinking that the old paradigm of a publicly traded corporation no longer fits into a society where the primary need for a company to succeed is to please the customer. The share holder cares about the bottom line but the customer does not. We teach our children that if you do what you love the money will come, but the corporate goals are the opposite. Money is not a product, only the result of a great product or service. I think we are going to see this sort of investing diminish as more businesses understand the biggest ROI is in a happy customer.

  • Cathy Richards

    I’m actually feeling a little guilty that Nestle has to go elsewhere now to pander their wares. I guess we in Public Health in North America are obviously succeeding in getting mothers to breastfeed (less Nestle formula sold) and make their own “baby food” instead of using jars. By baby food I mean food — just regular unprocessed cooked food — mashed with a fork.

    Most concerning is that the products they will be pushing will be the ones processed so much that they are shelf stable, rather than requiring refrigeration or freezing. And probably full of trans fats since there’s probably a huge cheap supply of them now that developed countries’ populations are reading labels more carefully.

    It’s very sad that human nature leads the powerful amongst us to go for short term profits despite long term risks — much like toddlers and teens do.

  • Joe

    Where on this planet is anyone forced to buy and or consume a particular food product? Companies can pitch a product all they want but have no power to force anyone to buy it. The entity with the power to force a decision is government.

    As an RD who works in public health I know the mantra I just refuse to sing it. I have small children both of which were fed formula and baby foods. Both are fantastically healthy! The same can be said of thousands of other children otherwise formula makers would be out of business.

    We were not persuaded to bottle feed by and evil profit seeking food manufacturer. Our babies bottle fed becuase they were both unable to breastfeed. So it was either formula or death. I think we made the wiser choice.

    What is routinely overlooked by those who comment on FP is that people make decisions on what is right for them not what satisfies a health elitists desire to make tick mark converts to what their version of science says they should.

  • Anthro

    @Joe (as you call yourself today)

    Your personal story is not relevant to public health and one wonders if your education included a psychology course–in which case you might know that that is the area of study that marketers use to manipulate peoples buying habits, especially children and those with limited education.

    No one “forces” any obese person to eat, but that hardly changes the resulting public health issues

  • http://amillionconnections.blogspot.com Eden Balfour

    The last two naysayers would do well to look at Nestle’s ad campaigns and track record in developing countries, as that is at issue here, not the choice of supposedly-educated Western consumers to use formula.

  • http://www.twittter.com/chinacsr Collective Responsibility

    I have been in China for the last 10 years, in / out of Asia for the last 15+, and the difference between the generations is amazing.

    One article a few months made reference to the fact that China’s rates of obesity and diabetes are growing so fast that the major pharmaceutical firms are now investing in R&D to “understand” the causes.

    Not sure what the answer really is, or if this is any different than tobacco (Asia is still largest market), but at some point governments are going to come to the conclusion that the negative externalities associated with these foods are too great to ignore and the subsidies which allow their economic models to thrive will be removed.

    r

  • Joe

    Keen point Keene Observer.

    Anthro, Anthro, Anthro my real personal story is relevant because it reflects millions of others just like it. I assume your issue with my story is that it is not in keeping with your convention of wisdom. My story is not a construct of government “intelligence” but a result of my real education guided by my real experience seeking the best for my real family.

  • Michael Bulger

    Joe,

    Congratulations on your success. Unfortunately, many millions of people are not as educated on nutrition and diet. Consider your own understanding of China’s efforts to combat obesity. Can you evaluate their efforts based on actual knowledge of interventions or government campaigns? Or are you just applying a broad stereotype of Chinese government to the issue in order to further your argument that government has no place in public health?

    Similar to your own lack of knowledge of Chinese domestic policy, many people have a lack of diet-related knowledge. They are particularly susceptible to food marketing (which is often devised to emphasize “health benefits” of less healthy foods).

    Marketing works surprisingly well. Humans are not infallible and make decisions based on communicated information even when that information is false or misleading. When a large portion of the population makes market decisions that negatively affect their health and well-being, and by extension the economy, the market has failed. This is the appropriate place for government to intervene.

  • Joe

    Michael,
    I am no expert on the Chinese government but I have some pretty good insights on human nature. People no matter where they live want the freedom to choose how they live, what they eat and so forth. Command and control government never works. If you doubt that then see Cuba as exhibit #1. That is especially true in the area of nutrition as a government cannot (and should not) control what its citizens eat.

    In my mind it becomes an issue or personal liberty. If women claim we have no right to tell them what to do with their bodies then how can some bureaucrat dictate how I eat or how much I weigh?

    Secondly if marketing works so well then why not band together with those who are like minded in message, secure some funding and market your message to those who you think relly need it. If marketing works so well for “Big Food” then it should work equally as well for a public health message. So go ahead and give it a shot.

  • Michael Bulger

    Dietary interventions through informational campaigns might be very cost-effective, so I think you are on the right track. The problem becomes paying for these campaigns. The junk food companies have a very clear incentive to market their products. More people buying junk food means more money for the junk food companies. A dollar spent on advertising has a return. This is why these companies spend so many billions of dollars building marketing campaigns.

    The problem arises when a benefit exists for the general public. More healthful diets means longer life expectancy and lower rates of morbidity. This benefits society as a whole. Unfortunately, in order to carry out a marketing campaign that would rival junk food companies, a large amount of capital would have to be focused on the promoting healthy foods. To this point, no industry has found enough incentive in the public good to rival the incentive that junk food corporations have found in harming the public good. This is where the market has failed.

    If marketing is the answer, as you suggest (and this is not an unreasonable suggestion), then an investment must be made. I would argue that the market has demonstrated failure. The government must now intervene to protect the public. Despite the best intentions of the free market, the playing field is inherently uneven. Producers of junk food command a huge share of concentrated capital and have the resources to outcompete the fragmented healthy foods producers on the open market.

    Realistically, the question becomes whether the most effective approach would be focusing public funds on regulation or a public marketing campaign promoting healthy foods over junk foods.

  • http://www.anamariaquispe.wordpress.com Ana Maria

    Tans Pacific Partnership…the session sounded like an “expansion” of agriculture and “medicine” to too many countries…ummmm

    There was a conference on avoiding toxics at Mount Sinai Children Environmental Health….and Joe’s children diet???? there are very long term consecuences….aren’t we dietitians supposed to prepare ourselves to breastfeed? My clients did and works!