Obesity in America… Specialty Medical  Gregory Schaeppi
 
 
 
 
 
 
 
Agenda <ul><ul><li>Background </li></ul></ul><ul><ul><ul><li>Obesity defined </li></ul></ul></ul><ul><ul><ul><li>Obesity /...
What is Obesity? <ul><li>Obesity is a disease defined as an imbalance between energy intake and output with the accumulati...
What is Obesity? <ul><li>Obesity is a disease defined as an imbalance between energy intake and output with the accumulati...
Percent of U.S. Adults Overweight 64.5% 56.0% 46.0% 30.5% 23.0% 14.4% Source:  Centers for Disease Control
Childhood Obesity in the U.S. Source:  Centers for Disease Control 6.5% 5% 11.3% 10.5% 15.3% 15.5%
Food Expenditures – Nominal Dollars Total Food At Home Food Away From Home Source:  USDA Economic Research Service http://...
Food Expenditures – Constant Dollars Total Food At Home Food Away From Home Source:  USDA Economic Research Service http:/...
Food Expenditures as a percent of Disposable Income Total Food At Home Food Away From Home Source:  USDA Economic Research...
Food Expenditures as a % of Disposable Income vs. Prevalence of Adult Overweight / Obesity Source:  USDA Economic Research...
Food Expenditures as a % of Disposable Income vs. Rate of Overweight Children in U.S. Food Away From Home Food At Home Tot...
Foodservice Sales by Type of Outlet All Other Lodging Source:  USDA Economic Research Service http://www.ers.usda.gov/brie...
Calorie Supply Per Capita Per Day Total Vegetable Animal Source:  USDA Economic Research Service (Adult male requires 2800...
Total Supply: Calories vs. Other Components Calories Grams Source:  USDA ERS Per Capita Supply Per Day Carbohydrates +27% ...
Cost Per Calorie Current Prices 1988 Prices Source:  USDA Economic Research Service Total Supply  / Per Capita Expenditures
Cost Per Calorie Some studies suggest that the low cost of highly processed “unhealthy” calories contributes strongly to t...
Cost Per Calorie Source:  The Hale Group, Ltd.
Obesity Trends* Among U.S. Adults BRFSS, 1985 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1986 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1987 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1988 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1989 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1990 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1991 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1992 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1993 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1994 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1995 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1996 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1997 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1998 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 1999 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 2000 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Obesity Trends* Among U.S. Adults BRFSS, 2001 Source: Mokdad A H, et al.  J Am Med Assoc   1999;282:16,  2001;286:10.
Health Risks of Obesity <ul><ul><li>High blood pressure  </li></ul></ul><ul><ul><li>High blood cholesterol  </li></ul></ul...
Health Risks of Obesity <ul><ul><li>High blood pressure  </li></ul></ul><ul><ul><li>High blood cholesterol  </li></ul></ul...
Weight Loss:  A Significant Concern Source:  NMI 2002 Health conditions the general population is trying to manage / treat...
Causes of Obesity Calories Consumed Calories Burned
Causes of Obesity Source:  The Hale Group, Ltd. More Calories Consumed than Burned Declining Food Costs Food Supply Chain ...
Tobacco, Alcohol Set Examples? <ul><li>What can be learned from tobacco, alcohol? </li></ul><ul><ul><li>“Big Fat” seen as ...
Tobacco History 1800 2000 Early 1800s – Cigarettes first introduced to U.S. 1864 – First Federal tax imposed WWI – Doctors...
Tobacco History 1800 2000 1964 – S.G. report concludes smoking is a cause of lung cancer 1965 – Congress requires health w...
Tobacco History 1800 2000 1994 – US tobacco manufacturers testify nicotine is not addictive and they do not manipulate nic...
U.S. Cigarette Consumption Source: U.S. Tobacco Production, Consumption, and Export Trends, Report for Congress, Updated J...
Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1980: MADD established
Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1982: Presidential Commission  on Drunk Driving
Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1984: Federal “21” minimum drinking age enacted
Yet, Alcohol Succeeds <ul><li>2003 Adams Handbook Advance </li></ul><ul><ul><li>Overall sales of $137.2 b (2002) </li></ul...
Implications For Food System So, who will voluntarily trim sales to accommodate lower calorie requirements?
Implications for Food System <ul><ul><li>Litigation </li></ul></ul><ul><ul><li>Legislation / Regulation </li></ul></ul><ul...
Litigation <ul><ul><li>Class action lawsuits on behalf of “overweight” or “obese” consumers </li></ul></ul><ul><ul><ul><li...
Legislation <ul><li>Nutrition Labeling </li></ul><ul><ul><li>NLEA addresses manufacturers now; Trans fat labeling due in 2...
Federal Legislation <ul><ul><li>S.1172 (Frist)  Improved Nutrition and Physical Activity Act  </li></ul></ul><ul><ul><li>H...
R&D / Innovation <ul><li>1980s-1990s </li></ul><ul><li>Low Fat Foods </li></ul><ul><li>Fat Bad </li></ul><ul><li>Carbs OK ...
Innovation Innovation . . . a winning strategy to create sustainable profitable growth 1982 1995 Market Value Top Tier Inn...
Sales & Marketing <ul><ul><li>Consumer expected to shift spending </li></ul></ul><ul><ul><ul><li>Merrill Lynch sees 1% shi...
“Our Drive-Thru Fancy Feast” Source:  USAToday, 15 October 2003
Source:  USAToday, 15 October 2003
Americans Avoid Cookie Jar Kraft Loses as Americans Avoid Cookie Jar <ul><li>Merrill Lynch – “We’ve identified cookies as ...
Fastest Growing Category in Foodservice
Expectations Exceed Growth For many manufacturers, growth mandates targeted acquisitions and alliances . . . Growth Expect...
The Strategic Planning Matrix Existing New Existing New Products Customers Status Quo Innovation Customer  Acquisition Acq...
Spending On Food Away From Home <ul><li>Growth in foodservice will continue from both … </li></ul><ul><ul><li>Meals eaten ...
Change Agents <ul><li>The consumer will drive change . . .  </li></ul>Who they are, What they have, What they want … What ...
Consumer Driven <ul><li>Future demand will be driven by: </li></ul><ul><ul><li>Consumers 45 and up - 100% of population gr...
The Foodservice Manufacturer Response Internal Strategies Contain costs & maximize revenue Shift focus from obesity to wel...
Customer Strategies <ul><li>Partner with customers to share knowledge, build programs to support target consumers. </li></...
Product Strategies <ul><li>Positioning of current products and development of new products in a wellness-driven world will...
Internal Strategies <ul><li>Consider how the total organization can support wellness strategy. </li></ul><ul><ul><li>Alway...
Obesity in America… Specialty Medical  Gregory Schaeppi
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American Idle...Obesity in the USA.

  1. 1. Obesity in America… Specialty Medical Gregory Schaeppi
  2. 9. Agenda <ul><ul><li>Background </li></ul></ul><ul><ul><ul><li>Obesity defined </li></ul></ul></ul><ul><ul><ul><li>Obesity / economic trends </li></ul></ul></ul><ul><ul><ul><li>Health risks and causes </li></ul></ul></ul><ul><ul><li>Implications for the Food System </li></ul></ul><ul><ul><ul><li>The tobacco and alcohol industries? </li></ul></ul></ul><ul><ul><ul><li>Litigation, legislation / regulation, business factors </li></ul></ul></ul><ul><ul><li>Developing a Strategic Response </li></ul></ul><ul><ul><ul><li>Understanding the changing consumer </li></ul></ul></ul><ul><ul><ul><li>Customer, product and internal strategies </li></ul></ul></ul>
  3. 10. What is Obesity? <ul><li>Obesity is a disease defined as an imbalance between energy intake and output with the accumulation of large amounts of body fat. </li></ul><ul><ul><li>Calculated by Body Mass Index (BMI) </li></ul></ul><ul><ul><ul><li>“Overweight” = BMI of 25 or more </li></ul></ul></ul><ul><ul><ul><li>“Obese” = BMI of 30 or more </li></ul></ul></ul><ul><ul><ul><li>“Severe Obesity” = BMI over 40 </li></ul></ul></ul><ul><ul><li>BMI Calculation: </li></ul></ul><ul><ul><ul><li>(weight [lbs] / height 2 [inches]) x 704.5 = BMI </li></ul></ul></ul>Source: Centers for Disease Control
  4. 11. What is Obesity? <ul><li>Obesity is a disease defined as an imbalance between energy intake and output with the accumulation of large amounts of body fat. </li></ul><ul><ul><li>Calculated by Body Mass Index (BMI) </li></ul></ul><ul><ul><ul><li>“Overweight” = BMI of 25 or more </li></ul></ul></ul><ul><ul><ul><li>“Obese” = BMI of 30 or more </li></ul></ul></ul><ul><ul><ul><li>“Severe Obesity” = BMI over 40 </li></ul></ul></ul><ul><ul><li>BMI Calculation: </li></ul></ul><ul><ul><ul><li>(weight [lbs] / height 2 [inches]) x 704.5 = BMI </li></ul></ul></ul>Source: Centers for Disease Control 127 mm Americans 9 mm Americans 60 mm Americans
  5. 12. Percent of U.S. Adults Overweight 64.5% 56.0% 46.0% 30.5% 23.0% 14.4% Source: Centers for Disease Control
  6. 13. Childhood Obesity in the U.S. Source: Centers for Disease Control 6.5% 5% 11.3% 10.5% 15.3% 15.5%
  7. 14. Food Expenditures – Nominal Dollars Total Food At Home Food Away From Home Source: USDA Economic Research Service http://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm
  8. 15. Food Expenditures – Constant Dollars Total Food At Home Food Away From Home Source: USDA Economic Research Service http://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm
  9. 16. Food Expenditures as a percent of Disposable Income Total Food At Home Food Away From Home Source: USDA Economic Research Service http://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm
  10. 17. Food Expenditures as a % of Disposable Income vs. Prevalence of Adult Overweight / Obesity Source: USDA Economic Research Service / CDC NHSC http://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm Obesity is defined as a BMI of 30+ % Overweight % Obese
  11. 18. Food Expenditures as a % of Disposable Income vs. Rate of Overweight Children in U.S. Food Away From Home Food At Home Total Ages 6-11 Ages 12-19
  12. 19. Foodservice Sales by Type of Outlet All Other Lodging Source: USDA Economic Research Service http://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table17.htm Full Service QSR Education
  13. 20. Calorie Supply Per Capita Per Day Total Vegetable Animal Source: USDA Economic Research Service (Adult male requires 2800 calories)
  14. 21. Total Supply: Calories vs. Other Components Calories Grams Source: USDA ERS Per Capita Supply Per Day Carbohydrates +27% Calories +15% Total Fat +3% Protein +16%
  15. 22. Cost Per Calorie Current Prices 1988 Prices Source: USDA Economic Research Service Total Supply / Per Capita Expenditures
  16. 23. Cost Per Calorie Some studies suggest that the low cost of highly processed “unhealthy” calories contributes strongly to the obesity epidemic, particularly among lower-income segments. 580 $0.99 Big Mac 710 $0.99 Original Whopper 190 $.19 Ramen Chicken Vegetable 390 $.79 Kraft Macaroni & Cheese 150 $3.85 Fruity Pebbles AVG. COST PER CAL 80 $2.49 Wonder Light Wheat Bread 80 $0.69 Red Delicious Apple 230 $2.69 Atkins Advantage Bar 35 $1.59 Beefsteak Tomato Calories Cost Item
  17. 24. Cost Per Calorie Source: The Hale Group, Ltd.
  18. 25. Obesity Trends* Among U.S. Adults BRFSS, 1985 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  19. 26. Obesity Trends* Among U.S. Adults BRFSS, 1986 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  20. 27. Obesity Trends* Among U.S. Adults BRFSS, 1987 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  21. 28. Obesity Trends* Among U.S. Adults BRFSS, 1988 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  22. 29. Obesity Trends* Among U.S. Adults BRFSS, 1989 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  23. 30. Obesity Trends* Among U.S. Adults BRFSS, 1990 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  24. 31. Obesity Trends* Among U.S. Adults BRFSS, 1991 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  25. 32. Obesity Trends* Among U.S. Adults BRFSS, 1992 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  26. 33. Obesity Trends* Among U.S. Adults BRFSS, 1993 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  27. 34. Obesity Trends* Among U.S. Adults BRFSS, 1994 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  28. 35. Obesity Trends* Among U.S. Adults BRFSS, 1995 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  29. 36. Obesity Trends* Among U.S. Adults BRFSS, 1996 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  30. 37. Obesity Trends* Among U.S. Adults BRFSS, 1997 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  31. 38. Obesity Trends* Among U.S. Adults BRFSS, 1998 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  32. 39. Obesity Trends* Among U.S. Adults BRFSS, 1999 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  33. 40. Obesity Trends* Among U.S. Adults BRFSS, 2000 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  34. 41. Obesity Trends* Among U.S. Adults BRFSS, 2001 Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.
  35. 42. Health Risks of Obesity <ul><ul><li>High blood pressure </li></ul></ul><ul><ul><li>High blood cholesterol </li></ul></ul><ul><ul><li>Type 2 (non-insulin dependent) diabetes </li></ul></ul><ul><ul><li>Insulin resistance, glucose intolerance </li></ul></ul><ul><ul><li>Hyperinsulinemia </li></ul></ul><ul><ul><li>Coronary heart disease </li></ul></ul><ul><ul><li>Angina pectoris </li></ul></ul><ul><ul><li>Congestive heart failure </li></ul></ul><ul><ul><li>Stroke </li></ul></ul><ul><ul><li>Gallstones </li></ul></ul><ul><ul><li>Cholescystitis and cholelithiasis </li></ul></ul><ul><ul><li>Gout </li></ul></ul><ul><ul><li>Osteoarthritis </li></ul></ul><ul><ul><li>Obstructive sleep apnea and respiratory problems </li></ul></ul><ul><ul><li>Some types of cancer (such as endometrial, breast, prostate, and colon) </li></ul></ul><ul><ul><li>Complications of pregnancy </li></ul></ul><ul><ul><li>Poor female reproductive health (such as menstrual irregularities, infertility, irregular ovulation) </li></ul></ul><ul><ul><li>Bladder control problems (such as stress incontinence) </li></ul></ul><ul><ul><li>Uric acid nephrolithiasis </li></ul></ul><ul><ul><li>Psychological disorders (such as depression, eating disorders, distorted body image, and low self esteem). </li></ul></ul>
  36. 43. Health Risks of Obesity <ul><ul><li>High blood pressure </li></ul></ul><ul><ul><li>High blood cholesterol </li></ul></ul><ul><ul><li>Type 2 (non-insulin dependent) diabetes </li></ul></ul><ul><ul><li>Insulin resistance, glucose intolerance </li></ul></ul><ul><ul><li>Hyperinsulinemia </li></ul></ul><ul><ul><li>Coronary heart disease </li></ul></ul><ul><ul><li>Angina pectoris </li></ul></ul><ul><ul><li>Congestive heart failure </li></ul></ul><ul><ul><li>Stroke </li></ul></ul><ul><ul><li>Gallstones </li></ul></ul><ul><ul><li>Cholescystitis and cholelithiasis </li></ul></ul><ul><ul><li>Gout </li></ul></ul><ul><ul><li>Osteoarthritis </li></ul></ul><ul><ul><li>Obstructive sleep apnea and respiratory problems </li></ul></ul><ul><ul><li>Some types of cancer (such as endometrial, breast, prostate, and colon) </li></ul></ul><ul><ul><li>Complications of pregnancy </li></ul></ul><ul><ul><li>Poor female reproductive health (such as menstrual irregularities, infertility, irregular ovulation) </li></ul></ul><ul><ul><li>Bladder control problems (such as stress incontinence) </li></ul></ul><ul><ul><li>Uric acid nephrolithiasis </li></ul></ul><ul><ul><li>Psychological disorders (such as depression, eating disorders, distorted body image, and low self esteem). </li></ul></ul>$93 Billion in Health Care Costs Cost of healthcare for obese people estimated to be 37% greater than normal weight people, adding $732 per capita each year to healthcare costs.
  37. 44. Weight Loss: A Significant Concern Source: NMI 2002 Health conditions the general population is trying to manage / treat: Weight Loss-Appearance Cholesterol Level Weight Loss-Health Fat Intake Sugar Intake Salt Intake Carbohydrate Intake Lactose Intolerance Food Allergies Protein Intake 44.8% 39.9% 38.8% 33.8% 31.1% 28.7% 14.3% 9.7% 9.6% 9.1%
  38. 45. Causes of Obesity Calories Consumed Calories Burned
  39. 46. Causes of Obesity Source: The Hale Group, Ltd. More Calories Consumed than Burned Declining Food Costs Food Supply Chain Over-Capacity New Realities of Society, Family and Education Consumer Confusion – Diet Fads, Food Pyramid
  40. 47. Tobacco, Alcohol Set Examples? <ul><li>What can be learned from tobacco, alcohol? </li></ul><ul><ul><li>“Big Fat” seen as the next “Big Tobacco” </li></ul></ul><ul><ul><li>Years of regulation, litigation and consumer education </li></ul></ul><ul><ul><li>Social stigma associated with smoking, drinking </li></ul></ul><ul><ul><li>Growth of no-smoking zones </li></ul></ul><ul><ul><li>Death of the “3-Martini Lunch” </li></ul></ul><ul><ul><li>Key drivers in litigation, legislation: </li></ul></ul><ul><ul><ul><li>Health care costs </li></ul></ul></ul><ul><ul><ul><li>Effects of second hand smoke </li></ul></ul></ul><ul><ul><ul><li>Drunk driving </li></ul></ul></ul>
  41. 48. Tobacco History 1800 2000 Early 1800s – Cigarettes first introduced to U.S. 1864 – First Federal tax imposed WWI – Doctors praise cigarettes for helping soldiers relax and ease their pain Late ’40s – Early ’50s – Smoking first linked to lung cancer, other diseases
  42. 49. Tobacco History 1800 2000 1964 – S.G. report concludes smoking is a cause of lung cancer 1965 – Congress requires health warnings on cigarette packs 1969 – TV and radio ads banned 1973 – AZ first state to restrict smoking in public places 1979 – Smoking restricted in gov’t facilities 1988 – Smoking banned on short domestic flights 1990 – Smoking banned on all domestic commercial flights 1993 – Smoking banned in White House
  43. 50. Tobacco History 1800 2000 1994 – US tobacco manufacturers testify nicotine is not addictive and they do not manipulate nicotine in cigarettes 1994 – Mississippi is first state to sue industry seeking to recover medicated costs (settled 1997) 1996 – Liggett offers to settle class action suit by taking financial responsibility for related disease and death for first time 1998 – Industry approves 46-state Master Settlement Agreement for $206 billion (paid through 2025)
  44. 51. U.S. Cigarette Consumption Source: U.S. Tobacco Production, Consumption, and Export Trends, Report for Congress, Updated June 3, 2003 (Primary data source: USDA, ERS
  45. 52. Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1980: MADD established
  46. 53. Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1982: Presidential Commission on Drunk Driving
  47. 54. Per Capita Alcohol Consumption (gals.) Source: USDA ERS 1984: Federal “21” minimum drinking age enacted
  48. 55. Yet, Alcohol Succeeds <ul><li>2003 Adams Handbook Advance </li></ul><ul><ul><li>Overall sales of $137.2 b (2002) </li></ul></ul><ul><ul><li>Distilled spirits up for fifth consecutive year (1.8%) </li></ul></ul><ul><ul><li>Wine up for ninth year (3.3%) </li></ul></ul><ul><ul><li>Beer up for seventh year (1.8%) </li></ul></ul><ul><ul><li>High end products – particularly imports – outperform the overall business </li></ul></ul><ul><ul><li>Malternatives, lights (40% of market) and imports advance in beer sector </li></ul></ul><ul><li>You don’t have to drink more, just drink better! </li></ul>Source: Adams Beverage Group
  49. 56. Implications For Food System So, who will voluntarily trim sales to accommodate lower calorie requirements?
  50. 57. Implications for Food System <ul><ul><li>Litigation </li></ul></ul><ul><ul><li>Legislation / Regulation </li></ul></ul><ul><ul><li>R&D / Innovation </li></ul></ul><ul><ul><li>Sales & Marketing </li></ul></ul>All could add significant cost to food system, but could also lead to new opportunities.
  51. 58. Litigation <ul><ul><li>Class action lawsuits on behalf of “overweight” or “obese” consumers </li></ul></ul><ul><ul><ul><li>From states seeking to recover healthcare costs </li></ul></ul></ul><ul><ul><li>Targeted lawsuits </li></ul></ul><ul><ul><ul><li>Individual manufacturers and operators could be targeted for their perceived role in misleading consumers </li></ul></ul></ul><ul><ul><ul><li>Trans fats could be a key issue </li></ul></ul></ul><ul><ul><li>“Legal Approaches to the Obesity Epidemic,” helped attorneys and public-health advocates plan strategies for future </li></ul></ul>
  52. 59. Legislation <ul><li>Nutrition Labeling </li></ul><ul><ul><li>NLEA addresses manufacturers now; Trans fat labeling due in 2006 </li></ul></ul><ul><ul><li>Some states and DC attempting to force restaurants to post nutrition information </li></ul></ul><ul><li>Federal and State Competitive Foods Policies </li></ul><ul><ul><li>Prohibit sale of foods of minimal nutritional value during lunch; may be allowed if income accrues to benefit of existing school foodservice or school / student organizations </li></ul></ul><ul><ul><li>23 states go beyond USDA policy </li></ul></ul><ul><li>Personal Responsibility Acts </li></ul><ul><ul><li>Primarily tort reform legislation; limits liability of food companies in question of consumer obesity </li></ul></ul>
  53. 60. Federal Legislation <ul><ul><li>S.1172 (Frist) Improved Nutrition and Physical Activity Act </li></ul></ul><ul><ul><li>H.R.2227 (Castle) Obesity Prevention Act </li></ul></ul><ul><ul><li>S.1428 (McConnell) Commonsense Consumption Act of 2003 </li></ul></ul><ul><ul><li>H.R.339 (Keller) Personal Responsibility in Food Consumption Act </li></ul></ul><ul><ul><li>S.1201 (Graham) YMCA Healthy Teen Initiative Act </li></ul></ul><ul><ul><li>S.1007 (Leahy) Better Nutrition for School Children Act of 2003 </li></ul></ul><ul><ul><li>S.995 (Leahy) Child Nutrition Initiatives Act of 2003 </li></ul></ul><ul><ul><ul><li>… and at least three other unnamed bills aimed at nutrition, wellness and obesity </li></ul></ul></ul>
  54. 61. R&D / Innovation <ul><li>1980s-1990s </li></ul><ul><li>Low Fat Foods </li></ul><ul><li>Fat Bad </li></ul><ul><li>Carbs OK </li></ul>Food Pyramid <ul><li>2000s- </li></ul><ul><li>Low Carb Foods! </li></ul><ul><li>Some Fat OK </li></ul><ul><li>Carbs Bad </li></ul>7-10 Servings of Starch (carbs) How does this evolution affect current R&D platforms and investment? What needs to change to meet new diet reality?
  55. 62. Innovation Innovation . . . a winning strategy to create sustainable profitable growth 1982 1995 Market Value Top Tier Innovators 24.5% Return S&P 500 Bottom Tier Innovators 8% Return The Innovation Premium Historical Market Value
  56. 63. Sales & Marketing <ul><ul><li>Consumer expected to shift spending </li></ul></ul><ul><ul><ul><li>Merrill Lynch sees 1% shift ($1.5 b) in consumer spend </li></ul></ul></ul><ul><ul><ul><li>Risk: Companies with 25% or more of sales exposed to “unhealthy categories” </li></ul></ul></ul><ul><ul><li>At risk categories: potatoes, pastas, bakery / bread, etc. </li></ul></ul><ul><ul><li>Can added cost of labeling, revamping R&D, litigation and lobbying be passed on to customers? </li></ul></ul>
  57. 64. “Our Drive-Thru Fancy Feast” Source: USAToday, 15 October 2003
  58. 65. Source: USAToday, 15 October 2003
  59. 66. Americans Avoid Cookie Jar Kraft Loses as Americans Avoid Cookie Jar <ul><li>Merrill Lynch – “We’ve identified cookies as an at-risk category.” </li></ul><ul><li>US sales of cookies at about $5 b, but Q3 showed 5% drop in shipments. </li></ul><ul><li>Health-oriented bar snacks and granola bars were up 15% with category sales of $1.8 b (excluding WalMart. </li></ul>Source: LA Times, 20 October 2003
  60. 67. Fastest Growing Category in Foodservice
  61. 68. Expectations Exceed Growth For many manufacturers, growth mandates targeted acquisitions and alliances . . . Growth Expectations 8 – 10% Growth Gap 3 - 7% Foodservice Industry 2 - 5% 10% 5% 1990 1995 2002 Years Change in Sales Growth Source: The Hale Group, Ltd.
  62. 69. The Strategic Planning Matrix Existing New Existing New Products Customers Status Quo Innovation Customer Acquisition Acquisitions & Alliances A Useful Framework to Structure Strategic Thinking $$$ Future Goal
  63. 70. Spending On Food Away From Home <ul><li>Growth in foodservice will continue from both … </li></ul><ul><ul><li>Meals eaten away from home </li></ul></ul><ul><ul><li>Meals prepared away from home, but eaten at home </li></ul></ul>25% 44% 53% 1955 1995 2005 Foodservice as Percent of Total Food Expenditures 1955 - 2010 Source: US Census Bureau 58% 2010
  64. 71. Change Agents <ul><li>The consumer will drive change . . . </li></ul>Who they are, What they have, What they want … What they eat, When they eat, Where they eat ... Defines Source: The Hale Group, Ltd.
  65. 72. Consumer Driven <ul><li>Future demand will be driven by: </li></ul><ul><ul><li>Consumers 45 and up - 100% of population growth </li></ul></ul><ul><ul><li>“On-the-go” consumers – take-out sales increasing </li></ul></ul><ul><ul><li>Ethnic menu influences </li></ul></ul><ul><ul><li>Manufacturers will capture a greater “share of stomach” by meeting consumers’ needs . . . </li></ul></ul>Planned Occasions On-The-Go Occasions Manufacturers’ Foodservice Solutions Source: The Hale Group, Ltd.
  66. 73. The Foodservice Manufacturer Response Internal Strategies Contain costs & maximize revenue Shift focus from obesity to wellness Source: The Hale Group, Ltd. Customer Strategies Product Strategies
  67. 74. Customer Strategies <ul><li>Partner with customers to share knowledge, build programs to support target consumers. </li></ul><ul><ul><li>Define corporate positions on issues and support with new products, program innovation and marketing materials </li></ul></ul><ul><ul><li>Understand customer menus, ingredients and role your products play </li></ul></ul><ul><ul><li>Understand potential risks faced by different customers </li></ul></ul>Source: The Hale Group, Ltd.
  68. 75. Product Strategies <ul><li>Positioning of current products and development of new products in a wellness-driven world will be critical to future success. </li></ul><ul><ul><li>Promote obvious health qualities of products </li></ul></ul><ul><ul><li>Position based on consumer perceptions of wellness & willingness to pay – natural, low calorie / carb, fresh </li></ul></ul><ul><ul><li>Develop new products that fit within wellness </li></ul></ul><ul><ul><li>Align with health-related organizations </li></ul></ul>Source: The Hale Group, Ltd.
  69. 76. Internal Strategies <ul><li>Consider how the total organization can support wellness strategy. </li></ul><ul><ul><li>Always provide nutritional information to consumers </li></ul></ul><ul><ul><li>Monitor legislative, regulatory, legal events; stay active with trade associations </li></ul></ul><ul><ul><li>Develop / sponsor health and nutrition education and physical fitness programs </li></ul></ul><ul><ul><li>Good example – help employees with health / nutrition </li></ul></ul>Source: The Hale Group, Ltd.
  70. 77. Obesity in America… Specialty Medical Gregory Schaeppi
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