Access to Nutrition Index (ATNI) Overview for Investors February - - PowerPoint PPT Presentation

Access to Nutrition Index (ATNI)

Overview for Investors

February 2012

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• Nutrition is a major global macro trend

driving structural changes and growth

• pportunities in the F&B sector
• The future prospects of F&B companies

are closely linked to their response to reducing malnutrition (both obesity and undernutrition)

• ATNI believes that companies that

perform well on nutrition will be more successful in the future – better placed to address risks, exploit opportunities

• The private sector can play an important

role in reducing malnutrition, along with

• ther stakeholders

Nutrition and industry

• ATNI aims to reduce malnutrition and

improve health by encouraging F & B companies to make continual and sustained improvements in their nutrition practices

• ATNI will assess major F&B companies’

performance on nutrition on an ongoing basis, providing companies, investors and stakeholders with in-depth, consistent information not currently available

• ATNI is engaging investors in F&B

companies to help them understand nutrition issues and assess companies’ performance on this material, long-term strategic issue ATNI approach

Context and approach

Nutrition: a critical global issue

Major macro trend

• Critical in both developed and emerging markets, some of which face a double

burden of malnutrition

• Driving structural changes and growth opportunities in the F&B industry

Key public health issue

• ‘Nutrition is a foundation for health and development. Better nutrition means stronger

immune systems, less illness and better health for people of all ages.‟ (World Heath Organisation)

• Essential to achieving two of the six of the Millennium Development Goals

Undernutrition:

• Affects almost 1 billion people and accounts for 11% of global burden of

disease; kills 3.5 million children under five each year (The Lancet); results in the loss of 2 - 3% of countries’ GDP (Copenhagen Consensus) Obesity and diet-related chronic diseases:

• By 2015 there will be 2.3 billion overweight adults in the world with more than

700 million of them classified as obese

• 41 countries currently have at least one million people who are considered
• bese
• Public health budgets are increasingly feeling the strain, with obesity-related

costs accounting for 2-7% of total health costs in wealthier nations (World Heath Organisation)

Increasing priority of international policy makers

• Tackling obesity and undernutrition is a key focus of international policy makers and

governments; significant future financial burden on public purse and impact on people’s life chances and productivity “„The simple fact is that there can be no real growth without healthy

• populations. No

sustainable development without tackling disease and malnutrition. No international security without assisting crisis- ridden countries. And no hope for the spread of freedom, democracy and human dignity unless we treat health as a basic human right.‟ Source: Gro Harlem Brundtland

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Regulatory risk

• Stimulated by concerns over obesity, many countries, states and cities worldwide are considering, or have

already introduced, regulations controlling F&B manufacturers’ activities and fiscal measures like ‘fat taxes’ which increase companies’ costs and restrict their reach.

Corporate reputation/brand risk

• As media coverage of diet-related diseases increases, F&B companies are often portrayed in a poor light and as

‘part of the problem’. F&B companies that do not take action to reduce transfats, fat, salt and sugar and introduce healthier products risk their products’ brand values and corporate reputations. Those that do take action have the

• pportunity to be seen as the ‘consumers’ friend’ – the company on which consumers can trust to look after their

health.

Market /revenues/share price risk

• Consumers in developed markets, concerned about their weight and diet-related diseases, have started to

change their eating habits, switching spending away from perceived unhealthy products and moving towards healthier options. Between 2002 – 2008, healthier packaged foods grew by 6% a year, compared to 3% a year for overall packaged food growth. (Bernstein Research, 2011)

• Companies are seeing whole categories affected and are changing their market strategies by, for example,

acquiring companies that produce ‘healthier’ products or expanding into new healthier product categories.

Litigation risk

• Some companies have already faced litigation for the foods they sell, and how (e.g., McDonald’s and Kellogg’s).

No lawsuit has yet succeeded, but the risk remains. (Stern, 2010, CBS MoneyWatch.com)

• Commentators as far back as 2002 referred to obesity as ‘the next tobacco’ – inferring that governments may at

some point in the future sue companies to recover some of the public costs of treating obesity and related diseases stemming from food choices and lifestyles. The comparisons continue. (Brownell & Warner, 2009)

Investment case for nutrition: risks

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Emerging markets: Economic growth + population growth + double burden = revenue growth opportunities

• Globally, 3.7 billion have incomes of less than $8 per day and spend about 50% of their

income on food (est. USD1.3 trillion) (Global Agenda Council for Food Security). As their income grows, they are likely to increasingly buy packaged foods, representing a large, untapped market opportunity for companies. Major investors are looking for product innovation and market penetration from leading food companies.

• A selection of 50 of the top F&B players (including global and regional companies) have

an average penetration of 16 countries and presence in an average of three

• categories. A group of developing market players have extensive presence in emerging

markets including Grupo Bimbo, Arcor, Ulker, UniPresident and Indofoods. (McKinsey &

Co for ATNI)

• Consumers are increasingly aware of nutrition issues and seeking specialised

products, especially in Asia, which is driving fortified product sales. (Frost and Sullivan,

2009)

• Companies that are on the front-foot on this agenda are able to capitalise on positioning

themselves as ‘nutrition’ companies and win brand loyalty, market penetration, and future growth.

• By participating in public-private partnerships to address nutritional deficiencies in-

country, companies can build good relationships and reputations with governments that may pay dividends in future, in terms of access to markets and preferential treatment.

Investment case for nutrition: opportunities

“PepsiCo (Overweight): Top pick: The market is focused on short-term 2011 guidance risk and is under-appreciating long-term positives. Our 7.5% five-year profit CAGR forecast is well ahead

• f the 4% rate the market is

pricing in, driven by underappreciated growth potential in emerging markets and nutrition, as well as margin expansion potential illustrated by our bottom-up analysis.” Morgan Stanley, 4 Jan 2011

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Mature markets: Innovation in nutrition = revenue growth

• pportunities
• Developed markets are mature; hard for companies to increase profits, gain

market share. Introducing (or acquiring) new ‘healthy’ categories or products may help them grow in these tough markets.

• Health and wellness-focused products are expanding rapidly, with 8 out of 10
• f the fastest growing F&B categories inextricably linked to health, e.g. probiotic

drinks: 13%; frozen fruit: 12%; dairy/dairy sub-drinks: 11%. (Dexia Asset

Management, March 2009)

• Healthier foods provide F&B manufacturers with the opportunity to improve

gross margins, including by premium pricing, lowering COGS through reformulation and reducing packaging size while maintaining a similar retail price, thus increasing price per volume unit. (Dexia, ibid)

• The top ten new F&B products launched in the US in 2006-7 were products

that help consumers meet their dietary, disease-fighting and weight goals, without sacrificing taste: Campbell’s Reduced Sodium Soup ($101 million); Bird’s Eye Steam Fresh Frozen Vegetables ($87 million); Vault/Vault Zero Regular and Diet Drinks ($70 million). (Dexia, ibid)

• Companies recognise increasing demand for healthier products and are

building new product offerings. Companies are pursuing opportunities to fortify foods and develop functional foods as well as nutraceuticals – expected to be worth $175 billion worldwide. (Financial Times, October 2/3, 2010)

Investment case for nutrition: opportunities

“A recent study by Professor John Speakman at Aberdeen University showed that physical activity among the UK population has not changed significantly over the past 25

• years. But the average calorie

content of the food we buy has increased markedly, by 12 per cent per person. If the fundamental problem is simply that we eat too much fattening food … then the most effective solution is for manufacturers to make healthier products …” The Financial Times, “Big Food Eyes Profits and PR in Smaller Waistlines,” October 2/3, 2010

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• ATNI builds on over a decade of experience in rating companies on a

range of environmental, social and governance issues

• 32 initiatives evaluated in designing ATNI to learn from best practice;

continued tracking of existing and new initiatives

Precedents

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Expert Group

Provides advice on methodology for assessing companies

Global Stakeholder Network

Widest possible network of stakeholders involved in public consultation on Index methodology

Funders Advisors Management Independent Advisory Panel

Provides strategic advice on stakeholder engagement, institutional considerations and financial sustainability

ATNI Project Team

GAIN staff and advisors drive development and day-to-day activities

Governance and management

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Scope

Malnutrition coverage:

Undernutrition through obesity

Core Index:

25 of the world’s largest food and beverage companies (may include privately held companies)

Type of company:

Multinational corporations and regional companies

Stage of supply chain:

Food and beverage manufacturers only

(Upstream, retailers, and food service companies potentially included in the future) India Mexico South Africa

3 Spotlight Indexes:

10 of the largest companies by F&B revenue in each market

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2009 2005 2000 2008 2010 1981 International Code

• f Marketing of

Breast-milk Substitutes 2001 2002 2003 2004 2007 2006 WHO Strategy for Infant and Young Child Feeding WHO/FAO Guidelines on food fortification with micronutrients WHO Special Session

• n Children

World Bank Repositioning Nutrition as Central to Development Harvard University Business action to fight micronutrient deficiency The Lancet Series on malnutrition Copenhagen Consensus JPMorgan Obesity: Reshaping the food industry Insight Investment/ JPMorgan The Proof of the Pudding Insight Investment/IBLF A Recipe for Success ATNI Synopsis Report WHO Reducing Risks, Promoting Healthy Life WHO Global Strategy on Diet, Physical Activity and Health WHO Recommendations for Marketing Food to Children City University Analysis of 25 F&B companies MDGs Includes 4 linked to malnutrition

Foundations of methodology

2011 MIYCN Working Group Using the Code of Marketing of Breast- milk Substitutes to Guide the Marketing

• f Complementary

Foods to Protect Optimal Infant Feeding Practices

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Evaluating the level to which commitment to nutrition is embedded in core strategy and backed by financial / human resources Evaluating the extent of companies’ implementation of commitments through advertising, nutrition education, promotion of physical activity and engagement with policymakers Assessment of nutritional appropriateness, affordability and accessibility of representative selection of companies’ product portfolios in Spotlight countries

Nutrition governance Influencing consumer choice and behavior Formulating and delivering appropriate, affordable, accessible products

Scores will also be available for each company by category

Composite score for each company ODRCD1 score Undernutrition score

Methodology structure

PRODUCT PROFILE (Spotlight Indexes only)

Evaluating the extent of companies’ implementation of commitments through R+D, product formulation and labeling, pricing, and distribution

CORPORATE PROFILE (Core & Spotlight Indexes)

1 Obesity and Diet-Related Chronic Diseases

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Methodology: Corporate Profile structure

Category Description Criteria Section 1: Nutrition governance A Corporate strategy, management and governance A1: Corporate nutrition strategy A2: Nutrition governance and management systems A3: External advice A4: Quality of reporting Section 2: Formulating and delivering appropriate, affordable, accessible products B Formulating appropriate products B1: R&D B2: New product development B3: Reformulating existing products B4: Nutrient profiling system C Product pricing, marketing and distribution C1: Product pricing C2: Product marketing C3: Product distribution Section 3: Influencing consumer choice and behaviour D Responsible marketing policies, compliance and spending D1: Responsible marketing policy: all consumers D2: Auditing and compliance with policy: all consumers D3: Advertising spending: all consumers D4: Responsible marketing policy: children D5: Auditing and compliance with policy: children D6: Advertising spending (children) and policy impact D7: BMS marketing policy (only for BMS module) E Supporting healthy diets and active lifestyles E1: Staff health & wellness E2: Supporting consumer-orientated healthy eating and active lifestyle programmes F Product labelling and use of health and nutrition claims

• F1. Product labelling
• F2. Health and nutrition claims

G Influencing governments and policymakers, and stakeholder engagement G1: Lobbying and influencing governments and policymakers G2: Stakeholder engagement 12

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Company research process

Complete methodology Desk-based analysis Engagement meetings

• Extensive

consultation with funders, Expert Group and Independent Advisory Panel

• Online public

stakeholder consultation held in November 2011

• Pilot test of

methodology on subset of companies

• Review of

companies’ websites, annual/CSR reports, and third-party reports/analysis

• This process

generates the companies’ initial scores

• Each company will

be approached for a meeting to discuss initial analysis and score

• Information not

available via desk research will be requested from companies

• Information provided

by companies during meetings to be incorporated into analysis

• Companies to be

provided with final draft analysis for input/comment and to fill remaining information gaps

• Final score and

rating generated Verification / finalization

* * Please see disclaimer on page 17

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Next steps and long-term proposition

Finalize design ATNI I (2012) ATNI II (2014) ATNI III (2016) ATNI IV (2018)

• Complete methodology development
• Research conducted to build ranking
• Institutional home established (outside of GAIN)
• First Index ready for launch in late 2012
• ATNI II published in 2014 and on a regular basis thereafter
• Impact regularly monitored against metrics
• Methodology evolves over time to incorporate advances in practice,

new evidence, policies, guidelines, standards, etc. For more information, please visit www.accesstonutrition.org

Investors: a critical ATNI constituency

Investors are critical stakeholders Clear strategy for working with investors Sign investor statement Investor perspective factored in

Major ESG investor brands and regional investors in US, Europe, Asia, Africa, Latin America were consulted during 2009 research and continue to be consulted ATNI would strongly welcome suggestions from investors re activities and project outputs that investors would find valuable ATNI aims to make outputs as valuable as possible to both mainstream investors and Sustainable and Responsible Investors ATNI will launch an investor statement in the coming weeks to garner investor support ATNI has drawn on the experience of project consultants and lessons learned from similar initiatives, and investors are represented on ATNI advisory groups (GEPF, SAM, F&C, BCAM)

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What investors can do in 2012

Facilitate engagement with companies Provide suggestions

Encourage companies to participate in face-to-face meetings with Index research team

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