american idle...obesity in the usa

1

Obesity in America…

Specialty Medical Gregory Schaeppi

9

Agenda

Background

• Obesity defined

• Obesity / economic trends

• Health risks and causes

Implications for the Food System

• The tobacco and alcohol industries?

• Litigation, legislation / regulation, business factors

Developing a Strategic Response

• Understanding the changing consumer

• Customer, product and internal strategies

Background

• Obesity defined

• Obesity / economic trends

• Health risks and causes

Implications for the Food System

• The tobacco and alcohol industries?

• Litigation, legislation / regulation, business factors

Developing a Strategic Response

• Understanding the changing consumer

• Customer, product and internal strategies

10

What is Obesity?

Obesity is a disease defined as an imbalance Obesity is a disease defined as an imbalance between energy intake and output with the between energy intake and output with the accumulation of large amounts of body fat.accumulation of large amounts of body fat. Calculated by Body Mass Index (BMI)

• “Overweight” = BMI of 25 or more

• “Obese” = BMI of 30 or more

• “Severe Obesity” = BMI over 40

BMI Calculation:

• (weight [lbs] / height2 [inches]) x 704.5 = BMI





BMI Calculation:


Source: Centers for Disease Control

11

What is Obesity?





BMI Calculation:






BMI Calculation:



127 mm Americans

9 mm Americans

60 mm Americans

12

Percent of U.S. Adults Overweight

0

10

20

30

40

50

60

70

1976-1980 1988-1994 1999-2000

Overweight

Obese

Severely Obese

0

10

20

30

40

50

60

70

1976-1980 1988-1994 1999-2000

Overweight

Obese

Severely Obese

64.5%56.0%

46.0%

30.5%

23.0%

14.4%


13

Childhood Obesity in the U.S.

0

2

4

6

8

10

12

14

16

1976-80 1988-94 2000

Age 6-11

Age 12-19

0

2

4

6

8

10

12

14

16

1976-80 1988-94 2000

Age 6-11

Age 12-19


6.5%

5%

11.3%10.5%

15.3% 15.5%

14

Food Expenditures – Nominal Dollars

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1929

1934

1939

1944

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

1929

1934

1939

1944

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

Total

Food At Home

Food Away From Home

Source: USDA Economic Research Servicehttp://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm

15

Food Expenditures – Constant Dollars

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

Total

Food At Home

Food Away From Home


16

Food Expenditures as a percent of Disposable Income

0%

5%

10%

15%

20%

25%

30%

1929

1934

1939

1944

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

0%

5%

10%

15%

20%

25%

30%

1929

1934

1939

1944

1949

1954

1959

1964

1969

1974

1979

1984

1989

1994

1999

Total

Food At Home

Food Away From Home


17

Food Expenditures as a % of Disposable Income vs. Prevalence of Adult Overweight / Obesity

0%

10%

20%

30%

40%

50%

60%

70%

1962 1974 1980 1994 2000

0%

10%

20%

30%

40%

50%

60%

70%

1962 1974 1980 1994 2000

Source: USDA Economic Research Service / CDC NHSChttp://www.ers.usda.gov/briefing/CPIFoodAndExpenditures/Data/table7.htm

Obesity is defined as a BMI of 30+

% Overweight

% Obese

18

Food Expenditures as a % of Disposable Income vs. Rate of Overweight Children in U.S.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1965 1970 1974 1980 1994 2000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1965 1970 1974 1980 1994 2000

Food Away From Home

Food At Home

TotalAges 6-11

Ages 12-19

19

Foodservice Sales by Type of Outlet

0%

10%

20%

30%

40%

50%

60%

1929

1939

1948

1954

1958

1963

1967

1972

1977

1982

1987

1992

1997

2002

0%

10%

20%

30%

40%

50%

60%

1929

1939

1948

1954

1958

1963

1967

1972

1977

1982

1987

1992

1997

2002

All Other

Lodging


Full Service

QSR

Education

20

Calorie Supply Per Capita Per Day

0

500

1000

1500

2000

2500

3000

3500

4000

1961 1966 1971 1976 1981 1986 1991 1996 2001

0

500

1000

1500

2000

2500

3000

3500

4000

1961 1966 1971 1976 1981 1986 1991 1996 2001

Total

Vegetable

Animal

Source: USDA Economic Research Service

(Adult male requires 2800 calories)

21

Total Supply: Calories vs. Other Components

2900

3000

3100

3200

3300

3400

3500

3600

3700

3800

3900

1970 1973 1976 1979 1982 1985 1988 1991 1994

0

100

200

300

400

500

600

2900

3000

3100

3200

3300

3400

3500

3600

3700

3800

3900

1970 1973 1976 1979 1982 1985 1988 1991 1994

0

100

200

300

400

500

600

Calories Grams

Source: USDA ERS

Per Capita Supply Per Day

Carbohydrates +27%

Calories +15%

Total Fat +3%

Protein +16%

22

Cost Per Calorie

$0.0000

$0.0005

$0.0010

$0.0015

$0.0020

$0.0025

1961 1966 1971 1976 1981 1986 1991 1996 2001

$0.0000

$0.0005

$0.0010

$0.0015

$0.0020

$0.0025

1961 1966 1971 1976 1981 1986 1991 1996 2001

Current Prices

1988 Prices

Source: USDA Economic Research Service

Total Supply / Per Capita Expenditures

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Cost Per Calorie

Item Cost CaloriesBeefsteak Tomato $1.59 35

Atkins Advantage Bar $2.69 230

Red Delicious Apple $0.69 80

Wonder Light Wheat Bread $2.49 80

AVG. COST PER CAL

Fruity Pebbles $3.85 150

Big Mac $0.99 580

Original Whopper $0.99 710

Kraft Macaroni & Cheese $.79 390

Ramen Chicken Vegetable $.19 190

Some studies suggest that the low cost of highly processed “unhealthy” calories contributes strongly to the obesity epidemic, particularly among lower-income segments.

24

Cost Per Calorie

$0.0454

$0.0117

$0.0086

$0.0031

$0.0018

$0.0017

$0.0014

$0.0007

$0.0005

$- $0.0100 $0.0200 $0.0300 $0.0400 $0.0500

Beefsteak Tomato

Atkins Advantage Bar

Red Delicious Apple

Wonder Light Wheat Bread

Fruity Pebbles

Big Mac

Original Whopper

Kraft Macaroni & Cheese

Ramen Chicken Vegetable

Cost per Calorie

Source: The Hale Group, Ltd.

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Obesity Trends* Among U.S. AdultsBRFSS, 1985

Source: Mokdad A H, et al. J Am Med Assoc 1999;282:16, 2001;286:10.

26



27



28



29



30



31



32



33



34



35



36



37



38



39



40



41



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Health Risks of Obesity

High blood pressure High blood cholesterol Type 2 (non-insulin dependent)

diabetes Insulin resistance, glucose

intolerance Hyperinsulinemia Coronary heart disease Angina pectoris Congestive heart failure Stroke Gallstones Cholescystitis and cholelithiasis Gout




Osteoarthritis Obstructive sleep apnea and

respiratory problems Some types of cancer (such as

endometrial, breast, prostate, and colon)

Complications of pregnancy Poor female reproductive health

(such as menstrual irregularities, infertility, irregular ovulation)

Bladder control problems (such as stress incontinence)

Uric acid nephrolithiasis Psychological disorders (such

as depression, eating disorders, distorted body image, and low self esteem).

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Health Risks of Obesity







Osteoarthritis Obstructive sleep apnea and

respiratory problems Some types of cancer (such as

endometrial, breast, prostate, and colon)

Complications of pregnancy Poor female reproductive health

(such as menstrual irregularities, infertility, irregular ovulation)

Bladder control problems (such as stress incontinence)

Uric acid nephrolithiasis Psychological disorders (such

as depression, eating disorders, distorted body image, and low self esteem).

$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.

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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%

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Causes of Obesity

Calories Consumed

Calories Burned

46

Causes of Obesity


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

47

Tobacco, Alcohol Set Examples?

What can be learned from tobacco, alcohol? “Big Fat” seen as the next “Big Tobacco”

Years of regulation, litigation and consumer education

Social stigma associated with smoking, drinking

Growth of no-smoking zones

Death of the “3-Martini Lunch”

Key drivers in litigation, legislation:• Health care costs• Effects of second hand smoke• Drunk driving

What can be learned from tobacco, alcohol? “Big Fat” seen as the next “Big Tobacco”

Years of regulation, litigation and consumer education

Social stigma associated with smoking, drinking

Growth of no-smoking zones

Death of the “3-Martini Lunch”

Key drivers in litigation, legislation:• Health care costs• Effects of second hand smoke• Drunk driving

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

49

Tobacco History

1800 20001964 – S.G. report concludes smoking is a

cause of lung cancer

1965 – Congress requires health warnings on cigarette packs

1969 – TV and radio ads banned1973 – AZ first state to restrict smoking in

public places

1979 – Smoking restricted in gov’t facilities1988 – Smoking banned on short domestic

flights

1990 – Smoking banned on all domestic commercial flights

1993 – Smoking banned in White House

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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)

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

52

Per Capita Alcohol Consumption (gals.)

0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

Source: USDA ERS

1980: MADD established

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0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

Source: USDA ERS

1982: Presidential Commission on Drunk Driving

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0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

0

5

10

15

20

25

30

35

1975

1978

1981

1984

1987

1990

1993

1996

1999

Total

Beer

Wine

Distilled Spritis

Source: USDA ERS

1984: Federal “21” minimum drinking age enacted

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Yet, Alcohol Succeeds

2003 Adams Handbook Advance Overall sales of $137.2 b (2002)

Distilled spirits up for fifth consecutive year (1.8%)

Wine up for ninth year (3.3%)

Beer up for seventh year (1.8%)

High end products – particularly imports – outperform the overall business

Malternatives, lights (40% of market) and imports advance in beer sector

You don’t have to drink more, just drink better!

2003 Adams Handbook Advance Overall sales of $137.2 b (2002)

Distilled spirits up for fifth consecutive year (1.8%)

Wine up for ninth year (3.3%)

Beer up for seventh year (1.8%)

High end products – particularly imports – outperform the overall business

Malternatives, lights (40% of market) and imports advance in beer sector

You don’t have to drink more, just drink better!

Source: Adams Beverage Group

56

Implications For Food System

0

500

1000

1500

2000

2500

3000

3500

4000

Calorie Supply Calorie Requirement

0

500

1000

1500

2000

2500

3000

3500

4000

Calorie Supply Calorie Requirement

So, who will voluntarily trim sales to accommodate lower calorie requirements?

57

Implications for Food System

Litigation

Legislation / Regulation

R&D / Innovation

Sales & Marketing

Litigation

Legislation / Regulation

R&D / Innovation

Sales & Marketing

All could add significant cost to food system, but could also lead to new opportunities.

All could add significant cost to food system, but could also lead to new opportunities.

58

Litigation

Class action lawsuits on behalf of “overweight” or “obese” consumers

• From states seeking to recover healthcare costs

Targeted lawsuits

• Individual manufacturers and operators could be targeted for their perceived role in misleading consumers

• Trans fats could be a key issue

“Legal Approaches to the Obesity Epidemic,” helped attorneys and public-health advocates plan strategies for future

Class action lawsuits on behalf of “overweight” or “obese” consumers

• From states seeking to recover healthcare costs

Targeted lawsuits

• Individual manufacturers and operators could be targeted for their perceived role in misleading consumers

• Trans fats could be a key issue

“Legal Approaches to the Obesity Epidemic,” helped attorneys and public-health advocates plan strategies for future

59

Legislation

Nutrition Labeling NLEA addresses manufacturers now; Trans fat labeling due in

2006 Some states and DC attempting to force restaurants to post

nutrition information

Federal and State Competitive Foods Policies 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

23 states go beyond USDA policy

Personal Responsibility Acts Primarily tort reform legislation; limits liability of food

companies in question of consumer obesity

Nutrition Labeling NLEA addresses manufacturers now; Trans fat labeling due in

2006 Some states and DC attempting to force restaurants to post

nutrition information

Federal and State Competitive Foods Policies 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

23 states go beyond USDA policy

Personal Responsibility Acts Primarily tort reform legislation; limits liability of food

companies in question of consumer obesity

60

Federal Legislation

S.1172 (Frist) Improved Nutrition and Physical Activity Act

H.R.2227 (Castle) Obesity Prevention Act

S.1428 (McConnell) Commonsense Consumption Act of 2003

H.R.339 (Keller) Personal Responsibility in Food Consumption Act

S.1201 (Graham) YMCA Healthy Teen Initiative Act

S.1007 (Leahy) Better Nutrition for School Children Act of 2003

S.995 (Leahy) Child Nutrition Initiatives Act of 2003

… and at least three other unnamed bills aimed at nutrition, wellness and obesity

S.1172 (Frist) Improved Nutrition and Physical Activity Act

H.R.2227 (Castle) Obesity Prevention Act

S.1428 (McConnell) Commonsense Consumption Act of 2003

H.R.339 (Keller) Personal Responsibility in Food Consumption Act

S.1201 (Graham) YMCA Healthy Teen Initiative Act

S.1007 (Leahy) Better Nutrition for School Children Act of 2003

S.995 (Leahy) Child Nutrition Initiatives Act of 2003

… and at least three other unnamed bills aimed at nutrition, wellness and obesity

61

R&D / Innovation

1980s-1990s

Low Fat Foods

Fat Bad

Carbs OK

Food Pyramid

Food Pyramid

2000s-

Low Carb Foods!

Some Fat OK

Carbs Bad7-10 Servings of Starch (carbs)

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?

62

Innovation

Innovation . . . a winning strategy to create sustainable profitable growth

Innovation . . . a winning strategy to create sustainable profitable growth

1982 1995

Mar

ket

Val

ue

Top Tier Innovators24.5% Return

S&P 500

Bottom Tier Innovators 8% Return

The Innovation Premium Historical Market Value

63

Sales & Marketing

Consumer expected to shift spending

• Merrill Lynch sees 1% shift ($1.5 b) in consumer spend

• Risk: Companies with 25% or more of sales exposed to “unhealthy categories”

At risk categories: potatoes, pastas, bakery / bread, etc.

Can added cost of labeling, revamping R&D, litigation and lobbying be passed on to customers?

Consumer expected to shift spending

• Merrill Lynch sees 1% shift ($1.5 b) in consumer spend

• Risk: Companies with 25% or more of sales exposed to “unhealthy categories”

At risk categories: potatoes, pastas, bakery / bread, etc.

Can added cost of labeling, revamping R&D, litigation and lobbying be passed on to customers?

64

Arby's Philly Beef Supreme Sandwich

730 calories, 40 grams of fat $5.99

McDonald's Grilled Chicken California Cobb Salad


BK Santa Fe Fire-Grilled Chicken Baguette


“Our Drive-Thru Fancy Feast”

Source: USAToday, 15 October 2003

65

Source: USAToday, 15 October 2003

66

Americans Avoid Cookie Jar

Kraft Loses as Americans Avoid Kraft Loses as Americans Avoid Cookie JarCookie Jar

Merrill Lynch – “We’ve identified cookies as an at-risk category.”

US sales of cookies at about $5 b, but Q3 showed 5% drop in shipments.

Health-oriented bar snacks and granola bars were up 15% with category sales of $1.8 b (excluding WalMart.

Source: LA Times, 20 October 2003

67

Fastest Growing Category in Foodservice

68

Expectations Exceed Growth

For many manufacturers, growth mandates targetedacquisitions and alliances . . .

Growth Expectations8 – 10%

Growth Gap3 - 7%

Foodservice Industry2 - 5%

10%

5%

1990 1995 2002

Years

Ch

ang

e in

Sal

es G

row

th


69

The Strategic Planning Matrix

Existing New

Exi

stin

gN

ewProducts

Cu

sto

mer

s

Status Quo

Innovation

Customer Acquisition

Acquisitions & Alliances

A Useful Framework to Structure Strategic Thinking

$$$

Future Goal

70

Spending On Food Away From Home

Growth in foodservice will continue from both … Meals eaten away from home Meals prepared away from home, but eaten at home

Growth in foodservice will continue from both … Meals eaten away from home Meals prepared away from home, but eaten at home

25%25%

44%44%53%53%

1955 1995 2005

Foodservice as Percent of Total Food Expenditures 1955 - 2010

Foodservice as Percent of Total Food Expenditures 1955 - 2010

Source: US Census BureauSource: US Census Bureau

58%58%

2010

71

Change Agents

The consumer will drive change . . . The consumer will drive change . . .

Who they are,

What they have,

What they want …

What they eat,

When they eat,

Where they eat ...

Defines


72

Consumer Driven

Future demand will be driven by: Consumers 45 and up - 100% of population growth

“On-the-go” consumers – take-out sales increasing

Ethnic menu influences

Manufacturers will capture a greater “share of stomach” by meeting consumers’ needs . . .

Future demand will be driven by: Consumers 45 and up - 100% of population growth

“On-the-go” consumers – take-out sales increasing

Ethnic menu influences

Manufacturers will capture a greater “share of stomach” by meeting consumers’ needs . . .

PlannedOccasions Planned

OccasionsOn-The-GoOccasionsOn-The-GoOccasions

Manufacturers’ Foodservice SolutionsManufacturers’ Foodservice Solutions


73

The Foodservice Manufacturer Response

Customer Strategies

Product Strategies

Internal Strategies

Contain costs & maximize revenueContain costs & maximize revenue

Shift focus from obesity to wellnessShift focus from obesity to wellness


74

Customer Strategies

Partner with customers to share knowledge, build programs to support target consumers.

Define corporate positions on issues and support with new products, program innovation and marketing materials

Understand customer menus, ingredients and role your products play

Understand potential risks faced by different customers

Partner with customers to share knowledge, build programs to support target consumers.

Define corporate positions on issues and support with new products, program innovation and marketing materials

Understand customer menus, ingredients and role your products play

Understand potential risks faced by different customers


75

Product Strategies

Positioning of current products and development of new products in a wellness-driven world will be critical to future success.

Promote obvious health qualities of products

Position based on consumer perceptions of wellness & willingness to pay – natural, low calorie / carb, fresh

Develop new products that fit within wellness

Align with health-related organizations

Positioning of current products and development of new products in a wellness-driven world will be critical to future success.

Promote obvious health qualities of products

Position based on consumer perceptions of wellness & willingness to pay – natural, low calorie / carb, fresh

Develop new products that fit within wellness

Align with health-related organizations


76

Internal Strategies

Consider how the total organization can support wellness strategy.Always provide nutritional information to

consumersMonitor legislative, regulatory, legal events;

stay active with trade associationsDevelop / sponsor health and nutrition

education and physical fitness programsGood example – help employees with health /

nutrition

Consider how the total organization can support wellness strategy.Always provide nutritional information to

consumersMonitor legislative, regulatory, legal events;

stay active with trade associationsDevelop / sponsor health and nutrition

education and physical fitness programsGood example – help employees with health /

nutrition


77

Obesity in America…

Specialty Medical Gregory Schaeppi

american idle...obesity in the usa

Health & Medicine