Recently, Kraft (KFT) made a great public relations noise about its plans to cut the salt levels in its foods distributed in North America by 10% over a two-year period. Not to be bested, PepsiCo (PEP) will lower sodium, sugar, and saturated fats in many of its top-selling products.
Pepsi plans to cut sodium in its foods from 2006 by 25% before the end of 2015 and sugar and saturated fat by about the same percentage by 2020, according to a number of new sources. The FT reports that the soda firm will increase the amount of whole grains, fruits, vegetables, nuts, seeds and low-fat dairy content.
Pepsi, its peers and competitors realize that there is growing political pressure on food companies which produce “unhealthy” product. Ample scientific evidence shows that obesity and heart disease are caused by poor diets. Congress has discussed putting a “sin tax” on unhealthy foods to cover some of the costs that they have on health care expenses. So, the actions by Pepsi and Kraft are not entirely out of the goodness of their hearts.
The cost of the move by food companies to healthier ingredients is not clear yet. None of the firms have put a number on the transitions. Artificial sweeteners may cost less than sugar. Sunflower oil, which reduces saturated fat levels, may be less expensive than the ingredients it replaces.
The plans by food companies may have come too late. The US government still faces tremendous costs for its new health care programs although the CBO says it will save the country $143 billion over the next decade. Little of that savings comes in the early years, when the plans are implemented. That means that federal deficits will remain high in the first half of the decade. Tax increases may be the most efficient way to bring those deficits down. Taxes on large companies which make unhealthy food are likely to be popular to voters.
Pepsi may be moving in the right direction, but it may be going too slowly to stay ahead of new taxes.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks