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CAFE standards have improved auto performance and emissions.
December is typically a time to reflect on the past year and ponder how we can do better in the next one. I’ve got a suggestion for the food industry: start turbo-charging your R&D to develop more products that are healthy, convenient and appealing — for the sake of consumers, the environment and your own shareholders. And I can think of no better template for spurring this change than the Corporate Average Fuel Economy (CAFE) standards that indirectly forced the automakers to innovate and produce better cars.
That’s why, in a paper issued today, I propose that the food industry adopt its own version of automobile CAFE standards to reduce the fat, sugar and salt in their products. These standards would compel every food company to innovate. In an era when Americans are alarmingly obese and Big Food is fending off lawmakers, activists and upstart competitors, more innovation is exactly what we need.
CAFE-like standards would oblige the food industry to focus on R&D instead of marketing to fuel growth. Prioritizing marketing over product innovation has left food companies vulnerable to breakthroughs like plant-based meats and milk. The industry continues to think that marketing can infuse new life into brain-dead products, when nothing could be further from the truth.
Prioritizing marketing over product innovation has left food companies vulnerable
The food industry needs to return to its golden age of innovation in the early 20th century, when it made breakthroughs that increased product safety, extended shelf life and delivered convenience. That century brought us vacuum packaging to keep food fresher, hydrogenation to keep unsaturated fats from going rancid, and freeze drying to preserve foods. These innovations allowed food companies to market products that met yesterday’s consumer demands for taste, value and convenience.
But the landscape is different this century, and the food industry is no longer innovating like it did before. First, almost 70% of Americans are overweight and/or obese. Next, the food industry is under attack by the media and scientific bodies such as the Lancet Commissions for contributing to the global “syndemic” of obesity, undernutrition and climate change. Third, food companies are being outflanked by new companies and local artisanal shops that offer fresher, healthier and more sustainably produced foods. Finally, consumers are demanding healthier products.
Yet food companies continue to push their iconic brands and launch line extensions, supported by strong marketing programs, to grow and retain shelf space. But marketing yesterday’s now-unappealing products is no longer sustainable. Food companies must now advance breakthrough innovations like they did in the last century.
Marketing yesterday’s now-unappealing products is no longer sustainable
The best way to do this is embrace a food industry equivalent of the auto industry’s CAFE standards. Those regulations drove automakers to product innovations that made them more competitive.
Adopting CAFE-like standards would force food companies to reckon with their role in contributing to serious societal problems and to rethink what they sell. This will take courage and it won’t be easy. But they should remember that the automakers didn’t welcome CAFE standards when they were imposed more than four decades ago.
Yet today many car manufacturers realize it spurred them to find ways to improve mileage without compromising the driving experience. CAFE standards also helped them regain ground they lost in the 1970s to the more fuel-efficient Japanese and European cars. The regulations also helped automakers meet the growing demand for lower-emission vehicles in California and the European and Chinese markets, where environmental standards are far stricter.
No wonder that Ford, Volkswagen, BMW and Honda sided with California last summer after the Trump administration proposed stripping that state of its right to set higher emissions standards for vehicles. On June 17 major automakers wrote a letter declaring that rollbacks could produce “untenable” instability.
CAFE standards have also improved the quality of the cars we drive. They have given us gasoline direct injection engines paired with turbocharging; transmissions with as many as 10 gears and continuously variable transmissions that help vehicles operate more efficiently; lighter space-age materials that cut down on fuel use; better air conditioning refrigerants to replace greenhouse gas coolants; glazed windows to keep out heat; and other improvements.
If automakers can accept standards that improve the quality of our air and force them to build better cars, why can’t companies whose products influence our health do the same? Why do Big Food companies only invest an average 1.4% of revenues on R&D (a third of the automotive industry’s R&D percentage) in contrast to a whopping 24% of revenue being spent by food and packaged goods companies on marketing, much of it going to the unhealthiest offerings?
The food industry is a conservative business sector comfortable with incremental change. It will never be confused with Silicon Valley companies. To ensure its future, it’s time for the industry to step out of its comfort zone and make a bold commitment like the four automakers that continue to embrace California’s emissions standards.
It’s time for the [food] industry to step out of its comfort zone and make a bold commitment
In the famous words of Built to Last authors Jim Collins and Jerry Porras, it’s time for food companies in aggregate to set “big, hairy, audacious goals.” I see three such “BHAGs” that the food industry should commit to by 2030:
1. Reduce its calorie footprint by 10%. The food industry sells trillions of calories each year. A 10% reduction would make a serious dent in calories consumed and bring calories down to late 1980 levels.
2. Cut sugar, sodium and saturated fats by 10%. Compared to the U.S. Dietary Guidelines, added sugars, sodium and saturated fats are overconsumed by over 60% of the American public. This is in contrast to almost 100% of the population underconsuming fruits and vegetables. More must be done to help consumers eat healthier.
3. Double marketing expenditures for healthier products. Most marketing continues behind traditional higher calorie and less healthy brands. Doubling the spending against healthier items will help drive consumer demand for better-for-you versions.
If companies like Unilever and food industry sectors such as confections and soft drinks can make serious commitments to lower calories, improve nutrition or sell more sustainable products, the industry as a whole can do so.
This will not be easy. But the template is in place, courtesy of the automobile CAFE standards. By putting up a tough goal on the boards, the food industry will be pressed to innovate – for their own good, and society’s as well.
