The warning comes after the UK’s largest supermarket agreed to increase healthy food options at its operations in Europe as well as the UK and Ireland after pressure from a group of seven institutional investors.
The coalition of Tesco activist investors is led by ShareAction, which in February filed a shareholder proposal calling on Tesco to reduce its exposure to less healthy food and drink products. The move was the first health-based shareholder resolution filed at a UK-listed company.
This initially prompted the supermarket, the UK’s leading grocer with a 27% market share, to announce plans to increase the proportion of sales from healthier products in the UK and Ireland to 65% by 2025.
After further pressure from ShareAction, Tesco has now agreed to extend the strategy to its Booker wholesale subsidiary, which supplies supermarket chains Budgens and Londis, and its Central European stores in the Czech Republic, Slovakia and Hungary.
The commitment across its entire retail group covers an additional £10bn in sales (20% of Tesco’s retail revenue), up from £42bn (80%) in March.
Sarah Bradbury, Group Quality Director at Tesco, said: “We share the same goal as ShareAction to make it easier for our customers to eat more healthily, and we’re pleased to now broaden our public commitments to Booker and our Central Europe business. These new commitments will ensure that every customer – wherever and however they shop with us – will have even greater access to affordable, healthy and sustainable food. Our focus now is on delivering the plans that we’ve set out, and we will continue to engage with ShareAction and other stakeholders as we work to make Tesco the easiest place to shop for healthy food.”
How to define healthy?
In the UK, Tesco will define healthy products according to the government’s nutrient profiling model developed by the Food Standards Agency in 2004-2005. It said its latest commitments for its Central Europe business were to increase sales of healthier products on a “similar trajectory” to its UK ambitions “by developing the appropriate methodology to establish our baseline and targets by the end of 2022”.
Both its UK and European plans promise to make its own brand products healthier through reformulation and to increase sales of plant-based meat alternatives by 300% by 2025.
However, ShareAction told FoodNavigator that these products, whose nutritional credentials and ultra-processed nature often come under scrutiny from consumer groups, were ‘not necessarily inherently healthy’. It warned that Tesco’s plans even risked breaching UK government plans to restrict in-store promotions on food and drinks high in fat, salt or sugar (HFSS) from April 2022.
Louisa Hodge, Food & Health Engagement Manager at ShareAction, told us: “ShareAction would encourage Tesco to consider health within their plant-based targets. Plant based foods, whist often healthier than their meat counterparts, are not necessarily inherently healthy. Many processed plant-based products (such as burgers and sausages) are high in salt for example.
“Therefore, health must be incorporated within the process of meeting plant-based targets. By omitting health in this process, the company may fall foul of government legislation coming in next year which will prevent marketing and advertising of HFSS foods and will limit where these products can be placed in store.”
Is bad food bad for business?
ShareAction withdrew its shareholder meeting resolution after Tesco’s latest pledge. The group said a two-year process of engagement has been agreed with Tesco and ShareAction’s Healthy Markets investor coalition, as the supermarket implements the new commitments.
According to figures from the UK government, obesity costs wider society £27bn a year and the NHS spends an estimated £6.1bn on overweight and obesity-related ill health. These figures are expected to rise to £49.9bn and £9.7bn respectively by 2050.
ShareAction argues that supermarkets “play a pivotal role in population health through their influence in shaping what we eat”.
The group said its Healthy Markets investor coalition will continue its work engaging with supermarkets and food manufacturers on the risks and opportunities they face from increasing regulation and shifting consumer preferences.
Hodge elaborated: “Investors are recognizing the importance of health. They see the risks and opportunities supermarkets face, given their outsized role in shaping our diets. By filing a shareholder resolution, our investor coalition sent a strong message to Tesco and to other supermarkets that shifting sales toward healthier options is important.”