I had this thought repeatedly as I read “Salt Sugar Fat: How the Food Giants Hooked Us” by Michael Moss. Moss spent four years researching this book, and he provides fascinating details about how some companies in the food industry knowingly formulate their products to be addictive without much regard for the health of their customers.
Portfolio 21 does not have a specific policy against investing in companies that make and market processed food, or fast food companies with the unhealthiest products; nonetheless we do not own these companies. The reason is not because these companies have unattractive growth potential. In fact, these companies have pretty good growth potential as they ruthlessly market their unhealthy products to underserved and often poor communities in developed markets and people rising from poverty in emerging markets. It is also not because of our personal biases against companies that create profits by selling unhealthy products. Yes, we are so biased but that would be too easy!
What keeps us out of these companies is the integrated research process we conduct on every company we consider as a potential investment. One of the aspects of our process is to identify the major environmental and social factors faced by the business sector a company operates within. In the packaged foods sector, there are many important impact areas we research, including the use of whole food ingredients, rather than preservatives and sugars. We also seek companies that have strong and transparent agricultural codes of conduct that minimize the use of GMO seeds, herbicides/pesticides, and the clear cutting of forest lands. We also consider the manufacturing and distribution of the products; we seek companies that use limited packaging and have innovative logistics in place to ensure efficient distribution.
We have often said that our investment process is highly selective as we search out companies with what we believe are world leading environmental and social practices, high quality fundamentals, and attractive stock prices. Through this process, we do find a few excellent companies in the packaged food, grocery, and restaurant segment. Some of the positive characteristics demonstrated in our holdings include companies dedicated to the transition to organics or fair trade, the local procurement of produce, and product reformulations focused on the elimination of unnecessary or artificial ingredients with natural ones.
Over the last few years, more media attention has been focused on this industry, and has produced books such as Moss’s “Salt Sugar Fat,” as well as Morgan Spurlock’s “Super Size Me,” which have allowed more people to learn about the tremendous impact of processed food on public health. Portfolio 21 recognizes that healthy food is essential and lies at the base of human needs. We are committed to diving deeper into food companies and examining their business policies and practices to identify the leaders.
John Streur is President of Portfolio 21 Investments. He has 25 years of experience in the field of investment management.