A food earthquake just hit south of the border. Mexico has successfully passed legislation placing an 8 percent sales tax on sugary soft drinks in response to their obesity epidemic. This is a significant public policy threat to the revenues of industrial beverage companies like Pepsi and Coca-Cola. It also raises public policy questions for the U.S. as it struggles with its own national epidemic of obesity and diabetes.
Health care costs expand with waistlines
Mexico and the United States are two of the world’s fattest countries. In the U.S. 31.8 percent of adults are classified as obese. In Mexico, it is 32.8 percent.
Heightened obesity levels increase human suffering. Obesity is linked to type 2 diabetes, coronary heart disease, stroke, hypertension and arthritis. Today, 25 million Americans have type 2 diabetes. 27 million have chronic heart disease. 68 million have hypertension and 50 million have arthritis.
Heightened obesity levels also place a heavy cost burden upon our national economy and family budgets. In the U.S., the cost of treating obesity-related diseases is $48 billion. The Harvard School of Public Health estimates that the added costs of lost work days, increased medical insurance rates and lost wages results in a $190 billion cost impact upon our national economy.
Twitter is about to launch their initial public offering. This public event has brought new focus to the fact that Twitter’s Board of Directors is all male. When Twitter CEO Dick Costolo was challenged on this issue by Vivek Wadhwa, a Fellow at the Stanford University Arthur & Toni Rembe Rock Center for Corporate Governance, Mr. Costolo responded by calling Wadhwa the “Carrot Top” of academic resources. Carrot Top is of course a cringe-worthy red-headed comedian no one wants to listen to. At the risk of being called the “Don Rickles of economists,” I’ll share four documented business reasons (in addition to the obvious ethical argument) for CEO Costolo to have women serving on Twitter’s Board of Directors:
Unilever is a pioneer in the art of winning customers and creating competitive advantage with brand authenticity through their positive impacts upon human and environmental well-being. Their CEO, Paul Polman, has staked his professional career on a strategy that says a business can achieve ambitious financial results by also achieving ambitious CSR results. Their business and sustainability results are establishing best practices in product design, marketing, branding and business operations.
Unilever’s CEO links financial success and sustainability
Unilever has successfully sold its products to 2 billion worldwide households. Most Americans would recognize their products like Dove Beauty Bar or Hellman’s mayonnaise (know as Best Foods west of the Rockies). Their annual revenues are approximately $66 billion. The company’s goal is to grow revenues in excess of $100 billion.
CEO Paul Polman is convinced that “…businesses that address both the direct concerns of citizens and the needs of the environment will prosper over the long term.”
Consumers are engaged in a search for authenticity that is challenging the sales sustainability of existing brands. According to a Harris Interactive survey, 44 percent of Americans have a “poor” or “terrible” opinion of corporate America. Less than a third of Americans view corporate America as “very good” or “good.” Havas Media’s research found that only 9 percent of U.S. consumers believe brands improve their lives. Ninety-three percent of Americans would not care if brands disappeared!
Ten dimensions of a great brand
Twentieth century brand success was based upon offering customers “more, bigger, cheaper” and delivering these benefits “now!” The 21st century consumer, enabled through mobile and social digital technologies, are redefining what a brand must offer to attract them and win them as customers. The American consumer is actively searching for brands that align value with values. The following ten brand best practices are proven to engage customers on their issues of value and values:
Price competitiveness. It starts here for most consumers in today’s economy. The price tag is the key qualifier on how interested a consumer will be in your product.
The Rainforest Alliance is proving that green products are a significant opportunity for growing sales even in this unsettled economy. Impressively, Rainforest Alliance certified chocolates now represent 10 percent of the world’s chocolate sales. Their certified teas have 12 percent worldwide market share. Approximately 15 percent of all bananas are Rainforest Alliance-certified. The business success generated by the Rainforest Alliance has attracted hundreds of alliance partners including Unilever, Yogi Tea and Clif Bar.
The frog icon is recognized worldwide as representing authentic green products. September 16-22, 2013 is follow the frog week.
Rainforest Alliance’s products offer best-practices examples on how going green wins customers. Market research is documenting a consumer revolution driven by their search for authenticity in the products they buy and the businesses they buy from. Today’s moms are searching for products that align value with values in support of their family’s wellness. The millennial generation is looking for businesses that are “cool with a purpose.” Corporate America is greening their supply chain to cut risks and costs. The bottom line for every business is that the global market for more sustainable goods and services now exceeds $1 trillion in annual revenues and is a path for achieving superior business revenue growth.
GM is generating $1 billion annually through recycling and repurposing their waste stream. They are literally turning trash into cash! This is not an isolated example. Sustainable waste management is now a competitive advantage for businesses ranging from Walmart to Dupont to small businesses like JJH Auto Body and Paint in Salt Lake City.
These companies and entrepreneurs are using waste management to cut their costs. They are using it to win contracts from corporate America by greening their supply chain. And they are using sustainability as a values-based path for engaging and motivating work associates.
GM best practices you can use in your business
GM is just one of a growing number of companies that are proving that there is a sustainable triple bottom line where measuring and managing to achieve environmental and social results will also grow profits. These companies have developed proven best practices that apply across industries. These best practices are low hanging fruit available to every business. Often these best practices will grow profits within the first 90 days of implementation.
Ford’s sales growth is proving that competitively priced, well-designed products that are more sustainable will outsell less-sustainable products. Ford’s line-up of fuel-efficient cars and trucks that deliver lower tail pipe emissions are selling at a record pace. In June 2013, Ford achieved a year-over-year 13 percent sales increase. That is Ford’s best sales performance since 2006. How hot is Ford? They have captured the number one position on the BrandIndex with more buzz than Amazon, YouTube or last years’s champ, Subway!
Ford’s sustainability commitment
Ford is a corporate leader in designing sustainable products and has pioneered vehicle designs that align with scientific analysis on the reduced level of greenhouse emissions required to address climate change. This commitment begins with Chairman Bill Ford and CEO Alan Mulally who have made sustainability one of Ford Motor Company’s four corporate attributes. Their commitment to fuel economy and reduced emissions now permeates Ford’s product offerings. From small cars to hybrids to electric cars to full size trucks, Ford is winning customers by selling solutions to pump price pain and climate change.
Imagine running an oil company where only one or two of the directors on your board have oil industry experience. Imagine running a computer company where none of the board uses a computer, tablet or smart phone. Now imagine corporate America running their businesses where less than 15 percent of their boards are women.
Women are not a minority except in terms of their parity with men on corporate boards. While women account for over 50 percent of college graduates and they dominate economic power in our economy with $8 trillion of annual buying power, they still account for less than 15 percent of S&P 500 boards of directors. Three percent of Fortune 1000 companies have no women on their board of directors. For the next tier of 1,000 midsize companies the level of ZERO women representation on the boards jumps to 30 percent.
The business case for women directors
Women serving on the board of directors is a best practice for winning business success. Research by Catalyst documents that Fortune 500 companies with women on their board of directors achieve the following superior business results:
Please repeat the words “more oil, higher prices” as you stand at the gasoline pump. These four words are key to solving your pain at the pump because they underlie oil price reality. “Drill, baby, drill” through hydraulic fracturing is pumping out more oil. It will not deliver sustained lower pump prices.
Why gasoline prices are high, going higher
There are two reasons why more oil does not mean lower pump prices. The first reason is that oil is a global commodity and its prices are a result of global supply and demand. Oil prices are higher because the incremental growth of global demand continues to exceed the incremental growth of global supply. More oil production does not lower prices if the rate of demand for oil rises faster than the rate of new supply.
Supply chain risk is the second reason for higher pump prices. Middle East unrest restricts supplies. Oil refineries are highly complex and they will have serious breakdowns that restrict supplies. Oil pipelines will leak, oil tankers will run aground and rail lines will have accidents. The fact that the world is pumping more oil than ever before in its history, also means it is more at risk. Higher risks and larger scale disruptions will generate higher prices at the pump.
Your gas pump reality is that the price will not go down and stay down. It is very likely you will be paying even more for gasoline five years from now. The only sustainable cost saving alternative is to use less gasoline.
New research documents that green products and meaningful brands deliver increased sales plus financial performance that outperforms the stock market. Havas Media just released an analysis on the financial performance of their top twenty global meaningful brands. The stocks for this portfolio of companies outperformed the stock market by 120 percent! The 2013 Small Business Sustainability Report just released by Green America, Association For Enterprise Opportunity and EcoVentures International reports that for small businesses defined as having five or fewer work associates (representing 88 percent of all U.S. businesses) the sale of green products outpaced their sale of conventional products.
Here are three compelling examples that selling green products is a path for winning superior revenue growth:
- Organic food sales grew 238 percent during 2002-11 compared to a 33 percent growth in overall food sales
- From 2006-11 the green building segment grew 1,700 percent while overall construction shrank 17 percent
- Renewable energy sales grew 456 percent from 2002-2011 while non-renewable fuel sales fell 3.2 percent
The bottom line is that 75 percent of the businesses that sell green products (as surveyed through the 2013 Small Business Sustainability Report) achieved an increase in sales during the 2008-11 economic recession.
The restaurant industry is in a crisis as customers, most especially moms and the millennial generation, question the source and impact of its products. The industry’s core revenue growth strategy of serving fast foods promoted through dollar menu pricing is now linked to the national obesity epidemic. Moms are increasingly viewing sodas and french fries, the profit margin champions of fast food, as a health threat to their loved ones.
The millennial generation is also shifting away from cheap fast food. The proven path to successfully selling the millennial generation is to be “cool with a purpose.” The fats, sugars, salts and chemicals contained in fast food and sodas are definitely not cool to this generation. And beyond a cheap meal, they question how the restaurant chains provide solutions to their concerns about community, the environment and their future.
Libby Auld: Successful entrepreneur pioneering the meaningful restaurant
Libby Auld, owner of Elote and The Vault restaurants in Tulsa, Oklahoma, is an example of a new generation of restaurants emerging across the U.S. These restauranteurs grow revenues by developing a meaningful connection with customers based on affordability, authenticity and purpose.
The revenue growth of the restaurant industry has hit a “sustainability wall” as it confronts a sea-changing shift in consumer expectations. Consumers are increasingly viewing food as a hazard loaded with sugar, salt, chemicals and fat.
Led by moms, consumer outrage is growing over their weight gains and increased health risks that science is tying to the American fast food diet. The food industry is now naked before the blogs, tweets and videos posted by consumers exposing unhealthy business behavior toward people, animals and the environment. The result is a sea-changing search by consumers for affordable and authentic foods.
The strategic conundrum facing the food industry is one of mixed messaging. Consumers now view industrial food as a commodity. They buy at the chain restaurant offering the lowest price. The chains are attempting to offer healthier food but their brand positioning is limited by their failure to execute an enterprise-scale shift to affordable and sustainable foods. This fifth article in my “Re-thinking Restaurants” series profiles how enterprise-scale strategies in the food service industry grow sustainable revenues.
Sustainable enterprise-scale strategies are creating competitive advantage
Companies that include Chipotle, Panera Bread and a rapidly growing number of local restaurants are taking advantage of their competitors’ marketing conundrum through an enterprise-scale approach to selling healthier food. Their marketing advantage is as clear and succinct as Panera Bread’s marketing slogan: “Live Consciously, Eat Deliciously.” These companies are winning new customers, growing their customer loyalty programs and achieving industry-leading growth of same-store sales through their enterprise-scale strategy built upon sustainable best practices.
Food sales are in a crisis. Chain restaurants’ growth formula of selling hamburgers, fries and soda at promotional prices has hit a profitability wall. Promotional pricing continues to spike sales but at the cost of eroded profit margins.
Another part of the chain restaurants’ revenue crisis is that they are having limited success selling healthier food. McDonald’s points to the successful launch of “Premium McWraps” as causing a slight uptick in same store sales. However, McDonald’s eliminated Chicken Selects and Fruit & Walnut Salads due to poor sales results. Industry-wide, research by the Hudson Institute found an increase in sales of low calorie menu items at chain restaurants during the same five year time period that higher calorie menu items suffered decreased sales. But the sales growth in healthier foods is not sufficient to compensate for lower margins created from selling higher calorie items at promotional prices.
Healthier chain restaurants are industry’s revenue-growth leaders
Chipotle and Panera Bread are two national chains that have figured out how to achieve sustained sales growth by convincing customers that their food is healthier and that their businesses are operated in a more sustainable manner. Chipotle points to the sourcing of half of their beans from organic farms and their implementation of a buy local plan as two examples of their growing adoption of sustainable best practices. This commitment has successfully connected with the millennial generation most especially through Chipotle’s award-winning short movie called “Back To The Start” that has over 7 million YouTube views. This success connecting with the millennial generation has enabled Chipotle to triple sales since 2006. One Chipotle executive summarizes their sales growth strategy as “Good Food Wins!”
“Living in the United States of Food Waste” is how Bloomberg Businessweek defined the scale and cost of food wasted annually. America wastes 40 percent of its food supply at an estimated cost of $250 billion annually. It is a cost that is unsustainable in the low margin food service industry. Professional estimates are that a restaurant can achieve at least a 10 percent cost savings from implementing a food waste management system.
Restaurants are also the most energy-intensive commercial buildings in the United States. It is estimated that the restaurant industry consumes three times the energy of an average commercial building. Cooking equipment, refrigeration appliances, HVAC systems and lighting are restaurant cost centers and a major element of their environmental footprint. It is estimated that the bottom line profit for a restaurant that reduces energy costs by $1 is equal to selling $12.50 in food at an 8% profit margin.
Moms’ focus upon restaurant air quality
There is also an emerging awareness over chemical use by restaurants and their impacts upon indoor air quality led by Concerned Caregivers. The top five things these EcoAware Moms are using more of are:
A food revolution is being led by the millennial generation and moms in rebellion against the growing health impacts tied to eating industrially manufactured food. The millennial generation was born into a national obesity and diabetes epidemic. Today, one-third of millennials are overweight. In response, they are rejecting McDonald’s and patronizing Chipotle and Panera Bread. While McDonald’s is the largest U.S. restaurant chain, they do not even rank in the top ten chain restaurants for millennials.
Moms are also revolting against chain restaurants due to their health impact fears tied to fast foods. Research by the Center For Science In The Public Interest (CSPI) found that 97 percent of the nearly 3,500 chain restaurant meals they offer do not meet the CSPI’s nutrition criteria for four- to eight-year-olds. A viral mommy-blogger posting, Empty Calories = Empty Messaging, summarizes their outrage at Coca-Cola.
One demonstration of children’s activism is when nine-year-old Hannah Roberson, along with her mother Kia Roberson, attended the McDonald’s 2013 annual shareholders meeting where she confronted McDonald’s CEO Don Thompson saying, “It would be nice if you stopped trying to trick kids into wanting to eat your food all the time.”
Affordable authenticity: Cancun Sabor Mexicano Restaurant
Jorge Saldana is the owner of Cancun Sabor Mexicano Restaurant in Berkeley, CA. His restaurant sets the performance bar for affordable, tasty and authentic food. He brings organically farmed produce and eggs harvested from his farm that morning to the restaurant every day. He proudly (and justifiably) lists his fresh ingredients on a chalkboard that hangs above his serving line to enable his customers to choose the freshest ingredients.