Tesco faces shareholder demand to boost sales of healthy food amid obesity crisis

Investors are pressuring retail giant Tesco into boosting its sales of healthy food and drinks amid growing evidence that Britain’s obesity problem has worsened during the pandemic.

Tesco it the biggest supermarket chain in the UK with hundreds of large and convenience-sized stores. Picture: Andrew Milligan/PA Wire
Tesco it the biggest supermarket chain in the UK with hundreds of large and convenience-sized stores. Picture: Andrew Milligan/PA Wire

A consortium of investors, led by responsible investment organisation ShareAction, has filed what is thought to be the first nutrition-based shareholder resolution at a FTSE 100 company.

ShareAction said there was an increasing concern among some investors about the long-term impact actions major retailers are having on public health.

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The investors are calling on Tesco – by far the UK’s biggest retailer – to cut its reliance on junk food for sales growth, arguing that new health regulations that could be imposed following the coronavirus pandemic pose a risk to profits.

If passed at its annual general meeting (AGM) later this year, it would force Tesco to disclose what proportion of its overall food and soft drink sales are made up of healthy products.

The issue of setting out a healthy food strategy was raised at the company’s 2020 AGM, ShareAction said, but the company refused to commit to making changes. It said the resolution was a “marked escalation” in pressure from investors.

Ignacio Vazquez, senior manager at ShareAction, said: “As the UK’s largest food retailer, Tesco’s actions are of systemic importance in tackling obesity. But its prime market position has not yet translated into leadership on this critical issue.

“We hope that Tesco’s board will endorse the resolution and grasp the opportunity to help build a healthier UK post-Covid, while also improving its financial sustainability in the long term.”

Obesity has now emerged as one of the biggest risk factors for acute cases of Covid-19, with severely obese people three times more likely to be admitted to intensive care with the virus.

The first phase of the UK government-commissioned National Food Strategy, published last summer, noted: “The fact that we went into the Covid-19 crisis with such high rates of obesity and diet-related disease has undoubtedly contributed to the UK’s appalling death rate.”

In response, the government is considering a series of measures to tackle the problem, including legislation to curb sales of junk food.

Elsewhere, other big retailers have already established a strategy to increase sales of healthy products.

Marks & Spencer’s “Plan A” sustainability programme includes a target of 50 per cent of sales on its own-brand items to be generated by healthier products by 2022.

Some 43 per cent of Sainsbury’s food and soft drink sales came from healthier products in 2019/20, and it has committed to reporting its progress twice yearly from 2021 onwards, ShareAction noted.

Food Standards Scotland recently published a report revealing the impact of Covid-19 on food and drink retail purchasing in Scotland between January and July last year.

It found that the purchase of confectionery items was consistently higher from May 2020 onwards compared to 2019 and substantially above the percentage increase seen in total food and drink sales.

Lorraine Tulloch, programme lead for Obesity Action Scotland, said: “The increase in purchase of discretionary foods is concerning. Even before the pandemic the Scottish diet was poor and that poor diet is driving the high rates of overweight and obesity we see in Scotland.”

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