UK supermarket giant Tesco commits to health targets following shareholder pressure

The move came after a coalition of institutional shareholders, spearheaded by the ShareAction group, challenged the grocer over its role in the UK obesity crisis.

The UK has the highest obesity rate (at 29.5% of the population) in Europe, according to this year’s Global Food Security Index, compiled by the Economist.

ShareAction complained Tesco was lagging behind its rivals such as Sainsbury’s and Marks & Spencer, which have both committed to binding targets to cut the number of HFSS products on their shelves.

The campaign group filed what it called the first health-based shareholder resolution at a FTSE100 company, calling on the UK’s largest food retailer to set similar targets.

The audacious move was backed by seven institutional investors managing over £140bn in assets, along with more than 100 retail investors, and will ensure the proposal is debated at Tesco’s AGM in the summer.

‘A significant achievement for shareholder engagement on health issues’

In response, the supermarket swiftly revealed what it called ‘ambitious new commitments to support healthy, sustainable diets’, including targets to raise the proportion of sales from healthier products from 58% to 65% and boost sales of plant-based meat alternatives by 2025.

Tesco also committed to publish a strategy to achieve this goal and to report on its progress annually. Healthy products will be defined by the government’s nutrient profiling model, which aims to balance the positive (i.e. fibre, protein, fruit/vegetables, etc) vs negative (fat, salt, sugar) components of food and drink.

ShareAction welcomed the move. “With 27% of the British grocery market, Tesco has an outsized influence on the nation’s health and its announcement is a significant achievement for shareholder engagement on health issues,” it said.

With the resolution still set to be put to shareholders at the company’s AGM, ShareAction added it looks forward to continuing engagement with Tesco to address remaining questions about the scope of the move of the supermarket’s plans and the methodology it is using to categorise healthier products. It also called on all retailers and manufacturers to set targets for growing the proportion of their sales from healthier products.

Is bad food now bad for business?

The ShareAction group believes companies’ efforts on health are of material financial risk, Jessica Attard, Head of Health at ShareAction, told FoodNavigator. “As greater government regulation comes into play, such as the sugary drinks levy, companies who aren’t taking their responsibility for health seriously are at greater financial as well as reputational risk,” she said. She added that ‘unhealthy food environments driven by corporate practices focused on short-term profit’ come at the expense of long-term sustainability and people’s health.

“Our food environment has become increasingly unhealthy and is contributing to the obesity crisis. Food and drink high in fat, sugar, salt and calories now more available, accessible, and widely advertised than healthier options in the UK. Over two thirds of packaged food and drink products were deemed unhealthy according to ATNI’s UK product profile,” she told us.

“We are not asking Tesco to get rid of unhealthy products and only sell healthier ones. What we want is for healthier options to become the easiest for consumers, and for Tesco and other retailers to create a retail environment that enables this.” 

Tesco’s targets exclude its convenience stores

Tesco’s health targets, however, only cover its Tesco-branded UK stores and exclude other parts of its business, such as Budgens and Londis-branded convenience stores, which are owned by Tesco, through its acquisition of Booker Group, and its international operations.

Does this mean unhealthy products simply ending up in other parts of Tesco’s business? “The target Tesco have announced today is market leading. However, there are some exclusions such as the retail businesses which fall within the Tesco-owned Booker Group,” noted Attard.  

“The stores are often a particularly important source of food for families on a low income and tend to have fewer healthy options at affordable price points. We think it’s both important and possible for Tesco to set targets for growing the proportion of healthier sales from the Booker Group and we’re urging them to do so.”

In response, a Tesco spokesperson said Budgens and Londis stores are “independently owned and operated”.

Who's to blame for obesity anyway?

Meanwhile, many complain the food industry has become a scapegoat for obesity and that the shift in diets towards energy dense (often HFSS) food and beverages is one led by consumers who increasingly demand affordable, tasty and convenient options. There is also, say many, a distinction to be made between healthy foods and healthy diets.

Should Tesco and other retailers therefore be concerned that ShareAction’s push for binding targets might drive consumers to instead buy products deemed unhealthy from their rivals?

“Our resolution doesn’t seek to remove unhealthy products from supermarkets but rather urges Tesco to use the tools at its disposal to shift sales toward the healthier products in their store,” said Attard. “We’re calling on all supermarkets to publish targets for growing the proportion of their sales from healthier products which we hope will align the whole sector on this important issue."

She added: “We hope that this shareholder resolution will make other supermarkets and manufacturers sit-up and take note. They all have a responsibility for shaping what ends-up on our plates and all have room for improving their efforts in this area.”

A Tesco spokesperson told us: “We know our customers want help making healthier choices, and we want to make Tesco the easiest place for them to find affordable, healthy, sustainable food.”