Tesco has said it will increase the proportion of its sales from healthier products to 65% by 2025 and will set out a strategy for how it will achieve this.
Last month Robeco and JO Hambro Capital Management’s UK Dynamic Fund were among seven institutional investors managing more than £140bn in assets that filed the first ever health-based shareholder resolution at a FTSE 100 company.
Coordinated by ShareAction, and along with 101 retail investors, the coalition of investors called on Tesco, the UK’s largest food retailer, to set targets to increase the proportion of healthy products in its sales.
In response to the new commitment from Tesco, Jessica Attard, head of health at ShareAction, said: “Tesco’s new plans are an important recognition of the role supermarkets play in shaping our diets, at a time when our health has never been more critical. We look forward to continuing to work with Tesco, and to seeing other supermarkets and food manufacturers step up to this challenge.”
Despite 85% of UK shoppers actively trying to improve their diet when shopping, and the UK government’s Better Health campaign including policy measures to restrict marketing of high fat, salt and sugar foods, the government estimates at least half of all grocery sales come from products that are high in fat, salt or sugar.
ShareAction said with severely obese people three times more likely to be admitted to intensive care with Covid-19, the pandemic has further highlighted the need to tackle rising obesity levels, and the part companies may be able to play in this.
Ignacio Vazquez, senior manager at ShareAction, said: “Supermarkets, and in particular their keyworker staff, deserve credit for working tirelessly throughout the pandemic to keep food on the shelves. However the companies also have a responsibility for the health impacts of their product ranges and marketing efforts.”
The resolution’s co-filers said Tesco, as the market leaders with 27% of Britain’s grocery market, plays a central role in shaping the nation’s diets and must reduce its reliance on unhealthy products for sales growth.
“As the UK’s largest food retailer, Tesco’s actions are of systemic importance in tackling obesity,” Vazquez continued.
Peter van der Werf, senior engagement specialist at Robeco, told ESG Clarity: “Robeco co-filed the shareholder resolution at Tesco as we have identified health and nutrition as a material risk for food retailers. Robeco has been engaging for three years with the food industry on product reformulation and responsible marketing. To build on the success of this program Robeco joined ShareAction in the Healthy Markets program outlining our expectations on health and nutrition to food retail companies in the UK. We expect Tesco to improve on nutrition reporting to support their customers to make better informed decisions that support healthy dietary choices.”
In response to Tesco’s new commitment, he said: “We are pleased Tesco recognises the need to take action on nutrition and is now ready to announce the nutrition target for 2025 in the Little Helps Plan. It shows once more that engagement with companies, and filing shareholder resolutions is a powerful tool to help companies moving in a more sustainable direction.”
The resolution will be put to a vote at Tesco’s AGM, for which a date has not yet been set. ShareAction said the investor group looks forward to continuing engagement with Tesco to address remaining questions about the scope of the supermarket’s plans and the methodology it is using to categorise healthier products.
It said the plans Tesco has announced cover only 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 Booker, and its international operations.
It also wants to see Tesco explain the definition of ‘healthier’ that it is using to categorise products.
Investors made similar requests at Tesco’s 2020 AGM. Tesco has already conducted small-scale trials of health-based interventions, which found that price promotions of fruit and vegetables resulted in a 13% increase in sales, while moving chocolate products out of prominent displays reduced sales by 22%. But Tesco has not yet implemented these on a broader scale.
A Tesco spokesperson said: “We are working hard to make it easy for our customers to make healthier choices, and we have set very clear targets on health and sustainability, published in our Little Help Plan. Our reformulation programme has already removed more than 50 billion calories from our products since 2018; our ‘helpful little swaps’ events offer healthier alternatives to family favourites at the same price; and, we have given away more than 100 million pieces of free fruit to children. We have also announced a target to increase sales of plant-based meat alternatives by 300% by 2025, and were the first retailer to set a target of this kind.
“We keep our targets under review to ensure they are sufficiently stretching, reflecting feedback from a wide range of stakeholders, and will share our latest health ambitions ahead of publishing our next Little Helps Plan update. Looking forward, we have strong plans to make Tesco the easiest place to shop for healthy and sustainably food, to encourage increased consumption of fruit and vegetables, and to raise awareness of healthier choices.”
Behind its peers
At the time of filing the resolution to co-filers also said Tesco is behind other UK supermarkets when it comes to healthy products. A recent review by the Access to Nutrition Initiative found Tesco reported on 30% of indicators of good health practice. Similarly, an October 2020 report from The Food Foundation found ‘encouraging healthy diets’ was Tesco’s weakest area of performance across 10 environmental and social topics.
Tesco said it monitors the health profile of its sales via its ‘Healthy Little Differences’ tracker, but co-filers said it does not disclose this information publicly or set targets to increase the share of healthy products.
By contrast, Marks & Spencer’s ‘Plan A’ includes annual progress updates since 2017 towards a target of 50% of sales (own-brand only) from healthier products by 2022. It reached 40% in 2019. Sainsbury’s has a target to increase the percentage of healthier products sold from 41% in 2015 to 45% in 2020 (it reached 43% in 2019/20). Sainsbury’s has also committed to set targets to 2040 and report biannually from 2021 onwards.
Kieron Boyle, CEO of Guy’s and St Thomas’ Charity, said: “Supermarkets like Tesco have a significant opportunity to show real leadership by disclosing and, where needed, improving their efforts to help families to keep healthy. This would build on Tesco’s market-leading work chairing the Collaboration for Healthier Lives that trials what positive retail and manufacturing changes look like in practice. We look forward to engaging with them and others on this topic.”
The institutional co-filers include:
- Robeco Institutional Asset Management B.V.
- JO Hambro Capital Management’s UK Dynamic Fund
- Epworth Investment Management
- Jesuits in Britain
- Guys and St. Thomas’ Charity
- The Marmot Charitable Trust
- The 1970 Trust