PSYC 123: The Psychology, Biology and Politics of Food

Lecture 14

 - Perspectives of the Food Industry (Guest Lecture by Derek Yach)


Guest Lecturer Dr. Derek Yach, leader in global public health and current Director of Global Health Policy at PepsiCo, offers an inside look into how a member of the food industry balances the needs of the company, consumer, and public health. Dr. Yach offers insight into how PepsiCo is thinking about research and development as a key to transforming the company. In addition, he reviews emerging research and policy trends within the company, highlighting PepsiCo’s long-term research goal of delivering science-based health and wellness solutions that satisfy the minds and bodies of consumers.

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The Psychology, Biology and Politics of Food

PSYC 123 - Lecture 14 - Perspectives of the Food Industry (Guest Lecture by Derek Yach)

Chapter 1. Introduction to Dr. Derek Yach [00:00:00]

Professor Kelly Brownell: It’s my pleasure today to introduce our guest speak Dr. Derek Yach. Trained — done medical training in South Africa, trained in public health at Johns Hopkins University, Derek Yach is one of the champions for global health. He’s done a great deal of research, written a great number of papers and books on the issue of global health and the spread of global disease. He has special expertise in the worldwide spread of chronic disease, as opposed to infectious disease.

When he was in South Africa, he established The Center for Epidemiologic Research at the South African Medical Research Council. He then came to the United States, well actually not to the United States directly; he spent time in Geneva at The World Health Organization in a very influential position. In that — he deserves a more coherent introduction — in that position, he was responsible for a worldwide framework convention on tobacco control and was also instrumental in a framework convention for diet, physical activity, and nutrition, and reported directly to the Director General of the WHO.

He then came to Yale University, where he was on the faculty of the School of Public Health. He went here to The Rockefeller Foundation, and then joined the PepsiCo Corporation as Director of Global Health Policy, and in that position, has had a major influence on the way a large corporation thinks about these diet and nutrition issues. So please join me in welcoming Dr. Derek Yach.

Chapter 2. The Industry’s Challenges and Opportunities in Public Health [00:01:51]

Dr. Derek Yach: Well, thanks Kelly, and it’s a real pleasure and opportunity to have a chance to talk to you today. Just to say that — you saw some of the OpEds. I’m pleased to say that one of the OpEds, the one that you saw written in 2004 by Kelly and Marion Nestle was timed fairly carefully and coherently to happen exactly while The World Health Organization was struggling against mainly the sugar industry to get through dietary guidelines on a worldwide basis; that editorial coming out literally in the week of the discussion at the World Health Assembly. It had a very important impact because it went straight into the hands of the ministers of health of every country of the world. I think not just writing an OpEd, putting it in the right place, but the importance of timing is also something really important to think about.

Well, I’m sure you’re probably intrigued to know what is somebody with a medical and public degree possibly doing at PepsiCo? How could we possibly be taking that list of brands that you saw earlier, and turning it into something that is healthier?

Well, I think what I hope to do is to give you an inside look not into the general arguments, but into the specific ways that we are thinking about research and development; and how we see research and development as the key to transforming the company. In the end, we certainly can and will continue to do a lot to stop marketing to kids. We need to and we will continue to try and change labeling to make it more effective. We can do a lot more to promote physical activity, we can do a lot more to promote health education; all of that is true.

But the proof of whether we really are a transformative company rests on the nature of our products: their content, the portion size, their functional benefit, or the harms that they could cause. That, I would say, is the central reason why this new entity called Global R&D at PepsiCo has been formed.

It’s only been in effect for a few months. We have for the first time a Chief Scientific Officer, who like me comes from a medical background. Born in Pakistan, trained in England, a few years at the Mayo Clinic where he was involved in heading endocrinology and metabolic research and then headed Takeda Pharmaceuticals Worldwide R&D for a number of years, before coming to PepsiCo.

You have interesting people with backgrounds — in his case, treating and preventing Diabetes. Now our colleagues are accusing him of causing Diabetes, and myself the same on the obesity side. We believe, as I said, that R&D is really where performance meets purpose, and where we start nourishing the minds and bodies of consumers.

Over the last few years, there have been a number of scenarios of what are we likely to expect in terms of the food industry. We looked at these carefully while we started developing our own scenarios. The first is really that we’re going to continue to have an extrapolation of the trends, rising food prices, hardship, commerce and agriculture respond, few choices become healthier, evidence-based medicine, stocks influencing our dietary patterns. That’s one possible scenario.

A second one is the challenge of hard times. We might say that these scenarios were developed before the start of the economic recession that we’re moving into. Even more dramatic rising food prices, oil prices, water scarcity, riots, failed states, recurring results. Healthy eating becomes costly — which, in fact, it is — diet related problems worsen, uninsured — the unsustainable healthcare costs continue to rise, calamity, disaster and so on.

Or a future that works for all. Instead of simple status quo or the grim reality, there could be one where we try and manage and predict the future, and actually advance a sustainable future where sustainable agriculture, the environment, health, water are all seen as needing attention simultaneously.

We are opting to bet on scenario three, not just bet on it, but to be involved in trying to create it. The reality we know is we face massive public health challenges. To look at three starkly, we face a massive problem of undernutrition on a worldwide basis, 850,000,000 people hungry literally in the last year and a half because of the food price crisis, 100 million people being pushed into food crisis.

Remember for these people, particularly the under two’s, we’re talking about permanent intelligence deficits that have both personal, economic, and family implications for the long term.

I think you all know that there a billion people overweight and obese — and in countries where you least expect it. In a country like South Africa, my own country, about 20% of children are stunted but 50% of women between the ages of fifteen and thirty are overweight or obese. So you have stunting and obesity occurring in the same setting, and we could talk about that later.

The massive costs for worker productivity are occurring. Worldwide, we’ve seen the impacts of aging, which we shouldn’t regard as a downside, but as a fantastic success of public health and development. But the reality is that as people grow older, there are certain nutrition challenges they face, muscle mass loss and cognitive function being too — that any of you would appreciate if you have older parents and grandparents.

Well, you might see those as challenges, or you might see them as opportunities: opportunities both for business and for public health. We tried to build the case for turning them around, and rather seeing the opportunistic side. In terms of undernutrition, we would argue that we have a massive consumer base, who while they may not be able to afford premium products, need high quality nutritious food even more then people in the higher social classes. How can we as a company engage and develop products in that area?

In the overweight and obesity area, we’re facing all the challenges which we’ll go into later, around how we might reduce salt, sugar, and fat and portion sizes in a systematic way and enhance functionality. In the Boomer category we see that there are opportunities, but there are some threats that we don’t want to start making false claims about extended longevity which are not based on science. Of course, if you go to any of the supermarkets or you go to the pharmaceutical shelves, and the chemist’s, you’ll find a wide range of products, most of them have not been tested for efficacy.

In terms of the challenges to the company itself, we face a wide range of challenges from investors, NGOs, WHO, government, just to give you a sense of them. This is the front page of a report for JP Morgan Investment Insights. The investment community is starting to focus far more, not just on the financial performance of companies, but on how well are they doing to address major public health problems, environmental sustainability, energy use.

In this report — which is pretty critical of ourselves — they highlight the fact that there are many aspects of our policies that we haven’t focused on. They highlight the need for affordable nutrition. They highlight the fact that we don’t have global marketing codes, and that we are practicing reasonable practices in one part of the world but not applying them in other parts of the world. Overall, we got ranked 7th out of 10 of the top food companies.

Now a report like this I find very attractive, because I can take that to our CEO and she reacts very seriously to a report like that. She will also react seriously to an OpEd, by the way, whereas an epidemiological article in an obscure public health journal tends not to attract the same kind of attention, even though it may be built on the same basis.

The second is, in many countries, we face direct challenges. This is the Minister of Health of India. The Supreme Court of India recently asked the India Medical Research Council to carry out a review on the healthful effects or not-healthful effects of soft drinks. That started a major debate among the beverage companies. How do you respond to that? Do you go into denial? Do you respond positively? Do you think about changing your policies and your practices? Remembering that India is a very important market for us, particularly since our CEO originally comes from Chennai.

A different type of threat and challenge is from the NGO community worldwide. This is the consumer international stamp soft drinks campaign. Obviously the kind of campaign doesn’t give you a warm and fuzzy feeling if you’re sitting inside a soft drink company. How do you respond to that? Again, do you go into a defensive mode? Do you look at the substance of what they’re saying? In discussion, we can talk about how we respond to some of these.

I think one of the most important sets of notes recently from Margaret Chan, the head of WHO, was reminding us that few choices are highly sensitive to price. The first items to drop out of the diet are usually the healthy foods; fatty processed foods are often the cheapest way to fill hungry stomachs. She’s talking from a global perspective, but I think any of you who’ve done any research would know this is true worldwide. Well, what is our response to that? How do we actually do something as a responsible company to turn that around? Again, it’s something I’ll come back to.

Chapter 3. A Research and Development Model for the Food Industry [00:12:19]

We see very clearly that there’s a difference between development and research. Development really involves applying current knowledge to a need and creating a new product. That’s obviously important, but what is really needed is to expand knowledge to enable new developments.

We have tended in R&D to be mainly a D company rather than an R company. The reason is really quite simple. If you look at most food companies they tend to be driven by very short term objectives demanded by Wall Street, as opposed to the pharmaceutical companies who have a pipeline of research of five to ten years. If we start telling our finance people that we want money from them to go away for ten years and we’ll give them solutions, I can tell you they will just walk away after laughing at us.

Instead, we need to think about a model that works better for the food industry where research yields results quicker than the cycle of pharmaceutical companies, but also starts building the case for some of the long term work. That’s where we are at present.

Just to give you a sense of what is the spending like, here’s R&D as a percent of net sales for many of the major food companies, and you’ll see we’re down at the lower end of the list. There are a range of reasons, so we’re spending around 1% of our revenues on R&D. The top leader is Unilever. Again, they tend to have a base of different products which also lend themselves to more research intrinsically than us.

But aside from that, let’s just think about how do you judge this figure? Is 1% a big figure, a small figure, how do you know? Well let’s look at some other industries. I use a Sensor razor made by Gillette and I was interested to know, well how much money does Gillette spend on R&D to get that kind of razor? They’re spending about 3% to 4% of revenues to produce a razor. The pharmaceutical industry spends about 15% to 18% of revenue on R&D and the biotech companies and the IT companies are spending 18% to 22%, to 25% of revenues. So we’re at the extreme low end. In fact, we are at the level of the extractive industries or the mining companies. Getting more coal out of a piece of coal or getting more gold out of a lump of gold is about where we’re at. I mention that because it shows where we are today and it’s certainly not where we’re going to be tomorrow.

How do you grow dramatically from here? Again, it’s something I’m going to talk about. We certainly see that conceptually, as we start doing long term research, there will have to be a close interaction between product developments. As I said, the process will have to be sped up compared to the pharmaceutical industry, but our vision is that while we know you have to start with a whole bunch of ideas, and over time you eventually end up having very few that get deployed, we need to be doing that in a fast approach and see when we can actually send them off to our business units. It’s fine for us to talk about a wonderful new product that’s going to promote longevity, for example, or muscle mass and strength. But if we don’t have a base out there in a business unit, by a business unit I mean one of the companies you saw on the screen before, nothing will happen.

We’ve started structuring — developed a new structure which looks like this, and hopefully over the course of the next year or two, I’ll be able to give you progress in each element. It shows you what does it take to do R&D within a large food company? Remember this is the first time we’ve ever taken all R&D capabilities across all those companies you’ve seen, and tried to mold them into one global unit. And that was only possible with the appointment of the Chief Scientific Officer who sits on the board and executive.

Biological and ingredient research, advancing research, understanding a wide range of issues, including for example, functional — the functionality of food, sensory perception — remember whatever we produce, if it isn’t going to taste great, it won’t be eaten. There are only a small fraction of people who eat healthy food that tastes like cardboard, very small proportion, as I’m sure you’ve probably been through in your courses.

I’m sure you will understand that there are intimate links between what you can do in terms of processing and packaging. The demand for biodegradability or for recyclability is incredibly high. We can’t go and produce products which can’t go into packaging that isn’t either going to be recycled or biodegradable, so we have a stepped-up series of activities around making sure that we have new guidelines for what kind of packaging we’ll produce now and in the future. Increasingly you’ll see packaging that’s also bioactive, that have actually, the packaging itself breathes some activity into the product, either maintaining it or protecting it, allowing us to take out any of the unnatural stuff from our products. Of course all this rests on food safety, and each one of I’ll come to in a brief second.

We have a strong nutrition group and with the creation of this new center, our CEO has made it clear that we now control the decision on new product development and new acquisitions, which means that any product about to be acquired or developed, has to meet what we regard as the optimal nutrition guidelines before it goes into the development phase. This means that if a great option for say an energy drink with tons of caffeine and guarana and ginseng comes up (which it actually did recently) we would judge it and say, well that’s actually not going to do very much to impress you that we are serious about health, or the consumer. Therefore despite the fact that it may be more profitable and some other things we should walk away from it. And that’s what’s happening to a great extent.

Then the area that I head, which is health and science and public health, science and policy tries to bring a lot of this together.

Chapter 4. Global Nutrition, Research Focus and Mapping Opportunity [00:18:43]

In terms of the nutrition challenge, I think we try and see this in very simple terms. We try to find what are the right nutrients; what are the nutrients to limit — so for example, sodium, fat, sugar would be up here. Those we want to limit for some reason, usually because excess has health consequences.

What do we want to increase? Again, this is perhaps one of the toughest areas because in a country like the U.S., there isn’t scurvy, there isn’t massive vitamin deficiency but there are certain unique deficiencies. Fiber is one, Vitamin D in younger kids is another, maybe even in older people, there are probably a wide range of others probably Omega-3’s are going to become more important as we learn about brain development and so on. We think that the dairy category as a category, provided you can keep the saturated fat levels low, remain an important area, and the whole area of protein remains important.

For each of these, we will have quantitative estimates of where exactly do we want to go. For example, where do we want to — what do we want to limit — when we say we want to limit salt, what does that mean in terms of the salt content of a packet of crisps or of our oatmeal, or of many of our other products?

We also want to start defining the question about what are the right occasions. As a company we basically only own one meal: breakfast, where we have oatmeal and Tropicana, and hopefully you all start your day with that. We don’t have any other major meals; we have a bunch of snacks. The question is, how can those be redefined in terms of main meals, as opposed to simply doing what the marketers would want, seek every possible occasion to fill it up with a snack opportunity, from early in the morning to late at night, to the wake up call at 2:00 in the morning to go and get some final snack to make sure you’re able to sleep through the night. That’s the way uncontrolled marketers would want to work. We face the challenge of trying to actually make sure that we don’t — that we have some constraint on how that happens. Then the right calories. We have a major focus now on trying to address the issue of what are the right number of calories per serving, that carry the right number of nutrients.

Our long term research is starting to focus on — in two broad areas, physiology and the sensory perception, and the two of course are closely linked. What we’re learning as we start looking at both the biology and the science, is that there’s a far more close and intimate link between sensory perception and physiological processes, whether it’s metabolic pathways, let’s say, of understanding sugar pathways, both the nutritive and the non-nutritive sweetener pathways; how they react to different types of signals around sensory perception with taste and flavor particularly.

We know now for example, that sensory perception occurs not just in the mouth and tongue, but it occurs through the upper GI tract. Signals are sent from there to the brain which have impacts on your feeling of satiety or your desire to eat or not to eat. How do we actually take that knowledge in a way in which its responsible and make sure that food design actually has the desired effect of not encouraging overeating and actually encourages people to be on a healthy path of consumption?

Our goal is to deliver science-based health and wellness solutions that satisfy the minds and bodies of consumers. I said the word “minds” is in here for a reason. I think you are all aware that increasingly, the newest science advances are telling us a lot more about the links between what have been seen as isolated metabolic pathways, for example, controlling sugar and the brain and that is just — it’s going to increase the question we have to ask is how do you actually use that science in a responsible way — and in a way in which we don’t have a response which many of you would probably raise — and that all we’re really doing is trying to manipulate the minds of consumers or trying to get into an addictive mode which is the mode that of course the tobacco industry got into?

If we actually look at it conceptually, we see that when we look at the vision of long term research, we see that there’s also an added element of natural and cultural identity interacting with inherent functional benefit and sensory experience. What does that mean? Well, we see everywhere in the world that there is intrinsic value and understanding about the anthropology of food. For example in India, Ayuvedic medicine, if you go through the Ayuvedic text, you will find thousands upon thousands of mention of specific foods to be used in certain circumstances to have desired effects both in terms of the body and the mind.

We are starting to look at that literature and trying to work with colleagues in India to understand how do we actually use some of that indigenous knowledge — again in a responsible way — the same we’re looking at in the Amazon; the same we’re looking at in South Africa; where all around the world you will find that there is indigenous knowledge about food use that is often eroding as we try and blanket the world with a homogenous bunch of food products.

Here’s just a brief example. We know in different parts of the world, in the Mediterranean culture, tomato — or tomato — and olive oil have been consumed together and have some bio-efficacies. The interesting thing is that the tomato benefits without the olive oil don’t — you don’t get the efficacy. So the good news there is that having olive oil on your tomato and having a bit of mozzarella, by the way, will actually have an enhanced effect, as opposed to just trying to eat a tomato alone.

Now, you would not get that if you took the usual single reduction approach of a scientist and go plant by plant, as opposed to going into the culture to see how combinations of food are consumed. Similarly, there are three spice combinations between ginger and some of the peppers, and some of the other spices, which in their Aryudevic text will tell you how you should combine classically.

This is a dramatic difference from an approach to search for specific bioactives and stick them into food, which is what a number of other companies and we still continue to do. It’s also a big difference between a pharmaceutical approach to nutrition, as opposed to a food-based approach, where you’re actually trying to build on the culture and build on the way actually people put their combinations together. We have a team focusing just on looking at these combinations, trying to understand in different parts of the world how foods are consumed, how we might maximize that and work with different groups.

When we look conceptually at all of this, we find that there are a wide range of opportunities for us to do almost anything you could dream of. Where do we place our bets? We’re placing them where we know that there’s going to be a benefit, a likelihood of success, a sure bet. But we also are looking at some very long shots and we know that we, at this stage, that in terms of the state of science, we know that a lot of the product development that we’re doing now for the next three months or six months is probably going to be irrelevant five, six, seven years from now. The problem, as I said, is the food companies, that it’s very difficult to actually motivate your own board to put money into long term bets.

If we look broadly at the technology and where we’re likely to go in the future — just to give you a snapshot of what we anticipate will start happening — if you look at most of our stuff we basically have got savory snacks skewed to mostly fried. Long term, well how can we think beyond frying and some of the grains? Everything is in a shiny plastic bag. We have a ton of stuff in these shiny plastic bags. Well, how do you actually move from that to being authentic and totally green? We have teams focusing on some of these things.

In terms of our beverages, all the stuff basically comes in lines that can only deliver what is called cold full or hot full. Cold full means basically sterilization can be kept at a minimum; it’s how you get Pepsi and a wide range of products. The beauty of a hot line is that you can actually sterilize things and have more active products like Tropicana and so on.

Well, how do we actually reinvent our processing so we can be more flexible, and retrofit them to be more flexible about the kind of products that you’ll see in the future? How do we even think about the fact that so many of our bottles are generic and there’s a large amount of material both in the plastic — so we have teams saying, well how do you actually dramatically reduce the plastic?

We’ve even been to the motor vehicle manufacturers, to find out what is happening on the cutting edge of material science that’ll allow us to dramatically take some of the metal products out of our packaging. All this aimed at the future. The problem of course is that this needs to be happening even in faster time.

The reality for some of this is that we suspect that with the current oil crisis, which even though the prices have collapsed a bit now, long term we believe that they are inherent drivers on both commodities and oil prices, I suspect that fifteen, twenty years from now, maybe less, the notion of being able to go into a supermarket and buy food that is from a season around the world will probably have disappeared, or the pricing will be so exorbitant, it’ll be priced according to the true cost of transporting that food. Similarly, we think that the kind of packaging you’re seeing today in the shiny bags will probably have disappeared, and we’ll be thinking about very different types of packaging.

To do this, you need to have an infrastructure. We already have these centers of excellence around the world. Obviously a number in the U.S., quite a strong centers in Mexico, the UK, a new center just opened outside of Lester, and in Russia where we’ve just acquired the largest fruit juice company in Europe, in India a large group, and in Shanghai. You’re likely to see others happen in Dubai and basically people say ‘if you’re not in Shanghai, Dubai, or Mumbai it’s goodbye,’ and that is really telling you something: that while the U.S. remains obviously critically important, everything to the east of the Middle East is where the future growth of the world is going to come from in terms of the world economy and the world demand and so on. That is how we are likely to be gearing up. It requires a cultural shift in the way we think about the future, the people we work with, the kind of products we develop, and also bringing in the scientists that we need to work with.

Chapter 5. Proactive Engagement and Strengthening Internal Policy [00:30:03]

I mentioned before that we are increasingly engaging with outsiders. One of my tasks was to say to colleagues internally, what’s the benefit of engaging with people? We think there are many reasons. If you actually engage, you can find solutions that may not require regulation. You can reduce unexpected shocks; you can actually improve the knowledge of leaders in science about what we’re doing.

We spend much time stimulating our own colleagues’ engagement in our health journey. I mention this because many of you anticipating a career in industry for example — and I’m sure there are a number of you — will be judging a company not just by the wage package that you’re going to get but the values and the content of the work. The more we change those, the more we find we become more attractive as a company. There’s a massive talent scarcity in the world, maybe not as high in the U.S. as it is in China and India, and our future growth markets, and this is being able to engage is perhaps one of our most important competitive edge of driving people into the company.

There are risks, and the kind of thing I’m doing here is a risk. Going out to a group of students and having a chat, and hoping that I’m going to get some pretty tough questions. The risk I summarize is in terms of the tortoise potential, but being from South Africa you wouldn’t know what this is. Basically a tortoise, as you know, makes progress only when it sticks its neck out, and then it’s vulnerable to being — having its neck chopped off. That’s a risk we face every time we go in to engage in an outside audience. That’s the reason why I suspect many of my colleagues have been fearful about engaging either with academics or with NGOs in some of these debates.

We have to show what are the gains of actually talking to people? Here’s just a simple list of a couple of areas where we are active showing some of the specific progress. Marketing to kids: there’s a continued great push that we’re actually keying up our marketing act in terms of children. We now have an agreement through the International Beverage Association that as of the end of January we’ll no longer be marketing beverage products to children under twelve worldwide. We extended that to foods in December 2008 and announced this in a letter to WHO. How do you know that we’re doing what we say we will do? Well we believe that there should be independent verification, not by ourselves but an independent audit company.

In terms of schools, probably the best example we have is the Alliance for Healthier Generation, where in the U.S. setting over the last two years 60% less calories have been shipped into the school system of 135,000 schools, and in agreement with The Clinton Foundation, The American Heart Association, and a range of others.

In terms of the workplace, the World Economic Forums Workplace Wellness Initiative for the industry, which is a joint initiative with The World Health Organization, trying to make sure that we walk the talk, that we actually change our internal processes in the workplace to make healthy eating and living better.

Product reformulation — I won’t go through all of this — but just to say in the area of Trans fats, The Pan American Health Organization which is the regional office for WHO in the Americas, has held a series of meetings which we’ve participated in, which led to a call for companies to pledge to make sure they are Trans fat free across the Americas by the end of the year. Obviously we’ve signed on as have most companies; but the problem that we realized in the discussion, was that it’s fine for big multi-nationals to sign on because we can do it, we can carry the costs.

The problem is what do you do about the smaller companies who don’t have the capital capability to do it and will be at a competitive disadvantage in their own countries? They’ve been forced to the table to do it generally. I raise that as an area of general interest, that when you think of the food industry, you think of food quality and you think of saturated fats and so on. You need to think as well about the non-multinational companies who often are the laggards of the industry in each of the countries. How do we bring them on board? It’s not that easy because they don’t have the financial capability to do a lot of what we can do.

Physical activity, of course we have a wide range of activities. We recognize that every time we talk about physical activity, even though we believe in the centrality of energy balance, your first reaction is going to be one that this is a self-serving interest, that we’re trying to divert attention away from the main topic which is calories in and that’s why we put it down here, not at the top. We’re doing all of this stuff, but we also need to do a greater amount of effort to change the physical activity environment. As you know, in the U.S., only one state has mandatory physical education in the school system — which I think is more than a scandal.

Our work on undernutrition is gaining strength and one of the major groups we work with is The Global Alliance for Improved Nutrition which is a Gates and Norwegian Government supported group who focus on micronutrient deficiency. They are starting to help us and I’ll give you the last thing — mention about it.

Finally, I would say one of the challenges we face worldwide is that there’s been a serious under investment in nutrition science and in food science, which is so severe that in some parts of the world you simply cannot find the nutrition and food scientists you need, both for ourselves or for government. The result, I believe, is often that you have anecdotal approaches to health policy not based upon understanding the consequences or the untoward effects of some of the approaches we’ve developed.

The most important interaction at the global level is with The World Health Organization. I was very pleased to see that we were able to get eight CEOs, General Mills should be here, to sign on to a letter to Margaret Chan, the Director General, spelling out a series of commitments about what we as companies will do over the next few years to support the global strategy on diet and physical activity. Each one of these is now being translated into detailed specifics in collaboration with WHO.

Starting with the marketing one, where there will be a meeting in November, but also embedded in these, is an explicit focus on salt, Trans fats and probably in time, sugar as well; a range of issues related to labeling. I put this up because in my ten years at The World Health Organization, I would have loved to have seen companies make this kind of commitment in the pharmaceutical industry, at a time when we were facing massive problems on access to pharmaceutical drugs in the area of Aids or neglected tropical diseases. We never got it because the industry itself could never agree and second they wouldn’t want to put something in writing.

You need to read this as being quite an important landmark decision and one which you sitting outside industry should be monitoring and calling to account, asking the question we’ve made these commitments now: are we implementing them? If so, why not, and we recognize we’re now facing a new set of challenges. Having made the commitments public, we now have to put in place the means to actually get behind everyone. Our failure to implement these will actually set us back significantly from the path of talking about engagement over the next few years, and I think that sort of pressure is pretty good to have on companies. Some of us will make it, others will not.

Just to say, how does this come together internally? How do we resolve tensions that exist between marketing and nutrition? The classic role of marketing is to want to reach everyone, everywhere, every time, every place. In nutrition we say there have to be restraints, we need to look at responsible marketing and so on. This gives you a sense of how do we — starting to get organized internally to have what are often pretty tough discussions, the kind of discussion that I think you’d be surprised to sit in on: when it’s a question of immediate profits versus long term health consequences. How do you make those trade offs so that the public health benefit actually comes to the fore?

Generally, I can’t say that in our company we actually have any level of hostility. It’s always a question of timing rather than the question of the intent to do the right thing. The intent is always there, the question of when and how you do it usually is what we debate.

In coming towards the end, our fearless CEO, Indra Nooyi, who is on the Yale Corporation and very much believes in the future of business from a different perspective, went to — made a commitment to the Prime Minister of the UK at the end of last year in a private meeting, and basically said — he said to her you need to do more about undernutrition in the world and she gave a response and said, yes, and said what we were going to do.

At the back of the room was a colleague of mine from the development agency for the British Government, who immediately sent me an email saying, this is fantastic news, what are the details of what you’re going to do? Of course it was the first I heard of it. But once the CEO has said it, probably of any company it’s policy. It’s now up to us inside the company to make it happen. Of course for many of us, this was a wonderful opportunity to say, well how do you harness the capabilities of a company to address a millennium development goal that is so lagging, Millennium Development Goal Number One. So we have a team now in place starting to address this in a substantive way; I’m not going to go through that. Let me just get to — before ending let me just jump down to the nutrition science issue —

Chapter 6. Challenges to Progress in Nutrition Science [00:40:28]

One of the things I mentioned earlier was the fact that we do face a problem in terms of the quality of nutrition science. How do you quantify this? What we did was we went to colleagues at Liverpool University who have one of the best library searching capabilities and they do these massive searches where we asked the question, what have been the publication output of the top ten medical and nutrition journals of the world over the last fifteen years. What is the origin by country of the first author of those publications over the last fifteen years? Have there been any trends?

This is just a snapshot of the data for the last two years. Basically it tells two interesting stories. First of all, if you categorize the articles over the last two years, 83% deal with overweight and obesity and 4% undernutrition, micronutrients somewhere in between. Now remember the figures I showed you earlier about a billion overweight or obese, and almost a billion undernourished, so clearly there’s quite a discrepancy in terms of the content of where nutrition researchers are placing their energy.

Second, if you look at the site, by far the majority is in the U.S. If I added in the UK and Canada, or Australia you would probably get this figure — this figure would probably go up 70-75%. If you take the total output of India and China, which accounts for 40% of the world’s population, it accounts for less than 5% of the publications.

Now you can say, these are the more elite journals, that’s true, but if you do the same studies in other areas of public health whether it’s in Aids or in cardiovascular disease and so on, you see a slightly better distribution, suggesting a higher proportion of scientific activity in these two countries. And of course if I was to add in SubSaharan Africa or Latin America, we’re talking about a publication output that is within rounding error. It’s almost imperceptible that it’s so small.

When we stand back we say well, the problem with this data for us as a company is that the scientists we need are not being produced, and the attitudes, the partners we need in government or in NGOs, or academia are simply not getting modern concepts of nutrition science. We have tried to build a case inside our foundation to say that what the company and the foundation needs to do is to join forces with many of the other development agencies and say, well we need to have a major push to strengthen nutrition science worldwide, particularly in the countries where we’re going to need it over the next few years.

Our vision is that The American Journal of Public Health, and this is the — if you look carefully this is the August 2015 edition, and this would be the headline on that, ‘PepsiCo’s Performance Demonstrates Companies Can Deliver Great Taste and Provide Beneficial Nutrition Improves the Consumer’s Health.’ Our aspiration is that The American Journal of Public Health would carry this special edition, and not only that one, but The New York Times also on August 8, 2015 would be carrying an article describing how we’ve actually started meeting the nutritional needs of vulnerable populations through R&D and joint efforts.

I’d be keen to have discussions to see how realistic it is that we’re going to get there and obviously to hear any of your concerns and questions. Thank you very much.

Chapter 7. Question and Answer [00:44:09]

Professor Kelly Brownell: In wanting to expose you folks to a perspective from the food industry, a lot of people from a lot of different parties could have been invited. As I’ve talked about, the food industry goes all the way from large businesses to small business, to the agri-business companies like Monsanto and Cargill, and Archer Daniels Midland, to the people who sell a lot of food — Wal-Mart being the leader of that list, to the people who manufacture food products like PepsiCo.

Why PepsiCo and why Derek? Well, why Derek is pretty obvious from what he just said. He has a unique perspective on this because of his background in public health and the fact that he now is working in the business setting. Buy why PepsiCo?

Well, PepsiCo of all the players that I know of is probably the most progressive, at least one of the most progressive food companies, and the progressiveness comes from the very top. Derek mentioned the current CEO of PepsiCo, Indra Nooyi, who is well connected with Yale as Derek mentioned, but has been very committed to this and the CEO that preceded her, Steven Reinemund, very committed as well to health and wellness as part of a business model, as well as almost a moral commitment.

If one looks to the industry for the most progressive players, I believe PepsiCo is at the head of the list, and hence, why I invited Derek. We have plenty of time for questions now and I welcome you to ask him any questions you’d like and as you can see from his comments he’s ready for it all.

Student: [inaudible]

Dr. Derek Yach: When I first — sorry the question was, what drove me to move from WHO or the public sector to PepsiCo, and did I believe I’d have a bigger impact? There are a couple of answers.

First, I mean during the process it was not something I sought or even thought about. I was at The Rockefeller Foundation heading global health when I got a call from the CEO’s office about a month before she assumed office, saying she wanted to have some different types of perspectives in the company as she took over.

Her vision, as Kelly said, was a very different vision from where we are necessarily today, and it was really that vision of where we want to go. I’ve always been driven by working with people with very powerful visions. At WHO I had another extraordinary woman who drove WHO, Gro Harlem Brundtland, who also I think inspired and there’s nothing like working inside an inspiring company.

When I was at WHO, I worked on the global strategy and one of the pieces of work I had to do at the time was to try and define the role of the private sector. It was the first time ever that we had actually spoken to food companies in WHO to try and understand what they thought they could do before we wrote down what we thought they should do. I remember preparing this list and I use that list still as my mandate for what I’m doing inside a food company and it’s not particularly different from the mandate that we gave to food companies when I was at WHO. Limit salt, fat, and sugar, improve the focus on nutritious products, change your marketing, change your labeling, address the schools’ policies and so on.

The move wasn’t easy. I mean to say it was easy would also be wrong. The first person I phoned after my wife, who actually was pretty supportive, but I phoned my mother in Cape Town. I said to her, I’m going to be making another move and she gets a bit sick of these moves because it’s difficult for her to remember and tell all her friends he’s now doing some — doesn’t know what I’m doing ever but — she said to me you do realize that they make these terrible sodas and chips? They have Simba in South Africa, which is the largest snack producer, and it’s always a good test to see well how can I convince her that I can make a difference.

It took six months before I could actually have a meeting — dinner at her house where I invited my PepsiCo people to actually come down and talk about what we had to do. I wouldn’t say she’s a hundred percent convinced yet, but she understands the journey that we are on and I think that’s what I also expect others to appreciate at this point.

At this moment we’re in the point of I would have people suspend their judgment with a little bit of skepticism, as we do I might say, because it’s a journey that may not succeed. We hope it is going to succeed. The core of what will make it succeed is whether we can transform the business model while we are transforming the product portfolio, and that is never an easy thing to do. We know consumer demand in the U.S. is very high for the healthier side of our portfolio; but consumer demand for the healthier part of the portfolio and other parts of the world is much more complex both to assess and to address.

So in answer to your question, yes I did think I could have a bigger impact using the experience, but I won’t say that — I really see myself as maintaining the same goals and objectives that I had at WHO, and try to see how you’re able to lever the partnerships that exist out there to achieve those goals. There’s no way PepsiCo’s going to do any of this alone. It’s going to require very strong academic and intellectual support on the science. It’s going to need deeper and different types of interactions with NGOs. It’s going to have more complex partnerships with many business entities that we’ve never worked with in the past, and all of that I see as a wonderful challenge. Yes, at the back.

Student: [inaudible]

Dr. Derek Yach: The question was, what about portion size, and how can we justify 32 ounce things, and Kelly I’m sure has shown you these gulps and super gulp things. That’s — it’s a critical question. I just glossed over one of the points I should have made.

I think that there are two very different — there are two independent issues that need to be addressed in addressing obesity through product design. The one is the energy density of the products and the second is portion size. We know from work from Barbara Rolls and many others that they actually operate independently. If you do the one without the other, you’re in trouble because we may very well bring down energy density and then have these huge packs people simply consume more, and you’ll be back to the same — the calorie position even though they may be healthier calories, the total volume may be wrong.

We have quite a concerted effort to include portion size as an explicit focus of our work, both through a joint initiative with a range of other companies in the U.S., which hopefully we’ll make public before — probably somewhere next year. The good news about it, and let me just give you the kind of thinking that we have.

First of all, I think that what portion size does — what nutrient profiling generally does is it actually doesn’t have — when you have labels on packs, my own view which is a personal and not a corporate view, is that the best benefit of having calorie labeling on every single pack — which is the route we’re heading towards — isn’t that it’s going to make a big difference on consumer behavior as much as on corporate behavior.

No company wants big numbers on their packs, so what they’re going to do — they’re going to do what you’re starting to see: 100-calorie packs becoming the norm in terms of cereals and snacks, and bars, and things. The beverage size: shrinking the size of the beverages. We have raised the question about why can’t we jack up our R&D to make sure that in any multi-serve pack there are actual divisions in the pack that change the default option, that you’ve got to actively make a decision to go on to portion two or serving two, rather than simply have the ability to pour and eat, and eat, and eat, and eat?

That discussion has started, and as I said, I’m quite impressed if you go to the shelves, to see how the 100-calorie notion seems to have taken off. In the research that we’ve certainly done, people are not overcompensating. The good news is that they seem to be reducing total calorie intake by having those 100-calorie packs, but the even better news to justify it in the company is that the cost — the profit to the company is slightly higher on a 100-calorie pack than it would be on a very large pack, meaning that it’s good for business and for public health.

The more we can push to understand innovative ways of doing portion control, I think the better we’ll be off in terms of both the obesity epidemic as well as some of the longer term issues. There is a downside, and the downside comes from the environmental consequences of packaging, because you tend to have more packaging. That’s going to be a debate that we also need to address. At the back there, and then there.

Student: [inaudible]

Dr. Derek Yach: The question was — maybe I won’t let you know what the question was. The question was, what about the fruits and vegetables; we’re a processed food company? And second of all how do you combine the tomatoes and olive oil in products?

Well I think on the first, we’ve got to be honest about what we are and what we are not. We are not a fresh fruit producer, and so we must be quite honest about that. We can get close in terms of our juices, we can do a lot better with both fruit and vegetable juices, and we can also get closer in terms of using fruit and vegetable products, and turning them into easy to use convenient products. Unilever’s pushed the boundaries on this in terms of Bird’s Eye and many of their easy to microwave, and steam, and use frozen vegetables.

It’s certainly our view that the majority of people, particularly in inner cities, are going to struggle to be able to meet their fruit and vegetable demand by having the natural full product as their sole means of meeting that demand. There will be a need for some degree of processed fruits and vegetables to meet the gap. We’re talking about a very big gap. The WHO guidelines of about 400 to 500 grams a day are not being met in almost any country of the world, except maybe Spain and some of the Mediterranean countries.

On the second, tomatoes and olive oil, there are a wide range of products, whether they are dips, which we do quite a lot of dips now, or whether they are even in terms of — we have some of our newer chips and food products coming out even in terms of some of the drinks that you’re going to see, beverages; there are ways to combine olive oil and tomato. Next year you should invite Eppin George, originally from India, who sits on this, and he’s able to give a much more passionate description of the work that he’s plotting and planning. It’s in pilot tasting in India and other parts of the developing world. Yeah, down here somewhere.

Student: [inaudible]

Dr. Derek Yach: The question is what about the food service industry? That is an incredibly important area. I mean the food service area is interesting, you’ve got to realize — I mean I’m sure you do realize, are our customers. Most big food companies would have a structured relationship with them, obviously Coke and McDonald’s, ourselves, and a whole range of others. They also recognize that they face this same kind of critique that we’re all facing, and the need to move.

In the U.S., we are likely to see them coming to this coalition, and I suspect within the next few months we’ll see — certainly McDonald’s and some of the bigger ones, young foods — entering into the global coalition. If I was to just tell you how tough it is to get eight CEOs to agree to start with… it was unbelievable work. Every little word gets lawyered and checked. Getting in the food service first we thought was going simply be too tough, but now that we’re out there, the food service companies are saying, well what about us? Why aren’t you talking to us?

There have been some food service companies who have until very recently had a position that makes it impossible for us to talk to them and that was their position on calorie transparency. Our CEO has gone out front saying, if you’re going to get on top of the issue of obesity you cannot do it without being completely transparent about calories on your packaging, on your menus, on every possible way, and having an educational program to let people know what that means.

Well as you probably know, there have been some in the food service industry who continue, or have challenged the New York restaurant ban — the demand on calories. That resistance we — is either completely gone or it’s almost have gone, which will open the door to us being able to talk. Somewhere at the back again and then down here — okay yeah.

Student: [inaudible]

Dr. Derek Yach: Well I think if you start off by saying, what have we done to the core of some of the classic products — let’s take the UK, for example — there’s been a 30% to 40% reduction in saturated fat and a 30% reduction in salt or sodium in the Walker’s Crisps brand. Now the Brits are completely fanatical about their chips, and they have been for a century. That translates into a measurable difference in terms of blood pressure, the salt levels in the UK.

I could go through a wide range of — in the same vein — in terms of new products, I think on acquisitions, one of the most important acquisitions I hinted at was the acquisition of a very large fruit and vegetable company, Lebedyansky out of Russia, which is going to give us the ability to have a fruit and vegetable platform that we never had in Eastern Europe and Russia. Remember that there is a massive cardiovascular disease problem in East and Central Europe and Russia, and in fact, death rates continue to rise among men rather than go down because of their nutrient profile. We think that we are well placed to start doing it.

In terms of specific brands, they tend to be small at this stage, so you’ve seen in the U.S. new brands coming on like Naked with a fairly good profile, and Stacy’s which is a baked product and I could give you a range of others as well. They tend to be smaller, they’re not going to be $500 million dollar brands, and just remember on that list there are something like seventeen brands in the portfolio which have over a billion dollars in sales worldwide.

The problem that a company like PepsiCo has, is how does it introduce a new relatively small highly healthy innovative product and give it a chance to survive before they kill it off? We have had some healthy brands. There was one I think called Fuellosophy, which you may have seen around, which was a beverage with quite an interesting portfolio, good protein, whatever, which got killed off because it simply wasn’t meeting its big figure target in time, and they simply weren’t going to put the marketing dollars behind it.

That’s why I say that while many of you will focus on the nutrient profile, I hope the folks here who will be taking the business science route, because the biggest challenge I think we face is to think about a business model that works more effectively for healthy foods, R&D, and delivery. Yes please.

Student: [inaudible]

Dr. Derek Yach: Yeah, there’s actually a report out by Consumer’s International, it came out yesterday. If you go to the website you’ll see it, it’s called something like Cereal Culprit or something, it’s a clever word on cereals. Basically, it makes the point about two other companies, not ours, making the point that often the salt levels are higher than sea water and the sugar levels are higher than soda in a number of the cereals, and that’s probably true.

For Quaker, which is our brand, our main cereal brand, we have got — and we are setting even tighter profiles around what is acceptable in terms of sugar and salt, and they will become the norm internationally and they are within what we regard as close to the dietary guidelines. It’s a very good point because I mean I — for many people hopefully breakfast is an important meal, and particularly for children.

I think we’ve grown up in a culture of increasingly adding the sugar and adding the salt. I think if any of you — I’m sure you’ve probably read the book, The End of Food, by Tom Roberts. Hopefully if Kelly hasn’t made it required reading after reading his book of course, I would recommend that it should be required reading. It’s — when you read the book, you get a sense of how the salt and the sugar got in there in the first place, into many of the products, and how the food conglomerates got to where they are today.

When I stood back and thought about the book, what struck me was that there were small decisions made all the way along the line, over fifty years we’ve been making these decisions without having a broad strategic framework within which to make them, and not thinking about the untoward effects. It hasn’t been necessarily mal-intent. Something that maybe the marketer said, we increase sugar we’ll probably make the sweetness will go up, kids will probably like it. Let’s — so we’ll be able to sell more. Who knows whether that was the case.

Getting out of that now and reversing it requires us to think a lot more strategically, not just about taking the salt down or the sugar down, but how you do it in a way in which you don’t switch consumers who now like the sugar into an event more unhealthy category to actually go an compensate for sugar? Or for salt? That’s the big fear.

The example I use is what happened on saturated fats in the 70s. When we all said, we’ve got to lower saturated fats because of the cholesterol and the cardiovascular consequences. How did industry respond? Well, I think two untoward effects happened. First, to maintain taste they pushed up the sugar levels in yogurts and dairy products, and at the time the public health folks never said anything that that was something they shouldn’t do, but they just did it because they saw that they maintained a consumer base.

The second was the drive towards hydrogenated oils and then the start of the Trans fat scare. That was the other way you did it. They created two new problems, sugar and dairy products and Trans fats in a wide range of products, off what was originally a base of trying to lower saturated fats.

Now when we look at how we’re going to lower sugar supply, or salt in the food supply, we need to be much wiser, and have a wider group of people from academia, research and whatever, think carefully not about just the direct effect of lowering it one category but the effect across the food system and across food preferences. One more, yes at the back there —

Student: [inaudible]

Dr. Derek Yach: Well I think in schools that actually are — four key things that we need to do. The first two, which are partly under our control, are marketing to kids and trying to move towards a market-free school environment. Second, the content of food that’s available through the food services and the vending machines; that’s what some of the progress in the U.S. is being achieved on.

The two which are less directly under our influence, nutrition education and physical activity, we believe first of all we have a powerful advocacy role with the rest of civil society to demand the government do what government doesn’t do, and that’s invest properly in physical education programs and quality education around nutrition in schools.

We think we can play a role, not necessarily through the corporation, because the fear of doing it through the corporation is that you then are accused of putting your branding out and trying to get involved in public policy issues. But certainly through the philanthropic arm of your foundation, supporting groups who might want to go and test and develop innovative school programs. The one which our foundation has supported in the U.S. has been Summerville through Tufts. Summerville is one of the well-evaluated school programs. It includes all of those components, and we believe it’s starting to show an effect. Similarly, there are other school-based programs starting to show an effect.

So I would draw the distinction between what we need to do in terms of our mainline core business. We have the capability to address marketing and the products in schools. We should be doing more on that, but we need to do it in partnership the education and activity components.

[end of transcript]

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