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FIGHTING FATA ROLE FOR FOOD RETAILERS
Copyright © 2016 Oliver Wyman 2
21.3Germany19.1
Belgium18.3
Austria
16.6Sweden
…AND COSTING THE NHS MORE TO TREAT
…AND THE SITUATION IS GETTING WORSE…UK OBESITY PREVALENCE IN % (1993–2014)
NHS SPEND £ MM
0
15
30
24.9UK
15.6France
% OBESE
…AND PREVALENCE VARIES BY LOCATION
% OBESETHE UK IS ONE OF THE MOST OBESE NATIONS IN EUROPE…
21.6Portugal
24.1Spain 17.2
Italy
Lowest
Low
Medium
High
Highest
FIGHTING FAT FACT FILE
…OR 27,200 LONDON BUSES
24.5Ireland
20
24
28
32
Leastdeprived
Mostdeprived
…THAT’S 2.4 MM BARRELS’ WORTH…
THE NATION N
EEDS
TO LOSE 343 MM
KG
OF FAT…
THAT’S 2,400,000,000 EXCESS CALORIES FROM…
Non-alcoholic drinks
Biscuits, buns and cakes
Sugar, preserves and confectionery
Dairy products
Savoury food Other
Alcoholic drinks
27%
11%
25% 20%
6% 6%5%
OBESITY DISPROPORTIONATELY AFFECTS THOSE INLOWER SOCIOECONOMIC GROUPS…
0 8,0004,000
2050
2015
9,700
5,100£
£
3Copyright © 2016 Oliver Wyman
FOREWORD
Welcome to Fighting Fat, a report that addresses the obesity crisis
in the UK by positioning large supermarkets as health and wellness
champions.
In January 2016, Oliver Wyman led a session at the World Economic
Forum in Davos entitled Sugar, obesity and diabetes – the other
global food crisis. In the discussion it was clear that harnessing the
positive contribution from the food and retail industries could deliver
real change.
After the Davos session and the UK government’s announcement
of a levy on sugary drinks, I challenged my retail team to come up
with a proposal for how the big retailers in the UK can leverage their
position to make a real difference in the nation’s weight. Crucially,
this had to be profitable for the retailer’s business.
The end result – this report – bundles together the historically
fragmented approaches of managing obesity – such as community
health checks, promotion of physical activity, and food labelling
initiatives – into one programme owned by food retailers. And the
benefits to their businesses are driven through increased customer
loyalty at a lower (or similar) long-term cost compared to a traditional
reward scheme and an enhanced brand position with a personal,
emotional connection.
The ideas may at first seem straightforward, but bringing them all
together in this setting has not been done before. Whether it is a
programme like the one we describe or a variation of it, the retailer
who makes the first move to claim the health and wellness crown will
surely see the biggest benefits to its bottom line. Going “all in” for
a health programme like this may be the differentiator needed for a
business feeling the squeeze from online and discount competitors.
I hope that this report provides a starting point of ways to benefit
both your business and the health of the nation.
Dr Nick Harrison
European Retail Practice Co-Leader
Dr NICK HARRISON [email protected] +44 20 7852 7773
4Copyright © 2016 Oliver Wyman
5Copyright © 2016 Oliver Wyman
INTRODUCTION
Obesity-related ill health in the UK is currently costing the NHS £5.1 billion per year and
this is likely to grow to £9.7 billion by 2050. Just to lower the average BMI to 25 (at the top
end of the healthy range) requires each adult to lose 6.1kg – equivalent to a 2.4 billion barrel
supertanker of fat (or 27,200 London buses).
At its most basic level, the obesity epidemic can be solved if consumers followed the simple
equation shown in Exhibit 1.
Many different stakeholders have proposed initiatives in an attempt to tackle the obesity
challenge. However, these initiatives are typically only focused on a single element of the
weight loss equation. For example, sugar consumption is in the headlines and is an important
part of the problem, but this campaign misses the opportunity to encourage healthier habits
like exercise. In addition, poorly targeted taxes and education campaigns can have the effect
of driving consumers to unanticipated outcomes, such as switching from sugary foods to
fatty ones.
We believe that the big supermarket retailers in the UK are in a position to address
both components of the weight loss equation, driving improved loyalty, with minimal
government intervention.
Exhibit 1: The weight loss equation
EAT HEALTHIER
Less sugar
Fewer saturated fats
Smaller portion size
Drink enough water
Less salt
BE MORE ACTIVE
More weight bearing exercise
More cardiovascular exercise
Less sedentary
LOSE WEIGHT
Body uses up fat storesinstead of creating them
Larger muscles burn moreenergy when at rest
Copyright © 2016 Oliver Wyman 6
WHY SUPERMARKETS ARE THE ANSWER
In the UK, the big supermarket chains are positioned to be able to influence customer health
habits in a way that could be very positive for their business while also delivering big health
benefits for their customers. The big four UK grocers cover 70% of the total UK retail spend and,
together, come into contact with a large percentage of the UK population every month.
By providing a range of simple services that make weight (and health) management easier,
retailers could encourage customers to both eat more healthily and increase their activity levels.
The key to delivering sustainable benefits is being able to connect changed habits to improved
outcomes. Unlike many stakeholders involved in health and wellness, the big grocers are able to:
1. Encourage people to eat more healthily
2. Encourage people to increase their activity levels
3. Measure health and wellness outcomes and link them back to shopping habits and activity levels.
In our view, a grocer that provides these services will find it creates a strong reason for
their customers to keep shopping with them, and – as described in our report The Future Of
Loyalty – this will protect against third parties coming in between them and their customers.
7Copyright © 2016 Oliver Wyman
1. MAKING BETTER FOOD CHOICES TO EAT MORE HEALTHILY
The current traffic light system for food products is complicated and can be confusing
to customers. It requires a customer to make mental trade-offs between five different
categories (calories, sugar, fats, saturates, salt). Is a product that’s green on fat but red
on sugar better or worse than the other way round?
To simplify the choices for customers, we propose switching to a points system
calculated at the product level and then combined at the basket level.. Instead of five
indicators each with three levels (high, medium, low), each product label could show
only two figures:
1. A Health Score ranging from -2 (unhealthy) to +2 (healthy), based on the overall nutritional value
2. The number of portions the pack contains.
These scores will help customers make healthier choices by clearly identifying which
products are better for them.
At the checkout, the Health Score and the portion count would be combined, providing
an overall score for the whole shopping basket (see Exhibit 2). This would help the
customer quickly asses the healthiness of the range of food they are buying for
their family.
Government guidance would be required to set the framework for these health scores,
for example by mandating the rules covering calories, sugar, fats, saturates, and salt per
portion that, when combined, calculate the overall Health Score. This guidance could
even change over time (given sufficient notice) to encourage food manufacturers to
over time to change their recipes to create healthier products.
Exhibit 2: Creating a basket-level scoring system for healthiness
Sugar per 100g 8.5g 6.5g 21g 17.2g 12g 10.6g
Calories per 100g 59 82 103 366 47 42
Calories per serving 88 123 116 213 70 139
Example Health Score per portion +1 -1 +1 -2 +2 -1
Number of portions 6 6 +4 6 8 8
Health Score for shop 6 -6 +4 -12 +16 -8
RegularFatFree
Copyright © 2016 Oliver Wyman 8
2. ENCOURAGING CUSTOMERS TO INCREASE ACTIVITY LEVELS
While grocers do not directly control customers’ activity levels, we think they can play a role
in encouraging people to be more active. There are several different ways retailers could
help customers track their activity levels. Many customers will already have activity monitors
(such as Jawbones and FitBits) and the retailers could link to this data, or the customers could
self-report by text, app, and email (with regular reminders from the grocer). For customers
who do not have an activity monitor, the retailers could even provide their own technology
solution that uploads directly to their database – which may not be as expensive as first
appears. When you consider many retailers already give families around a £50 discount each
year as part of their existing loyalty programme, offering a health monitor instead begins to
look more cost-effective.
There are other ways that retailers can use their assets to help improve activity levels. For
example, many of the grocers have stores with excess space. In these, we see a set-up where
the grocer builds gyms to fill some of the space. Attendance at the gyms and their fitness
classes could be tracked via the swipe of a loyalty card. All the activity data could then be
included on the shopping basked score: for example, every 10,000 steps could give a bonus
activity score of +2.
3. MEASURE HEALTH AND WELLNESS OUTCOMES AND LINK THEM BACK TO SHOPPING HABITS AND ACTIVITY LEVELS
A powerful part of the proposition will be showing customers how their activity and
shopping habits feed in to their health outcomes, helping them make informed decisions
and trade-offs. Each shopping visit to the supermarket would be an opportunity for the
grocer to monitor customers’ key health indicators – weight, BMI, blood pressure, and
so on – and to give advice as well as specialist services such as diabetes monitoring.
Many big supermarkets have large amounts of excess space in their stores. They could
use this space for walk-in clinics as well as other health services (such as gyms with fitness
classes, adding another reason for customers to visit the stores). Modern equipment (such
as smart scales) means customers could go through a five-minute (or less) health check in
these walk-in clinics. Where needed, the customer can also be offered personalised advice
linked to their shopping and activity habits. These can be tracked on an easy-to-use app or
web platform enabling customers to quickly compare their shopping and activity logs to the
health outcomes they see in the check-ups.
This will not require a big change to the grocers’ existing capabilities. They already collect
huge volumes of data to enable them to manage their businesses more effectively. They
have an excellent track record of building sophisticated databases and keeping sensitive
information private. The combined databases can be used as a national wellness database
by the government and NHS to shift their care models from reactive and repair-oriented to
proactive systems focused on prevention (see our report Measuring Wellness).
9Copyright © 2016 Oliver Wyman
As well as working to improve health at the level of individual shoppers or families, the
information collected could feed in to a digital community. This approach would allow friends
or colleagues using the same grocer to compare progress and the competitive element
this introduces could incentivise higher scores. Building this sense of community is likely to
make the service more engaging for customers and, we believe, will increase their loyalty for
retailer providing this service. In the UK, healthcare solutions can now be purchased from
both NHS and private providers. Therefore if the provision is high-quality and the prices
are favourable, commissioners could purchase health monitoring and related services from
grocers, which could help to offset some of the grocer’s costs.
Copyright © 2016 Oliver Wyman 10
Copyright © 2016 Oliver Wyman 11
CONCLUDING REMARKS
By redefining themselves as health and wellbeing brands, and building customer loyalty
through healthy living programmes, supermarkets are poised to create unique customer
propositions. Consumers will get the advice they need to improve their health, translating
into savings for the NHS.
This is a solution where everyone can benefit (as summarised in Exhibit 3), and which could
transform the waistline of an entire nation.
Exhibit 3: Stakeholder benefits of retail-based health and wellness services
SUPERMARKETS CONSUMERS GOVERNMENT/NHS
Increased customer loyalty
Enhanced brand position
Economic benefits
• Own brand healthy options likely
to be higher margin1
• Cheaper than % loyalty scheme
• Reduced basket splitting
• Ability to provide customers with
better, targeted offers/coupons
Positive reinforcement to make
better choices and sustain them
Helpful, easy-to-access
health support
Improved quality of life
Easy access to own information
Reduced health inequalities
Improved access to health services
Potential to build a robust National
Wellness Database2
Saves NHS money
Improving society’s relationship
with food in the long term
1. Production and manufacturing costs tend to be lower for fat-free or lower-sugar formulations
2. See our previous report Measuring Wellness
Oliver Wyman is a global leader in management consulting that combines deep industry knowledge with specialised expertise in strategy, operations, risk management, and organisation transformation.
In the Retail practice, we draw on unrivalled customer and strategic insight and state-of-the-art analytical techniques to deliver better results for our clients. We understand what it takes to win in retail: an obsession with serving the customer, constant dedication to better execution, and a relentless drive to improve capabilities. We believe our hands-on approach to making change happen is truly unique – and over the last 20 years, we’ve built our business by helping retailers build theirs.
www.oliverwyman.com
ABOUT OLIVER WYMAN
CONTACTS
Copyright © 2016 Oliver Wyman. All rights reserved.
JAMES BACOS
Global Retail Practice [email protected]
+49 89 939 49 441
CHRIS BAKER
North American Retail Practice [email protected]
+1 312 345 2965
WAI-CHAN CHAN
Asian Retail Practice Co-Leader [email protected]
+852 2301 7500
BERNARD DEMEURE
French Retail Practice [email protected]
+33 1 4502 3209
NICK HARRISON
European Retail Practice [email protected]
+44 20 7852 7773
RICHARD McKENZIE
Asian Retail Practice Co-Leader [email protected]
+86 21 8036 9320
MARÍA MIRALLES CORTÉS
Iberian Retail Practice Leadermarí[email protected]
+34 615 036 406
SIRKO SIEMSSEN
European Retail Practice [email protected]
+49 89 939 49 574
FREDERIC THOMAS-DUPUIS
North American Retail Practice [email protected]
+1 514 350 7208
