The waning appetite for marketing junk food in Asia

Over the past 12 months, the 136-year old Fraser & Neave (F&N), a beverage and snacks maker based in Singapore, has been busy recasting its business. The firm has been hustling to reformulate three-quarters of its portfolio, spending over $7 million to meet increasingly stringent laws around sugar intake that aims to shrink retail consumption of colas by 9 million litres and energy drinks by 21 million litres, by 2023.

Over the past year, several companies such as F&N, PepsiCo and Mondelez have taken a tough call to diversify their portfolio to include healthier—and compliant—beverages and snacks in their kitty. As countries including India, China, Singapore, Japan, Malaysia, Vietnam and Thailand tighten the screws on sales of unhealthy products with taxes, consumer awareness programs, restrictions and looming outright bans, these firms have hastened to rethink their brand portfolios.

Asia is today facing up to a problem of plenty—and it is causing cascading health issues. In Thailand, daily sugar intake has increased from 19 teaspoons a day in 1997 to 28 in 2019 and southeast Asia now accounts for about a fifth of all diabetes cases globally.

According to some estimates, countries in the region have seen the world’s largest increases in premature deaths related to cardiovascular disease in the past 20 years, even as obesity-related epidemics account for almost 20% of healthcare budgets for nations such as Indonesia and Malaysia. India, meanwhile, is the diabetes capital of the world.

Contentious regulation

For starters, is a steep tax or cess on these new sin categories the way out? Can Buharali, director of corporate and government affairs for Asia Pacific, Middle East & Africa (AMEA) with Mondelez, disagrees that selective taxation is an effective means to addressing health and wellness concerns. The company sells Cadbury, Bournvita and Oreo and is rightly concerned that its brand portfolio could be hurt by onerous regulation.  

“There is little, if any, evidence that taxing certain foods and beverages affects consumer purchasing behaviour, or improves access to healthier foods,” he contends. “A broader, more comprehensive approach to improve diets, increase physical activity and education is the best way to ensure enduring change.”

However, given these constraints, what wriggle room do these categories, ranging from chips to chocolate, have in building their brands?

“As the world gets gripped by junk-food-triggered illnesses, restrictions on advertising and branding of these categories are inevitable,” says Seema Gupta, a professor of marketing at the Indian Institute of Management, a top B-school in India, in Bengaluru. “One way out is by diversifying into healthier variants to dilute this negative perception, and another alternative is surrogate advertising—more branding will happen in store instead of mass media or through sponsorships of events.”

Inevitably, given the sheer size of the opportunity in Asia, brands are focusing on building offerings which are healthier. In the case of soft drink makers such as Pepsico and Coca Cola, this means reducing the amount of sugar (or using substitutes such as Stevia) and promoting healthier beverage options.

The marketing challenge

A big part of the challenge for marketers is identifying—and hitting—the moving target that is a potentially toxic brand. “In a world which is becoming increasingly more health conscious, it stands to reason that there will need to be some sense of responsibility from manufacturers of products which can be bad for our health. But where do you end?” asks Chris Kyme, a veteran ad industry executive and co-founder of KymeChow, a marketing solutions company.

Opinions differ and change all the time. If there is any wiggle room for brands, then perhaps their altruistic purpose is in educating consumers, he contends, about how much consumption is good or bad. “Help to educate people about consumption. Or should it get to a point where we need to see health warnings on packs, as with tobacco?” Kyme questions.

Contentiously, the difference is that smoking is bad for you, whereas with certain foods and drinks, they are bad for you when you over-indulge, similarly alcohol. For consumers looking to latch into brands and their beliefs, it can be very confusing for people to know what to believe.

“The real future for these brands is to modify/innovate their product offerings so that they are not seen as being harmful or worthy of a sin tax,” says Richard Bleasdale, managing director at The Secret Little Agency. “We’d expect marketing investment in these ‘legacy’ products to drop substantially—the increasing damage to corporate reputation and brand equity … is not a smart decision for brand-led organisations”

Onerous regulation

The odds are lengthening for these brands, says Megumi Matsunaga, senior analyst at Euromonitor International, a research agency, because governments are not just taking (unhealthy) beverages and snacks, they’re prompting brands vending healthier alternatives to sell them cheaper.

“In Malaysia … the government has urged organisations to reduce the selling price of healthy food, such as vegetables and fruit … in a bid to combat the country’s rising diabetes prevalence, which is the highest in Asia Pacific,” he adds. “In the Philippines, since June 2018, popular sugar confectionery items, such as chews, marshmallows, lollipops and yemas (local sweets made of custard and condensed milk) have been included on the list of foods not allowed to be sold in school canteens.”

Source: International Diabetes Federation

In this constrained market, the alternate branding strategy to follow is one of moderate marketing for the moderate consumption future, says Harish Bijoor, a branding consultant. “In the past we have pushed for overt consumption that is deep and heavy,” he explains. “Marketers love big consumption… (they) even seem to love irresponsible consumption.” In this healthy new world, this attitude needs to change for the moderate, for brands to be relevant.

Bleasdale, informed by his lengthy career in the ad industry, says that as seen with previous “sin” categories such as tobacco and alcohol, a wide a variety of branding and advertising bans can be implemented—from an all-out banning of any traditional media channel advertising or retail trade marketing to modifications to product packaging to include both simple and highly graphic health warnings, running all the way through to the removal of any brand identifiers, messages, colours and images. Regulators can also ban all sponsorships and collaborations with certain interest-based lifestyle areas like sports and even on any communications with certain younger age groups.

“To counter this, brands will gravitate towards other marketing disciplines such as CRM, PR, experiential or even CSR activities, to maintain and develop brand positioning and consistency,” he adds. “Advertising-wise, brands tend to move more into digital/social channels, where regulations have tended to be lighter, and they can communicate more easily at a product or promotional level.”

Spencer Wong, CEO, M&CSaatchi Spencer, thinks that this shift is already underway. “These kind of brands are sharply refocusing their brand messaging on aspects such as health and wellness and away from (troublesome) topics of sugar and energy,” he says. “Over the next five or 10 years, they will be compelled to look at new messaging and formats to be heard.”

Change in the air

As these changes gather momentum companies are on the move, rushing to keep pace with changing regulations and mindets.

In India, for example, the beverage and snacks giant Pepsico is retooling its business to be perceived as a healthy vendor of eats and drinks, even as its business struggles for traction in a challenging market. “So far, we have made significant progress by reducing 5% to 25% sodium across popular variants of our snacks master brands, Lay's and Kurkure and reduced 15% saturated fat in the entire Lay's potato chips range,” says a company spokesperson.

The company is turning to science and R&D to reduce sodium but ensure taste parity to the existing formulation. “We have set challenging 2025 product sustainability targets," the rep adds. "We strive that at least ¾ of our food’s portfolio volume will not exceed 1.3 milligrams of sodium per calorie. We will also strive that at least ¾ of our foods’ portfolio volume will not exceed 1.1 grams of saturated fat per 100 calories."

In its mainstay beverages business, the company has launched at least a dozen new variants over the past five tears to try to boost its healthy portfolio. To try to promote a healthier brand, PepsiCo India, in October 2019 adopted FSSAI’s (the Indian food safety regulator) Eat Right School (Safe and Nutritious Food, @School) program, in line with company’s commitment towards creating awareness about safe food, healthy and sustainable diets.

“Our support … is an extension of our global commitment to transform our portfolio to deliver products with improved nutrition across our beverages and snacks portfolio,” Ahmed ElSheikh, President, PepsiCo India had said in a statement. “We … recognise the significance of promoting healthy, nutritious and safe food, and the need to support such interventions to drive a larger impact for the society. We plan to continue to scale our efforts to inculcate healthy food habits amongst the community."

Jumping aboard

Other companies too are hastily jumping aboard this healthy bandwagon. Mondelez, for example, is focusing on what it calls its three pillars of action to drive growth in a market in flux: expanding its portfolio of well-being brands, renovating and improving the nutrition and ingredient profile of biggest-selling brands, and continuing to push people to snack mindfully.

To do this, says Buharali, the company has launched several brand innovations to reel in health-conscious consumers. They include Bournvita Women (India—no added sugar/vitamins/minerals bundle), Belvita biscuits (China, Southeast Asia—made with wholegrains/source of fibre/source of vitamins and minerals) and Halls XS sugar free candy (Thailand, Malaysia). “In 2019 we achieved a goal to deliver 15% of our revenue from our portion control snacks. Our next goal is to grow portion control products to 20% of our global net revenue by 2025,” he adds.  

Sugary and sodium-laden foods certainly are among the largest new targets of marketing regulation, replacing sin stocks of old (alcohol and tobacco). But they likely won't be the last.

Brands that can best reposition quickly to stay in front of consumer trends and regulatory winds are far more likely to stay in the game for years to come.