Eatwell economics report: Executive summary

Introduction  

The report analyses a transition to the Eatwell Guide in detail, investigating the implications for retailer profitability alongside the opportunities & challenges for industry, government and consumers to adopt healthier diets. 

To explore the requirements of a structural shift to the Eatwell Guide, IGD partnered with Frontier Economics to model the impact on retailer profitability if consumption patterns aligned completely with the Eatwell Guide (EWG).  

Health & sustainability diet challenge 

Obesity has doubled since the ‘90s and now more than one in five children leave primary school with obesity. The UK food system accounts for over one third of the UK’s greenhouse gas emissions and the total direct and indirect health-related costs of the UK diet is £370 billion. 

Eatwell Guide - A healthy diet will positively impact the economy   

To meet the EWG a structural shift is required to overcome the obesity crisis and improve the population’s diet within planetary boundaries. Currently under 1% of the population meet these guidelines.  

Transitioning to the EWG could save UK society over £211 billion and generate 17.9 million additional healthy life years. Dietary greenhouse gas emissions could also fall by 30%. A healthier nation would be a more prosperous one. 

Significant dietary shifts are required to achieve the Eatwell Guide   

A large increase in fruit and vegetables and carbohydrates, with a reduction in protein, discretionary foods and dairy is required to meet the Eatwell Guide. 

Aligning to the Eatwell Guide would reduce retailer profit under current economic models 

Aligning to the Eatwell Guide poses a significant profit challenge to retailers. The growth in profits of fruit and vegetables and starchy carbohydrates isn’t enough to offset the decline in profits from protein, discretionary foods, and dairy.  

This modelling is based on consumption data (NDNS) and average gross profit of the EWG categories; there may be significant differences compared to retailer purchase level data and within EWG category variation. The change in profit assumes all else is equal, without any response from the market or growth of population. 

To encourage healthier, more sustainable diets; a food system that makes healthier, more sustainable choices the default needs to be not only commercially viable, but advantageous for businesses. 

The report focuses on three key consumption shifts in more detail, looking at the opportunities and challenges for the food industry. 

• Increase in Fruit and Vegetable  

• Decrease in discretionary foods  

• Protein transition  

There are opportunities & challenges to drive UK fruit and veg growth 

Fruit and vegetables would need to grow in volume by a third to meet EWG targets. Requiring 3.5 million additional tonnes of imports per year unless UK domestic production expands. Doubling protected cropping could add £421 million in value and create 20,000 jobs. 

It’s crucial that UK horticulture is strengthened to not only to meet demand, but also to reduce the UK’s reliance on imports & improve supply resilience, when nearly half of the UK’s fruit and vegetable imports are projected to face climate threats by 2050. 

Awareness alone won’t increase consumer demand. The 5-a-Day campaign has 90% recognition, yet fewer than one in five adults meet the recommendation. Reshaping the food environment both in retail & out of home through placement, promotions & communication, reformulating products/menus to include more fruit & vegetables (F&V) and normalising higher F&V intake to make it the cultural default will be needed to drive the change.  

Reducing protein is a financial risk for retailers 

Margins on red meat and poultry are thin, but the high volume and average price per unit make protein a major profit pool for retailers. It also drives footfall: meat is central to most weekly shops. Reducing protein consumption by the 40% required by the EWG would threaten not just margins, but the core economics of the supermarket. 

Which protein categories need to decrease/increase is not stated within the EWG and so how that journey is made by industry and consumers is likely to differ based on their portfolios and preferences, respectively. A stepped transition, for example processed red meat to red meat, provides a more practical pathway for industry, farmers and consumers.  

There is an opportunity to make improvements in emissions through production methods as well as diet change. Economic resilience needs to be anchored to human and planetary health, decoupling what is produced from what consumed.  

Discretionary foods play a major role in current retail profitability and revenue 

Discretionary foods would need to reduce by two thirds to align to the EWG, it’s more than high revenue and profit margins that make it difficult for the food system to move away from discretionary foods. A significant share of supplier funding flows through unhealthier product lines, and promotions disproportionately drive additional unplanned purchases of these categories. 

Reformulation has delivered some of the most effective health improvements to date. Premiumisation, innovation and portfolio diversification also offer routes to transform the category while improving public health. Growing legislation is making investment in healthier products a commercial as well as a social imperative. GLP-1s usage trends also point to a decline & change in discretionary foods consumption.  

How Government and Industry could enable population diet change 

Industry and government must move together.  

For industry: Execute a health and sustainable diets strategy, the IGD Framework for population diet change can support this; Implement healthier sales reporting across retail, manufacturing and out-of-home; rebalance supplier funding toward future demand; and collaborate with government to align supply chains with EWG growth categories. 

For government: establish a clear, long-term regulatory roadmap so industry can plan and invest with confidence; introduce healthier sales reporting effectively to level the playing field & drive public health improvements; work with the food industry to incentivise and shift supply and demand of healthier foods.  

Read the full report 

The Eatwell Guide sets out where we need to get to, the IGD Eatwell economics report sets out the challenges and opportunities to get there. The question is no longer whether change is needed, but the pace & how it can be delivered. 

Read the IGD Eatwell Economics report and connect with IGD Health team for more information.