Last week, in Issue No. 126, we explored America’s sedentary way of life and the crisis of inactivity.
The punchline? Physical activity, not exercise or fitness, should be a top priority.
But, moving more is only one piece of the puzzle. So today, we’ll look at Big Food’s role in the obesity epidemic — and what can be done about it.
Edible Foodlike Substances
Ultra-processed foods have come to define the US diet.
- Nearly 60% of the calories consumed by Americans come from ultra-processed foods like soft drinks, cereals, and packaged snacks.
- Among the top 25 food manufacturers in the US, 86% of products are classified as ultra-processed.
Researchers have defined ultra-processed foods this way:
“They are not “real food” but formulations of food substances often modified by chemical processes and then assembled into ready-to-consume hyper-palatable food (cosmetic food).”
As Michael Pollan, author of books like The Omnivore’s Dilemma put it: we’re not eating food, we’re consuming “edible foodlike substances.”
Cheap and easy to access, ultra-processed food is wreaking havoc on our well-being.
- Eating ultra-processed foods leads to excess calorie intake and weight gain.
- Consuming ultra-processed foods increases risk of chronic ailments like heart disease, diabetes, and obesity.
Speaking to the NYT, Harvard research scientist Zachary J. Ward said, unless the reliance on processed food is reversed…
“Obesity will be the new normal in this country. We’re living in an obesogenic environment.”
As consumers, we choose what to buy. And we decide how much to eat. But eating well isn’t purely a matter of willpower.
According to The Lancet Commission on Obesity, Big Food is partly to blame.
In a 2019 report, the commission cited the industry’s influence and growth focus as contributing to the global obesity epidemic. The opposite of abundance, concerns related to malnutrition and access to healthful food were raised. More damning, the report characterized Big Food as the new Big Tobacco.
As William Dietz, a professor at George Washington University and an author of the report, said in a statement:
“Although food clearly differs from tobacco because it is a necessity to support human life, unhealthy food and beverages are not. The similarities with Big Tobacco lie in the damage they induce and the behaviors of the corporations that profit from them.”
While industry executives publicly dispute this portrayal, it has long been a topic of discussion behind closed doors.
In a NYT article entitled The Extraordinary Science of Addictive Junk Food, author and journalist Michael Moss details a 1999 gathering of food industry CEOs. At the meeting, the tobacco comparison was drawn by Kraft’s then-vice president Michael Mudd, who said:
“As a culture, we’ve become upset by the tobacco companies advertising to children, but we sit idly by while the food companies do the very same thing. And we could make a claim that the toll taken on the public health by a poor diet rivals that taken by tobacco.”
The message was not well received. According to Moss, the meeting ended when Stephen Sanger, former General Mills chief executive, said he would not alter his company’s recipes — taste would remain the priority.
In the years that followed, as Moss detailed, Big Food undertook a “conscious effort” to get consumers hooked on convenient and inexpensive options.
The New Consumer
Opting for healthier alternatives, younger generations have turned their back on Big Food.
- Private label CPG sales grew at twice the rate of name brands in 2019, totaling $146B.
- In 2020, smaller CPGs and private labels gained $12B in sales, marking the fifth consecutive year that large manufacturers have lost market share.
Acknowledging this fact, in 2015, then-Campbell Soup Company CEO Denise Morrison said:
“We are well aware of the mounting distrust of Big Food. We understand that increasing numbers of consumers are seeking authentic, genuine food experiences and we know that they are skeptical of the ability of large, long-established food companies to deliver them.”
Reluctant to change and slow to adapt, large food manufacturers failed to keep pace with shifting consumer preferences.
According to a Piper Sandler report, food is Gen Z’s top spending priority — with 54% of teens preferring healthy snacks. And, as we previously noted in Issue No. 25, Gen Z: The Ultimate Wellness Consumer, this generation wields $143B in spending power, signaling a sustained and lucrative shift to healthier options.
Playing catch-up, large food and beverage companies have begun to evolve.
Unilever is targeting $1.2B in alternative protein sales in the next five to seven years.
Nestlé expects sales of its health nutrition business to reach $4.4B by the end of 2021 as the company expands in personalized supplements and allergy treatments.
Mondelēz acquired healthier brands like Enjoy Life, Hu, and Perfect Snacks to advance its “Snacking Made Right” strategy.
PepsiCo has launched drinks like Bubly, Drift, and Frutly in hopes of appealing to younger consumers while also partnering with Beyond Meat for plant-based drinks and snacks.
But, much like last week’s issue on physical activity, the question remains: Are we solving the most pressing problems for the largest number of people?
If moving more is the answer to ending inactivity, then heeding advice as simple as Michael Pollan’s “Eat food, not too much, mostly plants” would go a long way for most people.
Of course, there’s not much money to be made from everyone walking more and eating less.
🎙 On the Podcast
This week, on the Fitt Insider podcast, we’re joined by Jason Karp, founder and CEO of HumanCo — a holding company of health and wellness brands.
In this episode, we discuss:
- Starting Hu Kitchen and selling to Mondelēz
- Investing in, incubating, and acquiring brands
- Building the Berkshire Hathaway of healthy living
- Launching a $250M SPAC targeting health and wellness
Listen to the full episode here.
📈 Market Watch
Xponential Fitness is planning a public offering that would value the company at $1.3B, according to Bloomberg.
A holding company of boutique fitness brands—including Pure Barre, Club Pilates, CycleBar, YogaSix, StretchLab, Row House, Rumble, AKT, and Stride—Xponential intended to IPO last year, but the pandemic derailed those efforts.
- Despite the pandemic, Xponential posted $435M in revenue last year.
- The company opened 240 new studios in 2020, 40% less than in 2019.
- Xponential recently acquired Rumble for a reported $300M.
TBD. While the brick-and-mortar industry suffered in 2020, gym and studio operators remain optimistic that members will be anxious to return.
💪 Yoga, Pilates, Toning
F45 Training introduced FS8, a new studio concept that combines yoga, Pilates, and toning in a 45-minute, circuit-based workout.
What it is: The low-intensity/impact version of its HIIT-based F45 program, FS8 classes utilize a Reformer, mat work, light weights, and resistance bands.
The plan: Following the blueprint of its parent company, FS8 launched in Australia, where it looks to gain a foothold. In 2021, the goal is 50 flagship studios across the country, followed by as many as 500 studios in coming years.
The big picture: F45 Training is a fast-growing fitness franchise with over 2,000 studios across more than 60 countries.
Early in 2020, the company was planning an IPO. Then, F45 entered into an agreement with Crescent Acquisition Corp to go public in a SPAC merger but pulled the plug, citing pandemic-related uncertainty.
Looking ahead. Taking a portfolio approach could be the key to sustained success. Equinox and Xponential Fitness have proven the model. Last year, Barry’s launched its own cycling studio to diversify. And with FS8, F45 is the latest boutique brand to follow that playbook.
China’s smart fitness startup Fiture raised $300M in Series B funding for its AI-powered workout mirror. The company had previously raised $91M since August 2019 from investors including Tencent and Sequoia Capital China.
Why it’s interesting: The Peloton of ‘X’ category has gone international.
- TREAD recently launched its smart bike in India.
- VAHA is an interactive workout mirror out of Germany.
- Volava is building a connected fitness platform in Spain.
A trend from the 2021 Fitt Insider Outlook, fitness is in the early stages of international expansion: “The global fitness and physical activity economy will reach $1.1T by 2023, with Asia, North America, and Europe accounting for 90% of the current spending.”
Patent wars. As US-based companies like Peloton, Echelon, and ICON Health & Fitness become increasingly litigious, the new class of international connected fitness startups begs the question: What technology is truly defensible?
📰 News & Notes
- Athleta sets up shop in Canada.
- Amazon is opening a London hair salon.
- Warning: “Stop using the Peloton Tread+”
- Regular exercise protects against COVID-19.
- lululemon will pilot Like New, a resale program.
- Plant-based “Nuggs” brand eyes $40M in sales.
- Apple Fitness+ adds workouts for pregnancy, older adults.
- The $10B business of perimenopause [Reread: Femtech 2.0]
💰 Money Moves
- Virta Health, a diabetes reversal program, closed a $133M Series E funding round led by Tiger Global Management, valuing the company at $2B.
- China’s smart fitness startup Fiture raised $300M in Series B funding for its AI-powered workout mirror.
- Athletic apparel maker and CrossFit favorite NOBULL raised new funding at a $500M+ valuation.
- Theragun-maker Therabody acquired PowerDot, a smart muscle stimulator.
More from Fitt Insider: The Big Business of Recovery
- Scarlett Johansson invested in health and wellness holding company HumanCo, becoming the creative director of its Snow Days brand.
- Astrology app Co–Star secured $15M in Series A funding led by Spark Capital.
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- Hallow, a Catholic meditation and prayer app, raised $12M in Series A funding led by General Catalyst.
- Legacy, a digital fertility clinic for men, closed a $10M Series A led by FirstMark Capital.
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- Supplement startup Feel raised $6.2M in funding led by Fuel Ventures.
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- Better-for-you ice cream maker Nightfood raised $4.5M in funding.
- Precision medicine company adyn closed a $2.5M seed round of funding to develop personalized birth control.
- Tulip, an egg donor database and resource for intended parents, closed a $1.7M seed round.
- Arli, an Australian addiction support platform, raised a $1.9M seed round.
More from Fitt Insider: Ending Addiction
- Atlast Food Co. raised $40M in Series A funding for its mycelium-based “mushroom meat.”
- Plant-based meat producer Hungry Planet secured $25M in funding.
- Outside acquired Cairn, makers of a subscription box of curated outdoor goods.
Listen in: Outside CEO Robin Thurston on the Fitt Insider podcast