Obesity litigants may target Cadbury

Cadbury Schweppes, the UK soft drinks and snacks giant, is the European food manufacturer most at risk of being sued by consumers claiming that its products contribute to obesity, according to a research report by JP Morgan.

The maker of Jelly Babies, Dairy Milk chocolate, Dr Pepper and Slush Puppie, ranks second only to America's Hershey corporation in a league table compiled by the US investment bank of food producers exposed to obesity-related lawsuits.

Growing concerns that the food industry will go the same way as tobacco and face a barrage of crippling damages claims forced Kraft, the world's second-biggest food manufacturer, to announce earlier this week that it is cutting the amount of fat and sugar in its products and reducing the size of portions.

The JP Morgan research says that the rise in obesity to "epidemic" proportions, with more than 1 billion of the world's population overweight, poses a serious threat to the food industry. It increases the risk that advertising, labelling, and distribution will be more tightly regulated and it will force manufacturers to overhaul their marketing practices and spend more on consumer education and research. "This is not good news for volume growth or margins," says the study.

Two lawsuits have been filed against McDonald's since summer last year claiming its products contributed to obesity and although the first case was dismissed, the second is still ongoing. JP Morgan's London-based analyst Arnaud Langlois said: "We believe one thing is certain - well capitalised law firms with a wealth of experience in tort action lawsuits in tobacco and asbestos will continue to target the deep pockets of the food companies."

The research lists Hershey, the US manufacturer of the eponymous chocolate bar, as most exposed to the obesity risk, followed by Cadbury, Coca-Cola, PepsiCo and Kraft, which is owned by Philip Morris. Unilever, the Anglo-Dutch food giant behind brands such as Pot Noodle and Findus beefburgers, ranks 11th.

JP Morgan says 88 per cent of Cadbury's group sales fall into the category of "not so healthy" food compared with 95 per cent for Hershey and 23 per cent for Unilever. "Among the European food players, Cadbury is most exposed to obesity concerns. This is the result of its large soft drinks, sugar and chocolate confectionery business," says the research.

However, it says some food companies could benefit by being seen as a "hedge" against obesity because of the perceived healthiness of their products. The research lists the French yoghurt manufacturer Danone top of the league, with 80 per cent of its food products classed as "healthy". Unilever ranks 10th in this list with 61 per cent of its food range deemed to be in the "healthy category".

The number of obese people in the world has risen by 50 per cent in the past seven years and globally there are estimated to be 300 million obese adults. In the US, 30 per cent of adults are obese while in Europe, 135 million people are affected by obesity.

A battle is raging between the food lobby and health experts as to whether the cause is increased consumption of unhealthy foods or lack of exercise.

A spokeswoman for Cadbury's said: "We regard obesity as a very important social issue and we are working with the Government and the World Health Organisation to develop ways to tackle it. One of the main causes seems to be lack of exercise whereas calorific consumption levels are dropping in the UK."

However, the JP Morgan note quotes a study in January this year by the Harvard Institute of Economic Research which concluded that snacking was responsible for the rise in obesity in the US, not lack of exercise.