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Apr 25, 2016 @ 23:11

Here are the lessons sugar can learn from big tobacco

Big food companies have achieved pariah status, with sugar taxes already implemented in Mexico and France and a levy planned for the U.K. in two years’ time. Last week, sugar producer Associated British Foods accused the government of trying to demonize the product and questioned whether that strategy would help reduce obesity rates.

But it is just that outsider status that has helped lift tobacco companies’ performance. Over the past five years, big tobacco has handed investors a 101 percent total return, according to Bloomberg Intelligence’s Global Tobacco Product Manufacturing index, well ahead of the MSCI World Index’s 42 percent. That is a phenomenal performance for a class of securities shunned by some investors on ethical grounds.

Slapping taxes on cigarettes has hurt the volume of sales. But it also made it easier for tobacco companies to slip through price increases. Food companies need to use emerging sugar taxes to take control of pricing. Big tobacco has traditionally been reluctant to engage in price wars. Not so the food sector, which often gets dragged into supermarket price skirmishes.



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