With the economic crisis looming upon us, statistics have shown that a vast portion of the population is turning to junk food in order to cut cost on their food purchases. As this may seem like a good idea at first, we have decided to demonstrate the real cost of such actions both at a personal and society level.
Increase sales for Junk Food businesses in Economic Crisis
Consumer trending from January clearly shows that people are resorting more and more to Junk Food as a way to cut costs on their food purchases.
Examining financial reports from the major players in the junk food business reveals significant profit increase for January. These observations are directly correlated to the hardship of our economic situation. They show impressive bottom lines, which are, for most of us, unexpected effects of the recession.
As an example here is some statistics on the top player in the junk food industry:
“Cash-strapped consumers kept buying McDonald’s burgers and breakfast items in January, helping the fast food company post a 7.1% worldwide increase in same-store sales for the month (january)” – AP.
McDonald’s numbers are impressive, yet McDonald’s is far from being the leader in this junk food gold rush.
Wendy’s/Arby’s stocks were at $2.84 low on October 27, 2008. Since then, and in correlation with the development of the economic crisis, the stocks kept on rising to $5.28 as of February 26, 2009. This represents an 87% growth – AFP.
However Wendy’s/Arby’s is far from winning the race. In fact, the gold medalist, as far as my research showed me, is Dominos Pizza.
“A business which had not difficulty to stand out during tough times for the economy was Dominos Pizza. Consumers are opting towards low cost restaurants. The English company has show a 10% increase in revenues for 2008. On November 20, 2008, the stock price for Dominos was at a $2.83 low but has grown 150% to $7,08 as of February 26, 2009” – AFP.
Why does junk food seem to be cheaper?
Junk Food is designed to be marketed as a cheaper alternative to healthy foods. If you take out all health and other related costs junk food generates, at a pure dollar of calorie level, junk food is cheaper.
The University of Washington has done some research on the topic and provides us with a clearer understanding on how junk food might seem cheaper.
“The research has removed any nutritional values out of foodstuff and looked at cost on a dollar per calorie basis. In fact, “the findings, reported in the Journal of the American Dietetic Association, may help explain why the highest rates of obesity are seen among people in lower income groups.” – New York Times.
“The survey found that higher-calorie, energy-dense foods are the better bargain for cash-strapped shoppers. Energy-dense munchies cost on average $1.76 per 1,000 calories, compared with $18.16 per 1,000 calories for low-energy but nutritious foods” – New York Times.
“Although people don’t knowingly shop for calories per se, the data show that it’s easier for low-income people to sustain themselves on junk food rather than fruits and vegetables, says the study’s lead author Adam Drewnowski, director of the centre for public health nutrition at the University of Washington. Based on his findings, a 2,000-calorie diet would cost just $3.52 a day if it consisted of junk food, compared with $36.32 a day for a diet of low-energy dense foods. However, most people eat a mix of foods. The average American spends about $7 a day on food, although low-income people spend about $4, says Dr. Drewnowski” – New York Times.
These findings do relate to the increase sales for the junk food businesses. The main concern however is that it does not account for the medium to long-term costs created by the consumption of junk food. It also does not include the other essential nutrients to a healthy diet.
It does, however provide a good demonstration about why junk food might seem cheaper at a surface level.
Finally, whilst still doing some research I have found another interesting angle to this question on Benetton Talk:
“Basically a lot of junk food and junk food ingredients derive from carbohydrates and fats teased out of corn, soybeans and wheat. In the US these three commodity crops, along with cotton and rice, are hugely supported by the government under the farm bill, which ultimately leads to the overproduction of these commodities. The farm bill works by paying farmers with a check that grows exponentially with the amount of commodity crop bushels produced.
In comparison, fresh produce receives next to nothing from the government, which results in cheaper soft drinks(due to corn derived sugars) and more expensive fruits and vegetables.”
Not an official source of information but still an interesting concept to explore!
Junk food Businesses have invested interests
Junk food businesses are marketing machines using a medium to deliver commodities in which they have strongly invested interests in worldwide markets: sugars, salts, and fats for example.
“McDonald’s has practiced a backward vertical integration, by replacing most of its suppliers. It has done so to reduce costs(…). Soft drinks are supplied exclusively by Coca-Cola, which is also its ally. McDonald’s supplies also include raw material such as sugar” – McDonald’s Business Report.
NB: I am still looking for more official sources about junk food businesses market shares in such commodities! Please contact me if you find something!
Here is an excerpt from a report prepared by the National Alliance for Nutrition and Activity: From wallet to waistline: The hidden costs of super sizing:
“For food companies, the actual monetary costs of offering larger portions are small, because the cost of the food itself is small relative to labour, packaging, overhead, transportation, marketing, and other costs. Thus, even the relatively small amounts of extra money consumers spend when “upgrading” to larger portion sizes, mean larger corporate profits.
In addition to using price to encourage the purchase of larger portion sizes, fast-food restaurants, in particular, actively encourage consumers to “upgrade” to larger sizes with point-of-purchase displays and verbal sales prompts from employees. Fast-food establishments also encourage consumers to combine their entre with high-profit-margin, high-calorie soft drinks and side dishes like French fries (“Value Meal,” “Combo Meal,” etc.) — a technique known in the food industry as bundling.”
Some people have a different opinion about this topic. For example, when being questioned about the increase in sales McDonalds’ Chief Executive Jim Skinner said:
“McDonald’s continues to appeal to customers as we offer high-quality, affordable meal options and unparalleled convenience”- (AP).
If we look at junk food in supermarkets, there is another concept which explains junk food popularity as well as describes some other way junk food businesses have invested interests. Slotting Fees:
“Such high slotting fees make it very hard for smaller food companies to compete. The food companies able to afford these expensive fees usually sell junk food, containing very cheap ingredients. The money saved on ingredients is spent on advertising and expensive slotting fees. This is why junk food sections at the supermarket are so large and extremely visible, and also, very popular” – Pro Health Blog.
Cheaper production equates to more advertising and slotting capital.
What is defined as Junk Food
Junk Food or Fast Food are they the same?
In a vast quantity of articles, the terms ‘junk food’ and ‘fast food’ are used interchangeably without an appropriate understanding of the discrepancies between the two.
In fact, both terms are often related but have complete different meaning. The term ‘junk food’ refers to the quality and the nutritional value of a food product. ‘Fast food’ on the other hand defines space time according the preparation and serving times. ‘Fast Food’ is strictly a time attribute and does not take into consideration the nutritional values of foodstuff.
So, Fast food is not necessarily junk food. Sushi is a great example of ‘fast food’ not being ‘junk food’.
For this research we focus solely on Junk Food and take no consideration of the time it takes to prepare the meals.
What is defined as Junk Food?
Junk food was first coined as a term in 1972 by Michael F. Jacobson of the Center of Science in the public interest. From 1972 to today many of us have had our own definition of the term Junk Food. However the best definition found so far is as follow:
“Food is classified as junk or healthy in accordance with the concentration of ingredients whose presence in the human body beyond a critical level is harmful” – Junk Food, Health and Productivity.
These harmful ingredients can be salt, fat, sugar, additives, preservatives, etc. That definition alone raises many questions. One of which is: how can you be allowed to sell harmful products to the population with such little governance and regulation?
Here is a list of other harmful ingredients you will find in a hamburger from the top junk food business in the world. This extract has been taken directly from the FDA‘s official report on pesticide residues in American fast food.
“1,1,1-trichloromethane – 1,2,4-trimethylbenzene – BHC, alpha – Chloroform – Chlorotolulene, o – Chlorpyrifos – DDE, p,p – DDT, p, p – Dichlorobenzene, p – Dieldrin – Diphenyl 2-ethylhexylphosphate – Ethylbenzene – Heptachlorepoxide – Lindane – Octachlorepoxide – Styrene – Tetrachloroethylene – Toluene – Trichloroethylene – Xylene-m and/or p – Xylene, o – Chlorpyrifos-methyl – Cumene – Diazinon – Dicamba – Ethylenethiourea – Iprodione – Malathion – Pirimiphos-methyl – Propyl benzene, n”
Aside from being a physiological problem, the junk food gold rush is also hindering our economy. When I first came up with the will to write about this We were very surprised that very little statistical data had been published on the subject.
“As this is an ongoing project we are encouraging all readers to post comments and forward us information. All valuable information will be added to this dossier and properly referenced.”
Junk Food hinders health and productivity
One great find was a paper published by the School of Economics of the University of Wollongong, Australia: Junk Food, Health and Productivity: Taste, Price, Risk and Rationality.
In this paper, the author Amnon Levy PhD, takes a statistical approach to comparing junk food to non junk food diets in relations to taste, price, risk, rationality and therefore health. If you are into stats and math, here is the full paper.
Here is one of the conclusions drawn after the algorithmic models were tested and analyzed:
“So long that the difference between the relative taste and the relative price of junk- food is positive, the individual’s rational diet deviates from the physiologically optimal junk-free diet and generates losses of health, income, longevity and quality of life. The extents of these losses depend on the individual’s health-sensitivity to a physiologically inadequate diet, time-preferences and survival-elasticity. A tax rate that bridges the gap between the relative market price and the highest relative personal taste of junk-food ensures the choice of a junk-free diet by every member of the society. The universal choice of junk-free diet supports the fastest converging path to the highest individual and aggregate levels of health and production.”
In his conclusion, Amnon Levy PhD, outlines two main concepts with regards to junk food consumption: The negative effects of junk food consumption on ones health and the possibility of a taxation system on junk food.
Junk food consumption has a direct negative correlation on health, income, productivity, longevity and quality of life. Using statistical models, the author clearly outlined that the more junk food an individual eats, the greater the losses are on an individual competitive advantage.
A relatively easy extrapolation can be made from these concepts to a society level. As no cohort studies seemed to have been published on this topic, it makes it quite difficult to outline the effects of junk food on the society’s health and productivity. However we can easily draw a conclusion from this study and the percentage of the population opting for junk food as an alternative to healthy diets.
“Food-market researcher Technomic found in a 2005 survey that 69 percent of consumers described their diets when eating out as “fair to poor,” compared to 39 percent who said they eat “fair to poor” diets at home” – Fast Times for Fast Foods.
Here is more data showing consumer trending towards junk food in Canada taken from CBC News in an article called Fat facts.
“According to Statistics Canada, 48 per cent of Canadians have a body-mass index (BMI) of 25 or more, meaning they are overweight. Fifteen per cent of us are obese. Obesity among Canadian children has also increased dramatically in the last 15 years, more than doubling among boys, and tripling among girls.
Canadians are voracious eaters, consuming on average 2,921 calories daily, deriving a third of those calories from fat. A moderately active male needs about 2,500 calories a day, and females about 1,800.”
“A University of Pennsylvania report on a study of cooking habits looked at supermarket purchases and surveys completed by young adults in Pennsylvania. Less than 15 per cent of the items purchased were ingredients that require cooking or preparation. Nearly 30 per cent of items bought could be characterized as junk food — soda pop, frozen pizzas and TV dinners. The study examined the types of foods young adults know how to prepare, and noted that many described scrambled eggs or packaged macaroni and cheese as the most complicated recipes they know.”
Secondly the author draws many conclusions on the idea of introduction a taxation policy on Junk Food. This concept has recently been a more frequent topic of discussion and seems like it could provide a partial solution to the junk food problem. The author provides an algorithmic explanation on relative choices made taking into account ones rationality on price over taste. In short, if a the taste sought is offered at a lower premium, a consumer will rationalized in favor of purchasing a junk food item.
The idea of introduction a taxation policy seems, at first glance, like a good solution to the problem. First, it could solve the loss of productivity, income and health problems created by a junk food diet. Secondly it could provide income for governments in order to pay for the health and other related care created by junk food diets.
“A paper published in the British Medical Journal estimates that a tax on fatty foods could prevent hundreds of premature deaths annually, and reduce the incidence of heart disease by 10 per cent – Fat Facts.”
Type II diabetes and Junk Food
As per previously stated, the statistical data reflecting the true cost of junk food consumption on our respective economies is fairly scarce. So in order to demonstrate what we could call the tip of the iceberg we had to resort to statistics published on junk food consumption’s usual suspects. One of these is type II diabetes which has been officially classified as an obesity-related illness.
Type II diabetes has been directly linked as a causal effect from junk food consumption. Numerous research papers have published on this topic and were for us a good angle to reflect how such an illness hinders our economy.
“While there is, as yet, no cure for this disease, diabetes can be managed. In the case of type 2 diabetes, it is important to know that it can be prevented. Research has shown that a combination of good nutrition and physical activity can actually help prevent or postpone type 2 diabetes” – Public Health Agency of Canada.
Type II diabetes an evergrowing problem
In almost all cases, type II diabetes is the result of poor nutrition and is an exponentially evolving problem. This also reflects an exponentially evolving economic problem.
Here is some statistics from the Canadian Diabetes Association:
“An estimated 246 million people worldwide are affected by diabetes. With a further 7 million people developing diabetes each year, that number is expected to hit 380 million by 2025.”
Some statistics now coming out and growing at a very fast pace are occurrences of type II diabetes in children:
“We never saw type 2 diabetes in children 30 years ago,” says Professor Heather Dean, a paediatric endocrinologist at the University of Manitoba and a leading expert on type II diabetes in children.
“Incidence of the disease, once found only in overweight or obese adults, has jumped 10 to 30 fold in children and adolescents in the past 10 to 15 years,” says the Canadian Diabetes Association (CDA). “Within the next 15 years, the worldwide incidence is expected to increase by up to 50% over current numbers.”
Type II diabetes and other obesity-related diseases prevalence in children has become such a worldwide concern that there was recently a bid by Australian doctors and parents to charge some parents with obese children with child-neglect:
“Both Australian parents and doctors were targeted this past week with threatening-sounding proposals: to charge parents of fat children with child neglect and have their children taken from them, and to charge doctors with medical malpractice if they fail to report fat children to state child protective services” – Junk Food Science.
The cost of Type II diabetes in Mexico
It is obvious that there is a serious health problem but how much does it cost. How is our economy affected by consumption of junk food?
Here is an example coming from the Financial Times in an interview with Armando Barriguete, a high-ranking official at Mexico’s health ministry:
“Obesity-related illnesses are now so widespread that they are beginning to place a severe strain on the health system: the treatment of type 2 diabetes alone consumes more than one-third of the entire social security budget. Estimates suggest that within five years it will account for two-thirds.”
According to the OECD estimated figures for 2007 in Mexico. One third of the social security budget in 2007 would equate to 44.26 billion dollards spend on type II diabetes alone.
In five years, a minimum of 85 billion dollars spent on resolving an issue which is as basic as eating healthy. Just think for one second where this money could go: Crowded ER’s, basic care to the elderly, etc.
As we all know, our economy is in a very weak position at the moment. Moreover, many of us have criticized in government buy-backs and bailout plans as capital is invested, our capital, to try to rescue large corporations. The question I am asking now is: Have you ever thought about the fact that our governments are also bailing us out from our silly food choices?
The cost of type II diabetes in the US
In the United States, the problem also has a great impact on the economy.
Brandle M, Zhou H et Al from the Department of Internal Medicine, University of Michigan investigated the direct medical cost of type 2 diabetes in 2003. Here are the results:
“The median annual direct medical costs for subjects with diet-controlled type 2 diabetes, BMI 30 kg/m(2), and no microvascular, neuropathic, or cardiovascular complications were 1,700 dollars for white men and 2,100 dollars for white women.
A 10-kg/m(2) increase in BMI, treatment with oral antidiabetic or antihypertensive agents, diabetic kidney disease, cerebrovascular disease, and peripheral vascular disease were each associated with 10-30% increases in cost.
Insulin treatment, angina, and MI were each associated with 60-90% increases in cost. Dialysis was associated with an 11-fold increase in cost.
Insulin treatment and diabetes complications have a substantial impact on the direct medical costs of type 2 diabetes. The estimates presented in this model may be used to analyze the cost-effectiveness of interventions for type 2 diabetes.”
Here is another set of data which start to partially bring out the cost of junk food on our economy. The follown exerpt is taken from the University of Virginia ‘Health System’
“Diabetes affects an estimated 20.8 million people in the US (90 percent to 95 percent have type 2 diabetes) – 14.6 million have been diagnosed, but 6.2 million are unaware they have the disease. According to the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) and the American Diabetes Association, those affected include:
- 9.7 million US women (8.8 percent of all women)
- 10.9 million US men (10.5 percent of all men)
- 176,500 people under age 20
- 10.3 million adults over age 60
- 3.2 million African Americans (13.3 percent of all African Americans)
- 2.5 million Hispanic/Latino Americans (9.5 percent of all Hispanic/Latino Americans)
- 13.1 million Caucasian Americans (8.7 percent of all Caucasian Americans)
According to the most recent statistics, diabetes was the sixth leading cause of death, and the fifth leading cause of death from disease. Diabetes costs $90 billion annually in direct medical costs. Diabetes costs $40 billion annually in indirect costs (loss of work, disability, loss of life).”
So if we take the average percentage of people that have type II diabetes (92.5%) and apply it to the combined costs of diabetes ($130 billion), we can roughly estimate that type II diabetes could cost up to $120.5 billion dollars annually. Thus being a cost generated in most part from our choices in food and exercise.
The cost of Type II diabetes in Canada
For us Canadians lets look at the some statistics on type II diabetes. Here is an excerpt taken from the Canadian Diabetes Association’s website called: The cost of diabetes:
“The personal costs of diabetes may include a reduced quality of life and the increased likelihood of complications such as heart disease, stroke, kidney disease, blindness, amputation and erectile dysfunction.
Approximately 80% of people with diabetes will die as a result of heart disease or stroke.
Diabetes is a contributing factor in the deaths of approximately 41,500 Canadians each year.
Canadian adults with diabetes are twice as likely to die prematurely, compared to people without diabetes.
Life expectancy for people with type 2 diabetes may be shortened by 5 to 10 years.
The financial burden of diabetes and its complications is enormous.
People with diabetes incur medical costs that are two to three times higher than those without diabetes. A person with diabetes can face direct costs for medication and supplies ranging from $1,000 to $15,000 a year.
By 2010, it’s estimated that diabetes will cost the Canadian healthcare system $15.6 billion a year and that number will rise to $19.2 billion by 2020.”
Aren’t those pretty outstanding numbers for resolving a problem which could be avoided simply by eating right?
Junk food and the Environment
Junk food and the environment will be the next topic researched for this dossier. We are currently sifting through the information but have decided to give you a little preview of the figures we dug out. Once again the numbers about the cost of junk food on the economy our outstanding.
Here is an exerpt taken from an article called: The price of junk food.
“Expert dumpster diver Timothy W. Jones, a prof at the U of Arizona, concluded that 14% of the food people buy winds up in the trash at a cost of $200 billion a year. Another $100 billion worth of edible food is thrown out or withers on the vine.”
What next? Well this is the exact reason why we decided to put together À mort la Malbouffe. To educate, inform and trade information to promote healthy eating. I have demonstrated just a sample of the cost of junk food to our economy and the good news is that we, as a collective body can do something about it. I hope reading this article will make you think twice the next time you’re about turn into a drive through.
Simply by discussing and educating we all can make a difference to our society’s health and well-being. In fact, according to Heart and Stroke Foundation CEO Sally Brown:
“25 per cent of cases of heart disease, stroke and other ailments could be prevented if Canadians were eating a diet rich in fruits, vegetables, grains and lean meats and dairy products.”
As Hippocrates himself said, “Let thy food be thy medicine.”
Entrepreneur spécialisé en gestion de projet, technologie et alimentation.
Je travail présentement avec mon père comme directeur du développement de la Fringale. Un traiteur scolaire de la région de québec. 
Wow, thanks a lot for sharing this research. Sounds to me like our respective health departments should take over this research.
A pleasure. We did spend a lot of resources into this research and we are very happy to share it and that people such as yourself can enjoy it!