Will the first lady's mission to fight fat trim corporate profits?

Michelle Obama's 'Let's Move' campaign aimed at ending childhood obesity might have a negative impact on some food stocks.

By InvestorPlace Feb 11, 2010 11:37AM

InvestorPlaceBy Jim Woods, InvestorPlace.com


In what she hopes will be her signature issue, Michelle Obama announced the "Let's Move" campaign yesterday, a plan designed to rid America of childhood obesity. Her multi-front attack on the issue involves encouraging kids to exercise more and helping teach parents how to make better food choices. The plan also includes improving the quality of food in schools, building supermarkets in poor neighborhoods and making food nutrition information easier to understand.


Now on its face, it's hard to argue that there is something wrong with wanting America's youth to be in better physical shape. I'm certainly not objecting to that noble goal. But I think there is a downside to this plan, and it's one that could impact some of corporate America's biggest food companies.


In what I suspect is a not-so-coincidentally timed announcement, beverage and snack food giants Coca-Cola (KO), Dr Pepper-Snapple Group (DPS) and PepsiCo (PEP) just said they would post calorie counts on the front of their product containers by the end of 2012. This kind of proactive move by food companies to get out in front of this issue -- and I suspect put a buffer between them and any potential negative publicity generated by the "Let's Move" campaign over their high-calorie offerings -- is something I think we'll see more of soon.


Interestingly, over 40 high-profile food and agribusiness company executives pledged their support for Mrs. Obama's initiative, including Kraft Foods (KFT) and Sara Lee Corp. (SLE). In a letter written to the first lady and signed by all the food company executives, they wrote, "Too many of our children are seriously overweight, and our companies stand ready to work with you to address this health crisis."


My question here is -- at what cost? How much money will these companies have to spend to "work with" Mrs. Obama to, for example, add nutritional information to their labels or to reformulate product recipes so they contain less fat, sugar, salt and calories? Also, how much will any potential changes made to food products spurred on by "Let's Move" cost in terms of reduced consumer demand for their reformulated products? Or, will the new alliance with Mrs. Obama have the opposite effect on these companies and actually stimulate demand for their products?


It's too early to tell what the ramifications of "Let's Move" will be on food stocks, but one thing that's nearly certain is that the first lady's well-intentioned plan to tackle the childhood obesity issue is going to put a stamp on food and agribusiness companies -- and that stamp might not be in the best interest of shareholders.


As far as Michelle Obama's childhood health initiatives go, there is one food company that can withstand the fat-wars. Read: "8 Policy-Proof Stocks That Will Survive Washington" for details.


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