Evidence to Define the Sustainability of a Healthy Diet

Evidence to define the sustainability of a healthy diet

Defra

FO0430

Annex C – Economic Sustainability

Contents

1.0Methodology

1.1Economic sustainability

1.1.1Determining the indicators for measuring the economic sustainability of a healthy diet

1.1.2The search for evidence of the economic sustainability of a healthy diet

1.2Expert Panel and workshop

2.0Results: Economic aspects

2.1Economic data on the supply chain for selected products

2.1.1Data coverage: Stage of supply chain

2.1.2Data coverage: Economic indicator

2.1.3Data coverage: Product group

2.1.4Sources of macro-economic data

2.2Evidence of the economic sustainability of a healthy diet

2.3Other research and policy on sustainable diets

2.4Evidence of economic impacts in other sectors

2.4.1Smoking and the tobacco industry

2.4.1.1Methodology

2.4.1.2Article summary

2.4.2The cost of diet related illness

2.4.2.1Methodology

2.4.2.2Article summary

3.0Summary

Appendices

C.1Summary of articles that examine the economic effects of a shift in diets

C.2Additional references

C.3Literature on sustainability and sustainable diets

C.4Articles relating to the economic impact of a reduction in smoking

C.5Literature on the health impact of healthy and unhealthy diets

1.0Methodology

1.1Economic sustainability

At the root of basic economic theory is the decision on the optimum allocation of scarce resources. With finite resources (land, labour, capital) and other things being equal, increasing the production of good x will necessarily lead to a reduction in output of good y. Thus, trade-offs need to be made as, by implication, more of one good means less of another. In economic theory, it is assumed that resource (re)allocation is determined through the interaction of buyers and sellers in the operation of markets, in which price is the fundamental economic messenger.

According to Defra (2009), a basic comparison of broad statistics on what diets currently consist of and what the eatwellplate suggests, illustrates:

“…. the need to shift the overall balance of the diet towards the proportions shown in the eatwell plate, which is with the majority of the diet coming from the fruit and vegetables and starchy food groups”[1].

If society is to shift towards a more healthy diet such as that indicated in the eatwellplate, then this would entail a shift in resources to achieve the desired output (in terms of food consumed). The required shift in the basket of foods consumed can only occur if resources are allocated from existing production and distribution activities (those associated with ‘unhealthy’ foods) to the production and distribution of ‘healthy’ foods. This will have implications for land use, employment in the food industry and the balance of food trade, all of which, to vary degrees, will be reflected in changing prices for inputs and final products. These changes are necessary in order for the required (re)allocation of resources to occur between food sectors, but in imperfect markets (there are few if any ‘perfect’ markets in the world) prices do not always adjust as required and there are often non-market consequences (externalities) that result in public sector intervention. The result of this complex process of adjustment is that there is a good deal of uncertainty concerning the economic sustainability of a shift to a healthier diet.

Economic modelling can be used to predict what might happen to different types of economic activity (e.g. primary production, manufacturing, distribution, retailing, consumption) and different economic indicators (e.g. land use, prices, employment, trade) under different scenarios. It is then up to government to decide whether the required (re)allocation of resources is feasible, given resources available, and sustainable in a way that, to use the definition given in the 1987 Brundtland report[2]:

“ …meets the needs of the present without compromising the ability of future generations to meet their own needs”.

Government then has to determine what, if any, intervention is necessary to facilitate desirable outcomes (e.g. increased consumption of ‘healthier’ foods) and/or mitigate undesirable outcomes (e.g. price inflation for ‘healthier’ foods, unemployment in ‘unhealthy’ food sectors, increased food deficit due to imports of ‘healthier’ food products).

Thus, there are three stages to consider in examining the economic sustainability of healthy diets.

1. Determination of the economic indicators to be used to measure the economic sustainability of a ‘healthier’ diet
2. Use of those indicators to model economic outcomes under different scenarios - what needs to happen to prices, land use, employment and trade in order for the UK diet to become ‘healthier’?
3. Assessment of the economic feasibility and desirability of different outcomes, with a view to identifying potential interventions (policy measures) for Government.

The first two stages form the main content of the economic component of this report - gathering and assessing the quality of the evidence to date. Gaps in evidence are identified and commented upon. The third stage is outside the remit of this project but the findings from stages 1 and 2 will contribute to the assessment of government’s role in the process of adjustment from the current state to the desired future state and the prioritisation of research funding in this area in the future.

1.1.1Determining the indicators for measuring the economic sustainability of a healthy diet

Identification of indicators to measure economic sustainability occurred alongside the identification of literature on the economic impact of changing diets. As a starting point, the basic factors of production (land, labour and capital) were selected and then other possible dimensions added, these being trade, pricing and managerial capacity. It was thought that these would be possible indicators that studies might have used when assessing the economic effects of a change in diets, but amendments or additions to these indicators was anticipated as the literature search progressed.

Initial findings from the literature search helped to inform the selection of economic indicators and it was then possible to draw up a final list of indicators that could be used to assess the evidence base for the economic sustainability of ‘healthier’ diets. These indicators are shown in Table 1.

Table 1: Economic indicators

Land (area)
Production
Prices
Value of output
Employment
Trade

The organisations and websites visited are shown in Table2. Contact was made with the majority of these organisations or individuals and where a response was received, the contact details are reported.

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Table2: Sources used in data collection

Organisation / Website / Contact
Trade associations
The Agricultural and Horticultural Development Board / / Ken Boyns, MI Director

BPEX /
British Retail Consortium / / Richard Lim, Economist
.​uk
DairyCo / / Arnaud Haye, Senior Analyst – Dairy

Eblex / / Diane Northrop

Michelle Quagliano
michelle.quagliano@e​blex.org.uk
Federation of Bakers /
Flour Advisory Bureau /
Food and Drink Federation / / Dominic Goudie
Trade Policy Executive, Competitiveness Division

Food Storage and Distribution Federation / / Chris Sturman, CEO

Home Grown Cereals Authority /
Horticultural Development Company /
IGD / / Priscilla Monaghan , Customer Service Co-ordinator

National Association of British and Irish Millers / / Catherine Lehane, Trade Policy Officer

National Association of Master Bakers /
National Dried Fruit Trade Association UK / / Cathy Grant, Secretary General, NDFTA Secretariat

The Potato Council / / Jim Davies, Senior Analyst – Potatoes

Government bodies
Defra / / (commodity prices)
(family food)
(Food and Farming Group)
(Food and Farming Group)
Janet Carr, Defra Food Statistics

Joanne Gardiner, Overseas Trade Statistics, Trade and Statistical Projects, Economics and Statistics Programme

Keith Seabridge, Agricultural Accounts, Farming Statistics Programme

Selina Matthews

Lee Dobinson, Economist, Food Economics Team

Lucy Foster

Sonia Molnar

Department of Health / / Farida Rahman
Nutrition Policy and Advice

Food Standards Agency / / Simon O’Connell, Information & Knowledge Management, ISTED

HM Revenue and Customs /
Office for National Statistics / / (for questions regarding RPI data)
Julian Dowsell Annual Business Survey – Publications

Universities
Bangor University/Aberystwyth University /
/ Gareth Edwards-Jones
Professor of Agriculture and Land Use, Bangor University
Waitrose Professor of Sustainable Agriculture, Aberystwyth University

ESRC Research Centre for Business Relationships, Accountability, Sustainability and Society (BRASS), Cardiff University / / Natalia Yakovleva, Research Associate

University of Kent / / Prof Robert Fraser

London School of Hygiene and Tropical Medicine, University of London / / Professor Richard Smith, Head of Global Health and Development and Professor of Health System Economics

Dr Alan Dangour, Senior Lecturer, Nutrition
[email protected]​c.uk
Centre for Rural Economy, Newcastle University / / Anne Liddon
Science Communications Manager
Rural Economy and Land Use Programme
Mary Brennan

University of Reading / / Prof Bruce Traill
[email protected]​c.uk
Other
Agra CEAS / / Dr Edward Oliver, Senior Consultant

Dr Dylan Bradley, Senior Consultant

Independent consultant / Dr Corinna Hawkes
Consulting Services, Food and Nutrition Policy

Nielsen / / Mike Watkins, Senior Manager, Retailer Services

Sainsbury’s / / Phillip Jones, Customer Manager, J Sainsburyplc

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1.1.2The search for evidence of the economic sustainability of a healthy diet

The generic food supply and distribution chain adopted by the project was used as a basis for identification of literature. This chain includes the stages of breeding, production and harvesting, storage and transport, processing, distribution and retail and consumption.

The next step was to determine a set of search terms for searching the various databases for relevant information. This was to be done for each of the five food sectors in the eatwellplate. The search terms were grouped according to four categories:

Group 1 / Terms to describe the food group
Group 2 / Terms to describe healthy eating
Group 3 / Terms to describe the stage of the supply chain
Group 4 / Basic economics terms that might be expected to arise in any economic impact study

As an example, the search terms used for the fruit and vegetable sector are shown in Table 3. By including a broad range of descriptors and by running a selection of searches combining these groups of terms, it was expected that any articles looking at the impact of a change in diets would be identified but also any studies looking at current consumption patterns. The latter was researched by excluding the Group 2 terms from the searches.

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Table 3: Search terms used for Fruit and vegetables

Food group / Healthy eating / Stage of supply chain
1 / 2 / 3a / 3b / 3c / 3d / 3e / 3f
Food group / Healthy eating terminology / Breeding / Production and harvest / Storage and transport / Processing / Distribution and retail / Consumption
fruit
vegetables
horticultural
fresh produce
salads
crops
growing
fruit juice
dried fruit
organic / healthy eating
healthy diets
dietary change
healthier eating
increased consumption
increased demand
eatwellplate
higher demand
healthy eating guidelines
dietary guidelines
dietary recommendations
consumption patterns / production
farming
agriculture
growing
cultivating
harvesting
pickers
harvesters
foreign workers
hired labour
fertilisers
pesticides
planting / haulage
transport
markets/marketing
in transit
freight
fuel costs
warehousing
cold storage
warehouse operators
drivers
refrigeration
air freight / processing
processing plants
packing
processing technology
ready prepared
tinning
tinned
frozen
dried
canned
grading
quality control / sales
distribution channels
distribution
retail
farm sales
cold storage
supermarkets
pick your own
farm shops
farmers markets / consumption
shopping basket
substitution
demand elasticity
five a day
product quality
food miles
staple foods
Economics terms
4 / 4a / 4b / 4c / 4d / 4e
Economics - generic / Labour / Capital / Trade / Land / Prices
economics
modelling
sustainability
elasticity
inputs
outputs
costs, income
revenue
agricultural producers
farmers
agriculturalists
horticulturalists / labour
employment
unemployment
redundancy
jobs
job loss
foreign labour
pickers
harvesters
engineers
farm labour
farm workers
job creation / capital
investment
profit
profitability
business
farm business
greenhouses
poly tunnels
irrigation
sprinklers
tractors / imports
exports
balance of trade
balance of payments
trade
third world
Kenya
Uganda
Peru
EU
Spain
South Africa / land
land use
land rent
land value / prices
pricing
markets
marketing

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The search engines used are shown in Table 4.

Table 4: Search engines used in literature search

Web of Science
SCOPUS
Index to Theses
Proquest
IBSS
Google Scholar
Google
Emerald

All articles and reports appearing to have some relevance to the project were recorded. Of these, where an article appeared from the abstract to have considered the economic effects of a shift in diets, it was briefly summarised. These summaries are included in Appendix C.1.

As well as searches on each of the five sectors, some generic searching was undertaken and the results of this searching are presented in AppendixC.2.

1.2Expert Panel and workshop

The initial findings were then presented to members of an Expert Panel for critical evaluation and comment at a workshop held in London on 20th December 2010. The issues raised and gaps identified were then further considered by the Project Team. A further Expert Panel workshop was held on 22nd July 2011 to consider the draft project report and inform advice for future research. Members of the Expert Panel are listed in Scientific Report.

2.0Results: Economic aspects

2.1Economic data on the supply chain for selected products

To examine the economic sustainability of ‘healthier’ diets or the impact of a shift in diets, indicators are used to describe current resource allocations and the impact of changes in demand. As described in Section1.1.1, the indicators researched for the current project were land use, production, prices, value of output, employment and trade. This was done for selected products within each of the five food sectors of the eatwellplate. Products were selected to represent each sector but in many cases, the data sources identified would be relevant to other foods in the same group.

Food products selected were as shown in Table5.

Table5:Food products chosen to represent different sectors of the eatwell plate

eatwell plate sector / Product(s) chosen to represent sector
Bread, rice, potatoes, pasta and other starchy foods / Potatoes, cereals, flour, bread
Fruit and vegetables / Carrots, lettuce, strawberries, dessert apples
Milk and dairy foods / Milk, cheese (Cheddar)
Meat, fish, eggs, beans and other non-dairy sources of protein / Red meat
Foods and drinks high in fat and/or sugar / Ice cream, biscuits

For each of the five food sectors, an attempt was made to identify data sources for each of the six economic indicators. The results of this search are shown in Table6.

A number of issues occurred when putting together the various sources of data on each indicator.

2.1.1Data coverage: Stage of supply chain

It is evident from Table6 that data availability is concentrated at the production end of the chain and the retail/consumption end. For storage, transport and distribution, the majority of cells contain sparse or no data sources. It would need specific research to calculate the product specific costs and labour input for transporting a load of carrots, for example, from A to B. This then opens the debate as to whether there is anything to gain from the calculation of some indicators for some stages of the chain.

2.1.2Data coverage: Economic indicator

Land (area) and production

Defra holds much of the data on the economic indicators specified for the production stage of the chain. Contact with the relevant individuals at Defra also suggested that in some cases it might be possible to draw on primary data sets to select data more specific to research needs.

Employment

Employment data is available from the Business Register and Employment Survey (previously from the Annual Business Survey) specified by industry. It is difficult to break this down to employment at the product level.

Trade

For trade, the primary source is HM Customs and Revenue. The difficulty here with specifying products is that these are often grouped together. For example, while strawberries are separately specified, lettuce is grouped with endive, making it difficult to give an exact figure for lettuce imports and exports.

Prices

For prices, some data is available from Defra and for some products this is available from the various representative trade associations or the ONS Focus on Consumer Prices publication. Whereas data further back the chain and for certain indicators is available at the product group level only, prices tend to be product/variety/season/quality specific.

Defra made reference to an indicator “price per calorie” of food as a useful measure of comparing “healthy” with “less healthy” foods. This indicator is referred to in The Food Statistics Pocketbook 2009, p. 42 (“Healthy foods often cost more per calorie”). However, whilst the base data is available to calculate these values using price (see Table6 for price data sources) and calorie content of foods (see FSA, 2002[3] ), no such calculations from Defra are publicly available and calculation of these indicators is outside the remit of this project.

Value of output

Value of output for the production stage of the chain is largely given in Defra’s annual publication, “Agriculture in the United Kingdom”. For other stages of the chain, this data is largely absent, except for consumption where value of consumption for some product groups is available from the various representative bodies.

2.1.3Data coverage: Product group

Product groups were specified as in the eatwellplate sectors. A random selection of products within each sector was selected to use as a basis for retrieving data. For some indicators, the data source would apply to all products within the group (such as trade, employment), whereas for the more diverse eatwell plate sectors such as “Meat, fish, eggs, beans and other non-dairy sources of protein”, for some indicators the data sources were more varied.

In addition, supply chains are much more complex than the basic production through to consumption chain used as a basis for research. For a product such as potatoes there will be various branches to the chain for seed potatoes, main crop, earlies, potatoes for processing, potatoes for fresh consumption. With cereals, supply chains are even more diverse. In addition, there can be several different types or varieties of the same product. Dessert apples are a good example, white or brown bread is another. There is a need to specify the product carefully, bearing in mind the purpose of the data collection exercise.

2.1.4Sources of macro-economic data