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VIDEOSex, Drugs, and the Rocky Economy: Junk Food
Fat, sugar are good for business -- and may soon be even better for government.
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Nothing explains the phrase better than the recent recession, which saw families look to stretch their dollars and lift their spirits by filling their bellies with pizza, fries, burgers, candy bars, and confectioneries.
According to a recent study from Carmen Bracamonte & Co., a Florida-based market-research company, 70% of American consumers now feel that health food is too expensive and 53% avoid buying it in order to save money.
Spotting a trend, this summer, KFC rolled out one of the fattiest items in the history of their menu: a bacon and cheese sandwich housed between two fried chicken breasts instead of bread. The company released the “Double Down” in only two states -- Nebraska and Rhode Island -- as test markets.
You can’t blame KFC. Their mostly fried menu has been one of the few big winners of the recession. This month, the chain's parent company Yum Brands (YUM), which also owns the Pizza Hut and Taco Bell brands, posted 18% growth in the third quarter.
And they aren’t alone.
Fast-food giant McDonald’s (MCD) is experiencing steady growth, reporting a 1% increase in its stock value between this past January and the previous year. In an economy where most businesses are scaling back, McDonald's is expanding. It recently introduced a range of premium beverage and cafe products in a move that clearly targets coffee giant Starbucks (SBUX).
In the grocery aisle, too, candy and confectioneries have seen sales boom. According to public filings, 2008 saw Cadbury’s (CBY) profits increase 30% and Nestle’s (NESN) go up 10.9%. For the candy makers, the figures were proof that history does repeat itself. During the Great Depression, companies like Hershey (HSY) displayed impressive staying power and the confectionery industry saw some of its most popular candy bars make their debut, including Snickers and Three Musketeers.
In perhaps the most striking acknowledgment that the junk food industry is recession-proof, some members of the United States government have come calling, proposing a special tax on fatty foods -- particularly sugary beverages sweetened with high-fructose corn syrup. According to the Urban Institute at the University of Virginia, a 10% "fat tax" could generate $522 billion in tax revenue over the next 10 years.
In Uncle Sam’s defense, the idea of imposing a “fat tax” was making the rounds in Washington before the collapse on Wall Street. But the recession, and the ongoing debate over health-care reform, has certainly shifted the proposal into top gear. According to the Center for Disease Control and Prevention, the cost of treating obesity-related health concerns has doubled over the past decade and now costs taxpayers more than $147 billion per year.
So what started primarily as a health issue could soon become a lifeline for a number of governments. By tapping into one of the few industries experiencing recession-era growth, America may soon be able to eat its way out of a budgetary mess.
Tough times never tasted so good.
Hoofy and Boo have covered some of the baddest vice stocks before. See their report below.
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