Sector-level analysisTrends in market capitalisation

Between 1962 and 2021, the aggregate market capitalisation of agri-food corporations in the five sectors increased more than 30-fold in real terms, from around US$120 billion (2021 USD) to US$3.7 trillion (Fig. 1). Over this period, the market capitalisation of the UPF manufacturing sector – by far the largest of the five sectors in terms of market capitalisation – was seen to increase from around US$80 billion to more than US$1.6 trillion in real terms. In comparison, the relative contribution of the UPF manufacturing sector to the aggregate market capitalisation declined from approximately 68% in 1962 to 44% in 2008, thereafter remaining relatively stable. The market capitalisation of the food service sector, which is partly comprised of fast-food restaurants that are dependent on UPFs to generate sales, increased from approximately US$0.8 billion in 1962 in real terms (approximately 1% of aggregrate market capitalisation) to nearly US$580 billion in 2021 (approximately 16% of aggregrate market capitalisation).

Fig. 1

Market capitalisation trends of five major U.S. listed food sectors, 1962–2021. *Data sourced from Compustat North America, accessed via Wharton Research Data Services. Market capitalisation values = share price at end of year x common shares outstanding. Sectors defined using Global Industry Classification Standard (GICS) and North American Industry Classification System (NAICS) groupings. The agricultural input sector includes U.S. listed corporations primarily active in: agriculture and farm machinery; fertilisers and agricultural chemicals; and specialty chemicals if identified as being linked with agriculture. The food production, primary processing, and commodity trading sector includes U.S. listed corporations primarily active in industries related to the production and trade of non-ultra-processed-foods, including culinary ingredients. The UPF manufacturing sector includes U.S. listed corporations primarily active in food industries that mostly produce and market UPFs. The food retailing sector included U.S. listed corporations primarily active in food retail, including supermarkets, as well as hypermarkets and merchandise stores if identified as being involved in food retail. The food service sector includes corporations active in the restaurant and catering services industries

The combined market capitalisation of the five sectors began to surge in the 1980s, in part because the share prices of many major agri-food corporations increased considerably during this period. For example, Coca-Cola Co’s share price increased seven-fold during the 1980s [59]. Another potentially important factor was that, during the 1980 and 1990 s, many non-U.S. based agri-food corporations, including Nestlé, began to feature on U.S. stock exchanges.

Trends in the distribution of shareholder capital

Of the approximately US$2.9 trillion (2021 USD) of shareholder capital distributed by the five sectors between 1962 and 2021, more than 50% (US$1.5 trillion in 2021 USD) was distributed by the UPF manufacturing sector, while approximately 13% (US$0.4 trillion in 2021 USD) was distributed by the food service sector. In 2021, U.S. listed corporations active in the five selected sectors distributed approximately US$130 billion in shareholder capital (via dividends and share buybacks) (Fig. 2, panel A). UPF manufacturing corporations and food service corporations were responsible for nearly 45% (US$58 billion) and 14% (US$19 billion) of this monetary value, respectively. Excepting several financial crises, including the global financial crisis (2007–2009) and that related to the COVID pandemic (2020), the value of shareholder capital distributed by these five sectors generally trended upwards over the 60-year period of analysis.

Fig. 2

Shareholder payouts made by five U.S.-listed food and agricultural sectors in absolute terms (Panel A) and relative to total revenue (Panel B), 1962–2021. *Data sourced from Compustat North America, accessed via Wharton Research Data Services. Shareholder value ratios = (dividends paid + value of share repurchases)/ total revenue. Share repurchase data from Compustat may include data on purchase of preferred stock. Sectors defined using Global Industry Classification Standard (GICS) and North American Industry Classification System (NAICS) groupings. The agricultural input sector includes U.S. listed corporations primarily active in: agriculture and farm machinery; fertilisers and agricultural chemicals; and specialty chemicals if identified as being linked with agriculture. The food production, primary processing, and commodity trading sector includes U.S. listed corporations primarily active in industries related to the production and trade of non-ultra-processed-foods, including culinary ingredients. The UPF manufacturing sector includes U.S. listed corporations primarily active in food industries that mostly produce and market UPFs. The food retailing sector included U.S. listed corporations primarily active in food retail, including supermarkets, as well as hypermarkets and merchandise stores if identified as being involved in food retail. The food service sector includes corporations active in the restaurant and catering services industries

Since the early 1990s, the UPF manufacturing sector and the food service sector have, in general, distributed a greater proportion of their revenue to their shareholders compared to the other three agri-food sectors (Fig. 2, Panel B). Drawing from the work of others [60], we refer to this ratio as the ‘shareholder value ratio’ because it serves as a useful proxy for the percentage of funds that corporations distribute to their shareholders relative to the amount they distribute among their other ‘stakeholders’, including workers [60]. During the three-year period between 2019 and 2021, the UPF manufacturing sector and the food service sector distributed the equivalent of 10.4% and 11.9% of their revenue to their shareholders, compared to 3.1% and 1.1% during the three-year period between 1990 and 1992. Between 2019 and 2021, the agricultural input sector, the food production, processing, and commodity trading sector, and the food retailing sector distributed the equivalent of 6.4%, 1.4%, and 2.0% of their revenue to their shareholders.

Company-level analysisTrends in market capitalisation

Today’s largest UPF manufacturing corporations by market capitalisation were among the first of all existing food and agricultural corporations to be publicly traded. Nestlé, the frontrunner in this respect, was first publicly traded on the Zurich Stock Exchange in 1873 [61]. 46 years later, Coca-Cola Co and PepsiCo both made their first public offerings on the New York Stock Exchange (NYSE) in 1919 [62, 63]. In 1930, newly formed Unilever, created when Dutch company Margarine Unie merged with British company Lever Brother, was listed on the Amsterdam stock exchange [64]. It was not until after the Second World War when today’s largest major UPF food service corporations began to emerge. In 1965, McDonald’s made its first public offering on the NYSE [65]. PepsiCo acquired Pizza Hut, Taco Bell, and Kentucky Fried Chicken in 1977, 1978, and 1986, respectively, before spinning off its fast food restaurant operations in 1997 under the publicly listed corporation Tricon Global Restaurants [66]. After merging with U.S. company Yorkshire in 2002, Tricon Global Restaurants changed its name to Yum Brands [66].

Figure 3 shows the trends in market capitalisation of the six abovementioned major UPF corporations. Beginning in the early 1980s, the market capitalisation of Coca-Cola Co, and to a lesser extent PepsiCo, Nestlé, Unilever, and McDonald’s, began to surge. By the end of 1997, Coca-Cola Co’s market capitalisation reached approximately US$260 billion (in 2021 USD), placing the company in the world’s top-five largest corporations by market capitalisation at that time [67]. Around the turn of the 20th century, however, the market capitalisation values of Coca-Cola Co, and to a lesser extent Unilever and McDonald’s, decreased considerably. Among other factors, some commentators attributed the fall of Coca-Cola Co’s market capitalisation to issues such as a reorganisation of the company’s management structure, a probe led by the U.S. Securities and Exchange Commission into its accounting practices, and the declining sales of its flagship product, Coca Cola [68]. From the mid-2000s till 2021, the market capitalisation of Nestlé, PepsiCo, Coca-Cola Co, Unilever, and McDonald’s were seen to increase along a relatively similar trajectory. The combined market capitalisation of Nestlé, Coca-Cola Co, PepsiCo, McDonald’s, Unilever, and Yum Brands reached nearly US$1.3 trillion at the end of 2021, representing more than 34% of the combined market capitalisation of the five agri-food sectors analysed.

Fig. 3

Market capitalisation trends of six major UPF corporations, 1962–2021. *Data sourced from Compustat North America, accessed via Wharton Research Data Services. Market capitalisation values = share price at end of year x common shares outstanding

Trends in the distribution of shareholder capital

In 2021, Nestlé, Coca-Cola Co, PepsiCo, McDonald’s, Unilever, and Yum Brands distributed a combined total of approximately US$45 billion to their shareholders via dividends and share buybacks. This amount represented approximately 34% of the aggregrate shareholder payouts made by all five sectors analysed.

At different points in time, the six major UPF corporations analysed in this study began to transfer greater amounts of money to their shareholders relative to their total revenue, capital expenditure (a proxy for the long-term interests of the ordinary worker), and income tax payments (Fig. 4). Coca-Cola Co was the first of these six corporations to reach this inflection point, which occurred in the early 1980s. This happened around the same time that the then-Chief Executive Officer (CEO) of Coca-Cola Co Roberto Goizueta reported that the company’s ‘primary objective will continue to be the maximization of shareholder value’ [67]. While this sort of rhetoric was becoming increasingly commonplace in the 1980s, at least in the U.S. [69], it nevertheless represented a distinct departure from the rhetoric of the company’s earlier CEOs. In 1959, for instance, William Robinson contended that it was an error for executives to put shareholders ‘first, last, and all the time’, and that corporations needed to also serve workers, customers, and communities [70].

Fig. 4

Net income, shareholder payouts, capital expenditure, and income tax paid by six major UPF-dependent corporations relative to their revenue, 1962–2021. Data sourced from Compustat North America, accessed via Wharton Research Data Services. Total shareholder payouts = dividends paid + value of share repurchases. Share repurchase data from Compustat may include data on purchase of preferred stock. N.b. the y-axes vary for McDonald’s and Yum Brands compared to the other corporations

The six major UPF corporations operationalised the objective of maximising shareholder returns in the short-term in several ways, albeit to varying degrees. First, at different points in time, their annual dividend payments began to surge (Fig. 4). Relative to 1982, the annual dividend payments made in 2021 by Coca-Cola Co (US$7.3 billion), PepsiCo (US$5.9 billion), Nestlé (US$8.4 billion), Unilever (US$5.1 billion) and McDonald’s (US$3.9 billion) increased by more than 9 times, 16 times, 21 times, 14 times, and 34 times, respectively, in real terms. In 1999, a year after selling part of its chemical operations, Unilever also paid a ‘special dividend’ of 5 billion GBP, which, at the time, was the world’s largest ever single payment to shareholders [71]. In 2021, Yum Brands annual dividend payments reached US$0.6 billion, nearly 5 times larger than when it first began paying dividends in 2004.

Second, like many publicly listed corporations in diverse sectors, the corporations began to undertake large share buyback programs (Fig. 5). As with dividends, share buybacks –when a corporation buys back its own shares on the open stock market – is a practice that transfers money from the ‘real economy’ to corporate shareholders [32]. Share buybacks also influence financial metrics commonly linked to executive remuneration [32]. Shortly after the practice effectively became legalised in the U.S. in 1982 [72], Coca-Cola Co began its first of many large share buyback programs. By 1990, Coca-Cola Co had already spent approximately US$8 billion on share buybacks in real terms (2021 USD). After beginning its first formal share buyback program in 2005 [73], Nestlé, the UPF corporation that has spent the most on share buybacks in the last decade, bought back nearly US$100 billion worth of its own shares between 2006 and 2021 in real terms.

Fig. 5

Monetary value of dividends and share buybacks made by six major UPF-dependent corporations, 1962–2021. Data sourced from Compustat North America, accessed via Wharton Research Data Services. Share repurchase data from Compustat may include data on purchase of preferred stock

Third, some of the major UPF corporations underwent major restructuring to boost their net profit margins (net income relative to revenue), a ratio that has tracked closely to their ‘shareholder value ratios’ (Fig. 5). In 1999, for instance, Coca-Cola Co underwent a restructuring ostensibly to reduce production costs, with more than 5,000 jobs cut from the company’s global workforce [70]. As another example, in 2020, Unilever underwent a major restructure as part of its so-called ‘Path to Growth’ strategy [74]. Within ten years of the strategy’s implementation, the company had cut more than 90,000 jobs. In response to falling profits and revenues in the early 2010s, McDonald’s announced a ‘turnaround plan’, involving the ‘stripping’ away of layers of management, as well as the ‘refranchising’ of its restaurants (i.e., selling company-owned restaurants to franchisees) to increase profitability [75, 76]. Similarly, in 2016, Yum Brands decided to spin off its Chinese operations into a separate publicly listed company, in part to facilitate the company’s refranchising strategy [77]. Before doing so, the company sought to ‘return cash to shareholders’ by buying back US$6.1 billion worth of its own shares, a move made possible through the issuance of large amounts of debt [78].

Fourth, as with many major transnational corporations, the major UPF corporations’ profit margins also likely benefited from declining corporate income tax rates around the world, especially up until the 2010s [79]. Evidence also suggests that the major UPF corporations have actively sought to minimise their income tax obligations, including by shifting their profits from high-tax jurisdictions to lower-tax jurisdictions [80,81,82,83]. While Fig. 5 does not show the effective tax rates paid by the major UPF corporations, it does show that, relative to total revenue, their income tax payments, which make up a large proportion of the money that these corporations transfer to governments, have fallen and/or remained relatively low.

Investor-level analysisThe influence of investors on the governance of major UPF corporations: responsible investors

In our analysis of voting data, we identified 14 separately filed public health-related shareholder proposals that were put to a vote at the annual shareholder meetings of the selected UPF corporations between 2012 and 2022. All 14 targeted Coca-Cola Co, PepsiCo, and McDonald’s. In some cases, similar proposals were filed with multiple corporations and during different years. For example, Harrington Investments filed seven separate shareholder proposals calling on the corporation’s decision-makers to commission an independent review of the sugar-related health impacts of its products – three times with Coca-Cola Co (2019, 2020, 2021), twice with PepsiCo (2020, 2021), and twice with McDonald’s (2020, 2021). All 14 public-health related proposals received insufficient support to be passed. We found that the average support for the identified public health-related proposals was only 10.5%. The highest level of support we found was 13.5%, which was for a proposal filed with PepsiCo in 2022 entitled ‘Report on Public Health Costs of Food and Beverage Products’.

We identified that some responsible investors have also attempted to influence the governance of major UPF corporations through direct engagement with corporations, such as face-to-face meetings, videoconferences, telephone calls, and written communication, often as part of a coalition. As an example, fund managers from Switzerland-based Pictet Asset Management have directly engaged with major UPF manufacturers such as Nestlé, reportedly to increase the share of ‘healthy products’ within their portfolios [84]. Similarly, fund managers from UBS Asset Management reportedly led a collaborative engagement involving 30 investors with Chinese food corporation China Mengniu to discuss, among other things, issues relating to nutrition [85]. As with some other investors, Pictet and UBS Asset Management receive technical guidance from the not-for-profit organisation Access to Nutrition Initiative (ATNI), which claims to assess the nutritional quality of a corporation’s portfolio by analysing the extent to which it is comprised of fruit and vegetables, as well as the levels of fat, salt, sugar and other components within individual products [86].

Given that most investors do not disclose the full details of their engagement with corporations, it is difficult to assess the extent to which responsible investors have influenced the governance of major UPF corporations to promote public health and nutrition. In 2022, though, the non-governmental organisation ShareAction announced that an investor coalition it had led had managed to pressure Unilever into committing to publicly report on the healthfulness of the corporation’s food products against a range of government-endorsed nutrient-profiling models [87].

The influence of investors on the governance of major UPF corporations: hedge funds

We found that all six major UPF corporations have been targeted by so-called hedge fund ‘activists’. Hedge fund ‘activists’ have managed to considerably influence the governance of major UPF corporations, at least in recent years. In 2016, for instance, hedge fund Corvex management bought a stake in Yum Brands, and then afterwards managed to secure a board position for its CEO Keith Meister [88]. Before long, Keith Meister disclosed plans for the company to spin off its Chinese operations which, as discussed in the previous section, were later enacted [88]. The rationale behind this corporate restructure was that it would provide shareholders with a steady stream of income from royalties generated through the ‘refranchising’ of its company-owned restaurants in China [88]. As another example, in 2017, hedge fund Third Point bought a US$3 billion stake in Nestlé. The hedge fund soon began to apply considerable pressure on Nestlé’s board and management in an attempt to increase the company’s profitability, share price, and shareholder returns [89, 90]. Within a short period of time, Nestlé had reportedly carried out many of Third Point’s demands, including the implementation of a large share buyback program [91]. In a similar fashion, hedge fund company Trian Fund Management chose to ‘exit’ PepsiCo after the company’s share price and dividend payments had surged, with the hedge fund claiming that it played a key role in driving these shareholder gains [92]. The same hedge fund opted to target Unilever in 2022, acquiring a 1.5% stake in the company. Shortly afterwards, and amid rising shareholder discontent regarding the company’s lagging share price, Trian Fund Management co-founder Nelson Peltz was given a position on Unilever’s board [93].

Share ownership and voting behaviour of four of the world’s largest asset management firms

Figure 6 demonstrates that the voting behaviour of BlackRock, Vanguard, State Street, and Capital Group likely has a large influence on overall shareholder support for proposals targeting the six major UPF corporations. In combination, these four investors held approximately 29.3% of shares in Yum Brands in 2022 (compared to 14.6% in 2012), 27.5% of shares in PepsiCo (16.9% in 2012), 21.5% of shares in McDonald’s in 2022 (11.5% in 2012), 19.7% of shares in Coca-Cola Co (15.7% in 2012), 17.7% of shares in Unilever (10.5% in 2012), and 10.0% of shares in Nestlé (6.8% in 2012).

Fig. 6

Combined share ownership of four of the world’s largest asset managers in six major ultra-processed food corporations, 2012 vs. 2022. Data sourced from Bureau van Dijk’s Orbis database

Table 2 shows the number and percentage of times that BlackRock, Vanguard, State Street and Capital Group voted for and against proposals put to a vote by the board of directors, as well as the public health and other environment, social, and governance (ESG) related proposals put to a vote by shareholders, during annual shareholders between 2012 and 2022. All four asset management firms were found to vote overwhelmingly in favour of the proposals put forward by the board of directors, most of which related to remuneration and board elections. We also found that the four investors did not vote against any of the four proposals put forward by the board of directors of the two Western Europe-based corporations – Nestlé and Unilever – relating to increasing shareholder payouts and approving political donations and lobbying expenditure.

Table 2 Number and percentage of times that five of the world’s largest institutional investors voted for and against proposals at annual shareholder meetings, 2012–2022

Excepting abstentions and votes withheld, these four investors were found to vote against all identified public health-related shareholder proposals. Similarly, they were also found to vote against all identified shareholder proposals relating to political contributions and lobbying, with the majority of these proposals calling for the commissioning of a report on the corporation’s current political activities in order to increase transparency. More broadly, we found that BlackRock, Vanguard, and State Street voted in favour of the identified ESG-related proposals 1.1%, 0%, and 3.4% of the time, respectively (excepting abstentions and votes withheld). Capital Group was found to vote in favour of 23.8% of the identified ESG proposals, with the majority of these (12/20) relating to increasing the rights of shareholders (e.g., reducing the threshold for shareholders to call a special meeting).