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'Let's Move' Spurs Mixed Reactions

Zacks Equity Research

The U.S. first lady’s keep fit campaign ‘Let's Move,’ which has been launched nearly two years back for protecting children against obesity, is causing worry for some food giants. The campaign suggests the inclusion of more vegetables and fruits and less of meat and fats in US school meals. The processed meat producers are among the worried lot, as this definitely means lesser consumption of their products.

Obesity among children has spread like an epidemic. Nearly 57% of New Yorkers are overweight or obese, and about 10% of the obese children have been told they have Type 2 diabetes. The health officials report that many obese children are under treatment in the city hospitals and need knee replacements, among other things.

The ‘Let's Move’ campaign, patronized by First Lady Michele Obama, has changed the way the Americans eat. Mrs. Obama has addressed governors, mayors, school groups, food makers and other constituencies, urging them to promote a healthy and obesity free lifestyle for the future of America.

She visited schools across the country to encourage students to plant vegetables and fruits in their own school gardens and also open salad bars in their lunchtimes. She has been working hard at exercise clinics with kids, including those on the White House South Lawn.

Her first major victory since the launch of the movement came when U.S. Department of Agriculture (:USDA) passed a rule which calls for a major overhaul of the menus in school kids’ lunchboxes. It set a platter of new federal standards for the lunch program, which feeds roughly 31 million children each school day.

The updated school lunch standards are expected to spell the end of "mystery meat" served in the schools, and instead fill plates with offerings such as whole wheat pasta, fresh cantaloupe, grilled chicken and chef salads.

Moreover, Friday's menu, cheese pizza with tater tots and canned fruit will be replaced by whole wheat crust, baked sweet potato fries. Pineapple in sugary fruit syrup would be replaced by grape tomatoes, which will be served with low-fat ranch dip.

The new endeavors by the government to reduce obesity have, however, caused food giants to worry. Processed meat producers like Tyson Foods Inc. (TSN) and Sara Lee Corp. (:SLE) are not happy with the new regulation.

The National Cattlemen’s Beef Association feels that meat is an important part of diet as it provides protein, they also point that the variety of beef options available allows schools to incorporate lean beef into their menu plans on any budget.

The government, however, feels that dropping meat at breakfast won’t impair nutrition because children get plenty of protein from whole grains, and breakfast meats are often processed and fatty.

However, the campaign has been a blessing for some food giants in America. For example, this development marked a victory for ConAgra Foods Inc. (CAG), maker of Hunt’s tomato products and Schwan Food Co., which holds 70% of the market for pizza in the $9.5 billion school food-service industry.

The campaigns seem to be forcing the retailers reconsider things, as most recently Walmart Stores Inc. (WMT), the country's largest retailer, promised to cut the levels of salt, fat and sugar in their products. It also pledged to bring down the prices of fresh fruit and vegetables so that they are easily available to people who strive for healthy eating habits. ConAgra Foods lobbied to block its limits on potatoes and tomato paste in pizza.

Currently we hold a Zacks #3 Rank for Tyson, Sara Lee and Walmart, implying a short term hold rating. For ConAgra we hold a Zacks #2 Rank, implying a short-term Buy rating.

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