Power Sheet – October 27, 2015

October 27, 2015, 2:12 PM UTC

A bunch of CEOs got handed a tough new leadership challenge yesterday, and it will be instructive to observe how they handle it, for better or worse. As you’ve likely heard, a committee of the U.N.’s World Health Organization announced that processed meat causes cancer. This wasn’t the typical announcement of a new research study saying this or that “may contribute to” some health problem or “is correlated with” some nasty effect, and “further research is needed.” The WHO says processed meats – hot dogs, bacon, sausage, ham, deli meats – are carcinogens. They cause cancer, period. Like cigarettes. “Each 50-gram [1.8-ounce] portion of processed meat eaten daily increases the risk of colorectal cancer by 18%,” the panel says flatly.

Produced by Ryan Derousseau

We’ll now see how the producers respond to this potential industry crisis. Especially revealing will be the reactions of the four huge companies that dominate the U.S. meat business: Arkansas-based Tyson Foods, led by CEO Donnie Smith; the Brazilian company JBS, led by CEO Andre Nogueira; Cargill, America’s largest private company, led by CEO David MacLennan; and WH Group, led by chairman Wan Long, which owns America’s largest pork producer, Smithfield Foods (U.S. chief: Larry Pope). Watch specifically for answers to three key questions:

Will they respond tactically or strategically? It’s unclear for now whether the WHO report will even affect U.S. consumption of processed meat. The very idea of Americans giving up bacon and hot dogs may turn out to be preposterous, no matter what some U.N. agency says. Even if consumption dips, the producers may just cut prices and hope the whole affair blows over. And who knows – maybe that will happen. But longer term, the tactical response will almost certainly be insufficient.

Will they acknowledge risks? The meat producers knew the WHO announcement was coming and were ready with a response through their trade association. “Dramatic and alarmist overreach,” they called the report, stating that plenty of research shows no risks from processed meat and pointing out flaws in research that says otherwise. But the WHO panel included hundreds of researchers from around the world who agreed on a firm conclusion. If the industry leaders continue to deny any risk, and further research reinforces the WHO report, they may lose all credibility. That could hamper their ability to stave off potential new government regulation.

Will anyone break ranks? If consumers take the report seriously and cut consumption significantly, pressure will grow on individual producers to break ranks with the industry, acknowledge risks, and promote “healthier” less-processed or unprocessed versions of today’s products (if they can). No producer would want to be the last one to do that.

The likeliest outcome is that this challenge will play out over years, much as the challenge to cigarette producers did. The processed meat business is different in dozens of ways, of course. But the risk is that, if not led wisely, it too could become a declining industry and a social pariah.


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What We're Reading Today

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Today's Quote

“You better figure it out, because there’s an Uber out there that’s already figured it out...The bottom line is that the c-suite is staying up at night.” - Glen Finch, IBM's global head of big data and analytics, speaking at the IBM Conference, discussing the threat of encroachment from small, nimble startups.  Fortune

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