Big Food's Tobacco Moment

San Francisco's lawsuit against Big Food isn't about nutrition. It's about exposing an industry that stopped making food decades ago.

“Truth is like poetry. And most people fucking hate poetry.” — The Big Short (1974)

In 1999, a Kraft vice president named Michael Mudd stood before his fellow food executives and delivered a warning. Their products, he said, might be causing 300,000 premature deaths a year and $100 billion in healthcare costs. The industry needed to reform before regulators and lawyers forced the issue. The room listened politely. Then they went back to selling Oreos.

Twenty-six years later, the lawyers have arrived.

On Monday, San Francisco sued Kraft Heinz, PepsiCo, Coca-Cola, General Mills, Nestlé, Mars, Kellogg, Mondelez, Post Holdings, and ConAgra. Six companies control roughly 70% of the packaged foods Americans buy. City Attorney David Chiu called their products “food that’s not food.” The lawsuit seeks damages for decades of healthcare costs the city absorbed while these companies profited. The tobacco playbook, dusted off and reloaded.

But here’s what most coverage is missing. This isn’t a lawsuit about food. It’s a lawsuit about supply chains.

The defendants aren’t food companies. They’re manufacturing and logistics operations that happen to move calories. Their competitive advantage has never been taste or nutrition. It’s shelf stability. Centralized production. Ingredient arbitrage. The ability to ship a product from a factory in Iowa to a store in Florida and have it sit there for eighteen months without spoiling. That’s the business. The “food” is just the vehicle.

Ultraprocessed isn’t a vibe. It’s industrial substrates, corn syrups, stabilizers, emulsifiers, shelf-life agents, assembled into food-like objects no home cook could replicate.

This is why they can’t simply reformulate their way out of trouble. High-fructose corn syrup isn’t in everything because it tastes better. It’s there because it’s cheap, mixes uniformly at scale, and doesn’t crystallize during storage. Hydrogenated oils don’t go rancid. Emulsifiers and stabilizers aren’t bugs in the product. They are the product. Pull them out and the entire supply chain collapses.

The chemistry is the business model. Now the chemistry is the liability.

At Sugar Capital, we’ve spent four years investing in founders who understood this before it became a headline. Grüns. Magna. Esspo. These aren’t companies trying to be slightly better versions of the old thing. They’re building from different assumptions. Shorter shelf life. Smaller batch production. Ingredients you recognize. The tradeoff is tighter margins and more complex logistics. The upside is a product people actually trust.

The stock market noticed. Shares of the named defendants dipped on the news. Not a crash, but a tell. Investors are pricing in tail risk that didn’t exist before. That capital will flow toward brands that don’t need to lawyer their way through the next decade.

The consumer is already there. Eighty percent of shoppers associate “processed” with unhealthy. They’re reading ingredient lists. What they lack isn’t awareness. It’s options. Working parents don’t buy Lunchables because they’re fooled. They buy them because they’re exhausted. The grocery aisle remains dominated by legacy products because shelf space is bought, not earned.

This is where retailers become the chokepoint.

San Francisco sued the manufacturers. But the real power sits with grocers who decide what gets stocked, where it’s placed, and how it’s promoted. A grocery executive once told me the hottest real estate in the store is three feet wide and four feet tall: the eye-level shelf where childhood habits are formed. Endcap displays. Checkout lane candy. None of this is neutral. If ultraprocessed foods become legally and reputationally toxic, retailers won’t hide behind “consumer choice” forever. The smart ones are already expanding prepared food sections and testing cleaner private-label lines. The same calculation grocers made when they quietly phased out tobacco. The center of the store is next.

What makes this political moment unusual is the coalition. San Francisco is as progressive as American cities get. Robert F. Kennedy Jr., Trump’s Health Secretary, has made ultraprocessed foods a centerpiece of his agenda. When the Bay Area left and the populist right agree on an enemy, the direction is locked. Only the timeline is negotiable.

I’ve watched industries resist change until resistance became more expensive than adaptation. Denial. Delay. Disruption. The pattern never varies. Tobacco took decades. Opioids moved faster. Ultraprocessed food is somewhere in between, but the trajectory is set.

Michael Mudd saw it in 1999. His colleagues didn’t want to hear it. They had quarterly earnings to protect. Supply chains to feed. Shareholders to satisfy. The same incentives that built the empire made it impossible to dismantle from within.

So the dismantling will come from without.

From lawsuits. From regulators. From founders who build what the incumbents can’t. From retailers who decide the old partnerships aren’t worth the shelf space. From consumers who finally have something better to reach for.

The room that ignored Michael Mudd is about to pay for the silence.

The shelf life finally ran out.