by Marion Nestle
Jun 30 2011

Pepsi’s “health food” initiatives in trouble?

As I keep saying, public concerns about obesity put food companies in an impossible dilemma.  Even if companies want to produce healthier products and stop marketing to kids, they can’t.  If they do, they lose sales.

Case in point: PepsiCo.  Its investors are unhappy that the company  is pushing its “healthier-for-you” foods instead of doing what it is supposed to: pushing the far more profitable “fun-for-you” products like PepsiCola, Gatorade, and Cheetos.

According to the Wall Street Journal, investors are worried that Pepsi sales have fallen to #3 in rank after Coke and Diet Coke.  They blame the company’s CEO, Indra Nooyi:

Hailed as a strategic visionary since taking PepsiCo’s reins nearly five years ago, Mrs. Nooyi is facing doubts from investors and industry insiders concerned that her push into healthier brands has distracted the company from some core products.

They ask: “Is she ashamed of selling carbonated sugar water?”

Products that PepsiCo calls “good for you” still make up only about 20% of revenue. The bulk still comes from drinks and snacks the company dubs “fun for you,” including Lay’s potato chips, Doritos corn chips and Pepsi-Cola, by far the company’s single biggest seller with about $20 billion in annual retail sales globally.

Advertising Age, of course, thinks the reason PepsiCo has a problem is because it’s not spending more on marketing:

Analysts and investors blamed the decline on PepsiCo chairman and CEO Indra Nooyi, who took the reins five years ago….Back in 2005, PepsiCo spent $348 million on soda ads in the U.S.; by last year, the company was spending just $153 million.

Advertising Age (June 20) reports PepsiCo’s sales in 2010 at $58 billion.  It’s profits on this? $6.3 billion.

Along the way, PepsiCo spent $1.01 billion to advertise its products, just in “direct media” (TV, radio, print, and Internet ads that go through advertising agencies).  It probably spent just as much or more on indirect methods such as trade show, point-of-purchase campaigns, and other such things.

Advertising Age gives 2010 marketing figures for specific products (numbers rounded off to the nearest million):

  • Pepsi:  $154
  • Gatorade: $113
  • Quaker:  $56
  • Tostitos: $35
  • Tropicana: $31
  • Lay’s: $25
  • Cheetos:  $11

Wall Street analysts say the company better do something to boost sales of its core products, or else.  Expect to see a lot more advertising dollars spent on “fun-for-you.”  And maybe fewer on “good-for-you?”

The food industry spent billions to convince people that eating tons of junk food is normal, expected, and what adults and kids are supposed to do.  Now, it faces a backlash driven by obesity and its health consequences.

Wall Street insists that companies not only make profits, but grow.  Companies must hit their quarterly growth targets.

Maybe it’s time to take a good hard look at the way Wall Street operates.  We want to bring agricultural policy in line with health policy, right?  How about also bringing investment policy in line with health policy?

Hey, I can dream.

Comments

There’s growing evidence that speculation on foodstuffs has a large role to play in the price hikes that lead to food riots in 2008. I would dream bigger than you even, Marion, and say that commodity speculation on food staples should be outlawed.

  • Anthro
  • June 30, 2011
  • 3:27 pm

Since we’re repeating ourselves today, I’ll chime in with: Don’t own stock in junk food companies unless you want to be part of the problem–not even a little bit as in a mutual fund.

One suggestion for PepsiCo: How about more (actual) single serving packages–even at a higher price. Look, I love Cheetoes, but I will NOT buy a large package or even the “small” one as they contain many servings and I know I can’t “eat just one” or even the 13 or 20 that constitute a serving. But I would pay $1 for a one serving packet just to enjoy something “fun” without blowing my calorie intake. This is something that even I would grab at the checkout!

——

Off topic but I must tell this story:

My husband was working at a very upscale private school (putting in a floor) where the principal bragged that they do not have soda in the vending machines–No, indeed, they have SNAPPLE instead! It reminded us that when we went to school, public or private, the only refreshment was the drinking fountain–or “bubbler” as we call them here in Milwaukee.

Anthro … To paraphrase you … “not even a little bit” … that’s my recommendation related to Cheetos. While the front of the package states zero trans fats, that certainly is not the case.

We all know trans fats is a killer. So … I recommend “not even a little bit” of poison for the body.

For the rest of the story, visit http://partiallyhydrogenated.com

Ken Leebow
http://www.LifewithoutLipitor.com

  • phil
  • July 1, 2011
  • 8:07 am

to dream big we have to wake up and look at how every single penny of ours is spent, i.e. how money (not only Wall St) works.
for instance, what is your pension fund doing right now?
http://www.grain.org/articles/?id=80

[...] post: Food Politics » Pepsi's “health food” initiatives in trouble? This entry was posted in Food, Health and tagged companies-want, even-if-companies, food, health, [...]

  • Mari Avalo
  • July 1, 2011
  • 10:36 pm

This country is so bought and paid for by big conglomerate America that reading stuff like this just disgusts me about our country, and I get a sense that nothing is going to change until catastrophy strikes. Policy for tighter regulation (on anything)? That would mean less profits and governement is getting in the way of capitalism, and ultimately the Golden American Dream. Less profitability= unamerican, and those that might suggest it should get our of “our” country.
Health tied to investment and profit, now that would be quite a dream.

  • Joe
  • July 2, 2011
  • 12:32 am

I wonder what percentage of government services that are so coveted by so many are paid via the taxes levied on Pepsi, Coca Cola, McDonalds et al? If these mean ol corporations earn less profit they pay less in taxes which leave less in government coffers for government services. Therefore more profits = more takes = more government and thats what you want right?

[...] http://www.foodpolitics.com/2011/06/pepsis-health-food-initiatives-in-trouble/ This entry was written by TimK, posted on July 2, 2011 at 9:13 am, filed under Uncategorized. Bookmark the permalink. Follow any comments here with the RSS feed for this post. Post a comment or leave a trackback: Trackback URL. « Trans Fat: City of Cleveland vs. OH legislature [...]

  • Anthro
  • July 2, 2011
  • 12:18 pm

@Ken

While I don’t think Cheetoes are particularly healthy, I would not use the term “poison” to describe them. I enjoy them occasionally. I find it much easier to say no to investing in junk food than to never eat Cheetoes or flourless chocolate torte.

@Joe

Please spare us and take a logic class. Effective government is not the same thing as “more” government. Perhaps if less tax money had to be used for treating the childhood obesity that results from the profits of these companies and their shareholders, we could use it for other things? Why is is so difficult for you to grasp the concept of PUBLIC HEALTH?

[...] Food Politics) [...]

[...] but nothing yet that truly matches the scale and urgency of the problem. Furthermore, Pepsi is now getting hammered by investors who fear the initiative will lead to lower profits, which is likely to give pause to others in the [...]

[...] WFP is engaged in a similar project. It also works in partnership with PepsiCo, manufacturer of crisps, soft drinks, and a range of non-foods; Cargill, whose inhumane and unhygienic [...]

[…] (h/t Food Politics) […]

[…] but nothing yet that truly matches the scale and urgency of the problem. Furthermore, Pepsi is now getting hammered by investors who fear the initiative will lead to lower profits, which is likely to give pause to others in the […]

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