by Marion Nestle

Currently browsing posts about: PepsiCo

Jul 26 2011

Thanks to emerging markets, U.S. food companies grow profits

The second quarter financial results are in and food companies are doing great, thanks to sales in developing countries. For example:

McDonald’s: Meatandpoultry.com reports (July 22) a 15% increase in income “boosted by strong sales throughout the world.”  Total revenue for the quarter was $6.9 billion, up 16% from $5.9 billion during the same quarter last year.

PepsiCo: Food Navigator reports an increase in net income to $1.88 billion up 18% from $1.6 billion last year. Despite “challenging conditions in the North American beverage market”… worldwide beverage and snacks businesses accounted for growth along with the acquisition of Russian dairy and juice company Wimm-Bill-Dann.  Sales in emerging markets increased 4% in beverages and 9% in snacks:  “We continue to enjoy robust top-line growth in key emerging markets,” said PepsiCo chairman and CEO Indra Nooyi.

Coca-Cola: Although its North American sales were sluggish, sales increased “due to growth in emerging markets such as China, Russia and Mexico.”  Income rose 18% to $2.8 billion from $2.4 billion last year.  Sales rose 6% in Latin America, 5% in Europe, 7% in Eurasia and Africa, and 7 in the Pacific region.   Growth in China ws 24%, in Russia 17%, and in Mexico 7%.  In contrast, North American volume recorded a growth of a measly 1%.

Americans are turning away from these products.  We already have plenty of obesity.  Now it’s time to export it.

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.

Jun 16 2011

The latest in cause marketing: KFC, Pepsi, and diabetes

I collect things like this—examples of food company marketing alliances with health and nutrition organizations that by all rights should be advising their members and clients not to eat much of the company’s products.  This one promotes mega-size Pepsi to raise funds for the Juvenile Diabetes Research Foundation.

 

 

 

 

 

 

 

 

 

 

This particular treasure comes from a blogger, Joe Tower, who runs a business—“Selfish Giving”—that helps companies do cause marketing.  This one crosses a line, even for him:

I’ve said this before: I don’t have a problem with nonprofits and fast-serve chains doing cause marketing. What I do have a problem with is when fast serve chains like KFC encourage consumers to buy products that directly contribute to the health conditions – in this case diabetes – they are supposedly trying to prevent by partnering with the cause in the first place….What was JDRF thinking? I’m not sure, but I’m calling them today to see if I can find out!

Here are excerpts from the response from JDRF:

We appreciate your concerns and your questions about the banner promoting a JDRF fundraising activity at KFC. Please understand that the fundraiser in question is a local initiative in Utah involving a single KFC franchise owner with a personal type 1 diabetes connection.That said, JDRF values its supporters, both individual and corporate, and their efforts to raise funds to support research aimed at improving lives and curing type 1 diabetes. JDRF carefully reviews national partnership opportunities to ensure that they are appropriate prior to joining corporate campaigns to raise funds.

Regarding this particular promotion, we understand that one of the criticisms has been the association with a sugary product, which many have associated with contributing to diabetes. It’s important to note that JDRF supports research for type 1 diabetes, an autoimmune disease that results when the immune system attacks the cells in the pancreas that produce insulin, therefore requiring a child or adult with the disease to depend on insulin treatment for the rest of their lives. It is a common misconception that type 1 diabetes is caused by obesity or eating too much junk food or sweets.

Finally, JDRF does not endorse any particular products, nor any particular diet. People with type 1 diabetes should work with their healthcare team to determine a diet that works best for them. JDRF fully supports people living with type 1 diabetes engaging in healthy eating habits and lifestyles.

–Gary Feit, National Manager, External Communications, Juvenile Diabetes Research Foundation

As I find myself saying again and again, you cannot make this stuff up.   And how does Pepsi, now promoting itself as a wellness company, feel about this?

[Thanks to David Schliefer for sending]

Update June 17: I hear rumors attributed to a Pepsi V.P. that the promotion is “no longer running.”

May 11 2011

Sugary drinks vs. obesity: power politics in action

It used to be that the “soda wars” referred to Coke vs. Pepsi.  No more.  Today’s soda wars are fought on the health front, as more and more evidence links sugary drinks to obesity and other health problems.

The current issue of the New Yorker has an article by John Seabrook (in which I am briefly quoted) about Pepsi’s attempt to “health up” its snacks and drinks.

Seabrook’s article, “Snacks for a fat planet,” describes the extraordinary amount of money and effort Pepsi is spending to try to tweak its products to make them seem healthier.  His article doesn’t exactly give Pepsi a pass (as some of my readers have complained), but it does not really come to grips with how sugary drinks and snacks affect health or how Pepsi is marketing its products in developing countries.

That, no doubt, is why Pepsi has sent out a press release to reports that enclosed the complete article and suggested that reporters might be “interested in the company’s focus on its innovative approach to:”

  • Reduce salt, fat and sugar across the portfolio – the New Yorker feature explains PepsiCo’s effort to re-shape natural salt so that it has more surface area, and, in turn, is perceived as “saltier” on the tongue – meaning they can maintain all the salty flavor in Lay’s but reduce overall sodium content
  • Scale more drinks and snacks made with whole grains, fruit, vegetables and dairy to new markets – e.g. bringing vegetable-based gazpacho (perhaps with an edible whole grain spoon) to the U.S.
  • Test new ingredients brought back from “treks” around the world – e.g. using a state-of-the-art robot in PepsiCo’s new Hawthorne, NY research lab to test botanicals and other natural ingredients from near and far – e.g. even secluded villages in the far East – to determine their impact on taste and viability for use in PepsiCo snacks and drinks (Do they intensify sweetness? Can they be a substitute for sugar? Do they have a particular healthful function?)

Score this one as a win for Pepsi.

Along with such pledges, Pepsi is aggressively marketing sodas to teenagers.  The San Francisco Chronicle reports on Pepsi’s new “social marketing” vending machines.

At a trade show in Chicago this week, PepsiCo rolled out a prototype interactive soda machine that lets you send a drink as a gift to a friend or a random stranger.

“Our vision is to use innovative technology to empower consumers and create new ways for them to engage with our brands, their social networks and each other at the point of purchase,” Mikel Durham, PepsiCo Foodservice’s chief innovation officer, said in a press release.

“Social Vending extends our consumers’ social networks beyond the confines of their own devices and transforms a static, transaction-oriented experience into something fun and exciting they’ll want to return to, again and again.”

But these kinds of marketing pushes are not confined to Pepsi.   Advertising Age reports that Joe Tripodi, Coke’s chief marketing officer of Coca-Cola explains the company’s growth strategy: focus on teenagers:

The company sees huge opportunities to grow colas, and the business as a whole, around the world in the next decade. Teen recruitment will be particularly important, as the company follows demographic trends.

“There was a time [a decade ago] when we walked away from teen recruitment and probably lost a generation of drinkers,” Mr. Tripodi said. “Parts of the world lost confidence in cola as the engine of growth. We’ve gotten that back in a big way. …When you look at the massive opportunity in so many huge countries in the world, that’s what energizes us and why we believe cola is still at its very early stages.”

And then there are partnership strategies. The latest is Sonic drive-ins’ campaign for Limeades for Learning. The campaign encourages eaters to vote for school projects like those that support physical activity.  Sonic promises to fund the projects with the most votes. The Limeades, by the way, are 620 calories (for a medium) or 950 calories (for a large).

Finally, for now, the Boston Globe reports that most Massachusetts voters support a sales tax on sodas if the money is used for some useful purpose.  But:

The American Beverage Association has been aggressively fighting taxes on soda, as cities and states across the country look for new tools to counter an obesity epidemic and raise revenue amid squeezed budgets. It has spent millions fighting initiatives that impose product-specific excise taxes on sugar-sweetened beverages and has been successful in nearly every attempt.

Expect more such public relations efforts superimposed on fundamental marketing techniques aimed at kids and fighting back on taxes and other attempts to limit soda intake.

 

 

 

How does this comport with the spanking new advertising guidelines to children or any of the previous pledges? Is sending a soda to a friend an activity or marketing? Or both?

 

http://www.sfgate.com/cgi-bin/blogs/techchron/detail?entry_id=87904

 

 

 

Apr 30 2011

Soda industry vs. NYC Mayor Bloomberg’s proposed ban

Today’s New York Times carries a piece by Robert Pear on soda industry opposition to NYC Mayor Bloomberg’s proposal to ban the use of food stamp (SNAP) benefits to buy sugary drinks.

My first-Sunday monthly column for the San Francisco Chronicle is on precisely the same topic.  I will post it tomorrow.

In the meantime, here’s what the Times says about how the soda industry is organizing opposition:

While the American Beverage Association has led the opposition, the fight demonstrates how various parts of the food industry have united to thwart the mayor’s proposal. Beverage industry lobbyists have worked with the Snack Food Association, the National Confectioners Association, which represents candy companies, the Food Marketing Institute, which represents 26,000 retail food stores, as well as antihunger groups like the Food Research and Action Center and Feeding America.

But here’s how the strategies play out in practice:

Eighteen members of the Congressional Black Caucus recently urged the Obama administration to reject New York’s proposal. The plan is unfair to food stamp recipients because it treats them differently from other customers, they said in a letter to Agriculture Secretary Tom Vilsack.

While Coca-Cola and PepsiCo are among the largest contributors to the nonpartisan Congressional Black Caucus Foundation, a research and education institute, caucus members say their positions are not influenced by such contributions.

See my Food Matters column tomorrow for how I view all this.

Mar 25 2011

Are processed “junk” foods in trouble?

So many readers have sent me the link to the Chicago Tribune story about efforts of packaged food producers to make their products look healthy that I thought I had best say something about it.

The article lists the large number of companies that are “healthifying” their products:

  • PepsiCo: Combining Tropicana, Quaker Oats and dairy; low-sodium salt.
  • Walmart: Cutting trans fat and sodium in its Great Value products; encouraging major brands to make healthier products.
  • Kraft:  Adding fruit to Lunchables and more whole grain to Wheat Thins.
  • Nestlé (no relation): Making small changes so consumers won’t feel deprived.
  • Campbell’s:  Trying to reduce sodium in soup, promoting liquid vegetables through its V8 brand and whole grains with Pepperidge Farm.
  • Starbucks: Offering sweets with 200 or fewer calories.

And Pepsi, says the Wall Street Journal, is converting most of its products—but not Doritos or Cheetos—to all-natural ingredients.  Doritos and Cheetos, in case you wondered, are:

harder to retool and are marketed to teens and other consumers who might be turned off if told the chips were all natural.  As well, going all natural risks highlighting the artificial ingredients that were in the chips before.

What’s going on here?  Processed food makers must be in trouble.  “Healthy” and “natural” are the only things selling these days.

But isn’t a “healthy” processed snack food an oxymoron?  They can tweak and tweak the contents, but these products will still be heavily processed.

Too much evidence now concludes that marketing a product as “healthy” or “natural” makes people think it has no calories.

And as I keep saying, just because a processed food is a little bit less bad than it used to be, doesn’t necessarily make it a good choice.

Mar 17 2011

Soda companies vs. soda taxes: breathtaking creativity

I keep telling you.   You can’t make this stuff up.  Try these for food politics–in this case, soda politics–in action.

Beverage Association gives $10 million to Children’s Hospital of Philadelphia (CHOP)

From the Philadelphia Inquirer blog (March 16):

In keeping with a controversial pledge to made last year to City Council as part of an effort to ward off Mayor Nutter’s steep tax on sugar-sweetened beverages, the soft-drink industry will donate $10 million to the Children’s Hospital of Philadelphia to fund research into and prevention of childhood obesity.

The three-year grant is funded by a new organization, the Foundation for a Healthy America, created by the American Beverage Association, the national trade group representing manufacturers and bottlers. The ABA was instrumental in lobbying Philadelphia City Council to reject Nutter’s proposal to tax sugary drinks at 2-cents per ounce as a way to cut consumption and raise money for the general fund.

In a press release Wednesday, CHOP insisted that it will “retain absolute clinical and research independence,” as the source of its funding for the research is likely to come under attack from those wary of the beverage industry’s influence. That includes funding for clinical studies to be submitted to peer-reviewed publications.

Atkins Obesity Center publishes review of effects of soft drinks on obesity

In a delicious irony, the latest review of this topic comes from the Atkins Center at Berkeley.  Yes, the Atkins Diet Atkins, the one that promotes high-fat, low-carbohydrates, and has everything to gain from proving that sugars are bad for you.

With that duly noted, set the irony aside.  The review was funded by independent agencies and organizations.  Let’s take its results at face value.

The reviewers looked at five kinds of evidence: secular trends, mechanisms, observational studies, intervention trials and meta-analyses.  All supported the idea that

The currently available evidence is extensive and consistently supports the hypothesis that sweetened beverage intake is a risk factor for the development of obesity and has made a substantive contribution to the obesity epidemic experienced in the USA in recent decades.

Sweetened beverages are an especially promising focus for efforts to prevent and reduce obesity for two reasons: (i) the evidence supporting the association between sweetened beverage intake and excess weight is stronger than for any other single type of food or beverage; and (ii) sweetened beverages provide no nutritional benefit other than energy and water.

Coca-Cola funds North Carolina School of Public Health campaign against Childhood Obesity

Isn’t that nice of them?  The apparently unironical slogan of the campaign : “Everything in moderation.”

Robert Wood Johnson Foundation report, “F as in Fat”, features piece by PepsiCo’s CEO

Melanie Warner, writing on bNET, explains that the RWJ Foundation is usually scrupulously independent but that putting Pepsi’s PR piece into its document makes no sense.

A third of the way into the report, up pops a bizarre “personal perspective” from PepsiCo’s (PEP) CEO Indra Nooyi in which she details the many ways her company is working to make America healthier. “Helping consumers by building on our portfolio of wholesome and enjoyable foods is not just good business for PepsiCo -– it’s the right thing to do for people everywhere,” Nooyi chirps in a two-page soliloquy that reads like a press release and touts everything from Pepsi’s pledge to reduce the sodium in its products by 25% by 2015 to its reduced sugar drinks like Trop50 and G2. No other food company is mentioned, just Pepsi.

[This inclusion]…also ties into the ongoing debate about what role the food industry should play in helping Americans slim down. Are food companies trusted partners who are committed to fundamental changes, or is getting people to eat healthier versions of processed food really a whole lot of Titanic deck chairs?

As the research linking soft drinks to obesity gets stronger and stronger, it is no wonder that the Beverage Association is buying off city councils, and soft drink companies are eager to position themselves as helping to solve the problem of childhood obesity, not cause it.

Do these actions remind you of any other industry’s behavior?  Cigarette companies, anyone?

Jan 5 2011

Pepsi’s answer to “eat natural”: snackify beverages and drinkify snacks

Over the holidays, Pepsi announced two changes to its products.

“All Natural” Frito-Lay: First, the company announced that half its Frito-Lay chips would now be made with “all natural” ingredients.

“Natural,” you may recall, has no regulatory meaning.  Companies pretty much get to define for themselves what the word means, provided what they say is “truthful and not misleading.”

By “natural,” Pepsi means removing MSG, artificial colors, and other chemical additives from some—but by no means all—chips and other snacks.  This is a good start, but Cheetos and Doritos?  Not a chance.

As to worries that the word “natural” is a calorie distractor and might encourage overeating, a Pepsi spokesperson said: “It’s meant to say: made with natural ingredients….It’s not meant to say: eat more.”  Really?  I’m not convinced.

Tropolis Squeezable Fruit: Next, Pepsi announced the latest innovation in kids’ products: Tropolis pouches of squeezable fruit.

I learned about Tropolis from a reporter at the Wall Street Journal, Valerie Bauerlein, who forwarded Pepsi’s press release:

Each fun-flavored 3.17 fl oz (90g) pouch provides a smooth blend of real squeezable fruit, is a good source of fiber, and offers 100 percent of the recommended daily value of vitamin C – all for less than 100 calories.

Tropicana Tropolis is made with no added sugars, artificial sweeteners or high fructose corn syrup; and no artificial flavors, colors or preservatives.

“Fun-flavored” is a euphemism for sugar.  The press release explains what’s not in the product.  So, what does it contain? It took some doing to find out, but it arrived eventually along with some further background information from Pepsi:

The issue is kids aren’t getting enough fruit, so Tropicana Tropolis is trying to help solve that problem in a fun, nutritious way…Studies show that families are not getting enough fruit and vegetables in their diets, and the health experts we talked to (registered dietitians and pediatricians) when developing Tropolis also raised this issue.

As you might imagine, I was not one of the experts they talked to.  Here are the ingredients:

  • Grape World: Apple puree, filtered water, banana puree concentrate, fibersol-2 fiber (maltodextrin), grape juice concentrate, apple juice concentrate, lemon juice concentrate, natural flavor and ascorbic acid (vitamin C).
  • Cherry World: Apple puree, filtered water, banana puree concentrate, fibersol-2 fiber (maltodextrin), apple juice concentrate, cherry juice concentrate, lemon juice concentrate, natural flavor and ascorbic acid (vitamin C).
  • Apple World: Apple puree, filtered water, banana puree concentrate, fibersol-2 fiber (maltodextrin), apple juice concentrate, lemon juice concentrate, natural flavor and ascorbic acid (vitamin C).

Translation: “Juice concentrates” is another euphemism for sugar.  You don’t believe me?  See the list of sugar euphemisms in the 2005 Dietary Guidelines (Table 14).

My translation: this is watery apple and banana sauce, artificially thickened, sweetened with fruit sugars, flavored with additives, and with added vitamin C.

As Valerie Bauerlein’s Wall Street Journal account explains,  this product is about expanding Pepsi’s profits in the “better-for-you” category as captured in a quotation that is sure to become a classic.

Ms. Nooyi [Pepsi’s CEO] has said she wants to build the nutrition business to $30 billion from $10 billion by 2020.…We see the emerging opportunity to ‘snackify’ beverages and ‘drinkify’ snacks as the next frontier in food and beverage convenience,” Ms. Nooyi said.

I ’m also quoted in her article (I did the interview while stranded in Miami trying to get back to snowbound New York):

Marion Nestle, a professor of nutrition at New York University, said that the fruit concentrates are simply sugar. “They start out with real food, so let’s give them credit for applesauce and mashed-up bananas,” but “the rest of it is sugar,” she said. “Kids would be better off eating an apple or a banana.”

PepsiCo said Tropolis should get kids to eat more fruit, which is what’s most important.

Tropolis raises my favorite food philosophy question: Is a “better-for-you” product necessarily a good choice?  Is this a good way to get kids to eat more fruit?

You decide.

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