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Notes and commentary from Day Two of the 2004 CIES World Food Business Summit

ROME – Never let it be said that events such as this one don’t occur in the real world, and don’t focus on significant and immediate issues.

After all, in the “real world” this week, there was a report in the Wall Street Journal that concerns about the obesity epidemic may in fact be having an impact on the number of cookies consumed by Americans, as “the number of bar-coded cookie boxes sold last year fell 5.4%, the third consecutive year of decline.” Sales of Kraft’s Oreos alone dropped nine percent, according to the report.

This puts tremendous pressure on cookie manufacturers, who are torn between two imperatives – they have to satisfy investors by constantly expanding profits, and they have to be sure not to alienate consumers by ignoring constantly expanding waistlines.

It is this tension – both real and perceived - between commercial concerns and societal issues that was front and center during Day Two of the annual CIES World Food Business Summit here. Coming after an initial set of sessions during which it was argued that capitalism and moral behavior are not mutually exclusive, the day’s discussions about obesity issues were a reminder that sometimes they may be exactly that.

Not that any of the speakers would have conceded the point. But the passion of their messages suggested that they are resolute in their commitment to their positions.

Take, for example, Dr. Marion Nestle, author of “Food Politics” as well as a professor of nutrition, food studies and public health at New York University, pointed out that in a highly competitive market, food marketers have only two choices – “to get customers to choose your product instead of someone else’s, or to get people to eat more food.” In such an environment, she said, “obesity is collateral damage.”

Nestle castigated the food industry for its “eat more messages,” for making health and nutrition claims that she suggested were scientifically indefensible (even though current US law allows them), and for spending $34 billion a year market foods that, for the most part, make up the smallest part of the food pyramid as the foods people should eat the least.

She specifically cited Tropicana’s new “Light and Healthy” orange juice, which claims to have less sugar than traditional juice; she noted that the company seemed to achieved this simply by adding water. And she noted that when Kraft came up with a low-calorie version of its 53-calorie Oreo, they managed to get the per-cookie calorie count down to 47. (Nestle may have been the only person in the room who would have seen the WSJ story about the drop in Oreo sales as good news.)

Portion size also came in for criticism. “Studies show that if you put large portions of food in front of a person, they’ll eat more, even if they’re not hungry,” she said. And Nestle accused the industry of “crossing an ethical line” in its marketing to young people, which she said encourages them to pester their parents for specific brands and products that simply are not healthful.

Nestle suggested that industry players “are on the wrong side of the issue” if they oppose governmental actions to deal with obesity, but also said, “You are in a terrific position to be part of the solution.” The key, she said, is to serve smaller portions of healthier foods, and create price breaks so that such products are not more expensive that their less healthy counterparts. (She even suggested, in a comment that left most of the business people in the room incredulous, that retailers and manufacturers ought to be reducing their portion size. “Why do companies have to grow?” she asked. “If you are a company that makes $20 billion, why isn’t that enough?”

The two speakers who followed her work for companies that have specialized in growing sales – E. Neville Isdell, the new chairman/CEO of the Coca-Cola Co., and Mats Lederhausen, managing director of McDonald’s Ventures for the McDonald’s Corp.

Their response to Nestle’s proposition was to suggest that their brands’ power was in offering consumers a wide variety of choices. “A portion for every appetite” was how Lederhausen put it. And Isdell noted, “Fifty years ago, Coke made one product that came in one bottle. Today, we make 400 different beverages in thousands of different packages.” There has been, he said, “an explosion of consumer choice” that puts the responsibility for making informed choices squarely on the individual.

Indeed, Isdell noted that “there is a very good argument” that the industry in general has done enough in this area, creating a wide range of choices of high quality that are both affordable and available. And he said, “It is well worth reflecting on the magnitude of this sector’s accomplishments.

And Isdell seemed to put the onus squarely on consumers’ preferences when he quoted 20th century economist Joseph Schumpeter, who once said, “It is not enough to produce satisfactory soap. It is also necessary to induce people to wash.”

Lederhausen framed McDonald’s approach to the problem also as providing choice, but also as creating educational tools that focus consumer priorities on the issue. And he seemed to want to cover all his bases when he said, at one point, “Isn’t it interesting that every conversation about responsibility ends up being about someone else’s responsibility?” Later, though, he conceded, “We have to recognize our enormous responsibilities.”

So what to do? For a food company, how much attention to this issue is enough? And how much is too much, because it may inhibit the profit motive?

In some ways, it seems an insurmountable tension, especially when put into context by speaker Charles Handy, a social philosopher and management scholar, who suggested that in what he termed “a relationship economy,” it is the connection between brand and consumer that allows certain companies to escape the curse of commoditization.

And the chairman of Vodafone, Lord MacLaurin of Knebworth – who was just Sir Ian MacLaurin when he was chairman of Tesco – certainly seemed to echo these sentiments. “Increasingly, the balance of brand success is shifting to things you cannot touch, to the intangible qualities of a brand,” he said. “You have to get the balance right between the tangibles and the intangibles,” and he suggested that “the intangibles create the context within which people relate to the brand.”

So maybe the question isn’t “How much is enough?”

Maybe the question is whether the obesity question is a tangible or an intangible issue for the food industry.

In all likelihood, this question wouldn’t generate any more agreement among Nestle, Isdell, Lederhausen and the rest than any other question. After all, Nestle noted at one point that the things she heard the food industry saying “are very much like what we used to hear from the cigarette companies when they were under attack,” denying culpability while pushing for choice, personal responsibility and lack of government intervention.
KC's View:
To be honest, while we agree with many of Nestle’s points, that seems a little harsh. Even if the food industry hasn’t made all the right moves in dealing with the obesity issue, it can be fairly said that many companies are trying to find their way through a complicated maze made up of conflicting science, public attitudes, and investor pressures.

That’s no easy thing.

But Lord MacLaurin made an excellent point when he said that brands need to stand for consistency (something he was largely responsible for during his tenure at Tesco), and that it is critical that marketers “understand the underlying significance of the business you’re in.”

Is the food business responsible for helping consumers to eat healthy? To help the shopper make informed, intelligent decisions? To provide a plethora of choices appropriate to the consumer base? And to even allow for consumer indulgence?

We would say “yes” to all of the above. And that the industry is not there yet.

The key to making this happen, it seems to us, is forthright communication based on honest information.

Not easy. And sometimes, a perilous course.

Just this week, for example, it was revealed that Subway has created a series of advertisements that focus on childhood obesity, featuring actual children who lost weight through a combination of diet and exercise. But the ads haven’t run yet, in part because the networks won’t play them.

Of concern is the recent Federal Trade Commission (FTC) ruling that KFC broke the rules when it suggested in commercials that fried chicken was a low-carb, healthy food that could help you lose weight. Nobody wants to be on the wrong side of a federal ruling, so everybody is walking carefully.

“Honest information,” it appears, may be in the eye of the beholder.