Currently browsing posts about: PepsiCo

Lobbyists are supposed to report what they do and how much money they spend doing it, but this information is not easily available to the public.

CBS News reports that PepsiCo spent $750,000 to lobby government last quarter.  This comes to roughly $3 million annually, a drop in PepsiCo’s annual $30.6 billion sales in the U.S.—$57.8 billion worldwide.

What is Pepsi lobbying about?  Open Secrets publishes the filing information on its website.

PepsiCo lobbied the House, Senate, Executive Office of the President, FTC, FDA, and USDA, focusing on these issues, among others:

• Childhood Obesity (generally, no specific legislation)
• Food and beverage labeling (generally, no specific legislation)
• Marketing and advertising issues in response to Interagency Working Group on Food Marketed to Children (IWG) (see previous posts)
• Restrictions on use of supplemental nutrition assistance program (no specific legislation)
• Implementation of S. 3307-healthy, Hunger-Free Kids Act of 2010
• Biofuels policy generally

I’m especially interested in lobbying against the IWG guidelines.  Pepsi, of course, was not alone in opposing them.  As I noted in a previous post, the the Sunlight Foundation reported on food companies lobbying against them.

Media companies also opposed the IWG guidelines, as shown by Viacom’s annual filing with the Security and Exchange Commission, a document forwarded to me by Jeffrey Chester of the Center for Digital Democracy:

…some U.S. policymakers have sought limitations on food and beverage marketing in media popular with children and teens. In April 2011, the Interagency Working Group on Food Marketed to Children (the “IWG”)…requested comment on proposed nutritional restrictions for food and beverage marketing directed to children and teens aged 17 years and under.

Although the guidelines are nominally voluntary, if implemented by food and beverage marketers, they could have a negative impact on our Media Networks advertising revenues, particularly for our networks with programming targeted to children and teens.

Congress asked the FTC to set up the Interagency Working Group to propose guidelines on marketing foods to kids.  Did it really think food companies would accept such guidelines, voluntarily at that?

As I keep pointing out, food companies have to market to kids to sell products and grow sales every quarter.

If they don’t sell products to kids in the U.S., they will intensify efforts to sell products to kids in developing countries, thereby outsourcing childhood obesity.

Surely it’s time for mandatory rules about marketing junk foods to kids?  If not now, how about soon?

On the plastic bottle front, much is happening.

BPA plastics are banned from the European market, only to be replaced by other plastics that seem to have their own problems.  These are detailed in three articles in Food Additives and Contaminants dealing with the migration of chemicals from baby bottles.

• Santillana et al.,  Migration of bisphenol A from polycarbonate baby bottles purchased in the Spanish market by liquid chromatography and fluorescence detection (2011); doi: 10.1080/19440049.2011.589036.
• Simoneau, et al., Comparison of migration from polyethersulphone and polycarbonate baby bottles (2011) doi:10.1080/19440049.2011.604644.
• Simoneau, et al.,  Identification and quantification of migration of chemicals from plastics baby bottles used as substitutes for polycarbonate, ( 2011); doi 10.1080/19440049.2011.644588.

In response to such concerns, soft drink companies are engaging in the latest form of “cola wars,” this time the race to greener bottles.  As the New York Times puts it,

Over their decades of competition, the battle between Coca-Cola and PepsiCo has taken on many colors — brown (cola), orange (juice), blue (sport drinks) and clear (water).

Now, they are fighting over green: The beverage rivals are racing to become the first to produce a plastic soda bottle made entirely from plants.

Coca-Cola has signed up with three biotechnology companies to produce materials for 100% plant-based bottles.  It already has some recyclable PlantBottles, but these are only 30% plant-based (mono-ethylene glycol, MEG).  The other 70% is purified terephthalic acid, PTA.  Coke says it will go to 100% plant-based by 2020.

PepsiCo says it is doing the same thing, only faster.

OK, plant-based.  But from what?

Coke says it is experimenting with Brazilian sugarcane, molasses, and other plant residue materials but might also use crops grown specifically for plastic production.  Pepsi says it will use agricultural waste products, such as corn husks, pine bark or orange peels.

What about corn?  Corn has already been used to produce plastics, but doing this is just like growing food crops for biofuels, causing land conversion, higher food prices, and heavy fertilizer use.

It will be good to get the harmful chemicals out of drink bottles.

But soft drinks are inherently wasteful of natural resources.  All the greenwashing in the world can’t hide that.

This morning, the Center for Digital Democracy announced that consumer groups have filed a complaint (and see the appendices) with the Federal Trade Commission against PepsiCo.

Why?  Because of the ways PepsiCo uses digital marketing techniques to push its products to children and adolescents.

These include:

• Disguising marketing as video games, concerts, and other “immersive” experiences
• Claiming to protect teen privacy while collecting a wide range of personal information
• Using viral techniques that violate FTC guidelines

The report points to Pepsi’s Hotel 626 video game as a particularly egregious example.

Also this morning, Public Health Law & Policy released a comprehensive report on the kinds of digital marketing tactics that are now used routinely by fast food, snack food, and soft drink companies. The report identifies specific marketing campaigns from PepsiCo, McDonald’s, and others that exploit kids’ use of digital media.

I can’t wait to see what the FTC does with this.

In the meantime, here’s Michele Simon’s enlightening report on what it’s like to play Hotel 626.

And Lori Dorfman of the Berkeley Media Studies Group sends these case studies on digital marketing to kids:

• McDonald’s Avatar
• Multicultural marketing
• Coca-Cola’s digital ads
• PepsiCo/Frito Lay/Doritos—Hotel 626
• PepsiCo/Mountain Dew/Dewmocracy

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.

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.

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.”

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

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.