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Yesterday’s New York Times contained an enormous—three full pages—investigative report on Walmart’s use of bribes to circumvent zoning restrictions in Mexico.

The article pulls no punches:

The Times’s examination reveals that Wal-Mart de Mexico was not the reluctant victim of a corrupt culture that insisted on bribes as the cost of doing business. Nor did it pay bribes merely to speed up routine approvals. Rather, Wal-Mart de Mexico was an aggressive and creative corrupter, offering large payoffs to get what the law otherwise prohibited. It used bribes to subvert democratic governance — public votes, open debates, transparent procedures. It used bribes to circumvent regulatory safeguards that protect Mexican citizens from unsafe construction. It used bribes to outflank rivals.

This is not the first time the Times has written about Walmart’s bribery in Mexico.  As I wrote at the time,

Wall Street pressures on corporations not only to make profits, but to grow profits every quarter, are the root cause of much food company corruption and corner-cutting.

But this report takes the investigations to another level. It documents how Walmart officials deliberately undermined efforts by the Mexican government to keep the historic area around the Teotihuacán pyramids free of commercial use.

It comes with:

• A slide show
• A multimedia Feature: Wal-Mart Abroad
• A video: Wal-Mart Comes to Teotihuacán
• Another video: A Leader in Protests Against Wal-Mart

Among other things, Walmart is the world’s largest supermarket chain. Its 10,000 stores in 27 countries sold $443.9 billion worth of goods—more than half from grocery sales—for net earnings of $15.8 billion in 2012.

As the Times’ article makes clear, the company resorted to whatever seemed necessary to get what it wanted.  This particular case may be an anomaly but it  could not have happened without a corporate culture deeply devoted to maintaining sales and profits.

A cautionary tale?

While Congress is fussing over the farm bill, Michele Simon’s new report, Food Stamps: Follow the Money, identifies the businesses that most stand to gain from the $72 billion spent last year on SNAP.  This program, formerly known as food stamps, gave 46 million Americans an average of  $134 per month to spend on food in late 2011.

Just as health and anti-obesity advocates are working to bring agricultural policy in line with health policy by getting the farm bill to promote production of healthier foods, they also are looking at ways to encourage SNAP recipients to make healthier food choices.  At present, SNAP recipients have few restrictions on what they can buy with their benefit cards.

In contrast, participants in the Women, Infants, and Children program (WIC), which is not a farm bill program, can only use their benefits to buy foods of high nutritional value.  The idea of requiring SNAP recipients to do the same has split the advocacy community.

Anti-hunger advocates fear that any move to restrict benefits to healthier foods, or even to evaluate the current food choices of SNAP recipients, will make the program vulnerable to attacks and budget cuts.  They strongly oppose such suggestions.

Follow the Money explains some of the politics behind efforts to maintain the status quo:

• Food industry groups such as the American Beverage Association and the Snack Food Association teamed up with anti-hunger groups to oppose health-oriented improvements to SNAP.
• Companies such as Cargill, PepsiCo, and Kroger lobbied Congress on SNAP, while also donating money to America’s top anti- hunger organizations.
• At least 9 states have proposed bills  to make health-oriented improvements to SNAP, but  none have passed, in part  due to opposition from the food industry.
• Coca-Cola, the Corn Refiners of America, and Kraft Foods  all lobbied against a Florida bill that aimed  to disallow SNAP purchases for soda and junk food.
• Nine Walmart Supercenters in Massachusetts received more than $33 million in SNAP dollars in one year.
• Walmart received about half of the billion dollars in SNAP expenditures in Oklahoma over a 2-year period.
• J.P. Morgan Chase holds contracts in 24 states to administer SNAP benefits.
• Banks and other private contractors are reaping significant windfalls from the economic downturn and increasing SNAP participation.

The point here is that banks that administer SNAP have a vested interest in keeping SNAP enrollments high and makers of junk foods have a vested interest in making sure that there are no restrictions on use of benefits.

Another point: data on use of SNAP benefits exist but are either proprietary or not made available.

The report concludes with these recommendations:

• Congress should maintain SNAP funding in this time of need for millions of Americans;
• Congress should require collection and disclosure of SNAP product purchase data, retailer redemptions, and national data on bank fees;
• USDA should evaluate state EBT contracts to determine if banks are taking undue advantage of taxpayer funds.

I’ve not seen this kind of analysis before and this report deserves attention.  At the very least I hope that it will encourage Congress to make sure that the poor get their fair share of SNAP benefits.

On April 22, the New York Times published an unusually lengthy account (front page plus three full pages) of how Walmart executives in Mexico bribed officials to allow the company to open stores in many locations in record time.

I was struck by the simplicity of the rationale for the illegal behavior (I’ve italicized the key points):

But The Times’s examination uncovered a prolonged struggle at the highest levels of Wal-Mart, a struggle that pitted the company’s much publicized commitment to the highest moral and ethical standards against its relentless pursuit of growth.

Under fire from labor critics, worried about press leaks and facing a sagging stock price, Wal-Mart’s leaders recognized that the allegations could have devastating consequences, documents and interviews show.

Wal-Mart de Mexico was the company’s brightest success story, pitched to investors as a model for future growth. (Today, one in five Wal-Mart stores is in Mexico.) Confronted with evidence of corruption in Mexico, top Wal-Mart executives focused more on damage control than on rooting out wrongdoing.

As I keep saying, Wall Street pressures on corporations not only to make profits, but to grow profits every quarter, are the root cause of much food company corruption and corner-cutting.

This morning, Walmart announced a new FOP labeling program:

The logo will go on Walmart’s in-house brand products that meet the company’s nutritional criteria.  These criteria are similar (but not identical) to those recommended by the Institute of Medicine (IOM) in its recent report advising the FDA about what should be included in front-of-package labels.

Because the FDA has not yet acted on the IOM report, Walmart—like other retailers—is jumping the gun in doing its own thing.  Its thing, however, is a substantial improvement over the Facts Up Front scheme put in place by the Grocery Manufacturers Association and Food Marketing Institute.

In general, strict nutrition criteria for salt, sugar, and saturated fat exclude most supermarket products.

Walmart’s criteria are pretty strict.  They exclude 80% of Great Value products.

In the cereal category, for example, only these Great Value items qualify:

• Extra Raisin Bran Cereal
• Raisin Bran
• Bran Flakes
• Crunchy Oat Squares
• Frosted Shredded Wheat
• Crunchy Nugget Cereal
• Toasted Wholegrain Oat Cereal

But these Great Value cereals do not:

• Cocoa Cool Cereal
• Cinnamon Crunchy Oat Squares Cereal
• Apple Blasts Cereal
• Sugar Frosted Flakes Cereal
• Toasted Corn Cereal
• Crisp Rice Cereal
• Fruit Spins Cereal
• Fruity Puffs Cereal
• Crunchy Honey Oats Cereal
• Vanilla Almond Awake Cereal

OK, but I wish the company had waited for the FDA to decide on a plan for FOP labeling (and I wish the FDA would get busy on that plan).

All of these schemes are ways to avoid putting negative information on package labels.  No seller or retailer wants a red traffic light—“don’t buy me”—on its products, especially because research shows that stop signals work.  Customers tend not to buy products marked with red traffic lights.

The IOM report concluded that negatives (“don’t buy”) worked better than positives (“buy me”) in guiding consumer choice.   A more recent study confirms that finding.

Companies much prefer green-light systems like the one Walmart is doing.

The Walmart press release explains:

Walmart moms are telling us they want to make healthier choices for their families, but need help deciphering all the claims and information already displayed on products…Our ‘Great For You’ icon provides customers with an easy way to quickly identify healthier food choices…this simple tool encourages families to have a healthier diet.

But does it?  Will Walmart customers buy more of the items marked with the logo instead of the other kinds?  The company says it is doing the research.  Will customers who buy products with the logo be healthier as a result?

I can’t wait to find out.

Addition, February 8: Here’s the way the New York Times dealt with this (I’m quoted).

Walmart is not satisfied with being the biggest food retailer in the world.  It wants more.  It has saturated national suburban areas, says the New York Times, and is now lobbying hard to get into New York City—that bastion of liberal thinking: 

Wal-Mart is pursuing that goal with the intensity, sophistication and checkbook of a full-fledged political campaign, hiring star political consultants, including Mayor Michael R. Bloomberg’s former campaign manager, producing expensive television and print advertisements and conducting polls.

And it is doing it with the kind of in-your-face aggressiveness that would make a New Yorker proud.

A glossy brochure it mailed to thousands of city residents appeals to their sense of autonomy, declaring: “You don’t ask the special interests or the political insiders for permission to watch TV. So why should they decide where you’re allowed to shop?”

A spokesperson for Walmart explained that after exhausting all other customer segments:

Now we only have one segment left…People who self-identify themselves as liberals.

In New York, an indisputably Democratic city, Wal-Mart faces a big challenge, both from lawmakers…and from unions, who accuse the retailer of endangering small businesses and mistreating its workers.

Wal-Mart has responded with an all-out push meant to overwhelm and outmaneuver its far less deep-pocketed opposition. It has put out a flurry of television, radio and newspaper advertisements, including one radio spot that accuses opponents of not caring “about how many jobs Wal-Mart would create or how badly people need them.”

 Advertising Age is also following the Walmart saga closely.  On March 6, it wrote about Walmart’s enormous influence over the retail industry.  This could be a force in favor of better industry self-regulation (if such a thing is possible):

Walmart, however, clearly has been out in front of the rest of the industry on many issues. And unlike a government, it isn’t bound by constitutional due process that bogs regulations sometimes for years. No Tea Party representatives are trying to withhold funds for its greenhouse-gas reduction plans. And with billions of dollars at business at stake for its biggest customers, Walmart wields a bigger stick than any fines a government can impose.

And on March 20, Advertising Age wrote about Walmart’s complicated problems with class issues related to its pricing strategies. 

The chain so far is having trouble winning back shopping trips and dollars it lost the past two years from middle- and lower-income core consumers, and it also appears to be turning off the group it made inroads with through its last strategic revamp, Project Impact. That initiative cleared promotional merchandise out of aisles and reduced assortments to make stores more visually appealing and easier to shop in for upscale shoppers. But as Walmart scaled back on Impact by adding products back to its shelves and aisles and returned to everyday low pricing, those shoppers have become less satisfied.

Walmart may be family owned, but the family is exceedingly wealthy and runs an absurdly large enterprise—$405 billion in 2010, of which $140 billion was in food.  Anything Walmart does has an out-of-proportion impact on customers, its 2 million “associates” workforce, and competing businesses, large and small.

Everything Walmart does deserves scrutiny, and its efforts to move into New York City are no exception.

Not everyone liked Sam Kass’s speech as much as I did (see previous post) and I’ve been asked to expand on the idea that we need to pressure the White House to do more.  Here’s how I see the situation.

We live in an era when corporations run government.  You don’t believe this?  Take a look at the appalling events in Wisconsin.  Consider the implications of last year’s Supreme Court decision in Citizens United, allowing corporations virtually unlimited funding of congressional election campaigns.

Election campaign funding is the root source of corruption in American government.   If corporations were not allowed to fund election campaigns, we might be able to elect legislators who are more interested in public health than corporate health.

The First Lady’s Let’s Move campaign aims to reduce childhood obesity.  This, in itself, is fundamentally anti-corporate.  Why?  Because fixing obesity means eating less and eating better, and both are very, very bad for business.  And they are especially bad for the corporations that make highly profitable junk foods—snacks, sodas, and the like—and for retailers who display these products on supermarket shelves.

From the perspective of the White House, the food business is not going away.  If the Obama administration is not going to be perceived as anti-business, it has to work with corporations.  But what can food corporations really do to help kids eat more healthfully?

I worried about this question when I returned from the World Economic Forum in Davos a few years ago.  There, I met high-level executives of food corporations and realized that I needed a clear, unambiguous agenda for them.  But because I think people would be healthier if they ate mostly unprocessed foods, and I’m not much impressed by small nutritional tweakings of junk foods, I had a hard time thinking of positive things they could do.

The only agenda items I could think of were negatives: stop marketing junk food, stop marketing to kids,  stop marketing junk food as health food, stop attacking critics, etc.  Negatives won’t sell.

I think Mrs. Obama’s choice of childhood obesity as her First Lady’s Cause was a courageous decision.   In the current corporate context, the accomplishments listed by Mr. Kass add up to something meaningful.  The First Lady is doing what she can.  And let’s face it: nobody else in that position ever has.  Never have issues of food and nutrition been made so legitimate.  For that alone, she deserves thanks.

If the Obamas think they have to work with business, they have to work with Walmart—it’s the 800-pound food gorilla.  In theory, if Walmart tweaks food products, reduces the price of healthier food options, sources lower cost fruits and vegetables, and moves stores into inner cities, the net result will be healthier choices for Walmart customers.  In practice, we have to wait and see.

The White House must think these potential gains are worth the cost of the nose-holding they have to do about Walmart’s labor and business practices.  Nose-holding is the price of getting things done at that level.

I am in the privileged position of not having to make those kinds of compromises (thank you, NYU).

It is not an accident that Mr. Kass’s riff began with “parents told us.”  The First Lady cannot budge without substantial popular support and pressure.  If we think she is in a position to do any good at all for the movement to reverse childhood obesity and improve the food system, we have to let her know what we’d like her to try to do—loudly and repeatedly.

So maybe the First Lady’s—and Sam Kass’s—next speech will begin: “Everyone who cares about how our food is produced and consumed told us….”

Maybe I’m overly optimistic (it’s my nature), but I still see Mrs. Obama’s efforts as an opportunity.  We ought to be using it to push for what we think is right.

I’ve been asked to explain my brief appearance on the Colbert Report (so brief, that if you blinked, you missed it).  On February 1, Colbert did a “Thought for Food” piece about Walmart’s recent food initiatives.

What was I doing there?  Colbert used a clip from an ABC News interview from January 20.  I was away from NYU that day and taped the interview in a studio at Cornell University.

And once again, here’s my NPR interview with Robert Siegel on All Things Considered about the Walmart announcement.

I’m eager to see how the Walmart promises get put into action.

Enjoy the weekend!

I’ve been asked to provide a link to my NPR comments on the Walmart announcement.  Here it is.

I was also interested to read what Dan Flynn, the editor of FoodSafetyNews, just said about it.

Enjoy!