January 25, 2013 7:02 pm

Coke: Out for the calorie count

A backlash against the group’s anti-obesity ads underscores the dilemma food and drink companies face

The real thing: following New York City’s graphic campaign targeting soft drinks, Coke responded by emphasising its smaller and healthier options

When Michael Bloomberg unveiled his plan to ban sales of big sugary drinks last spring, he was ready for a fight. New York’s billionaire mayor had been here before, stubbing out cigarettes in public places and forcing restaurants such as McDonald’s to display calorie counts on their menus. Big Soda was next.

Last year New York embarked on an anti-soft drink marketing campaign, with shocking subway advertisements showing obese amputees alongside diagrams displaying growing drink sizes.

“I just spent roughly $600m of my own money to try to stop the scourge of tobacco,” Mr Bloomberg scoffed when asked if he feared the well-funded industry’s onslaught. “I’m looking for another cause.”

The $75bn industry has launched its response. This week beverage lobbyists took on New York health officials in court to block Mr Bloomberg’s ban on sales of supersized sugary beverages. Outside the courtroom, Coca-Cola, the world’s largest beverage company, was facing a growing backlash against a new advertising campaign intended to portray itself as a combatant in the war against obesity.

Around the time of Mr Bloomberg’s proposal, executives from Coca-Cola gathered at their Atlanta headquarters to plan a counter-attack. Pressure over a ballooning obesity epidemic was intensifying and proposals to levy taxes on soft drinks were bubbling up across the US. Coke decided to respond head-on.

This month Coke ran two-minute ads on national television. Against a background of slim people sipping Coke and healthy youngsters exercising, a narrator offers a simple summary of the obesity crisis: all calories are created equal. “If you eat and drink more calories than you burn off, then you’ll gain weight,” the ad says as a young woman jogs across the screen.

The widely viewed ad quickly drew scorn. Hundreds of people berated Coke on YouTube, and public health advocates cried hypocrisy. Many wondered why Coke had not included any of the millions of obese Americans in the ad. “The idea that Coca-Cola is a force against obesity is ludicrous,” says Marion Nestle, a public health professor at New York University. “They sell liquid candy at a time when the last thing people need are calories with no nutrients attached.”

Such a backlash is uncommon for Coke, a company whose marketing machine dreamt up slogans including “things go better with Coke” and “the real thing”. (Coke says it welcomes negative reactions in the spirit of fostering dialogue.) The criticism, however, demonstrates the perilous balancing act food and beverage companies face when they address obesity.

“There’s a very important conversation going on about obesity and we want to be part of that,” says Stuart Kronauge, Coke’s head of sparkling beverages in North America.

Losing a grip on the conversation would be especially costly at a time when soft-drink sales have declined steadily as consumers shift to teas, juices and water.

The beverage industry has been investing to create tastier recipes with fewer calories and has diversified to produce healthier fare. But the experience of PepsiCo, Coke’s leading rival, proves that this can also be fraught with challenges. Indra Nooyi, Pepsi’s chief executive, made a big push in the direction of healthier “good for you” food and drinks when she took the top job in 2006. The company invested in products such as oatmeal and dairy but was scolded by investors and Wall Street analysts for ignoring its colas. Last year Ms Nooyi ramped up advertising behind Pepsi.

The food industry has largely focused on self-regulation in an effort to avoid attention from policy makers. McDonald’s began offering apples and milk in its “Happy Meals” for children and Burger King launched a “better for you” menu with salads, wraps and fruit smoothies. However, some companies are serving healthier food in the US while exporting more artery-clogging items – such as the hot dog stuffed-crust pizza that Pizza Hut sells in the UK – overseas.

The beverage industry feels that the range of unhealthy options, as well as declining demand for soft drinks, are important reasons why it should not be singled out with regards to obesity. Susan Neely, president of the American Beverage Association, showed participants at an industry conference last month a chart with falling soft-drink sales and rising obesity rates as evidence that other junk foods, along with a lack of exercise, were to blame for expanding waistlines.

However, with states facing budget shortfalls, she warned, the fight against soft-drink taxes was not going away. “We will continue to challenge, wherever there is an onerous tax or onerous regulation in the public domain, and we will be there and we will fight it.”

So far beverage lobbyists have been successful at fending off taxes, most recently when a closely watched proposal in Richmond, California failed last November. But other states, including Nebraska, Hawaii and Massachusetts, are considering higher taxes on soft drinks and some cities have pondered following Mr Bloomberg’s lead of imposing portion control.

Beverage companies are not the first to face this predicament and the industry has carefully studied the plight of “Big Tobacco”, which saw cigarettes go from symbols of glamour to public health pariahs over a span of four decades.

Lori Dorfman, a public health expert at the University of California, Berkeley, says the new Coke commercial harks back to a move by US tobacco companies in 1954. Facing mounting criticism and evidence that cigarettes were linked to cancer, 14 tobacco executives published a “frank statement” in more than 400 US newspapers. The letter acknowledged new research had given publicity to a “theory” that cigarettes were linked to lung cancer, but warned that the experiments were inconclusive.

“Statistics purporting to link cigarette smoking with the disease could apply with equal force to any one of many other aspects of modern life,” they wrote. “Indeed the validity of the statistics themselves is questioned by numerous scientists.”

. . .

Health advocates today contend that this echoes the logic of beverage companies claiming that all calories are the same. Dr Toni Yancey, a director at UCLA’s Kaiser Permanente Center for Health Equity, says that even calories from unhealthy foods such as pizza and hamburgers have more nutritional value than those in soft drinks because they are delivered along with useful nutrients such as protein and fibre. “The way the body metabolises a 200-calorie soda is not the same way it metabolises a 200-calorie yam,” Dr Yancey says.

Drink makers decry the comparison with the tobacco industry, pointing to their zero-calorie beverages and the fact that cigarettes were never made healthier. In an interview with the Financial Times in 2011, Derek Yach, Pepsi’s former health policy director, made the case that taxation of tobacco worked because it could be applied to the entire product category, but that there was no evidence that consumers would not just switch to other high-calorie drinks if soft drinks were taxed.

Different variations of taxation are already under way in Europe. France taxes sugar-sweetened beverages, Denmark taxes saturated fats and Hungary taxes hamburgers. David Cameron, UK prime minister, has also considered a “fat tax” to address Britain’s obesity problem.

A 2012 report by the OECD acknowledged that taxes on soft drinks and junk food tended to hit poor people the hardest. However, it concluded that the poor would benefit disproportionately from the health gains resulting from such taxes – and that the revenues are useful for paying down deficits.

“Revenues from taxes on unhealthy foods can be substantial,” the OECD says. “These offer invaluable opportunities either for attenuating any regressive impacts or for magnifying the public health effects of the taxes.”

As food and drink companies wrestle with regulators and lawmakers over developing fair policies, the burden of obesity on the US economy is growing. The US Centers for Disease Control estimates that 35.7 per cent of American adults are obese, as defined by body mass index, accounting for $147bn in medical costs. That is expected to rise to $210bn in 2030, with at least 44 per cent of adults in every state suffering from obesity.

In New York City alone, about $4bn is spent a year on healthcare treatments related to obesity. With such a steep cost, Mr Bloomberg appears unlikely to be dissuaded by opposition from small business groups or a slick advertising campaign from Coke.

Making his case last summer, Mr Bloomberg signalled that he was more fearful of the scourge of soft drinks than of tobacco. “People’s lives will be shorter, their quality of life is going to be dramatically reduced and obesity is going to start killing more people in this country than smoking,” he says.

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