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Why companies repudiate their own products

By
Dan Mitchell
Dan Mitchell
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By
Dan Mitchell
Dan Mitchell
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September 26, 2014, 10:35 AM ET
Inside a Dollar General Store Ahead Of Earnings
Soft drinks are displayed on the shelf at a Dollar General Corp. store in Saddle Brook, New Jersey, U.S., on Saturday, Dec. 3, 2011. Photographer: Emile Wamsteker/Bloomberg via Getty ImagesPhotograph by Emile Wamsteker — Bloomberg/Getty Images

This week, the Big Three soft-drink makers pledged to reduce the number of calories people consume. And several big food-and-beverage outfits pledged to further restrict their marketing aimed at kids, who make up a huge part of their customer base. In both instances, as in many others before now, the food industry is in effect repudiating its own products, and pretending that it actually wants people to consume less of them.

Such is the state of business and marketing in the early 21st century: if you sell a problematic product, you can’t simply defend it by noting that it’s legal and that people can choose whether to buy it or not. You have to do a dance with policymakers, interest groups, and the media, feigning concern about the public’s well-being in order to continue selling products that do the public harm (while perhaps shifting to products that do less harm, assuming there’s sufficient demand for them). We’ve seen this before from booze producers (“please drink responsibly”), tobacco companies (in that case, courts have ordered them to sabotage themselves), and energy companies that tout their credentials as environmental stewards even while continuing to sell atmosphere-scorching, waterway-defiling fossil fuels.

It’s easy for critics to lash out at these companies for trying to have it both ways — and for caving in to the “nannies.” But the fact is that they have little choice. It would certainly be refreshing and satisfying if a food company were to just come out and say, “yes, we sell products that can do people harm, but they’re legal, and people want them, so we’re going continue to provide them.” But it would also be a gigantic risk — for legal reasons as well as reputational ones — that most big, public companies can’t afford to take.

So the dance continues, and will likely never end. In a way, it can be seen as a kind of democratic politics applied to industry — an ongoing struggle among competing interests. And politics ain’t pretty.

In both cases this week, industry critics applauded the gains they made, but also said that more has to be done. The International Food and Beverage Alliance, which includes 11 of the world’s biggest food companies, pledged in a letter to the World Health Organization to expand the limits they already have placed on traditional advertising to other media, such as mobile ads and interactive games, and movie tie-ins. They also pledged to limit the use of licensed characters. The Center for Science in the Public Interest said the plan has “several gaps,” as Politico put it. It wants the restrictions to also include label claims and in-store advertising. (The Alliance members are: Unilever (UL), Nestle, Coca-Cola (KO), McDonald’s (MCD), Mondelez Group (MDLZ), Ferrero, General Mills (GIS), Grupo Bimbo, Kellogg (K), Mars, and PepsiCo (PEP).)

Meanwhile, Coca-Cola, Pepsico, and the Dr Pepper Snapple Group promised to cut the number of calories consumed in the form of their sugary drinks by about one-fifth over the net decade by, among other things, altering their marketing and changing their packaging. Critics in general said that this was all fine, but it doesn’t mean much in the scheme of things, given that the Big 3 are fighting hard to prevent various proposals for taxing sugary beverages, and are still selling plenty of sugar-laden concoctions.

But this is just how it works now: industry critics make marginal advances over time, while food companies constantly compromise and readjust.

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By Dan Mitchell
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