Taking on Big Soda over Taxes: Lessons Learned from Fighting Big Alcohol

Posted on by Corporations and Health Watch

With soda taxes becoming an increasingly attractive policy option to help prevent diabetes and obesity and to fill empty state coffers, the soft drink industry is fighting back, and hard. While tobacco is often mentioned as the analogous issue, in fact, alcohol and soft drinks have much in common. In this piece, experienced alcohol control advocate Michele Simon translates lessons learned from the ongoing fight against Big Alcohol into six practical lessons for soda tax advocates.

Since I started working at Marin Institute, an alcohol industry watchdog group, in 2007 it’s become painfully clear that corporations have the same playbook. Whether it’s the food industry, tobacco, or alcohol, they all use the same talking points and lobbying strategies. While Big Tobacco may be most infamous for decades of hiding scientific evidence of harm and the deceptive marketing, all industries have similar tactics.

In my work at Marin Institute, raising alcohol taxes has been a primary focus of our policy agenda because we know that increasing prices is one of the most effective ways to prevent underage drinking and adult overconsumption.

With soda taxes becoming an increasingly attractive policy option to help prevent diabetes and obesity, the soft drink industry is fighting back, and hard. While tobacco is often mentioned as the analogous issue, in fact, alcohol is more similar to soft drinks.

Besides the obvious (they are both beverages), alcohol and soft drinks each hold a special place in American culture. There’s nothing more American than relaxing with a Coke, or a Bud. Also, unlike smoking, which everyone (well, except the tobacco industry) can agree should simply be stopped, when it comes to beverages, the message is more about cutting down.

Here, I offer a few of the lessons that alcohol control advocates have learned from decades of fights with industry over raising taxes, fights that continue to this day.

Lesson One:
Don’t let industry claim that soda doesn’t cause obesity or that taxes won’t work.

This is a tried and true tactic: attack the science, discredit the scientists, and make unscientific predictions that are in direct conflict with the published science. As is the case with tobacco, the alcohol industry has abandoned its futile attempts at claiming there is no scientific connection between alcohol consumption and health problems. However, because the science is less far along in obesity, the soda industry attempts to refute what science there is on the connection between drinking soda and poor health. Still, this argumentation is easily countered by showing those studies that claim no connection between soft drinks and obesity tend to be funded industry, big surprise.1

A related argument is that raising taxes will not result in the desired public health goal of lowered consumption, and thus fewer health problems. The alcohol industry does try to make this argument, claiming that people will continue to drink and of course, what we really need instead is better education and parental oversight. The soft drink industry loves to point out how there are “many causes” of obesity and that they should not be singled out, and that soda taxes won’t work due to this “complexity.”

Now it’s true that we do have less science when it comes to predicting behavior change from soda taxes than either tobacco or alcohol, both of which have been studied for decades by economists and other researchers. So it’s imperative that when we are making claims related to “elasticity” (the economic term for consumer response to price change) that we get it right.

We also have to be honest by saying that we may need more research to fully understand pricing effects. One thing we’ve learned from alcohol is that taxes can be a very blunt instrument in effecting price change because companies are very clever in how they absorb the added business expense. Companies can keep cheap products cheap while marking up more expensive products, or simply cut costs instead. Product pricing is extremely complex and cannot always be predicted accurately. One study suggests that minimum pricing on all alcohol may be a better policy than raising taxes, due to price manipulation by industry.2 Minimum pricing is when the government sets a floor; for example, that retailers cannot sell below cost. Such a policy has a more direct impact on prices than taxes. Perhaps minimum pricing should be considered for soda.

Lesson Two:
Don’t let industry claim that a penny per ounce tax will cause massive job loss.

Job loss and adverse economic impacts are industry’s most effective talking points. It cannot be underestimated how powerful and persuasive this argument is with politicians, as it gives them a convenient excuse to curry favor with industry by voting against a tax increase. Already, lobbyists for Big Soda have descended on New York State to convince lawmakers there to vote against a tax, with unsubstantiated claims of massive job loss. A recent story in the New York Daily News estimated that the beverage industry spent $3 million on lobbying against the state soda tax proposal.

The alcohol industry has been extremely effective claiming job losses so it’s no surprise the soda industry is following this path. And of course, in these tough economic times, such arguments carry even more weight. “We are already struggling. Don’t kick us when we are down. This is the worst time to raise taxes,” we hear all the time. Of course, meanwhile, every state legislature is in the red, desperate for revenue, which is precisely why soda taxes are even being considered in so many states in the first place.

But there is no good time to raise taxes. If and when the economy improves, the soft drink industry won’t suddenly stop opposing taxes. Alcohol control advocates have countered industry’s job loss claims in a few ways. First, they argue that the tax increase being proposed is so small that the impact on business will be negligible. Of course, it will still be enough to see a public health impact, but it won’t put anyone out of business, even the small “mom and pop stores.” Secondly, there is no good science to back up industry’s wildly exaggerated claims of job losses. Unfortunately, we do not have any science on the public health side either to examine what any potential job loss might be based on, either from an alcohol or soda tax increase, and this is an area of research that is sorely needed. We do have decent studies on indoor smoking laws that showed bars did not go out of business, despite industry claims to the contrary during those battles.3

Another response to the economic argument is that when people stop buying one type of product (whether tobacco or alcohol or soda) those consumer dollars do not disappear. Rather, people spend that money in other parts of the economy, so there is no net loss. Moreover, the money to be gained in tax revenue will be spent on programs that will create jobs. For example, in New York, the Healthcare Education Project is projecting that 29,000 healthcare jobs will be lost if the soda tax there does not pass. This dwarfs the beverage industry’s job loss projections of 6,000 if the soda tax is passed.

Lesson Three:
Don’t let industry claim they care about poor people and working families.

The beer industry has been particularly shameless about arguing that beer taxes are regressive because they hurt poor Joe and Jane Six-pack. We make the obvious counter argument, that beer, like soda, is not a necessity of life. (Moreover, research shows that people with higher incomes actually consume more alcohol.) The soda industry, through its ad campaigns and front group, Americans Against Food Taxes, is promoting the imagery of family picnics, and claiming that average Americans would never be in favor of such policies. In alcohol, polling has proven very useful to demonstrate the overwhelming support for higher alcohol taxes, especially when the funds are applied to alcohol-related programs. Polling could also be useful in countering soda industry claims that all Americans think taxes are always bad. Positive polls also offer politicians cover.

Lesson Four:
Make sure to index all excise taxes to inflation. (Industry hates this.)

One of the biggest challenges in the alcohol field is that excise taxes (based on volume sold) are not indexed to inflation. As a result, because most states have not raised their excise taxes in years, the real value of tax revenue has significantly declined. For example, in California, the real value of alcohol excise tax revenue, which was last raised in 1991, has declined 37 percent. (See Marin Institute’s maps that demonstrate the impact of neglected and outdated alcohol excise taxes in each state.) This amounts to a subsidy for industry, since product prices remain artificially low. Here, you have not only industry to battle, which hates indexing to inflation for obvious reasons, but also many lawmakers who do not believe in placing automatic increases on taxes. But without it, you will find yourself fighting the same battles year after year for increases. Note that because sales taxes are usually assessed as a percentage of price, sales taxes will go up as prices increase. This is one benefit to sales tax over excise tax.

Lesson Five:
If and when you start gaining success locally, do not allow industry to get preemption at the state or federal level. (This is really important.)

Most excise taxes on products such as tobacco and alcohol are assessed at both the federal and state level and for good reason, as both levels of government rely on the revenue generated by taxing these products. Some states also allow the local taxation of tobacco and alcohol, which is of critical importance, especially now when so many counties and cities are hurting for revenue. And of course, it’s at the community level that the adverse impact of harmful products is felt most severely. Unfortunately, the alcohol industry has successfully preempted localities from assessing taxes in most states. In other words, only states can levy alcohol taxes, not cities or counties. (There are some exceptions; for example, California allows local fees under limited circumstances.)

For soda taxes, it’s imperative that cities and counties retain the right to assess local taxes and fees as they see fit. Also, if there is ever to be a soda tax at the federal level, under no circumstance should such a law preempt state-level taxation. Doing so would be a public policy disaster and makes no sense from a states-rights or public health perspective.

Lesson Six:
Be Prepared for the Long Haul.

Finally, do not underestimate how much industry will lobby to the death against taxes. This is unlike any other fight–school food, menu labeling, you name it–and the food industry cares more about taxes. Taxes go to the heart of the corporate business model: having complete control over pricing, which is critical to maintaining steady profits.

Also, unlike other issues for which there may be grounds for compromise (such as menu labeling), industry will not compromise on taxes. This issue is non-negotiable.

Instead, industry will kill bills, and when they can’t stop a bill, they will successfully water it down to a much lower, perhaps insignificant tax rate. (Then when you try to raise it next time, it will look like a huge, unreasonable increase, which will be used against you.) Big Soda, in cahoots with distributors, restaurants, and the retail sector, will out-spend and out-maneuver public health advocates for decades to come. Already the soft drink industry has increased its lobbying against soda taxes by750 percent both in Congress and the states, which indicates how seriously they take this threat. They can spend millions of dollars fighting taxes and still get a good return on that investment due to the money they save in the long run.

And the fight will never be over, because even if you get a tax this year, it will probably be small, and you will have to fight to increase it next year, and the year after that. Public health advocates will have to decide if the enormous resources it will take to succeed are ultimately worth spending decades fighting on taxes, or if other policies, such as reducing corn subsidies, would be more effective. Either way, the lobbyists will remain employed.

Michele Simon is the Research and Policy Director for Marin Institute, an alcohol industry watchdog group, and the author ofAppetite for Profit: How the Food Industry Undermines Our Health and How to Fight Back. Visit her website and read herblog.

References

  1. Vartanian LR, Schwartz MB, Brownell KD. Effects of Soft Drink Consumption on Nutrition and Health: A Systematic Review and Meta-Analysis, Am J Public Health. 2007;97:667-675.
  2. Gruenewald PJ, Ponicki WR, Holder HD, and Romelsjoe A. Alcohol Prices, Beverage Quality, and the Demand for Alcohol: Quality Substitutions and Price Elasticities. Alcohol Clin Exp Res, 2006; 30 (1): 96-105.
  3. See e.g., Klein EG, Forster JL, Erickson DJ, Lytle LA, and Schillo B. Does the Type of CIA Policy Significantly Affect Bar and Restaurant Employment in Minnesota Cities? Prev Sci. 2009 Jun;10(2):168-74.

 

Interview with T.J. Faircloth from Corporate Accountability International

Posted on by Corporations and Health Watch

Is it time for Ronald McDonald to hang up his clown shoes? T.J. Faircloth, Research Director for Corporate Accountability International (CAI), thinks that it is. In March, CAI launched a campaign called “Value [the] Meal” to pressure fast food companies to stop aggressively marketing to children, blocking labeling laws, and interfering with the development of healthier public policies. We interview T.J. to find out more about the campaign’s strategy and rationale.

On March 11, Corporate Accountability International launched a new campaign called “Value [the] Meal” to pressure fast food companies to stop aggressively marketing to children, blocking labeling laws, and interfering with the development of healthier public policies. Corporate Accountability International (CAI) has been waging campaigns to end corporate abuses for 30 years. In April, Corporations and Health Watch staff person Marissa Anto interviewed T.J. Faircloth, the Research Director of CAI, about the Value [the] Meal campaign. What follows is an edited version of that interview.

CHW: What inspired the Value [the] Meal Campaign to focus on Ronald McDonald as the target of your campaign against fast food advertising to children?

TJF: Basically our Value [the] Meal Campaign was inspired by rampant corporate abuse of our food system. We looked at the entire food system from seed to plate and we realized that corporations were playing a negative role in our food system by spurring the epidemic of diet-related diseases, specifically the staggering increase of childhood obesity and diet-related illnesses like type II diabetes that really have a profound impact on children’s health all over the world.

Even globally we’ve seen the rates of diet-related illnesses spike. We wanted to start a campaign that would ultimately help reverse this epidemic by targeting the irresponsible actions of transnational corporations who play a major role in spreading this epidemic. Through understanding the various abuses of transnational corporations, we became interested in the marketing of unhealthy foods to children and that’s where we started to hone our attention towards McDonald’s being the industry leader and their brand spokes-character, Ronald McDonald.

CHW: Ronald is both a symbol but also an important part of McDonald’s brand value. What do you think are the pros and cons of using Ronald as the focus on your campaign?

TJF: Ronald, in our opinion, is really the face of a broken food system. For 50 years, there has been this iconic character who has hooked kids on an unhealthy product. There’s no one out there who would disagree that fast food is unhealthy. When we examined the role of the fast food industry in the current epidemic of diet-related diseases, it was clear that the marketing of unhealthy food to children is a key contributor to the problem.

McDonald’s as an industry leader has pioneered an irresponsible business model that depends on hooking kids on an unhealthy product early. When you start to pull apart their brand you find that their key to success is from establishing this lifelong relationship starting with Ronald McDonald and the toys and the happy meal and the playgrounds. This relationship begins at childhood and then continues throughout a person’s lifetime. So the pro for us is that by going after Ronald we were really going after the heart of their business model. We wanted to demonstrate the scope of Ronald’s market reach and more broadly the marketing of unhealthy foods in general. Whether it’s the fast food industry, the soda industry, the candy industry or even packaged foods; we thought that by going after Ronald and going directly after the McDonald’s business model, it would help people to organize around this problem.

Ultimately, the cons are that since McDonald’s has made such an effort to establish this lifelong relationship with its customers, people really have an emotional attachment to this corporate clown. As a result, some people have had a reaction when initially hearing about our campaign [to retire Ronald McDonald]. If they didn’t have a lot of context, they ask, “Why would you go after a beloved children’s character?” So we really have to deconstruct this emotional attachment that many adults still have with this character.

The other potential con is that McDonald’s has been so savvy with their marketing that they have the Ronald McDonald House charities and they have positioned Ronald McDonald as the face of those charities. We honestly commend the work of those charities and in no way have any issue with what the charities do. Our issue is more around the irony that, on the one hand, you have this corporate figure who supposedly helps kids, but he’s also contributing greatly to diet-related diseases among children. So those are two things on the con side that we’ll have to work on throughout the course of this campaign.

CHW: How did you come up with the Ronald McDonald tracking idea? What are its goals?

TJF: We wanted to demonstrate that marketing does have a profound impact on children’s health. Corporations have billions of dollars to spend on marketing and they don’t do it because it doesn’t work; they do it because it does influence the eating habits of children. The initial idea was let’s try to demonstrate the scope of Ronald McDonald’s reach and also the scope of the marketing of unhealthy food and how many children it reaches through various venues.

We wanted to show that marketing is having an effect that most parents and educators and even public health officials don’t really understand. It’s no surprise that nearly every child can recognize this corporate icon.

CHW: What is the Value [the] Meal campaign’s strategy?

TJF: The strategy really depends upon building a public climate here in the U.S. that connects McDonald’s with its impact on public health and that mobilizes people to demand change from the corporation. Our basic strategy is to mobilize tens of thousands of people across the country through the campaign to put pressure on McDonald’s to change its irresponsible marketing practices that target children. In that effort we’ve joined with teachers, parents, public health professionals, community leaders, faith communities, even socially responsible investors and elected officials to call for Ronald’s retirement with the understanding that any meaningful change in their marketing practice would need to start with their iconic children’s character.

CHW: What do you think is the biggest barrier to making fast food restaurants more accountable to the general public and the public’s health?

TJF: We feel like the biggest barrier is the immense power that these industries can wield. It not only allows them to exert control over our food system but it also allows them to manipulate public opinion, nutrition science, and public health policies. McDonald’s is a 32 billion dollar brand. They have really deep pockets, and can spend millions on public relations campaigns and marketing campaigns that can convince the public that their food is not harmful to health. Corporations like McDonald’s also have tremendous political power and they hide behind trade associations, the main one being the National Restaurant Association, which we’ve found has lobbied against legislation and public health policies relating to the fast food industry and the restaurant industry at large.

CHW: Can you describe some of the instances you report where corporations have attempted to influence scientific research concerning the negative effects of fast food?

TJF: A story in the Washington Post in 2004 reported that there are at least 30 McDonald’s restaurants located in hospitals nationwide, including in children’s hospitals in Los Angeles, Philadelphia, New York, and Cleveland. In some cases, Ronald McDonald is actually in the lobby hailing patients. And there was a study published in Pediatrics that estimated that fast food restaurants can be found in 30% of U.S. hospitals with pediatric residency programs. The reason why that’s a big deal is the study had shown that when fast food is directly located in hospitals, particularly children’s hospitals, the parents of those children who are in the hospital change their opinion about the nutrition value of fast food. So when those parents were asked how they felt about the nutrition quality of fast food, they had higher opinions of fast food when fast food was directly located in hospitals.

We’re also concerned about industry funding of national health groups. The American Academy of Family Physicians has formed their own partnership with McDonald’s. The company is now a sponsor of the AAFP’s Americans in Motion Program. If fast food corporations have these kinds of partnerships with health groups it sends a mixed message to people who might be concerned about the impact of fast food on public health.

Another example would be the American Dietetic Association (ADA). They received funding from many food corporations, such as Coke and Pepsi and even McDonald’s and other fast food companies, and you see these companies show up at the ADA’s annual conference and they have exhibitions, so again these partnerships skew the perception of how healthy fast food is.

One of the other issues we’re interested in is the Health Advisory Boards/Health Advisory Councils that many fast food companies have. McDonald’s has a global advisory council that has several health officials and doctors who advise them on nutrition and health. For us, that really sends mixed messages to people that fast food is healthier than it is.

And the last thing we keep an eye on is the direct funding of nutrition science from fast food. For example, a couple years ago the Scripps Research Institute and McDonald’s announced a collaboration regarding research and an educational initiative to drive progress towards a solution to childhood obesity and type II diabetes. McDonald’s donated $2 million to address these issues facing America’s children. If McDonald’s just changed some of their practices, they’d have a tremendous impact on type II diabetes and childhood obesity. It’s not really necessary for them to fund science. We know Scripps will be unlikely to come out with research that is negative towards the fast food industry because of that.

CHW: Can you discuss your findings from your most recent report on fast food advertising to children?

TJF: There were three main findings. First, we confirmed that corporate icons, children’s characters, and targeted fast food marketing to children have a profound negative impact on children’s health. Children do not understand the persuasive intent of brand marketing and they quickly develop brand loyalty that carries over into adulthood. For example, a 2007 study from Stanford University found that preschool children reported that food in McDonald’s wrappers tasted better than identical food wrapped in plain wrappers, suggesting that branding can even trump sensory input. In addition, marketing fast food to children really undermines parental authority by tapping into what the industry calls “pester power” where kids relentlessly pester parents to purchase unhealthy products, so even the most diligent parents can eventually succumb to this pressure in order to appease their children.

Second, we discovered, just as McDonald’s says, Ronald McDonald is literally everywhere. We had hundreds of members submit details of all the venues, locations, and events that Ronald frequents. We know he’s in schools, in educational materials, libraries; we saw him at the Olympics and other sporting events that appeal to children, parades like the Macy’s Day parade, children’s museums, in and around children’s hospitals, and on TV and the internet. Basically, almost anywhere where children tend to gather. So really just understanding the scope of Ronald’s reach was another major finding.

The last important finding was based on a national poll we conducted with Lake Research Partners that provided insight into McDonald’s use of Ronald McDonald. One question was, “What sort of impression do Americans have of Ronald McDonald?” We found that 65% of Americans actually have a favorable impression of Ronald McDonald. Not surprisingly, directly connected to that, about 65% of Americans actually have a favorable opinion of McDonald’s. But though the clown is well liked, we still found that a majority, 52% of Americans, favored stopping corporations from using cartoons and other children’s characters from selling harmful products to children. So that was one revelation. Even among those who have a favorable impression of Ronald McDonald, about half of those, 46%, actually support retiring Ronald. Looking more closely at the demographics, among parents who have children under the age of 18 and have favorable impression of Ronald and the McDonald’s Corporation, half support Ronald’s exit to the nearest retirement home. It was interesting to see that despite this widespread support for both the corporation and Ronald and the emotional attachment to the character, you still have a pretty broad base support for getting rid of him.

CHW: What role can President Obama or the First Lady and her Childhood Obesity Campaign have in improving fast food practices?

TJF: There’s a Voluntary Corporate Initiative housed under the Better Business Bureau called the Children’s Food and Beverage Advertising Initiative in which companies, including a dozen or so fast food companies, have now made these pledges to reduce the marketing of unhealthy food to children under 12. However, this voluntary initiative has been in effect for two years and several reports show that this it is ineffective, having no impact on the quality of food that these companies are marketing to children. So it’s clear that voluntary agreements with the industry will not work.

So the President’s or Michelle Obama’s initiatives requesting that the industry take voluntary action it just won’t be effective. The President should work to quickly implement the national menu labeling legislation that was part of health care reform. This would be a mandatory regulation under health care reform that would require, similar to what has happened in New York City, that all chain restaurants post calories on their menu boards. This would give customers the information they need to make more informed decisions. That would be one immediate thing the President could do, because it’s looking like it would take 2-3 years for this legislation’s implementation.

The President could also restore the Federal Trade Commission’s authority to regulate food marketing to children. There’s a joint interagency Working Group on Food Marketing to Children that includes representatives from the Federal Trade Commission, Food and Drug Administration, Centers for Disease Control and Prevention, and U.S. Department of Agriculture – that produced and presented in December a set of recommended nutritional standards for foods marketed to children. Those recommendations were supposed to be finalized in February, but they haven’t been finalized yet. They appear on the surface to be strong, so the President should work to have the guidelines finalized and then to make them into mandatory regulations.

CHW: Your campaign focuses on one company, the biggest one. What do you think of broader efforts to ban all unhealthy food advertising to children? I heard that Dennis Kucinich proposed legislation to ban tax deductions on advertising unhealthy food to children, so what do you think of efforts like that?

TJF: We totally agree with those efforts. As I’ve mentioned, when you look at this issue, it’s not just the fast food industry. I think a lot of people are interested in the fast food industry and agree that really any fast food is inherently unhealthy. That is different from packaged food products, which are sort of a mixed bag. When you think about the junk food industry, you’re really talking about the soda industry, the confectionery candy industry, packaged foods, and then fast food. We’re organizing around fast food but the problem is really widespread and all those other pieces of the junk food industry market to children and have a profound impact on their health. I think that fast food advertising may be more visible and the scope may be larger. But we totally support those efforts to really ban the marketing of all unhealthy marketing to children whether it’s fast food, soda, candy, or packaged foods.

CHW: Are there any fast food chains that are doing the right things? If so what are they doing that can serve as models for the rest of the industry?

TJF: There are some chains working to improve their supply chain, reducing pesticide use, increasing organics, and increasing local acquisition of food. There are many that are providing healthy options, which is different from healthier options. We’ve seen some movement among the bigger fast food chains that provide healthier children’s meals or salads that still have a ton of calories (dressings, condiments). But there are some chains that actually provide some healthy options. There are some chains that, even before the regulation, labeled nutrition information prominently and made that information available prior to the sale. McDonald’s will say that they’ve provided that information for many years now but it’s often after the products are sold. For example, customers can see calorie on the tray liners, after they’ve purchased the products. There are some smaller chains that have actually coordinated with local public health officials to address diet-related diseases in the communities they operate in. That seems like a very good step since public health concerns may differ from community to community. Some communities may be having a huge issue with hypertension and may need to reduce salt so restaurants need to take steps to reformulate salt content, that sort of thing.

CHW: What can academics, activists, and the average person do to compel fast food companies to improve the quality of their food?

TJF: We certainly respect the work that Corporations and Health Watch and the City University of New York have been doing to expose the irresponsible activities of the food industry that are greatly contributing to the epidemic of diet-related diseases and childhood obesity. Those academics and activists should continue to work on that front to expose the irresponsible corporate activities that are having negative health outcomes. The best first step for the average person to take is to get involved: to join our Value [the] Meal campaign to pressure McDonald’s and other fast food chains to stop marketing to children, and specifically regarding McDonald’s, to retire Ronald McDonald. Anyone can engage with the campaign by signing Ronald’s retirement card and joining our organizing effort. We’re making great progress in pressuring McDonald’s with exciting and compelling actions designed to engage the average person in the effort to protect children’s health.

For more on McDonald’s and the Value [the] Meal Campaign, see:

Prior CHW reports on McDonald’s:

PepsiCo vows to cut salt, sugar, and fat: Is Big Food getting healthy?

Posted on by Corporations and Health Watch

In March, PepsiCo Inc. announced that it was setting goals to substantially reduce the amount of sodium, sugar, and fat in its products over the next decade. Other Big Food companies like Kraft Foods Inc., ConAgra Foods Inc., and the Campbell Soup Co. have also recently vowed to make healthier products. CHW editor Emma Tsui briefly explores where this wave of industry health consciousness is coming from and how people are reacting to it.

On March 22, 2010, PepsiCo Inc. announced that it was setting goals to substantially reduce the amount of sodium, sugar, and fat in its products over the next decade. Specifically, the corporation hopes to cut the average sodium per serving in some of their brands by 25% by 2015, and to reduce average saturated fat and added sugar by 15% and 25% by 2020. Called “Performance with Purpose,” the initiative also seeks to increase the whole grains, fruits, vegetables, nuts, and seeds available among PepsiCo’s products, as well as to improve the corporation’s commitments to environmental sustainability and the health of its workforce.

PepsiCo’s global food and beverage business includes not only Pepsi-Cola, but numerous other familiar brands like Frito-Lay, Tropicana, Dole, Gatorade, Tazo teas, and Quaker, the maker of oatmeal, which is considered to be the company’s leading healthy food brand. Other Big Food companies like Kraft Foods Inc., ConAgra Foods Inc. (maker of Chef Boyardee, Healthy Choice, and Slim Jim products, among others), and Campbell Soup Co. have also recent publicly vowed to improve the healthfulness of their products by reducing their sodium content.

So where has this wave of industry health consciousness come from? PepsiCo emphasizes the dual objectives of responding to consumer preferences and improving the health of consumers in their decision to improve the healthfulness of their products. “Consumers are heading toward ‘good-for-you,’” MSNBC quoted PepsiCo CEO Indra Nooyi as saying during the recent investor meeting. Not only that, but as a limited liability corporation, Nooyi has said that it is important for companies like hers to recognize, “…if we are operating with a license from society, we owe that society a duty of care.” More cynical observers speculate that PepsiCo, like other food companies, is trying to avoid government regulation, which might set tougher standards and impose sanctions for violations. As one commentator noted, “Considering the vast resources large companies like PepsiCo, Kraft, and Campbell Soup Co. have at their disposal, these firms are wise to invest [in] research and development now, rather than scrambling later to avoid congressional hearings and even government regulations.”

Though reducing sodium, fat and sugar in processed foods may seem like an encouraging sign for the public’s health, there’s no doubt that PepsiCo’s interest in health is closely tied to its enduring interest in profit. “We believe that a healthier future for all people and our planet means a more successful future for PepsiCo,” Nooyi noted in the company’s press release. MSNBC added that PepsiCo’s portfolio of healthier or “good for you” products currently earns them approximately $10 billion (approximately one-fifth of their total revenue), and indicated that Nooyi estimates that this amount will grow to $30 billion within the decade.

But what impact can we expect these kinds of changes to have on health? Reaction to news of the “Performance with Purpose” initiative casts doubt on its health benefits, and responses to the company’s work to create what reporters have dubbed “designer salt” have been particularly skeptical. In these studies, by altering the shape of the salt, PepsiCo researchers have been able to increase the percentage of salt that dissolves on the tongue and is tasted, so that less salt can be used. In response to this news, the New York Times pointed toward the need to reduce consumption of snack foods, writing, “It’s not enough for snacks to have artificial sugar and new-fangled salt. High-tech or not, we also have to eat less of them.” Hemi Weingarten of the Huffington Post was in agreement, but blamed the marketing practices of PepsiCo and other major corporations in addition to consumer behavior. “So long as mega-corporations continue to manufacture and sell snacks as their main line of business, people will be encouraged by their aggressive marketing to consume more and more snacks and less real foods,” he wrote.

By Emma Tsui, Postdoctoral Fellow at the City University of New York School of Public Health at Hunter College and editor at Corporations and Health Watch.

Photo credits:

  1. wallyg
  2. roadsidepictures

Globalization accelerates woes for Toyota, world’s leading car manufacturer

Posted on by Corporations and Health Watch

For more than a decade, Toyota customers have reported incidents of sudden acceleration, resulting in crashes, injuries, and deaths. The company now faces charges that it intentionally hid defects from customers. Nick Freudenberg explores what role globalization may have played in accelerating Toyota’s woes, and what can be done to prevent such corporate catastrophes in the future.
About a year ago, Toyota became the world’s largest car manufacturer by sales after General Motors, the previous leader, was hit by the economic crisis. The Japanese company built its reputation and sales by emphasizing safety and quality, contrasting its products with less durable and dependable American vehicles. In the last year, however, Toyota has faced accelerating woes – declining sales, safety problems such as sticky accelerators and faulty brakes, and a spate of lawsuits, regulatory actions and unfavorable media coverage. In this report, CHW examines Toyota’s troubles, analyzes their links to broader global trends, and assesses the implications for automobile safety and public health.

Sticky accelerators and faulty brakes

For more than a decade, Toyota customers have reported incidents of sudden acceleration. At first Toyota attributed these reports to driver problems, then to problems with floor mats. Now both the company and the U.S. National Highway Traffic Safety Administration (NHSTA) have launched major investigations into sticky accelerators. By the end of March 2010, according to Reuters, Toyota had recalled about 8.5 million vehicles around the world. In early April, the New York Times reported that the U.S. Transportation Department (DOT) was seeking a $16.4 million fine against Toyota, the largest allowed, because the company had failed to promptly notify the government about potential problems with accelerator pedals. Toyota seems likely to pay rather than contest the fine.

According to Safety Research and Strategies Inc., an auto safety advocacy group, between 1999 and the end of January 2010, 2,262 cases of sudden acceleration involving Toyota vehicles were reported, resulting in 815 crashes, 341 injuries and 19 deaths. To add to Toyota’s troubles, in February, the U.S. Transportation Department opened an investigation into brake problems in the 2010 Toyota Prius, the company’s best-selling hybrid car. Shortly thereafter, Toyota recalled more than 400,000 cars. The company’s most recent problem was a Consumer Reports “no buy” warning for the Lexus GX 460 due to its rollover risk. Toyota suspended sales of its SUV the next day.

In testimony before a Congressional hearing in February, Akio Toyoda, the company’s president and grandson of its founder, apologized for the company’s missteps. “I fear the pace at which we have grown may have been too quick”, he told House members. “I regret that this has resulted in safety issues described in the recalls we face today, and I am deeply sorry for any accidents that Toyota drivers have experienced.”

Investigations and lawsuits

To determine the causes of the accelerator problems, the U.S. DOT last month asked experts from the National Administration for Space and Aeronautics (NASA) to analyze Toyota’s electronic throttles to determine if they have contributed to unintended acceleration. In an interview with Reuters, Secretary of Transportation Ray LaHood said, “We are determined to get to the bottom of unintended acceleration.” Nine NASA scientists are expected to bring expertise in electronics, electromagnetic interference and software integrity to the DOT investigation.

Key legal questions are what Toyota knew when and what they did with that information. In addition to the fine the DOT is seeking, a bevy of lawyers are pursuing these questions:

  • By early February, Toyota faced at least 30 lawsuits in the U.S. and Canada seeking class-action status on sudden acceleration.
  • In March, Orange County (CA) District Attorney Tony Rackauckas filed a civil lawsuit against Toyota, charging that the company had intentionally hid defects from consumers. “We intend to prove that Toyota ignored, omitted, obfuscated and misrepresented the evidence that was amassing for many years regarding serious safety defects in their cares,” he told reporters.
  • In September 2009, a former Toyota attorney told CBS News that Toyota had illegally withheld evidence in hundreds of rollover deaths and injury cases. The plaintiff, Dimitrios Biller, filed a racketeering lawsuit charging that his complaints about the company’s legal misconduct led to his firing. Company lawyers said that Biller had “breached his ethical and professional obligations…by violating attorney-client privilege.”
  • The inspector general of U.S. Department of Transportation is reviewing the NHTSA’s handling of the investigations into unintended acceleration, and the National Academy of Sciences is examining unintended acceleration and electronic vehicle controls throughout the auto manufacturing industry.
  • In addition, according to Fair Warning, an online publication on health, safety and corporate conduct, Toyota faces a federal criminal investigation and inquiries by the Securities and Exchange Commission, the Connecticut Attorney General, and a U.S. Attorney in New York.

Globalization – the fundamental cause of Toyota’s problems?

For public health researchers, Toyota’s troubles provide a case study of how global market forces can lead companies to engage in practices that threaten health.

How did this happen? First, in an effort to beat its U.S. competitors, Toyota pushed to expand production, move into new markets and dominate the growing market for smaller, more fuel-efficient cars. Although the results of current investigations will not be known for several months, it appears that Toyota cut safety corners to realize these opportunities, as CEO Toyoda tacitly admitted in his apology to Congress.

Second, the current practice of sourcing and using parts around the world means that once a defective part gets into the supply chain, it can cause global problems, a trend Christian Science Monitor reporter David Grant called the “dark side of globalization.” Toyota has blamed the accelerator problem on a faulty accelerator mechanism manufactured by Chicago Telephone Supply Company, a U.S .company founded in Chicago in 1896, now located in Elkhart, Indiana. In additional to its use in Toyota vehicles sold in the United States, the CTS part was also used in 1.8 million Toyotas sold in Europe, a Ford car produced in China and the Pontiac Vibe, formerly made by General Motors. All have now been recalled for repair. Global sourcing may make it easier for producers to lower costs but they also risk spreading dangerous products around the world, as also shown by the global spread of contaminated peanut butter manufactured by the Peanut Corporation of America in Blakely, Georgia last year and the 2007 recall of tainted pet food made in China.

Third, the growth of multinational corporations and the weakening of national regulatory agencies have made it more difficult for governments to keep an eye on big companies. At Congressional hearings on Toyota acceleration problems, NHTSA Administrator David Strickland promised that his agency would take a “hard look” at the power it has. Current authority, he said, may not be sufficient to regulate modern technology. Strickland also told the panel it was unclear whether the agency can regulate “in a way that allows the auto industry to build and sell safe products that the consumer wants to drive.” DOT Secretary La Hood has also called for more resources for regulating auto safety. The $16 million fine proposed by DOT is a drop in the bucket of profits Toyota earned in the decade since accelerator problems were first identified.

Globalization – the possible solution to Toyota’s problems?

Just as multinational company-led globalization created the problems that Toyota now faces, bottom-up globalization may suggest new solutions. The intense international media and consumer group scrutiny of Toyota and regulatory and legal action on many fronts and continents makes it harder for Toyota to ignore the problem and easier for advocates to share information and resources and to plan common strategies.

As public health authorities expand the use of global treaties to regulate tobacco, alcohol and perhaps food, might a Framework Convention on Motor Vehicle Safety follow? Such an approach might slow a race to the bottom in which big companies look for the lowest cost supplies and the quickest route to showrooms, even if such measures compromises safety. An enforceable global treaty could also protect more scrupulous manufacturers from their less responsible competitors. In 2000, a new UN treaty set in motion the development of global standards for automobile manufacturing. Such a treaty could set the stage for future harmonization for technical regulations on vehicles, ranging from pollution and fuel-use standards to anti-theft devices and windshield wipers. However, to date industry groups have dominated this process and enforceable standards are nowhere in sight.

Each year about 400,000 people around the world are estimated to die in automobile crashes and 30% of the victims are under the age of 25, making auto deaths an important cause of overall mortality and premature deaths. Many more die from exposure to automobile pollution that could be prevented by available technology. By adding their voice to the call for stronger auto safety and pollution standards and for tougher oversight of the auto industry, public health advocates can help improve the safety of cars on the road, while also increasing space in the market for safer and more sustainable forms of transportation.

By Nicholas Freudenberg, Distinguished Professor of Public Health at the CUNY School of Public Health at Hunter College and founder of Corporations and Health Watch.

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