Coca-Cola and rivals promise health changes but are profits the real reason?

2nd October 2014
The Guardian
Soda giants pledged to market bottled water, diet drinks and push for smaller sizes. Are they just what’s good for business?
What’s in a name? Or 250 names?
For Coca-Cola, it’s massive profits.
Coke’s dramatic turnaround in fortunes – a reverse in an 11-year slide in profits – has been a stunning development. What drove it was its global, personalized run of Coke bottles with names.
This summer, you could buy Coke cans blaring a number of international names suggested by customers, including Jake, Ali, Juan, Latoya, Maddy and Cassandra. Other bottles announced the drinker a “BFF” or a “star”. The idea was a social media and sales hit, bringing in a 2.4% increase in sales after 11 consecutive years of sales decline, according to Wells Fargo.
Gimmicks, however, don’t keep global behemoths afloat forever.
Beverage companies including Coke have other plans to curry favor with consumers, including physical makeovers and new sweeteners.
At the Clinton Global Initiative last week, Coke, Pepsi and Dr Pepper pledged to manufacture smaller sizes of bottled water and diet drinks. Pepsi introduce a new diet sweetener, called Sweetmyx. The companies are also lobbying aggressively against “sin taxes” on beverages. The American Beverage Association has spent over $2m in an advertising blitz to convince people to vote “no” on such a tax that is on the ballot in Berkeley, California.
“It’s unbelievable how much money is going into a small town,” says Claire Wang, a professor of public health at Columbia University of the flood of money into Berkeley politics for the soda tax.
The beverage giants won’t go without a fight – that much is clear. The question for consumers, however, is whether the attempts of the cola industry to redeem itself may come too late. They could even backfire.
Super-size me – or don’t
The drinks companies’ pledge to create smaller bottles harkens back to their glory days. Older Coke consumers will remember that the single-serve bottles were once only 6.5oz in the 1950s. For decades now, those bottles have been 12oz or 16oz.
“Now the kid size is 12,” says Wang about McDonald’s serving size. “The portion size has become ridiculous.”
The recent pledge to sell smaller-sized drinks may seem like a reasonable solution. American consumers particularly tend to stockpile food, explains Harikesh Nair, a professor at Stanford Business School.
Selling smaller container sizes may reduce overall consumption in the long run, making it a business decision that will keep both soda businesses and health experts happy.
At the Clinton Global Initiative, Coke, Pepsi and Dr Pepper vowed not just to cut down on beverage size, but to reduce the calories Americans get from drinks by 20% over the next decade.
That sounds like a generous contribution to public health. But while nutritionists and health experts welcomed the move from soft drink companies to back away from super-sizing, they doubt it comes from real concern for growing national waistlines.
Many experts suspect that companies may be putting a positive spin on a global decline in sales of sugary drinks. The math is simple: selling lesser quantities of sugary beverages allows companies to charge higher prices for less product.
‘Innovation’ in sugary additives
Another headwind: consumers seem to have fallen out of love with cola, regardless of the bottle size.
“The consumption of sugary beverages worldwide, and especially the US, has declined, even before the pledge,” says Wong.
Many health-conscious consumers have started to pay attention to the kinds of sweeteners in cola.
The popularity of cane-sugar based “Mexican Coke” in Los Angeles and New York is driven by a preference for more natural forms of sugar. Other Americans are showing an increased affinity for diet drinks. Coca-Cola already uses Acesulfame-K and aspartame for Diet Coke besides high fructose corn syrup in non-diet drinks.
PepsiCo’s Indira Nooyi among other soda company chiefs admit that the industry relies heavily on innovation. This translates to a scramble for newer – and cheaper – flavour and sweetness enhancing chemical agents.
While many health experts say that diet drinks are considerably better than sugar- or syrup-based drinks, even diet colas are not ideal for health, many believe.
The search for the perfect cola sweetener has, however, driven advancements in biotech.
Pepsi recently announced that it would start to use Sweetmyx, a flavor enhancer in its drinks starting this year. Sweetmyx is a flavor enhancer that tricks your taste buds to register drinks as sweeter than they truly are.
The ingredient was developed by San Diego-based biotech firm Senomyx, which claimed it had obtained ‘generally recognised as safe’ approval from the Food and Drug Administration, meaning that it was safe to consume.
But what many don’t know is that FDA issued a correction explaining that it does not regulate such additives. The safety assurance on Sweetmyx came not from the FDA, but a panel sponsored by the industry that manufactures these chemicals.
This conflict of interest has experts worried. “The people that create these flavour modifiers get to decide if they’re safe,” says Rebecca Solomon, director of clinical nutrition at New York’s Mount Sinai Beth Israel.
She is concerned that these products may not get the same rigorous testing that standard FDA approval requires.
She says that while artificially sweetened drinks are healthier replacements for diabetics, using diet drinks to replace excess consumption of sugary drinks is bound to be harmful.
Why soda companies hate taxes
Another factor that allows prolific consumption is how these drinks are priced.
Carbonated drinks such as Coke and Pepsi are are significantly cheaper when bought in higher quantities. And so the consumer always benefits economically, if not physically, when she buys more.
“There was this chart I often cite,” Wang says of how the Consumer Price Index explains price rise over several years. Fresh food and vegetables have become increasingly expensive.
“Over time, soda has become cheaper,” she says.
Enter the sin tax. Some cities have proposed taxes on soda that charges the producer by ounce.
The sin tax would replace the current sales tax on containers of soda. In states that tax soda, the average sales tax on the fizzy beverages was more than 5%, with a maximum of 7%, according to the Robert Wood Johnson Research Foundation.
But soda companies vehemently dislike the sin tax because it is profitable for them to sell smaller cans and bottles of soda at current prices. If prices for consumers rise due to higher taxes, sales volumes are likely to fall, denting profits again.
So opposed to the idea of a sin tax are beverage companies that the “aggressive marketing” they promised at the Clinton Global Initative is going towards political lobbying – not bottled water.
Ask Solomon what cola companies could do to promote healthier drinks, and expect a laugh in return.
“What they could do that isn’t a conflict of interest to their own business?” she counters.
fried soda
Nutritionists are wary of the negative health risks and high calories associated with alarming fructose and sugar content in carbonated beverages. Photograph: Richard Wong / Alamy/Alamy
The nutritionist believes that appropriate labelling of calories consumed and smaller portion sizing would make a genuine difference.
She also wishes there would be more honest advertising. “I think commercials need to indicate this is a treat. That this is a high-calorie beverage.”
Coke alone has also increased its marketing budget overall by $1bn over the next three years.
Ultimately, Solomon said there needs to be more awareness about what it means when someone is consuming 300 calories in a single drink. A few educated consumers may understand the consequences.
“But, to the majority of people buying that drink, the labeling isn’t helping,” Solomon said.
Nair agrees that transparent labelling is important: “That is for firms and regulation to fix,” he says. But he points that consumers need to make responsible choices as well. “The health consequences are for the informed consumer [to consider and] to make a decision.”