Corporate Social Responsibility (And The FMCG Market Response) PDF

Corporate Social Responsibility (and
the FMCG Market Response)
Euromonitor International : Strategy Briefing

May 2006
Strategy Briefings
World
List of Contents and Tables

1. Executive Summary............................................................................................................................................. 1
1.1 Trends.................................................................................................................................................................. 1
Chart 1
Factors Affecting Health-Related CSR Policies 2006........................................................ 2
1.2 Relevant Market Trends....................................................................................................................................... 2
Chart 2
Value Growth in Relevant Sectors 2000/2005 ................................................................... 3
1.3 Company Action .................................................................................................................................................. 3
Summary 1
CSR Efforts by Major FMCG Operators ........................................................................... 3
1.4 Future Outlook .................................................................................................................................................... 7
2. Introduction and Definitions .............................................................................................................................. 7
2.1 Scope of the Report.............................................................................................................................................. 7
2.2 Csr Overview....................................................................................................................................................... 8
3. Health and Safety Issues ................................................................................................................................... 11
3.1 Smoking ............................................................................................................................................................. 11
Table 1
Smoking Levels in Selected Markets 2000-2005............................................................. 11
3.2 Irresponsible Drinking ...................................................................................................................................... 12
Table 2
Death Rates from Chronic Liver Disease and Cirrhosis by Select Market
2000-2005 ........................................................................................................................ 13
3.3 Over-consumption of "junk Foods" ................................................................................................................... 14
Table 3
Obese Population in Selected Countries 2000/2005......................................................... 15
4. Government Action/legislation ......................................................................................................................... 16
4.1 Csr Reporting .................................................................................................................................................... 16
4.2 Anti-smoking Measures ..................................................................................................................................... 17
4.3 Anti-alcohol Measures....................................................................................................................................... 21
4.4 Anti-obesity Measures ....................................................................................................................................... 22
5. Lobbying Forces ................................................................................................................................................ 24
5.1 Environmental and Ethical Groups ................................................................................................................... 25
5.2 Smoking Pressure Groups ................................................................................................................................. 25
5.3 Industry-funded Ngos ........................................................................................................................................ 26
5.4 Industry's Own Lobbyists................................................................................................................................... 27
6. Voluntary Industry Measures .......................................................................................................................... 27
6.1 the Tobacco Industry ......................................................................................................................................... 27
6.2 the Alcohol Industry .......................................................................................................................................... 28
6.3 the Food and Drinks Industry............................................................................................................................ 30
7. Consumer Issues ................................................................................................................................................ 31
7.1 the Influence of the Media ................................................................................................................................. 31
7.2 Consumer Attitudes ........................................................................................................................................... 32
7.3 Demand for Natural Ingredients ....................................................................................................................... 33
7.4 Opposition To Marketing To Children .............................................................................................................. 34
7.5 Backlash Against Gm Foods.............................................................................................................................. 35
7.6 Legal Action ...................................................................................................................................................... 36
8. Impact on Consumer Markets.......................................................................................................................... 37
8.1 Confectionery .................................................................................................................................................... 37
Table 4
Sales and Growth of Confectionery Products in Selected Markets 2000/2005 ................ 38
8.2 Sweet and Savoury Snacks................................................................................................................................. 38
Table 5
Sales and Growth of Sweet and Savoury Snacks in Selected Markets
2000/2005 ........................................................................................................................ 39
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8.3 Breakfast Cereals .............................................................................................................................................. 40

Table 6
Sales and Growth of Breakfast Cereals in Selected Markets 2000/2005.......................... 40
8.4 Carbonated Drinks ............................................................................................................................................ 41
Table 7
Sales and Growth of Carbonated Drinks in Selected Markets 2000/2005........................ 41
8.5 Fast Food .......................................................................................................................................................... 41
Table 8
Sales and Growth of Fast Food in Selected Markets 2000/2005...................................... 42
8.6 Beer ................................................................................................................................................................... 42
Table 9
Sales and Growth of Beer in Selected Markets 2000/2005 .............................................. 43
8.7 FABs.................................................................................................................................................................. 43
Table 10
Sales and Growth of FABs in Selected Markets 2000/2005 ............................................ 44
8.8 Cigarettes .......................................................................................................................................................... 45
Table 11
Sales and Growth of Cigarettes in Selected Markets 2000/2005...................................... 45
9. Case Studies ....................................................................................................................................................... 46
9.1 Anheuser-Busch................................................................................................................................................. 46
9.2 British-American Tobacco Plc .......................................................................................................................... 47
9.3 Cadbury Schweppes........................................................................................................................................... 49
9.4 the Coca-Cola Company ................................................................................................................................... 51
9.5 Diageo ............................................................................................................................................................... 54
9.6 Kellogg Company .............................................................................................................................................. 55
9.7 Kraft .................................................................................................................................................................. 57
9.8 McDonald's Corp .............................................................................................................................................. 59
9.9 PepsiCo ............................................................................................................................................................. 61
9.10 Unilever Group................................................................................................................................................ 62
10. Outlook............................................................................................................................................................. 64
10.1 Trends To Watch ............................................................................................................................................. 64
10.2 Market Forecasts............................................................................................................................................. 66
Table 12
Forecast Global Value Sales in Relevant Sectors 2005/2010........................................... 67
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CORPORATE SOCIAL RESPONSIBILITY (AND THE

FMCG MARKET RESPONSE)
1. EXECUTIVE SUMMARY
1.1 Trends
Large businesses have come under increasing scrutiny in recent years with regard to their attitudes towards
the environment and employees, as well as their responsibility towards public health and safety, with some
companies being accused of sacrificing health for profits.
This has led many companies to re-think their strategies in terms of the types of products they offer and the
content of their products; advertising method; and efforts to warn consumers about the possible harmful
effects of their products.
Issues such as the health impact of tobacco and alcohol, the increase in alcohol-related crime, and the
possible health risks associated with fatty foods and carcinogenic ingredients are worrying governments,
due to rising healthcare and policing costs related to these problems.
As a result, national and regional governments have put measures into place to control the advertising of
tobacco and alcohol, warn the public of potential dangers, increase taxes on tobacco and alcohol and restrict
smoking in public places.
The World Health Orgnization (WHO)'s Framework Convention on Tobacco Control (FCTC) finally came
into force in February 2005, despite fierce opposition from the tobacco industry.
Controlling obesity is more problematic, due to differing opinions about which foods are "good" or "bad".
However, governments have introduced dietary guidelines, and in some cases have banned junk foods from
school vending machines and canteens.
A variety of labelling systems exist throughout the EU and elsewhere, and several governments have
introduced mandatory or voluntary regulations on nutrition labelling.
There are no actual laws regarding the marketing of "junk foods" to children, but the EU health and
consumer affairs commissioner, Markos Kyprianou, has warned the food industry that it must adopt selfregulatory measures in this respect, or face legislation.
Various non-governmental organisations (NGOs) put pressure on large companies to increase their
corporate social responsibility (CSR) activities by mounting campaigns against them or lobbying the
government for change.
Industry-funded NGOs, such as the UK's Portman Group and the US's Century Council, act as selfregulatory forces, campaigning for responsible drinking and aiming to reduce irresponsible marketing
practices.
Consumer concerns over bad company practises and health issues have been fuelled by the media, as well
as films such as Morgan Spurlock's "Super Size Me"; and "The Corporation", a film based on a book by
Joel Bakan.
Ethical consumerism is at an all time high, with people increasingly demanding to know more about the
origins and content of their food. This has led to a flurry of new products that are free of GM (geneticallymodified) ingredients, contain "natural" or fairly traded ingredients, and products that contain no artificial
preservatives and colourings.
Demand for healthy and nutritious products, especially where children are concerned, has given rise to
growth in functional foods, reduced-sugar, lower-fat and low-carb foods, at the expense of those that are
seen as devoid of nutritional benefits, such as crisps and fizzy drinks.
Consumers are increasingly concerned about the methods used by companies to market unhealthy foods to
children, such as advertisements shown during children's TV programmes, and viral marketing via the
internet or mobile phones,
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Cases of litigation against large companies have migrated from the tobacco industry to industries that are
charged with contributing towards obesity, such as fast food, snacks and soft drinks.
Chart 1
Source:
Factors Affecting Health-Related CSR Policies 2006
1.2 Relevant Market Trends
The fastest growth among the sectors under review was seen in FABs (flavoured alcoholic beverages), sales
of which increased by 82% between 2000 and 2005. This was from a relatively small base, however, with
growth slowing in more mature markets such as the US and UK.
The sector has been characterised by strong branding and aggressive marketing targeted at young
consumers, so companies are under more pressure than most to promote responsible drinking.
The confectionery market continued to grow strongly over the review period, by 34%, though the markets
of the US and Japan were more mature, and most growth in the major European markets came from the
sugar-free and functional gum subsectors.
In the light of the bad publicity surrounding sugar confectionery and chocolate, manufacturers focused over
the review period on developing sugar substitutes, low-carb products and smaller portions.
Fast food recorded strong growth between 2000 and 2005, underpinned by demand for convenience, and
the introduction of more nutritious menus by the large chains.
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Sweet and savoury snacks, breakfast cereals and carbonated drinks were most affected by concerns about
obesity and other problems. Manufacturers in all these sectors made efforts to improve the nutritional
content of their products, while lowering sugar and salt levels.
Global sales of cigarettes declined marginally between 2000 and 2005 to stand at just under 5.3 billion
sticks, despite continued growth in China and Russia the world's largest markets by volume.
Value sales of cigarettes continued to rise in many markets, due to tax hikes and price rises, and there was a
strong trend towards low-tar brands.
Chart 2
Value Growth in Relevant Sectors 2000/2005
% growth
Source:
Notes:
Refers to value growth, except in the cases of alcoholic and carbonated drinks and cigarettes, which are
measured in volume terms FABs = flavoured alcoholic beverages
1.3 Company Action
Companies have tackled CSR issues in a number of different ways, but are generally in favour of selfregulation rather than government legislation, as this allows them a greater level of control.
Drinks companies such as Allied Domecq, Anheuser Busch and Diageo have attempted to promote
responsible drinking through a series of television advertisements and other activities. Some also work with
retailers to reduce underage access to alcohol.
Similarly, some of the major tobacco companies, such as British American Tobacco (BAT) and Philip
Morris, support initiatives to discourage underage smoking, including pan-European and national media
campaigns.
Tobacco companies have less leeway to promote positive aspects of their products, and are therefore
focusing on developing "safer" cigarettes, such as BAT's "trionic" filters which reduce the amount of toxic
chemicals and could soon come to market.
Several major food manufacturers have attempted to pre-empt industry-wide agreements by introducing
their own health labels. These typically show amounts of calories, fat, saturated fat, sugar and salt contained
in each serving, how much these contribute to official guideline daily amounts (GDAs).
Some large food and drink manufacturers, including PepsiCo and Kraft, have revised their marketing
policies to restrict advertising to children, in the face of pressure from governments and consumers.
In the US, several large soft drinks manufacturers have announced their intentions to take their products out
of schools, ahead of possible legislation.
Summary 1
CSR Efforts by Major FMCG Operators
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Company
Actions
Anheuser-Busch
Operates community-based responsible drinking

programmes
Runs national advertising campaigns promoting
responsible drinking
Adheres to voluntary industry-wide advertising codes
and its own marketing code
Develops new products that are low in alcohol and low
in carbs
British-American Tobacco (BAT)
One of the few tobacco companies to publish a CSR

report
Operates youth smoking prevention programmes
Operates retail access prevention programmes
Runs national and regional (Europe-wide) smoking
prevention campaigns
Working to develop "safer" cigarettes
Cadbury Schweppes
Develops lower calorie and lower fat options, and new

sweetening techniques
Working to reduce trans-fats and salt content of
products
Discontinued making products with embedded toys
Adheres to a global marketing code of practice
Does not advertise to children under eight years
Discontinued king size lines; providing a broader
range of smaller portion options
Does not vend confectionery and carbonated drinks in
primary schools
Supports initiatives that promote physical activity and
responsible consumption of its products
Introducing a global nutrition labelling standard
The Coca-Cola Company
Operates fitness campaigns in schools (eg "Live It!"),

including distribution of pedometers
Working to improve the taste of diet and low sugar
products
Does not target children under 12 in any media
Follows Schools Code of Practice, whereby vending
machines are not placed in primary schools, and more
healthy choices are offered to secondary schools
Nutritional information panels on packaging now show
energy, protein, carbohydrate, carbohydrate of which
sugars, fat, saturated fat, fibre and sodium
Aims to convey active lifestyle messaging in its
communications and sponsorship activities
Plans to launch anti-cholesterol drink
Diageo
Key supporter of the WHO's World Health Day (held

annually in April)
Involved in training bar staff to influence the way in
which alcohol is consumed
Supports initiatives to prevent underage access to
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alcohol through retail outlets

Supports anti drink-driving initiatives in many countries
Runs branded advertisements in several countries,
whose core objective is to deliver a responsible
consumption message
Adheres to a marketing code which states that it may
not market to people under the legal purchase age
Kellogg Company
Operates fitness programmes (eg Frosted Flakes

"Earn Your Stripes"), including distribution of
pedometers
Has revised its strategy for marketing to children to
make it more socially responsible
Has a long history of printing nutrition messages,
recipes and product information on cereal packaging
Regular new product development to improve
nutritional content, such as Healthy Beginnings line-up
and low-calorie snacks
Works with health organisations and governments to
develop public policies to enhance consumer health
Kraft Foods Inc
Reduced fat content in 200 products in North America

and eliminated trans-fats from certain products since
2003
Fortified some products to help address nutritional
deficiencies in various countries, including calcium
and iron
Developed or acquired new products with a health and
wellness focus, including flavoured waters, string
cheese and snack mixes
Sets specific nutrition criteria for Kraft products sold in
school vending machines
Supports community based healthy living programmes
(eg "Triple Play in the US)
Operates non-branded health campaigns in schools
(eg Health 4 Schools in the UK)
Launch of improved nutrition labels in 2004, including
labels on small packaging
"Sensible Solution" logo used to identify products that
offer better nutritional choices
Does not advertise to children under 6; and since
2004 only advertises "healthier" products to children
under 12.
McDonald's Corp
Abolished its "super size" policy and introduced new,

healthier menu offerings (eg, salads, bottled water,
yoghurts, bagels, deli sandwiches, healthy kids
options)
Ronald McDonald given a more healthy image in
2005, with tracksuit and juggling fruit and vegetables
Launch of global public awareness programme
promoting balanced, active lives ("it's what i eat and
what i do i'm lovin' it,")
Now provides nutritional information, on websites,
posters, restaurant guides, trayliners and flyers
New Nutrition Information Initiative in 2006 provides
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detailed nutrition information on food product

packaging, including comparisons with pan-European
GDAs
Operates fitness programmes in schools (eg,
"Passport To Play")
Launch of global "Go Active!" programme in
2005,including distribution of free pedometers
J Sainsbury
Appointed high profile media personality, Anna Ford

as non-executive director in May 2006 to take
particular interest in CR issues
Initiated six areas of CR focus customers,
colleagues, community, environment, investors,
suppliers each with own targets, eg for customers
Healthier Eating choices introduced wheel of health
on food product packs to help customers make
healthier choices
Reducing salt levels in their own brand foods
Promoting food education more than 250,000 have
taken part in their Taste of Success initiative
PepsiCo
"Smart Spot" initiative enables consumers to identify

products that meet specified nutrition criteria (such as
Baked! Lays, Life Cereal, Gatorade Thirst Quencher)
S.M.A.R.T. lifestyle programme encourages health
and fitness, including a national advertising campaign,
interactive website and magazine
Has built "Smart Spot" playgrounds across the US,
mainly in low-income communities
No longer advertises Pepsi brand to children under 12,
or Cheetos chips brand to children under eight
Limits portion sizes of products sold in US schools,
and replacement of some products with lower fat
alternatives in elementary schools
Has adapted products to make them more healthy (eg,
trans fats removed from several products in 2003;
announced in 2006 that Walkers Crisps in the UK
would use a new type of oil which would reduce
saturated fats by 70%)
Commitment to use "essentially healthy ingredients or
offer improved health benefits" in 50% of new
products
Unilever Group
Considered one of the world's most socially

responsible companies, with a strong commitment to
all three corporate sustainability dimensions
economic, environmental, and social
Early pioneer of functional foods
Recently overhauled entire product portfolio, reducing
levels of salt, sugar and trans fats and improved
labelling
Continuous new product development in the area of
healthy foods, such as low-carb options, cholesterol
lowering products, steamed food and fruit juice "shots"
Adheres to marketing code which states that products
may only be advertised in the context of a balanced
diet, not promote oversized portions or inactivity and
exercise particular caution when advertising to
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children
Source:
1.4 Future Outlook
CSR efforts by food, drink and tobacco companies are likely to increase in the future, as companies
recognise that failure to meet expectations for socially responsible behaviour may ultimately destroy
consumer trust and hasten tough new regulations.
The implementation of the WHO's FCTC and other anti-tobacco measures will contribute to the inevitable
decline of cigarette consumption. Tobacco companies will be forced to appear more socially responsible by
warning of the dangers of smoking and developing new products that are deemed "safer".
Manufacturers of "junk foods" will focus on improving the nutritional content of their products, or diversify
into sectors that are perceived as more healthy, such as fruit snacks and flavoured bottled water.
Countries such as the UK may see further regulation with regard to advertising of alcoholic drinks, and the
introduction of nutrition labels.
At the time of writing industry was awaiting the outcome of Food Standards Agency (FSA) proposals to
introduce a "traffic light" system denoting which foods are "good" or "bad". In the meantime, companies
will continue to introduce their own nutrition labelling systems.
At the European level, legislation is expected to take effect from 2007 in the form of the EU's Health and
Nutritional Claims regulations.
Food and drinks companies have also been warned that marketing codes may become mandatory in the EU
in the future if companies do not introduce responsible self-regulation with regard to advertising to children.
Some have already taken steps towards this.
Food and drink companies may expect to see more litigation in the future, as more lawsuits such as those
seen in the tobacco industry are brought against companies accused of causing obesity.
2. INTRODUCTION AND DEFINITIONS

2.1 Scope of the Report
From the 1990s, many large corporations began to come under criticism by NGOs for their uncaring attitude
towards the environment and employees, especially in developing countries. Furthermore, members of the
public began to initiate lawsuits against tobacco, alcohol and fast food companies on the grounds that their
health had suffered due to misleading advertising or lack of sufficient warnings.
When these actions began to affect consumers' attitudes and buying behaviour, companies began to take note
and change their corporate practices for the better, for example by replacing harvested trees, treating employees
better, and reporting financials with more honesty. More recently, companies have attempted to turn this to their
advantage by increasing their non-financial report writing and even using CSR as a powerful tool to promote
and improve their public image worldwide.
This report focuses primarily on the CSR strategies of companies that market products that are seen as
potentially harmful to consumers' health, such as cigarettes, alcohol and foods that contribute to obesity
especially those targeting children. These include foods such as confectionery, sugary cereals, sugary soft
drinks, ice cream, and fast food (hamburgers, chips/French fries, pizza, fried chicken).
The report examines the reasons behind the need for companies to take action ie, the health problems
exacerbated by smoking and drinking, the association of alcohol with violence and road accidents, and the
global problem of obesity. It also looks at the reasons why these issues have come to the fore in recent years, ie,
through the actions of pressure groups, and consumer concerns fuelled by media coverage, and reviews key
trends in the affected market sectors.
Finally, the report analyses the measures that a cross-section of companies are taking to address these problems
and appear more socially responsible, as well as their reactions to new legal obligations placed on them by
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governments. For example, under increasing pressure from NGOs and consumers, and in an effort to pre-empt
government action, spirits manufacturers have increasingly sought to highlight their commitment to responsible
drinking and be seen to encourage moderation in consumption. Similarly, several food giants, including Kraft,
Nestl and Unilever, have reviewed their recipes and reduced the salt, sugar and fat content of some of their
products, and have also pledged to change some of their advertising and marketing practices, while these and
others have focused on improving nutrition labels.
2.2 Csr Overview

Definition
CSR is a term used to describe a company's efforts to apply the principles of "sustainable development", while
remaining sensitive to the needs of all of its stakeholders (eg employees, customers, suppliers, partners,
investors). This means taking into account the social and environmental consequences of its actions, as well as
financial and economic goals. Analyst Archie Carroll writes about a "pyramid of social responsibility", with
four basic levels of responsibility:
Economic (the responsibility to be profitable);
Legal (the need to obey the law);
Ethical (an obligation to do what is right);
Philanthropic (making a contribution to the wider community).
The issues of smoking, irresponsible drinking and obesity can be said to form part of a company's "ethical"
responsibilities.
CSR should not be confused with charitable donations and works. CSR is a more holistic approach that requires
a responsible company to take into full account the impact on all stakeholders and on the environment when
making decisions. This requires them to balance the needs of all stakeholders with their need to make a profit
and reward their shareholders adequately.
Today's heightened interest in the proper role of businesses in society has been promoted by increased
sensitivity to environmental and ethical issues, largely due to media interest. Indeed, in the absence of legally
binding regulations many companies are still known to get away with corporate activity that may have a
devastating effect on the local communities in which they work. Notable cases have included large corporations
such as Shell, BAT, and Coca Cola.
In some countries government regulation regarding environmental and social issues has increased, and standards
and laws are also often set at national or regional levels (eg by the EU). Investors and investment fund managers
have begun to take account of a company's CSR policy in making investment decisions. Some consumers have
become increasingly sensitive to the CSR performance of the companies from which they buy their goods and
services. These trends have contributed to the pressure on companies to operate in an economically, socially and
environmentally sustainable way.
Proponents of CSR believe that regulation is the best way to ensure that companies remain socially responsible.
This is because by nature, most corporations probably care little for the welfare of workers, and given the
opportunity will move production to sweatshops in less well regulated countries. Furthermore, most companies
do not pay the full costs of their impact, and the costs of cleaning pollution often fall on society in general. As a
result, profits of corporations are enhanced at the expense of social or ecological welfare.
CSR report writing
Applying the principles of sustainable development through a CSR policy is often accompanied by what is
called "triple bottom line" reporting, which declares not only financial results but also the social and
environmental impact of the business. Some countries, such as France, have made such reporting mandatory.
However, the measurement of social and environmental performance is difficult and new measurement
techniques need to be developed.
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Many large companies now produce annual reports that cover sustainable development and CSR issues, and
these reports are often externally audited. However, there is no common template for the reporting and the style
and the evaluation methodology varies between companies (even within the same industry). Critics often
comment that some of these reports are little more than a PR exercise, for example in the case of tobacco
companies.
A survey carried out by Dutch accounting firm KPMG International found that 52% of the largest 250 firms of
the Fortune 500 published a report on CSR in 2005, up from 45% in 2002. The survey identified significant
regional variation, however, with as many as 80% of Japanese firms publishing CSR reports, 71% in the UK,
41% in Canada and only 32% in the US. There were several reasons cited by companies for publishing CSR
reports, including increased shareholder value or market share, ethical considerations and motivating or
recruiting employees.
Protecting a nation's health
Another dimension has recently been added to CSR that of consumer health protection. Some believe it is the
responsibility of companies, as well as governments and consumers themselves, to attempt to control people's
levels of smoking, irresponsible drinking and over-consumption of fatty foods.
With regard to companies that may be partly responsible for putting people's health at risk, similar principles
apply. Private companies are responsible to their shareholders, who want the company to grow in terms of sales
and profits. However, in doing so there may be a conflict with the responsibility a company has to the health and
welfare of its customers. The question is, should the large food, drink and tobacco companies, which have a
responsibility to develop new products, market them and generate profits for their shareholders, do so at the
expense of the health of those who consume their products?
Many businesses claim to have a socially responsible code of practice that they adhere to, as well as an ethical
stance to their activities, but may still be contributing to putting public health at risk. For example, foods
marketed to children may claim to have no artificial colourings, preservatives or GM ingredients, but may be
filled with sugars and salts which contribute to obesity, heart disease and high blood pressure.
Many would agree that companies themselves should take some level of responsibility, but the debate currently
centres around how much responsibility companies should take, as opposed to the level of responsibility
assumed by governments, schools, parents or children themselves.
If companies themselves do not act, then governments may be forced to intervene in terms of legislation or
regulation. However, in doing so they may risk the accusation of being a "nanny state", dictating what
consumers should eat, drink, and when and where they should smoke. Examples of such a policy include the
banning of vending machines from schools, or bans on smoking in public places. Governments may also pass
legislation that forces businesses to give clearer information on packaging to help consumers make more
informed choices about what they buy. However, such legislation would impose additional costs on businesses
and may ultimately put up the price of the product to the consumer.
CSR or PR?
Some commentators are cynical about corporations' commitment to CSR and sustainable development, claiming
that the idea of an "ethical company" is an oxymoron. The economist Milton Friedman, for example, argues that
a corporation's principal purpose is to maximise returns to its shareholders, and that CSR is not compatible with
this. Others believe that the only reason corporations put in place social projects is to gain commercial benefit
from raising their reputation with the public or with government. Opponents of CSR argue that overall
improvements in health and living standards in third world countries has only been made possible due to the
market-orientated policies of large companies, which offer better pay and conditions than local businesses.
CSR has also been seen to damage a company's reputation, in cases where it is perceived as misleading. For
example, Shell has a much publicised CSR policy and was a pioneer in triple bottom line reporting, but was
involved in 2004 in a scandal over the misreporting of its oil reserves which seriously damaged its reputation
and led to charges of hypocrisy. Similarly, a report by a group of NGOs criticising BAT in 2004 stated that "in
Nigeria, Uganda, Pakistan, Kenya, Brazil and Russia, BAT advertises itself as a good corporate citizen, while
aggressively marketing its cigarettes to the youth and female market".
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Case study: PepsiCo's combined CSR/financial report how effective is it?

PepsiCo has been praised by ethical groups for including a substantial corporate responsibility component into
its annual financial report for the second consecutive year in 2005. Such combined reporting is rare among US
companies, and illustrates PepsiCo's efforts to communicate all aspects of its performance to investors and
stakeholders. However, PepsiCo does has been criticised for not directly addressing the association of its
products with obesity in its CSR report, despite the fact that many of its products are sodas or snack foods that
are high in fat, sugar or salt.
Lobbyists demand that PepsiCo exhibit more openness on the contribution of its product to healthy living,
perhaps by including a fact-based discussion of the success of the company's "Smart Spot" icon and "EnergyBalance" initiative, its position on company versus consumer responsibility in managing health, and its stance
on obesity lawsuits.
Advertising especially that related to children is given little coverage in the CSR report. Although PepsiCo
cites its policy of taking "special care" when making decisions about advertising directed at children, it provides
no specific explanation of ad content formulation. Furthermore, the report lacks any descriptions of company
policies to avoid marketing junk food to children while their reasoning faculties are still undeveloped. Ethical
groups argue that, given how important this issue is to a major stakeholder group, that of parents, PepsiCo
should rethink its reporting approach in this area.
It seems therefore, that PepsiCo is still being very selective about that information it provides to consumers and
stakeholders, in order not to damage its reputation further.
Behind-the-scenes lobbying
According to a report published by WWF and the strategy consultancy SustainAbility in 2005, companies may
portray themselves to be responsible in their corporate communications to the public, but can privately do
everything in their power to lobby governments in order to slow public policy progress towards certain health or
sustainability issues. For example, BAT has been publishing CSR reports since 2002 claiming that it is doing its
best to prevent youth smoking and warn the public about the dangers of smoking. However, according to the
lobby group ASH (Action on Smoking and Health), top BAT executives fought to block the WHO's Framework
Convention on Tobacco Control (FCTC), and also used support for AIDS prevention in Africa to try to win
political influence and "relegate" tobacco as a health issue. Furthermore, a report by The Guardian newspaper in
2002 claimed that BAT had been paying a middleman up to 250,000 a year to lobby countries to reject
international attempts to put stronger health warnings on cigarette packs, reduce the levels of tar and nicotine in
cigarettes and increase tobacco taxes.
In the case of the "junk food giants", these companies are accused by pressure groups of pushing governments to
defend their interests, while seeming on the surface to care about consumers' concerns and be doing their best to
address issues such as childhood obesity. In the US, especially, sceptics claim that the US government always
comes down on the side of the big industry players, due to their financial power. Indeed, an article published in
the opinions journal "The Nation" cites the fact that top managers of Coca-Cola, PepsiCo, Nestl and Altria
were among the largest financial backers of the Bush/Cheney campaign.
In 2003, when California lawmakers tried to ban the sale of sodas in schools, heavy lobbying from the soda
industry resulted in an exemption for high schools (where most soda is sold). In August 2004, California
legislation that would have set nutrition guidelines on foods sold in schools was narrowly defeated, despite
having the support of 80 health and education organisations, thanks to last-minute lobbying by the snack food
industry.
It was also reported that during the reauthorisation of the children's nutrition programmes by the US government
in 2004, the food industry managed to quash a proposal by one senator to make an amendment to the children's
nutrition programmes moving the guidelines from the USDA to the comparatively more independent Institute of
Medicine. The industry also won its lobbying effort to eliminate a recommendation for sugar intake from the
federal guidelines, although the guidelines do advise consumers to eat foods with "few added sugars".
Some sceptics even go as far as suggesting that companies are using bribery to improve the image of junk foods.
For example, one article reported that less than a month after Cadbury Schweppes gave a multimillion-dollar
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grant to the American Diabetes Association, the association's chief medical and scientific officer claimed that
sugar has nothing to do with diabetes or with weight.
3. HEALTH AND SAFETY ISSUES

3.1 Smoking
Smoking has been linked to lung cancer, emphysema and other breathing disorders. Second-hand smoke can
also cause cancer and further inhibit those with asthma. The WHO estimates that current smoking trends can see
approximately 10 million deaths worldwide each year by 2025.
Analysis of smoking patterns over the last five years reveals that levels appear to be stable or declining the
major developed markets, while continuing to increase in emerging markets such as China, Russia, India and
South Africa. In some countries, such as Vietnam, Turkey, China and South Korea, smoking is a way of life and
considered a male activity. In China and Russia, smoking levels are alarmingly high, at almost 44% and 42% of
the over 15s population respectively in 2005.
The US now has one of the lowest levels of smoking prevalence in the world, at an estimated 17.5% in 2005.
The decline from 19.1% in 2000 can be attributable to such factors as increased federal and state taxes, a
growing awareness of the dangers of tobacco use, smoking restrictions and a reduced social acceptance of
smoking.
Other major European markets also saw a decline in smoking levels over the review period, including Spain,
France, the UK, Italy, Germany and Sweden. As in the US, driving factors for reduced smoking levels have
been rising prices and growing health concerns. On the UK, successive governments have been very active over
the last two decades in educating the population on the dangers of smoking and promoting the use of nicotine
replacement therapy (NRT), which has helped increase success rates for quitting.
What is still worrying is that while overall smoking levels in Europe have fallen or stagnated, there has been a
growing number of female smokers, and also smokers in younger age groups. In Germany, for example, over
the last 50 years the average age at which females start smoking has dropped from 22 to 14. This is one of the
most important issues for cigarette manufacturers to deal with.
Table 1
Smoking Levels in Selected Markets 2000-2005
Smoking prevalence in population aged 15+

2000
2001
2002
2003
2004
2005
China
Russia
India
South Africa
Brazil
Japan
Netherlands
Spain
Poland
France
UK
Italy
Germany
Canada
Australia
Sweden
US
42.1
41.7
36.2
35.5
33.5
33.6
34.5
34.4
32.0
25.8
27.0
24.1
32.4
21.3
21.8
18.9
19.0
42.6
41.5
37.2
35.8
33.2
33.4
33.5
34.4
32.0
25.4
26.6
23.5
34.6
20.8
21.9
17.8
18.7
42.7
41.2
37.3
36.2
33.1
33.0
32.9
34.6
28.7
25.7
25.4
22.5
34.8
20.5
21.1
18.4
18.1
43.0
41.5
38.0
36.5
32.9
32.7
32.8
34.5
28.4
25.4
24.8
22.6
32.5
20.5
21.3
18.0
17.7
43.6
41.9
38.0
36.6
32.9
32.9
32.7
29.2
28.4
25.5
25.3
22.0
31.7
20.8
20.8
17.8
17.5
Source:
41.7
42.2
36.2
34.9
33.3
34.3
32.4
34.2
32.0
27.0
27.0
24.4
34.5
20.9
22.5
18.9
19.1
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3.2 Irresponsible Drinking

Action against high numbers of road deaths
The very high number of annual road deaths around the world is currently a major concern for the WHO, which
began a campaign to lower these figures in March 2004. One factor in this is the significant number of deaths
and injury caused by drink-driving, and a number of countries including the UK, France and Brazil have
recently been actively promoting their resolve to reduce the problem.
This has not proved popular with some drink manufacturers, and in France wine-makers have vociferously
protested against the strict enforcement of anti drink-driving legislation, which they blame for a dramatic
reduction in sales of wine in restaurants since late 2002.
The fact that such campaigns have failed in the UK means that there is still some way to go before drink-driving
is effectively tackled at both national and global levels. However, it is likely that changing attitudes towards the
unacceptability of drink-driving will prevail in the medium to long term, which may well have a similarly
negative effect on on-trade sales as those witnessed in France.
Binge-drinking of particular concern
The effects of alcohol-related crime and violence are of great concern to several governments, especially in the
UK, where the problem of binge-drinking (commonly defined as the consumption of 11 or more drinks on one
occasion) is particularly pronounced.
Medical opinion is in agreement as to the benefits of moderate versus binge levels of drinking, and international
guidelines for safe drinking levels have been published and widely promoted. In addition to the ensuing violence
and social disruption caused by binge-drinking, not to mention lost working days, it is very harmful to the body,
forcing it to deal with very high levels of toxins over a short period of time. It is of particular note that bingedrinking is most prevalent amongst younger drinkers, leading to a call from some researchers to raise the
drinking age in order to offset the phenomenon.
Once restricted to a male pastime, binge-drinking is becoming increasingly common amongst women, and
alcohol abuse amongst women in general is on the rise. Recent UK-based research estimates that in the 18-25
year-age group, alcohol abuse rose by around 32% in men and 70% in women between 1991 and 2003. In
addition to other health concerns surrounding binge-drinking, this puts women at a higher risk of sexual assault
and unwanted pregnancy, the results of which will be felt by society in the short to medium term.
Case study: Binge-drinking in the UK
Binge drinking and alcohol-related crime are two of the most high-profile problems in the UK. Consequently,
the British government introduced a package of measures to deal with alcohol-related crime and released the
National Alcohol Harm Reduction Strategy for England in March 2004.
According to Government statistics, alcohol is the cause of 44% of violent crime and 70% of weekend night
admissions to casualty. Alcohol-related illnesses cost the NHS 1.7 billion a year and around 17 million
working days are lost annually because of alcohol abuse, costing the UK economy 6.4 billion. Furthermore,
additional costs of cleaning up the mess caused by alcohol-imbued people, either through damage to people or
property, is estimated at over 7 billion a year.
Binge-drinking is a particular problem in city-centres, where saturation of demand has led to operators
increasingly fighting to undercut each other and employ fierce promotional activity to maintain their share
against competing outlets, including irresponsible marketing, price promotions and an abundance of happy
hours.
However, there has recently been a move towards a more responsible approach to drinking from within the pub
industry. In April 2004 the pub chain J D Wetherspoon abandoned its two-for-one promotions, reduced the
number of alcoholic units in its cocktail pitchers from six to four and re-priced its spirits measures so that a
double measure is now equal in price to two single measures. To strengthen this approach, the prices of its soft
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drinks have also been reduced. The company stated that it hoped to stop tempting customers into binge-drinking
through incentivising larger drink orders.
The Licensing Act 2003, which came into effect in January 2005, was one attempt to tackle the problem. This
allows flexible opening hours and the potential for pubs and clubs to be open 24 hours a day, seven days a week.
The government argued that this would encourage a more relaxed drinking culture by avoiding the tendency to
binge drink in advance of closing time, and to avoid the potential problems that can arise when a number of
licensed premises send all their patrons onto the streets at the same time. Furthermore, authorities in cities
blighted by late-night violence, including Nottingham, Newcastle and Westminster councils, have already
introduced a city-centre block on new premises opening, except in specific circumstances.
Opponents of extended licensing hours believe that the problem will only be exacerbated, with street violence
prolonged over a longer period. Furthermore, later closing times are still not supported by later availability of
public transport, one of the key issues which could prevent people from loitering on the streets and the violence
that is associated with this loitering. Until these factors are tackled head on, health problems and crime
associated with alcohol consumption are set to continue regardless of whether opening hours are flexible or
restricted.
It is expected that operators will increasingly work together to play a proactive role in controlling the problem of
binge drinking. As well as efforts by pub chains such J D Wetherspoon to reduce promotions, large drinks
companies such as Diageo are also becoming more active in encouraging sensible drinking. In 2004, the
company launched a television advertising campaign to support its Smirnoff brand, which included the strapline
"Knowing when to stop is a good thing", and further national advertising campaigns were launched in February
2006.
Diseases caused by alcoholic drinks consumption
Increasing the risk of liver disease and cancer are two of the largest health concerns facing regular, long-term
and heavy drinkers. It is generally accepted that the prolonged excessive consumption of alcohol directly
increases the incidence of aero-digestive tract cancers (mouth, throat, larynx and oesophagus). Drinking has
been associated with a modest increase in the risk for breast cancer.
Chronic liver disease and cirrhosis continue to be prevalent in a number of countries, and are responsible for a
great number of deaths each year. In some countries where unrefined alcoholic drinks are commonly consumed,
such as within Eastern Europe, mortality rates are very high. This is also the case within more affluent Western
European countries, whose rich, fatty diets contribute to damaging the liver.
Russia has the most serious problem of alcoholism, which is increasing annually. By 2005, there were almost 53
deaths from chronic liver disease and cirrhosis per 100,000 inhabitants. This is partly due to the prevalence of
bootleg and poor-quality alcohol, and for this reason, president Vladimir Putin called for the creation of a state
monopoly on vodka and spirits distribution in 2005.
Table 2
Death Rates from Chronic Liver Disease and Cirrhosis by Select Market 2000-2005
Deaths per 100,000 inhabitants
Russia
Mexico
South Africa
Germany
Czech Republic
France
Poland
Finland
UK
Spain
Japan
China
India
Sweden
2000
2001
2002
2003
2004
2005
20.2
25.3
12.0
20.9
18.0
15.6
14.3
13.0
10.2
14.4
11.2
10.5
9.6
7.0
26.5
24.8
13.4
20.3
17.7
15.3
14.6
13.0
10.7
13.7
11.1
10.6
9.3
7.4
31.2
24.5
14.9
19.8
17.5
15.0
14.2
13.2
11.1
13.0
11.0
10.0
9.5
7.8
36.5
24.1
16.4
19.2
17.2
14.7
14.0
13.4
11.6
12.3
10.9
9.9
9.4
8.1
44.4
23.7
18.3
18.8
16.8
14.5
14.0
13.4
12.0
11.8
10.7
9.7
9.4
8.5
52.6
23.2
20.1
18.1
16.6
14.2
13.8
13.6
12.5
11.1
10.5
9.5
9.4
8.9
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7.1
5.9
5.3
Canada
Australia
Netherlands
Source:
World
7.1
6.0
5.2
7.1
6.0
5.2
7.1
6.1
5.1
7.1
6.1
5.0
7.1
6.2
5.0
WHO/Euromonitor International
3.3 Over-consumption of "junk Foods"

Junk foods blamed for obesity
The growth in consumption of snack foods, fast food and soft drinks that are high in sugar and fats has been
blamed for the growing problem of obesity, especially in children. For example, it has been found that one can
of regular Coke contains about ten teaspoons of sugar and 150 calories. It has even been suggested that lowcalorie drinks may do more harm than good for people trying to lose weight. Findings, published in the
International Journal of Obesity in 2004, suggested that the "artificial" sweeteners found in diet soft drinks
confuse the brain's ability to regulate body weight and could encourage people to over-eat. The study found that
the body's natural ability to regulate food intake and body weight could be weakened if and when the
relationship was weakened by "artificial" sweeteners.
However, manufacturers and fast food operators have been at pains to point out that the problem of obesity is
not only due to higher intake of unhealthy foods, but also due to increasingly sedentary lifestyles, as children
spend more time in front of the TV, internet and games consoles, and not enough time doing sport or other
activities.
Children at risk
Technically speaking, the problem of obesity occurs as a result of increased consumption of more energy-dense,
nutrient-poor foods with high levels of sugar and saturated fats, combined with reduced physical activity.
Obesity is a significant contributory factor in chronic health conditions, such as heart disease, type 2 diabetes
and certain forms of cancer. Other, less dangerous conditions associated with obesity include osteoarthritis and
hypertension. In the US, the Department of Health and Human Services estimates that obesity is a factor in
some 300,000 deaths per year.
The common measure of obesity is the body mass index (BMI), defined as the weight in kilograms divided by
the square of the height in metres (weight kg/height m2). A BMI over 25 is defined as overweight, and a BMI of
over 30 as obese. According to the WHO, obesity has reached epidemic proportions globally, with more than 1
billion adults overweight, of which at least 300 million are clinically obese.
Childhood obesity is a particular area of concern. Researchers have shown an association between obesity in
childhood and a prevalence of high blood pressure, diabetes, respiratory disease, and orthopaedic and
psychosocial disorders in later life. In countries with a fairly severe incidence of childhood obesity, such as the
US and the UK, this reflects a youth food culture increasingly centred around processed and fast foods that are
high in fat and salt content.
US has highest rates of obesity
The US has the world's highest obesity rate, with 34% of the population of over 15 years old recording a BMI of
30 or more in 2005. Rising obesity is of particular concern among children and adolescents in the US. As
sporting participation has fallen, and hours spent in front of the TV have climbed, the inevitable lure of junk
food for the young has grown. The food industry has faced mounting criticism from politicians and parents
concerned with the effect of food advertising on children's consumption habits. In 2000, 16% of US adolescents
were overweight, and among the poorest teenagers and those of African American and Latino origin, this figure
rises dramatically.
Perhaps surprisingly, the emerging markets of Saudi Arabia and South Africa ranked second and third in terms
of obesity levels, at 28% and 27% of the population, respectively, in 2005. With regard to Saudi Arabia, this has
resulted in a much higher incidence of related disorders, such as diabetes Mellitus, hypertension and
hypercholesterolaemia, which were practically unheard of in the country 20 years ago. The situation is partly
due to the oil boom of the 1970s and early 1980s, which caused disposable incomes and leisure time to soar, and
led to a trend towards self-indulgence, but it could also been linked to the rapid rise and popularity of American-
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style fast food chains in Saudi Arabia As female pupils are not encouraged to participate in active sports, and do
not often go out to work, it has been suggested that the higher level of obesity in female Saudi Arabians stems
from not enough exercise.
The UK, Australia and Germany all had obesity rates of over 20% in 2005. Since 1980, the prevalence of
overweight and obese people has almost trebled in the UK, and a small but growing number of people fall into
the "morbidly obese" category with BMIs above 40. Again, the number of overweight and obese children and
adolescents is of particular concern in the UK. By 2020, it is predicted that 63% of adult women and 71% of
adult men will be overweight or obese.
Asia-Pacific benefits from better diet
The lowest rates of obesity are recorded in Asia-Pacific, due to more healthy diets in this region. Nevertheless,
obesity is a growing problem in the region, due to the infiltration of Western-style processed foods, as well as
less active lifestyles as a result of the introduction of more sophisticated technology and higher disposable
incomes. In China, the problem of obesity is concentrated at present in urban areas, and it is hoped that the
growing health awareness in China will stem its spread.
Table 3
Obese Population in Selected Countries 2000/2005
% of population aged 15+
US
Saudi Arabia
South Africa
UK
Australia
Germany
Mexico
Russia
Canada
France
Poland
Netherlands
Spain
Sweden
Argentina
Brazil
Italy
India
Hong Kong, China
China
Japan
South Korea
Source:
Note:
2000
2001
2002
2003
2004
2005
27.6
26.7
20.8
20.3
21.5
16.8
20.2
18.0
14.8
9.0
12.2
9.1
12.0
10.8
11.2
11.1
8.6
5.3
5.2
4.1
2.1
2.4
28.3
27.0
21.5
22.3
21.6
17.9
20.5
18.0
14.9
10.0
12.5
10.8
12.0
10.9
11.3
11.2
9.0
5.4
5.2
4.2
2.4
2.5
30.9
27.4
22.1
23.0
22.0
19.0
20.0
17.5
15.2
12.6
12.7
11.0
12.0
11.0
11.5
11.3
9.2
5.3
5.2
4.3
2.4
2.5
32.3
27.7
23.0
24.5
22.9
20.1
20.0
17.5
15.7
14.5
13.0
11.3
12.2
11.1
11.6
11.4
9.3
5.4
5.2
4.4
2.6
2.5
33.7
28.0
25.4
25.9
23.1
20.5
19.8
17.5
16.0
15.2
13.3
12.5
12.4
11.1
11.7
11.5
9.6
5.4
5.2
4.5
2.7
2.5
34.2
27.9
26.6
25.0
23.6
20.2
19.8
17.3
15.8
14.3
13.6
12.3
12.1
11.8
11.6
11.5
9.8
5.4
5.2
4.7
2.5
2.4
Obese population = BMI 30kg/sq m or more
Cancer links
In addition to accusations of contributing to the growing rate of obesity among children, carbonated drinks have
also been linked to an increased risk of oesophageal cancer. In 2004, at a conference of cancer and
gastrointestinal experts, it was announced that researchers in the US had found a strong correlation between the
increase in per capita consumption of carbonated soft drinks in the last 50 years and the rise in oesophageal
cancer in the US. Though these findings could merely be a coincidence, the research claimed to have found
some medical support for its suggestion. Carbonated soft drinks cause the stomach to distend, which in turn
causes the gastric reflux associated with oesophageal cancer.
Case study: The Benzene Scare
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The latest scare to hit the soft drinks industry on both sides of the Atlantic is that benzene has been found in
some carbonated drinks. Benzene, a known carcinogen, can be formed when sodium benzoate and ascorbic acid
(vitamin C) react together. Benzene has been linked to leukaemia and other cancers of the blood, and is also
found in pollutants such as car exhaust fumes. Sodium Benzoate is used in drinks because of its strong ability to
kill off bacteria, and the preservative's benefits are considered to outweigh the risks. Studies show that benzene
levels would not rise significantly at room temperature, but could rise under extreme conditions.
The US Food and Drink Administration (FDA) was alerted to the problem by an independent laboratory in New
York in early 2006. The lab found some soft drinks with benzene levels several times above the WHO's 10 parts
per billion (ppb) limit for drinking water. The FDA water limit is half that, while safety bodies in the EU use a
limit of just 1ppb.
The American Beverage Association (ABA) pledged to "use every means necessary" to make all soft drinks
makers aware that two common ingredients can react together to form benzene in drinks, but claims that such
levels pose little health risk to consumers, since people could get more benzene from the air they breathed.
Coca-Cola stated that the major manufacturers have learnt to control benzene formation in drinks containing
ascorbic acid and sodium benzoate. It is thought that Cadbury Schweppes exposes drinks to heat in an incubator
for a set period of time to monitor formulations. Cadbury, alongside Australian drinks group Koala Springs,
originally alerted the industry and FDA to a problem with sodium benzoate and ascorbic acid back in 1990. It
also then led industry testing for benzene, before it and others reformulated some of their drinks.
It is reported that more than 1,500 soft drinks containing sodium benzoate and ascorbic acid or citric acid have
been launched across Europe, North America and Latin America since January 2002.
The UK's FSA also carried out tests in the light of the US findings, and found that benzene was present in
British soft drinks at eight times the level permitted in drinking water. The British Soft Drinks Association
insists the levels produced pose no risk to health (which begs the question, why are they considered a risk in
drinking water?), claiming that someone living in an urban city consumed, on average, 400 micrograms of
benzene from exhaust fumes in a normal day.
However, soft drinks companies may suffer a loss in sales due to the adverse publicity caused by the findings,
and will need to convince the public that their products are safe, or reformulate them altogether, if they want to
be seen as socially responsible.
Other adverse effects
Junk foods such as confectionery and fizzy drinks have also been linked to problems such as tooth decay, lower
levels of concentration and hyper-activity. In the UK, it is estimated that more than 50% of four to 18 year-olds
now suffer from tooth decay. Research also suggests that teenagers who consume large quantities of caffeinated,
carbonated drinks are more likely to suffer sleep deprivation and lower levels of concentration, while those
teenagers who drink fewer carbonated drinks showed better results.
4. GOVERNMENT ACTION/LEGISLATION
4.1 Csr Reporting
Lack of legal requirements
There are few national legal requirements in place for CSR report writing, and those that are in place are fairly
vague. An exception to this is France, where a law passed in May 2001, known as the New Economic
Regulations, requires companies to publish social and environmental information in their annual reports. France
is still the only country to require both social and environmental reporting for all listed companies.
The European Commission released its 2001 Green Paper on CSR, followed by the July 2002 Communication
on the same subject, in order to set out a definition of social responsibility in a European context and to promote
models of good practice in European enterprises, but no laws have yet been finalised.
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In the UK the Company Law Reform Bill, published in November 2005, requires directors, in their effort to
promote the success of the company, to take account of the company's impact on the community, the
environment, employee interests and relationships with other stakeholders and the company's reputation for
maintaining high standards of conduct.
GRI guidelines
The Global Reporting Initiative (GRI) is an independent institution, founded in 1997, which attempts to
standardise sustainability reporting by way of a set of voluntary guidelines. GRI is an official collaborating
centre of the United Nations Environment Programme (UNEP), which incorporates the active participation of
representatives from business, accountancy, investment, environmental, human rights, research and labour
organisations from around the world.
In December 2005 the total number of countries using GRI standards rose to 54. GRI announced that several
large food and beverage companies had added their reports in the last few months, including Diageo Hellas,
Diageo Espana, Diageo/Seychelles Breweries, Inbev, Red Stripe (Diageo Jamaica), and Royal Numico N.V.
4.2 Anti-smoking Measures

WHO framework convention
In response to the WHO's concerns about smoking trends, The WHO Framework Convention on Tobacco
Control (FCTC) is the first global health treaty negotiated under the auspices of the World Health Organization.
This is an attempt by the WHO to have all countries adopting the same rules regarding tobacco rather than
having legislation varying from country to country. The treaty closed for signature on 29 June 2004. It entered
into force on 27 February 2005. 168 countries have signed the FCTC, and 64 have become Parties to the treaty.
The FCTC commits countries to implement a range of tobacco control measures such as a ban on tobacco
advertising, inclusion of significantly sized health warnings on cigarette packets, protection of people from
second-hand smoke, and the regulation of tobacco products.
This is an attempt by the WHO to have all countries adopting the same rules regarding tobacco. In the face of
increased regulation and awareness of the health risks associated with smoking in Europe and America, the
multinationals are moving their attention to developing countries.
Framework conventions and protocols are legally binding only on countries that ratify them. The onus will be
on national governments to implement the FCTC and protocols. How effective the FCTC will be in reversing
the tobacco epidemic will be determined by the how fully governments implement the obligations contained in
the FCTC.
Key provisions in the treaty encourage countries to:
Impose comprehensive bans on tobacco advertising, promotion and sponsorship. The FCTC requires all
Parties to undertake a comprehensive ban on tobacco advertising, promotion and sponsorship within five
years of ratifying the treaty.
Include the placement of rotating health warnings on tobacco packaging that cover at least 30% (but ideally
50% or more) of the principal display areas and can include pictures or pictograms;
Ban the use of misleading and deceptive terms such as "light" and "mild";
Combat smuggling, including the placing of final destination markings on packs. Measures required include
marking all tobacco packages in a way that signifies the origin and final destination or the legal status of the
product, and cooperating with one-another in anti-smuggling, law enforcement and litigation efforts;
Increase tobacco taxes in the hope of reducing tobacco consumption, especially amongst young people.
The FCTC also contains numerous other measures designed to promote and protect public health, such as
mandating the disclosure of ingredients in tobacco products, providing treatment for tobacco addiction,
encouraging legal action against the tobacco industry, and promoting research and the exchange of information
among countries.
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The next five years will see an expansion in M&A activity by multinationals targeting the few countries not
signatories of the FCTC.
Smoking bans
The introduction of a smoking ban in public places, including bars, pubs and cafs, has gained momentum
across the globe in the past couple of years. The rationale behind this move is to limit the harmful effects of
passive smoking, to protect both employees and the public alike, as well to curb smoking where possible. The
ultimate aim is to reduce the cost of public spending on health.
Among countries which now have a ban imposed are New Zealand, Canada, Ireland, Norway and Italy, as well
as some states in Australia and the US, including New York and California. Views are divided on whether there
will be EU-wide smoking ban legislation. The EU's Public Health Commissioner called for an EU-wide ban on
smoking in public places in October 2004, but whether this will actually be implemented in the near future is
questionable.
In Spain, one of the biggest tobacco consuming nations in Europe, a ban went into effect on 1 January 2006
banning smoking in the workplace. The new law bans smoking in offices, shops, schools, hospitals, cultural
centres and on public transport.
With regard to the UK, a complete ban on smoking in enclosed public places comes into force on in Scotland on
26 March 2006, and one in Northern Ireland 12 months after that. In February 2006, MPs voted overwhelmingly
to extend the ban on smoking in all pubs, restaurants, private clubs and most workplaces to England by the
summer of 2007. Offenders are likely to face a fine of 50. Health Secretary Patricia Hewitt believes the
extended ban could help 600,000 people to give up smoking. The Bill also proposed to raise the minimum age
for buying cigarettes from 16 to 18.
Difficult business climates in areas where smoking bans are in effect are likely to drive consolidation. With
improved purchasing power, consolidated chains will force further discounts from brewers and promote cutprice drinks to consumers, luring the public from their homes and off-licence purchases, or away from
competitors. Bars without the offer of food are likely to be most at risk from an outright ban on smoking.
Leading pub chain JD Wetherspoon had announced in 2005 that it would convert around 10% of its pubs to nonsmoking outlets, followed by the rest of the chain in May. However, when the government announced its
intention to bring forward the national ban, JD Wetherspoon announced in March 2006 that it would put off its
plans to convert its pubs to smoke-free zones until the total ban was put into place. Sales at the 49 pubs that JD
Wetherspoon converted into non-smoking outlets fell by almost 8% in the three months to January 2006, as
customers spent less at the bar and playing on fruit machines.
FDA restrictions
In 1996, the FDA published regulations restricting the sale and distribution of cigarettes and smokeless tobacco.
The provisions of FDA's rules included:
Authority to change the language of the current cigarette health warnings and substantially enlarge their
size;
Full disclosure of ingredients added to tobacco products;
Authority for the FDA to regulate, or ban, terms such as "light" and "low tar";
Authority for the FDA to mandate changes in the design of tobacco products to protect the public health,
including authority to remove harmful ingredients and smoke constituents
The sale of cigarettes and smokeless tobacco to children and adolescents under the age of 18 is a violation
of federal law. The rule requires tobacco retailers to check a photo identification bearing proof of age for
anyone 26 years old or younger.
The minimum package size for cigarette retail sales is 20 cigarettes. This provision further restricts retailers
from opening cigarette packaging in order to sell individual cigarettes.
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Vending machines are no longer allowed to sell tobacco products except in locations, such as bars, where
the proprietor can ensure that no person under the age of 18 is allowed to enter at any time.
Self-service tobacco displays are no longer allowed in points of sale. The FDA believes this will reduce
under-age theft of tobacco products as well as involving the sales clerks in transactions with young people
who wish to purchase tobacco.
Health warnings on tobacco products

US
In the US, the Comprehensive Smoking Education Act of 1984 required that four Surgeon General's Warnings
be rotated on cigarette packages and advertisements. The warnings are: "Smoking causes lung cancer, heart
disease and may complicate pregnancy"; "Quitting smoking now greatly reduces serious risks to your health";
"Smoking by pregnant women may result in foetal injury, premature birth, and low birth weight"; and "cigarette
smoke contains carbon monoxide". The warnings were intended to communicate, in plain language, the risks of
smoking. In July 2004, the Senate passed a bill that would make the health warnings larger, with more explicit
descriptions of the health damages caused by cigarettes. The House of Representatives must approve the bill for
it to become legal.
EU
In May 2001, a directive of the European Parliament and Council regulating tobacco products became law.
Health warnings must cover at least 30% of the front and 40% of the back surface of individual packets of
tobacco. The following warnings are rotated on the most visible surface: "Smoking kills/smoking can kill"; and
"Smoking seriously harms you and others around you". Additional warnings must be printed on the other most
visible surface of the package, including:
Smokers die younger.
Smoking clogs the arteries and causes heart attacks and strokes.
Smoking causes fatal lung cancer.
Smoking when pregnant harms your baby.
Protect children: don't make them breathe your smoke.
Your doctor or your pharmacist can help you stop smoking.
Smoking is highly addictive, don't start.
Stopping smoking reduces the risk of fatal heart and lung diseases.
Smoking can cause a slow and painful death.
Get help to stop smoking: (telephone/postal address/internet address/consult your doctor/pharmacist).
Smoking may reduce the blood flow and causes impotence.
Smoking causes ageing of the skin.
Smoking can damage the sperm and decreases fertility.
Smoke contains benzene, nitrosamines, formaldehyde and hydrogen cyanide.
In 2003, the EU halted the branding of cigarettes as "light" or "mild", saying that this misleads consumers about
the dangers of smoking.
Australia
In Australia, new regulations came into effect from 1st March 2006, forcing all tobacco products imported and
manufactured for retail in Australia to be printed with new health warning labels, which provide smokers with
information on an expanded range of health effects. In the case of cigarette packs, health warnings most now
occupy 30% of the front and 90% of the back of pack, with a graphic appearing on both front and back.
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Advertising restrictions on tobacco

The EU and WHO have both specified that the advertising of tobacco should not be allowed. The WHO
Framework Convention on Tobacco Control, which came into effect on 27 February 2005, requires that all of
the 168 countries that agreed to the treaty ban tobacco advertising unless their constitution forbade it.
EU
Tobacco advertising on television has been banned in the EU since the early 1990s. The European Union
Tobacco Advertising Directive took effect in July 2005. This EU Directive bans tobacco advertising in the print
media, on radio and over the internet. The directive does not include advertising in cinemas and on billboards or
using merchandising. Nor does it include tobacco sponsorship of cultural and sporting events which are purely
local, with participants coming from only one Member State. A number of EU Member States, including
Finland, Ireland, Portugal and the UK, already have wide ranging tobacco advertising bans in place. Germany,
Spain, Luxembourg, Sweden, the Czech Republic, Greece, Slovenia, Cyprus and Hungary had as of August
2005 not transposed the Directive into national bills.
US
Tobacco advertising is regulated by the federal Cigarette Labelling and Advertising Act of 1965, but it is also
subject to further rules and regulations, imposed by the states, the federal government, or voluntarily followed
by the industry itself. The Master Settlement Agreement (MSA) places restrictions on tobacco product
marketing, including a ban on all outdoor advertising; transit advertising; the promotion of tobacco products in
films and TV shows; brand name sponsorship of team sports or other events with a significant youth audience;
and the use of cartoons in the advertising, promotion, packaging, or labelling of tobacco products.
In 2004, New York attorney general Eliot Spitzer, on behalf of 30 other state attorneys general, alleged that
Brown & Williamson's Kool MIXX campaign, which entailed DJ competitions and merchandise give-aways,
violated the MSA by targeting underage teenagers who participate in the hip hop culture. In June, a judge issued
a temporary injunction to stop elements of the campaign that appealed to teenagers in these states. Brown &
Williamson complied by discontinuing the "House of Menthol" website, the toll free numbers and merchandise
give-aways. The judge allowed the DJ competitions to continue because they took place in adult-only venues.
California increased cigarette manufacturers' responsibility for advertising by holding them accountable for
brands shown in films. Although the MSA outlawed paid product placement of cigarette brands within films,
directors still included brands to develop the films' setting. State authorities, in June 2004, asserted that
manufacturers are obligated under the MSA to ensure that these brand names did not appear in the films.
Complying with the authorities, companies asked several film production companies to remove their brands, but
the production companies refused, citing the constitutional right of fair use to protect their artistic vision.
Cigarette manufacturers and state authorities admitted that trademark laws and the Constitution prevent them
from taking legal action, but hope that consistent pressure to remove brands will result in fewer brand being
shown in films.
The corporate tax bill passed by the Senate in 2004 called for FDA regulation of advertising. Cigarette
manufacturers would need FDA approval to label their cigarette as "lights" or "ultra-lights". Additionally, the
FDA would only permit black and white advertisements at points of sale to dampen the appeal of cigarettes to
teenagers.
Taxation on cigarettes
EU Legislation on Tobacco Taxation sets the following rules on taxation (in the EU Directive 2002/10/EC
adopted on 12 February 2002):
All EU members must apply a minimum excise tax incidence set at 57% of the retail price of the most
popular price category of cigarettes.
Tax burden set at 1.28/pack of 20, equivalent to 60/1,000 sticks (where burden means actual figure).
Of all the EU accession countries (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia,
Slovenia), only Slovakia and Slovenia's tax incidence is over 50% (still below the EU minimum), and all the
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countries' tax burden is well below that stipulated by the EU. The hikes in taxation, necessary to fall in line with
these directives, have resulted in massive increases in the average retail price of cigarettes across the board, with
the Baltic countries hit hardest.
Whilst reducing tobacco consumption may seem a credible idea, this aggressive policy has significant
consequences as it widens the disparity of unit prices across Europe by imposing a uniform tax increase as
opposed to a percentage tax increase. This disparity has strengthened the trade in cigarette smuggling and
counterfeiting.
As a result of such high smoking rates in the accession countries, the practical view is that these hikes in
taxation and unit prices will merely facilitate a shift to lower tar cigarettes or to smuggling rather than a drop in
consumption.
There were also tax hikes in the tobacco sector in Germany and France which were not due to tax harmonisation
matters but a misjudged attempt to increase revenues. In France and Germany, large tax increases in 2003 and
2004 caused consumers to switch away from duty-paid cigarettes as cigarette volumes collapsed.
Master Settlement Agreement (MSA)
In November 1998, US cigarette manufacturers entered into the Master Settlement Agreement (MSA) to settle
health care cost recovery and other claims. Provisions of the MSA 1998 agreement included payments of
US$206 billion to 46 states over 25 years to reimburse smoking-related Medicare costs, US$1.5 billion over ten
years to support anti-smoking measures and US$250 million to fund research on reducing youth smoking. In
return, the US manufacturers would receive immunity to further legal action against them by state authorities.
The MSA has forced tobacco companies to contribute payments to an account where the money is kept in the
custody of a third party in order to cover future tobacco litigation in response to health claims. This has had a
massive impact in the industry with the US market seeing price increases as premium brands responded to the
impact of litigation by increasing prices to recoup the costs of the MSA. This could shift consumers towards
deep discount brands. Recently, a key feature of the US market has been the forcing of major manufacturers into
making huge promotional investments in order to defend their brands.
Anti-smoking campaigns
In the US, the American Legacy Foundation, created by the MSA and funded by the main cigarette
manufacturers, supports many programmes directed at teenagers and adults. One of the programmes, "Truth," is
well known for its edgy commercials designed to discourage teens from smoking. In one commercial, teens
stacked body bags, representing the annual number of deaths caused by smoking, outside a Philip Morris office
building. The effect of these efforts has been gradual, and long-term. Government education programmes and
non-profit advocacy groups have also found an ally in pharmaceutical companies, which market smoking
cessation aids as OTC products in the US.
In Europe, anti-smoking campaigns are regularly carried out both at national and EU levels. For example, in
March 2005 the EU launched a EUR72 million anti-smoking campaign to run until 2008, targeting adolescents
(15 to 18 year olds) and young adults (18 to 30 years olds). Under the slogan "HELP: for a life without
tobacco", the campaign consisted of a roadshow touring all EU capitals, as well as an advertising campaign and
a web site with help on how to quit. This followed the "Feel Free to Say No" campaign, which ran between 2002
and 2004, and achieved over a billion contacts with young people throughout the EU.
The UK government regularly launches hard-hitting anti-smoking campaigns. In March 2005 a new campaign
focused on fertility and attractiveness. It consisted of television, radio and poster advertisements which
illustrated the impact smoking can have on sexual impotence and appearance.
4.3 Anti-alcohol Measures

Licensing laws
In the UK, the Licensing Act 2003 came into force in November 2005. The most relevant aspects of the new law
with regard to the drinks industry are the scrapping of current "permitted hours", and the fact that local
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authorities, rather than magistrates, will take over the responsibility of granting licences. This means that
premises may apply for flexible opening hours, allowing them to potentially open around the clock. The
Licensing Act's four main objectives are:
Preventing crime and disorder
Ensuring public safety
Protecting children
Preventing undue public nuisance
The Licensing Act is not expected to have a significant impact on alcohol companies' CSR policies. However,
some critics believe that the new regulations may exacerbate the problem of street crime and drunkenness, since
people may drink as much as, or even more than, before but merely stagger pub leaving times. This may
therefore be as good a time as any for companies to reinforce the responsible drinking message in the UK.
Advertising restrictions on alcohol
The EU Council of Ministers adopted a Recommendation in 2001 to prevent drinks companies from making
alcoholic drinks which are specifically "targeted, designed or promoted to appeal" to those under 18. EU
member states are being encouraged to train on-trade staff to understand more fully the problems caused by
underage drinking. The Recommendation states that a complaints procedure should be put in place to deal with
establishments that break the rules.
At state level, considerable variations regarding advertising regulations. In Belgium, for example, significant
emphasis is placed on self-regulation by the alcoholic drinks industry. In France, on the other hand, the Evin
Law, introduced in 1991, led to much stricter regulations on the advertising of alcohol. The French wine
industry, already hit by a decline in both domestic consumption and export activity, has lobbied the French
government on a number of occasions in an attempt for the law to be relaxed with regard to wine advertising.
Such is the feeling within the country that ministers from both sides of the political spectrum have become
involved, and bills calling for amendments to the law were tabled in early 2004. In January 2005, a compromise
was reached, whereby wine growers would be allowed to use "objective characteristics" (such as geographical
origin, colour and taste) in the promotion of wine. However, they would still be banned from using any
promotion using qualitative arguments (such as pleasure obtained by the consumption of a particular product).
In the UK, new codes for the broadcast of advertising of alcohol came into force in January 2005, published by
Ofcom, the regulator for the UK communications industries. The main changes are as follows:
Rules were tightened on advertising to youth cultures, ie, children must not be seen or heard and no person
under 25 may play a significant role in advertisement for an alcoholic drink
The rules restricting sexual content in alcohol advertising have been strengthened compared to those which
previously applied, but would still allow responsible treatments involving flirtation and romance between
over-25s
At the same time, Ofcom has lifted a ban on showing people drinking in the workplace, saying that
advertisers must not normally show alcohol being drunk in a working environment.
New advertising restrictions on beer were introduced in Russia in January 2006, due to the growing problem of
underage beer drinking. Russia attempted to soften its hard drinking culture by encouraging beer-drinking
instead, but this backfired and caused young people to over-consume beer, or mix it with vodka. Beer
commercials are now banned from TV and radio between 7am and 10pm, and portrayals of people, animals or
cartoon characters are also banned. Ads may also not portray beer drinking as likely to make anyone healthy,
wealthy or sexy. A ban on posters near schools, gyms or cultural centres makes brewers' voluntary codes
compulsory. The new laws have been met with much opposition from sporting bodies in Russia, which rely on
brewers for sponsorship. Russia's biggest brewer, Baltic Beverages Holding, sponsors the national football
league, ice hockey, boxing and judo to promote its top-selling Baltika brand.
4.4 Anti-obesity Measures
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Governments and health organisations are making a concerted effort to improve the health of their nations by
supporting diet and exercise programmes, increasing nutritional awareness and encouraging companies to
include nutrition labels and regulate the advertising of fatty and sugary foods to children.
WHO estalishes international guidelines
Unlike the case of tobacco, the nature of food and drink makes it almost impossible and certainly very
impracticable for the WHO to impose binding rules for these products. However, in May 2004 the organisation
adopted the first ever global policy on diet and health in an attempt to regulate the world's eating habits. The
policy aimed at tackling the worldwide increase in obesity (despite stiff opposition from sugar-producing
nations). It included guidelines for urban planners on encouraging exercise, as well as advice on healthy eating.
Among the suggestions featured in the plan were:
A reduction of sugar, fat and salt in processed food;
Controls over food marketing to children, as well as the encouragement of healthy eating through toy
promotions;
Subsidising fruit and vegetables in school canteens;
Monitoring health claims on packaging and better nutrition labelling and health education;
Urban planning to encourage walking and cycling and the development of video games powered by bicycle.
National guidelines vary

In 2005, the Dietary Guidelines for Americans contained 41 key recommendations that emphasise eating more
fruit and vegetables, whole grains and low-fat dairy products, while limiting consumption of fats, particularly
trans fats. It also stressed the link between diet and exercise, and recommended that people engage in 60 to 90
minutes of daily physical activity. The new guidelines were criticised in some corners for not going far enough
to curb the growth rates. The backlash from some of the revelations in Fast Food Nation instigated policy
change in some states. New York and the Los Angeles Unified School District have both banned soda vending
in schools, a larger number of states have enacted bans on selling junk food in schools and have ended
franchises with fast food outlets to provide cafeteria meals.
The UK government released a White Paper in November 2004 that included a raft of measures aimed at
improving public health. These included restrictions on "junk food" advertising to children and a coding system
to identify healthy food. In an effort to improve the nation's diet, the government pledged to work with the food
industry to develop voluntary codes on food and drink promotion to children. These will identify the nutritional
value of foods based on the existing "five a day" labelling. The government also wants the food industry to
develop voluntary measures to cut sugar and fat levels in certain foods, as it has done with salt.
In Germany, the Federal Ministry of Consumer Protection, Food and Agriculture responded to the issue of
obesity in February 2004 by introducing a campaign called "Nutrition and Exercise". This aims to further more
activities designed to educate the general public about nutritional facts, and to encourage more sports activities
among children and teenagers, in order to prevent the rise of obesity. France has also seen intense government
pressure to address the childhood obesity epidemic. The onus is being placed firmly on parents and schools to
reform the diets of their children, and vending machines have been banned from schools.
Governments in developing markets are also encouraging better eating habits. For example, the Chinese
government recently began a project named "promise the fresh food" in many cities, which set up many farms
and vegetable gardens to produce greener food. After the SARS crisis, health is receiving an increasing level of
attention, and any enterprise that produces low-quality and unsanitary food products is strictly punished.
Health labels
Nutrition labelling is a mandatory requirement for all pre-packaged food products in several countries, including
Australia, Brazil, Canada, New Zealand and the US.
Currently a variety of labelling systems exist in the 25 EU members, posing a barrier to inter-country trade and
increasing packaging costs for companies. In December 2005, EU health ministers unanimously adopted a
common position on new labelling regulations, which may take effect from 2007. These will include the need
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for health claims to be backed by scientific evidence before they are given marketing authorisation. Meanwhile,
industry organisations and regulators are continuing to push for what they see as the most sensible food labelling
option.
In the UK, the FSA was finalising its proposals on labelling at the time of writing, in March 2006. However,
these will be recommendations only and will not be enforceable by law. The FSA is expected to recommend a
"traffic-light" scheme, whereby products would be given a red, yellow or green on-pack label, reflecting high,
medium or low sugar, salt and fat levels. The system is widely opposed by the major food manufacturers, as it
means that consumers would be discouraged from consuming "red products". The FSA has narrowed proposals
down to two schemes with colour coding: one a simple traffic-light system and one a colour-coded GDA
scheme.
In the US, the FDA called for clearer nutrition communications on smaller packages in March 2004. In a letter
addressed a letter to food manufacturers, the agency stated: "We encourage manufacturers to provide the most
accurate and useful nutrition information to consumers by taking advantage of the flexibility in current
regulations on serving sizes and label food packages as containing a single serving if the entire contents of the
package can reasonably be consumed at a single-eating occasion". Kraft was one of the first major food
manufacturer to act on this recommendation, announcing its intentions to improve nutrition labels in October
2004.
Restrictions on marketing to children
The issue of marketing unhealthy foods to children is currently a subject of hot debate, both in Europe and in
North America. There are at present no actual laws in place to prevent such activities. However, in January 2005
the European Union health and consumer affairs commissioner, Markos Kyprianou, warned the food industry
that it must adopt self-regulatory measures with regard to advertising junk food to children, or it may face
legislation.
Furthermore, a Directive on Unfair Commercial Practices from the European Commission, to be implemented
across all 25 member states by 2007, includes the banning of "a direct exhortation to children to buy or to
persuade their parents or other adults to buy advertised products for them".
In the UK, Ofcom was ordered by the government to consult with the industry and draw up guidelines, which
were expected to be released in March 2006.The government made clear that if by 2007 it is dissatisfied with
the new (voluntary) restrictions, it will issue legislation.
Restrictions on sales in schools
Controlling the level of junk foods sold through school vending machines and canteens is one way in which
governments can intervene in the marketing of such products. For example, in the US, In the US, 38 states
considered school nutrition bills in 2005, most of which included a vending machine component. At least 14
laws had been enacted by January 2006. For example, in September 2005, the Governor of California, Arnold
Schwarzenegger, passed legislation to ban the sale of all carbonated soft drinks in schools across the state.
Similar actions have taken place in Europe. In 2004, France voted to ban all vending machines that sell
confectionery and soft drinks in schools, and by 2005, an estimated 8,000 machines were removed from
France's middle and secondary schools. This was followed by an announcement in Brussels that vending
machines would be banned from the city's primary schools, while in Germany, where vending machines have
never been allowed in schools, local officials banned kiosks from selling confectionery and fizzy drinks near
schools.
In the UK, there have been calls for the removal of vending machines in schools which sell sweets, crisps and
fizzy drinks. Furthermore, in April 2005, following celebrity TV chef Jamie Oliver's expos of unhealthy school
meals, UK ministers announced a 280 million package of investment in school meals, including a new panel of
experts to offer advice and extra money for ingredients. New rules were due to come into force aimed at cutting
levels of salt, sugar and fat in processed foods served in schools, including burgers and cake.
5. LOBBYING FORCES
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5.1 Environmental and Ethical Groups

Environmental groups lobby to change corporate behaviour
Non-governmental organisations (NGOs) like Greenpeace, Friends of the Earth, and PETA play a very
important part in raising consumer awareness of environmental and ethical issues, and in pressurising companies
and governments to make changes to their practises. The animal testing and environmental lobbies which were
the focus of corporate campaigning in the late 1980s have now been joined by powerful Third World
"development" organisations. Indeed, it is becoming unusual to find a pressure group without some kind of
consumer awareness campaign aimed at influencing corporate behaviour.
Greenpeace is perhaps the world's best known campaigner for environmental issues. The non-profit organisation
was established in London, UK, in 1970 and has become an international group with a presence in 40 countries
across Europe, the Americas, Asia, and the Pacific. The group campaigns mainly on issues such as stopping
climate change; protecting ancient forests and oceans; preventing genetic engineering; eliminating toxic
chemicals and nuclear waste; and encouraging sustainable trade. Greenpeace claims to use research, lobbying,
and quiet diplomacy to pursue its goals, as well as high-profile, non-violent conflict to raise the level and quality
of public debate.
Although Greenpeace claims not to have any enemies, it has been particularly vehement in its condemnation of
McDonald's since the 1980s. The first "Worldwide Day of Action Against McDonald's" took place in 1985,
followed by the publication of the "What's Wrong With McDonald's?" fact sheet. The leaflet accused
McDonald's of promoting an unhealthy diet, unethically advertising fast food to children, and exploiting its
workers. It also attacked the company on environmental and animal welfare grounds, and promoted veganism.
McDonald's responded by filing libel action against some of the Greenpeace group's activists, and the "McLibel
Support Campaign" gained international publicity. Despite agreeing with many of McLibel's arguments against
McDonald's, the courts still ruled that Greenpeace had libelled McDonald's over some points and ordered the
organisation to pay 40,000 in damages.
Oxfam dissects Unilever
Oxfam was founded in the UK in 1942. Today, Oxfam International is a confederation of 12 organisations that
work together with over 3,000 partners in more than 100 countries to find solutions to poverty, suffering, and
injustice. The charity is in favour of ethical trading, and lobbies governments for change, as well as supporting
companies in their efforts to market Fair Trade products. Oxfam's policy is to seek to purchase goods and
services which are produced and delivered under conditions that do not involve the abuse or exploitation of any
persons; and have the least negative impact on the environment.
While most NGOs began life as outsiders challenging the system and focused on high-profile confrontational
direct action, they are increasingly working from within to develop the market itself as an instrument for driving
change within business. Many NGOs are now working in partnership with industry to co-develop social and
environmental standards, or to provide technical expertise and counsel. For example, in 2003, Unilever broke
ground by allowing Oxfam to spend two years probing and analysing its socio-economic impact in Indonesia,
where the company sells soap, soy sauce, ice cream and mosquito coils to consumers, more than half of whom
live on less than US$2 a day. Unilever says it was motivated by the desire to play its part in global efforts to
eradicate poverty. Oxfam, which agreed not to disclose confidential information, admitted that it had learned
some interesting lessons about the way multinationals operate in poor countries, and had been forced to revise
some of its assumptions. For example, it found that competing domestic industries had expanded in India rather
than contracted as a result of Unilever's presence. Indeed, Unilever indirectly provides the equivalent of 300,000
full-time jobs, in addition to its 5,000 direct employees.
5.2 Smoking Pressure Groups

There are a range of anti-smoking groups, including cancer charities. Many of these, along with government
health departments, have attempted to counter the advertising of tobacco by creating their own advertisements to
highlight the negative effects of smoking. The earliest commercials mainly focused on aiding smoking
cessation, the increased risk of lung cancer and the problems associated with passive smoking. However, they
have become increasingly hard-hitting over the years, with some campaigns now centred around decreased
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physical attractiveness and the risk of erectile dysfunction. These are more targeted towards younger smokers
than previous campaigns.
ASH
ASH is a powerful, global anti-smoking lobby. ASH collaborated with the Framework Convention Alliance
(FCA), an alliance of NGOs from around the world who worked jointly and separately to support the
development, signing, and ratification of the FCTC, which was finalised in 2005.
In the UK, ASH's main aims being as follows:
Banning all forms of tobacco advertising, sponsorship and promotion;
Raising tobacco prices through the tax system;
Tackling smuggling and the role played by tobacco companies in promoting it;
A comprehensive NHS response to nicotine addiction and support for cessation;
Major public communications programmes aimed at encouraging all smokers to quit and non-smokers not
to start;
Increasing provision of smoke-free places at work, in public places, and through persuasion and
awareness-raising, in the home with a view to eliminating all involuntary smoke exposure;
Consumer protection measures such as improved warnings, comprehensive risk communication; plain
packaging, bans on misleading claims, control over retailers;
Regulation of tobacco as a dangerous drug with controls over the contents of cigarettes and smoke, and any
health claims made in relation to tobacco and nicotine;
Harm reduction strategies for those who cannot or will not stop using nicotine.
ASH aims to communicate the scale and diversity of the problem to decision makers, the public and the media
to create proper understanding of the damaging role of tobacco in society. This includes advocacy and lobbying
of all relevant stakeholders for practical public policy measures to control tobacco based on evidence and best
practice, as well as new ideas. The organisation uses networking and alliance-building with a wide variety of
organisations interested in health and welfare especially using the internet and e-mail communication. ASH
challenges the tobacco industry's misleading or dishonest information and bogus arguments, and takes action to
restrain tobacco companies' damaging conduct.
5.3 Industry-funded Ngos

The Portman Group
The UK boasts one of the most active of the industry-funded social aspects organisations in Europe, The
Portman Group. Set up in 1989 by the UK's leading drinks producers with the purpose to promote responsible
drinking, The Portman Group is well respected as a self-regulatory force, having developed a good position with
the British government and opponents of alcohol advertising. The group has had some success in reducing
irresponsible marketing practices through its Code of Practice, which regulates the naming, packaging and
"below-the-line promotion" of alcohol products. Although the Portman Group has not yet involved itself in the
self-regulation of alcohol advertising, it could in many ways be considered a model for self-regulatory
organisations in other countries across Europe.
The Amsterdam Group
Another large organisation that campaigns for responsible drinking in Europe is The Amsterdam Group, which
recently became "The European Forum for Responsible Drinking". Pernod Ricard is one of the founding
members of the organisation. The Amsterdam Group has developed codes of ethical practice for marketing
communications (advertising, marketing, promotion, etc). It oversees their compliance by businesses and
coordinates campaigns against alcohol abuse within the European Union.
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The Century Council

In the US, The Century Council is an NGO that is dedicated to fighting drink driving and underage drinking.
The Council develops and implements innovative programmes and public awareness campaigns and promotes
action through strategic partnerships. The Century Council promotes responsible decision-making regarding
drinking or non-drinking of beverage alcohol and discourages all forms of irresponsible consumption through
education, communications, research, law enforcement, and other programmes. The US's leading distillers have
funded The Century Council since 1991, having invested over US$130 million in its programmes. These include
Bacardi USA, Brown-Forman, Constellation Brands, Cruzan, Diageo, Future Brands, Hood River Distillers,
Pernod Ricard USA and Sydney Frank Importing Co. An independent Advisory Board of leaders in business,
government, education, medicine, and other relevant disciplines assists the Council in developing new ideas.
Other organisations that campaign for responsible drinking include:
STIVA (Netherlands)
Entreprise et Prevention (France)
FISAC (Mexico)
International Center for Alcohol Policies
5.4 Industry's Own Lobbyists

PR plays an important part in industry efforts to change public perceptions of their products as being "bad for
you". Many large manufacturers use PR companies to lobby for them. One of the largest such agencies is
Edelman. In the UK, one of Edelman's most important clients is the Snack, Nut And Crisp Manufacturers'
Association. Edelman claims on its website that it aims to "create a more positive environment for the growth of
the savoury snacks category. This relates primarily to the issues around health and diet and trying to change the
perceived "bad for you" image that savoury snacks have". Edelman also advises Pepsico and Procter & Gamble.
An article in the San Francisco Chronicle in September 2004 coined the phrase "nutri-washing" as the method
used by the major food companies to convince consumers that their products are not bad. This is linked to the
"greenwashing" PR tactics used by corporations to make themselves appear environmentally friendly. For
example, the large food and drink companies seem fond of blaming lack of exercise for the obesity problem, and
not the food themselves. Another common ploy is to deny the nutritional status of individual food groups,
claiming that there are no "good" or "bad" foods, and that all that matters is balance.
The common tactic of promoting physical activity is applauded by some nutritionists as an attempt by industry
to make improvements, but is seen by cynics as a way to deflect attention away from children eating too much
of industry's unhealthy food. Similarly, school programmes are seen as a way for companies to receive free
marketing in schools, while increasing brand recognition among impressionable children.
6. VOLUNTARY INDUSTRY MEASURES

6.1 the Tobacco Industry
The tobacco industry is already highly regulated by governments, and at the regional level. However, cigarette
manufacturers have also introduced their own measures as part of their new CSR policies. These mainly consist
of advertising campaigns, as well as programmes designed to prevent young people from smoking.
For many years, the industry leader, Philip Morris, refused to admit that smoking causes harm to health.
However, the company recently changed tack and claims to be a leader in corporate responsibility in the tobacco
industry. The company now claims on its website: "because of the serious health effects of our products, we
believe we must stop children from smoking".
In June 2003, Philip Morris introduced "onserts" to its cigarette packs in Switzerland, and these were
progressively added to packs in other countries around sold around the world. This consists of a folded leaflet
glued to the back of the pack, which tell smokers about cigarette ingredients and the meaning of terms such as
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"mild" and "light". They remind consumers that smoking is dangerous and addictive, explains the company's
position on youth smoking prevention and addresses a number of other tobacco issues. Philip Morris says that it
has combined the onserts with brochures and notices in the local media, and has so far printed some 4.5 million
brochures in 24 languages.
Both Philip Morris and BAT support youth smoking prevention programmes (YSPs) around the world. Philip
Morris has such programmes in place in around 70 countries, focusing on teaching children to decide against
smoking and on establishing laws to prevent them from buying cigarettes. BAT also supports retail access
prevention programmes in 60 countries, education-based prevention programmes in 26 countries and
advertising-based prevention programmes in 27 countries.
BAT targets young people directly through advertising campaigns to promote the message that young people
should not smoke. One such campaign, called "Doesn't Smoke", ran in mid-2001 on the TV music network
MTV Europe, with ads appearing in 38 European countries for 14 weeks.
6.2 the Alcohol Industry

Self-regulation
Not surprisingly, the major beers and spirits companies are in favour of self-regulation rather than government
legislation. For example, Pernod Ricard claims it has been an active participant in developing codes of ethics
both on a national level (in France, the US, UK, Ireland) and international scale (the Amsterdam Group code).
In 2004 and 2005, Pernod Ricard was involved in the implementation of new industry self-regulation rules.
In the US, Anheuser-Busch adheres not only to a voluntary Beer Institute Advertising and Marketing Code, but
also to its own International Advertising and Marketing Code. The latter includes the following principles:
Advertising and marketing materials should not portray, encourage or condone drunk driving; depict
situations where beer is being consumed excessively, in an irresponsible way or in any way illegally;
portray people in a drunken state or suggest being drunk is acceptable conduct; or portray or imply illegal
activity of any kind.
Retail outlets or other places portrayed in advertising should be depicted well kept and respectable
establishments.
Advertising and marketing must be directed to people of legal purchase age (Anheuser-Busch regularly
purchases TV viewer composition data to check that advertisements are placed in compliance with this
code). No symbols, language, music, gesture, cartoon characters or celebrities are used that are intended to
appeal primarily to people below the legal purchase age (including Santa Claus). Furthermore, advertising
and marketing materials are not be placed in magazines, newspapers, television or radio programmes where
most of the audience is below the legal purchase age.
To help ensure that the people shown in beer advertising are and appear to be above the legal purchase age,
models and actors employed should be a minimum of four years older than the legal purchase age in the
country in which such advertisements will air, and must always be aged 21 or above.
Beers must not be advertised or marketed at any event where most of the audience is expected to below the
legal purchase age (although promotional materials may be displayed near facilities that are used mainly for
adult-oriented events, but which occasionally may be used for younger people).
No beer identification, including logos, trademarks or names should be used licensed for use on clothing,
toys, games, or game equipment, or other materials intended for use primarily by people below the legal
purchase age.
Anheuser-Busch provides to manufacturers of parental control software the names and web site addresses
of all of its beer web sites, and posts reminders on its websites indicating that its products are intended only
for those of legal purchase age.
Advertising and marketing activities should not associate or portray beer drinking before or during activities
that require a high degree of alertness or coordination.
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Advertising and marketing materials should not make exaggerated product representations, unsubstantiated
health claims or claims that individuals cannot obtain social, professional, educational, athletic, or financial
success or status without beer consumption.
Advertising and marketing materials should reflect generally accepted contemporary standards of good
taste, and should therefore not contain any lewd or indecent language or images, or portray sexual passion,
promiscuity or any other amorous activity as a result of consuming beer. Nor should they use any religion
or religious themes.
Advertising and marketing materials must not disparage competing beers. If comparisons are drawn
between competing beers, the claims made must be truthful and of value to consumers.
Advertising and marketing materials must not refer to any intoxicating effect that Anheuser-Busch products
may produce.
Advertising and marketing materials must not show littering or otherwise improper disposal of beer
containers, unless the scenes are used clearly to promote anti-littering and/or recycling campaigns.
Advertising and marketing activities on college and university campuses, or in college media, must not
portray consumption of beer as being important to education, nor must it degrade studying in any way.
Beers may be advertised and marketed on college campuses or at college-sponsored events only when
permitted by appropriate college policy.
Promotion of responsible drinking

Both Allied Domecq and Diageo attempted to promote responsible drinking through a range of television
advertisements in the UK during 2003-2006. As part of its Tia Lusso launch campaign in the UK, Allied
Domecq included the strapline "You just know. You just know to drink in moderation".
Diageo's July 2003 campaign for its Smirnoff vodka brand featured the strapline "Knowing when to stop is a
good thing". In April 2004, Diageo also began a 12-month responsible drinking awareness programme which
extended to 30 countries across all regions, including South Africa, India, Poland, Spain and a number of Latin
American countries. Furthermore, in April 2005, Alcohol Awareness Month, Diageo donated its advertising
space on a racing car to "Ask, Listen, Learn: Kids and Alcohol Don't Mix" a multimedia programme
developed by The Century Council and Nickelodeon that provides parents with tools to talk to their children
about the consequences of underage drinking in the US. In February 2006, Diageo began a high-profile
responsible drinking campaign in the UK, launching two responsible drinking TV advertisements entitled
"Many Me" and "Mirror". The ads are set in the different drinking environments of a night out in a bar and at a
house party and illustrate how excessive drinking for both men and women can ruin a good evening.
In November 2004, Scottish & Newcastle, which produces Foster's and Kronenbourg lagers, became the first
major brewer in the world to put safe drinking messages on its products. The company initially placed the
warnings on bottles and cans of Newcastle Brown Ale, but planned to extend them to its other brands, including
John Smith's bitter. Coors, which brews Carling and Grolsch lagers in the UK, introduced a similar policy in
2005, and other brewers were expected to follow suit.
Through these campaigns, the larger multinationals hope to be perceived as working with international
governments towards reducing the social problems associated with alcoholic drinks. Yet the timing of the
promotions, coinciding with debates about alcoholic drinks advertising legislation in a number of countries, is
unlikely to be accidental, and is bound to be looked upon as a cynical reaction by the international anti-alcohol
lobby.
UK pubs stop happy hour
In the UK, some drinking establishments are also carrying out voluntary measures to encourage responsible
drinking. In May 2005, more than half of the UK's pubs banned "happy hour" promotions in a bid to combat
binge drinking and antisocial behaviour. Members of the British Beer and Pub Association, which own 32,000
of the country's 59,000 pubs, ended cheap alcohol sales, including drink-all-you-can schemes. The move is
aimed at cutting the cost of excessive drinking in British pubs, which the UK government claims costs the
country 20 billion annually. At present, UK pubs alone invest more than 60 million in door staff, CCTV and
general customer security every year. The British Beer and Pub Association claimed in a statement that "with
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the backing of the government, police and licensing authorities, we aim to ensure that all pubs operate to
standards of corporate and community social responsibility".
Those joining the campaign included all pubs owned by Carlsberg, Heineken, Scottish and Newcastle, Youngs
and Theakston. The All Bar One, Slug and Lettuce and Pitcher and Piano groups are also supporting the
initiative, as is Diageo. The association also called on all pubs and supermarkets which sell cut-price alcohol to
follow its example.
6.3 the Food and Drinks Industry

Voluntary labelling systems
Several major food manufacturers in the UK have attempted to pre-empt industry-wide agreements being drawn
up by the FSA by introducing their own health labels. Under intense pressure from the government and media to
be more open about the nutritional values of their products, a group of five companies (Danone, Kellogg's,
Kraft, Nestle and PepsiCo) agreed in February 2006 to place health labels on the front of all their products. The
labels will state the amount of calories, fat, saturated fat, sugar and salt contained in each serving of brands such
as Walker's crisps, Dairylea spread and Shredded Wheat cereals. They will also state how much the serving
contributes to official GDAs for each of those nutrients. However, the labels will not be colour-coded to tell
consumers at a glance whether the products fall under government definitions of high, medium or low in salt, fat
or sugar. A similar move was undertaken by confectionery manufacturers in the UK (see box below).
Case study: UK health warnings for chocolate
In February 2006 it was announced that two of the UK's confectionery giants, Cadbury Trebor Bassett and
Masterfoods UK (owner of the Mars brand), would add labels to their products to explain the role of "treats" in a
balanced diet.
Chocolate bars and other sweets will now have "health warnings" printed on the back of their packaging similar
to those seen on cigarette packets. This is part of a major drive to educate the public, particularly children, on
their diet, and is part of the "Be Treatwise" campaign, launched by the Biscuit, Cake, Chocolate and
Confectionery Association (BCCCA).
Both companies agreed to change their labelling over the ensuing months to include the "Be Treatwise" logo, as
well as a detailed panel containing the nutritional content of their products. This will include the number of
calories, as well as sugar, fat, saturates and salt content. It will also state the government's GDAs of each, which
will be colour-coded for easy reading. The new labelling will include a panel for rotating messages, such as "Be
active for 30 minutes a day", in support of the government call for balancing lifestyle with activity.
A website based around the campaign also includes tips for consumers, including "Treats and snacks can be a
part of healthy balanced diet" and "Being active doesn't have to mean sweating at the gym". A link to the
website, www.betreatwise.org.uk, will be included on all Cadbury's labelling.
Cadbury is the UK's leading confectionery manufacturer, selling almost one million bars of Cadburys Dairy
Milk a day. The company was criticised in 2003 when it launched a campaign to persuade people to buy 160
million chocolate bars in exchange for "free" sports equipment.
The National Consumer Council (NCC) in the UK is cynical about this move, claiming that it will only confuse
consumers and has only been agreed to in order that Cadbury's and Mars can pre-empt possible anti-obesity
legislation (the FSA is currently consulting on front of pack signposting). Others believe the measure is futile
and no more than a PR move, and that consumers that are chocolate-lovers are unlikely to take any notice at all
of these "warnings".
Although the third confectionery giant, Nestl, is not included in the Be Treatwise campaign, Nestle announced
plans to introduce similar new labelling earlier in 2006. Nestl was first to decided to self-regulate its
confectionery packaging by introducing a calorie count and the government's GDA information to its packaging.
Self-imposed restrictions on advertising
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Some companies have revised their advertising policies and restricted their advertising to children. This is the
case of both PepsiCo and Kraft. The latter announced in January 2005 that it would stop advertising certain of
its less healthy products to children under 12. PepsiCo reported in March 2005 that it had already introduced
voluntary restrictions on its advertising to children for several months, but did not want to publicise this fact in
the same way as Kraft had done. PepsiCo decided to withdraw advertising for the Pepsi brand to children under
12, and of its Cheetos chips brand to children under eight. However, another rival, General Mills, refused to bow
to pressure, and in the summer of 2005 began its largest-ever ad campaign to children, touting the benefits of
breakfast cereal.
Soft drinks industry self-regulation
In January 2006, global drinks companies, including Coca-Cola, Cadbury Schweppes and PepsiCo, announced a
European initiative aimed at tackling the problem of obese children. Unesda, the Union of European Beverages
Associations, pledged to limit youth advertising, control sales in schools and improve nutritional labels. It also
announced that it would develop a wide range of drinks, including sugar-free and low-calorie, in container sizes
that limit intake. This represents the first time in history that the major beverage producers in Europe have
joined forces to define their commitments related to responsible sales and marketing practices, particularly with
regard to children and schools.
As part of the proposals, Unesda members have agreed the following measures:
not to put any marketing communication in printed media, websites or during broadcast programmes
specifically aimed at children under the age of 12;
To avoid any direct appeal to children under the age of 12 to persuade parents or other adults to buy
beverages for them.
To completely stop direct commercial activity in primary schools, unless otherwise requested by school
authorities;
To make a full range of beverages available in appropriate container sizes in secondary schools, allowing
for portion control, only after consultation with parents and educators.
Vending machines will be unbranded, and will promote healthy and active lifestyles, as well as balanced
diet.
Nutrition labels on cans and bottles will be improved to inform consumers about what they are drinking,
and help them control calorie intake.
In the US, several large soft drinks manufacturers have announced their intentions to take their products out of
schools, ahead of possible legislation.
Coca-Cola Amatil also withdrew its standard products, including Coke, Fanta, Sprite and Lift, from primary
schools across Australia. In addition to shifting its focus to water, juice and diet drinks, the company also
downsized its diet soft drinks range for schools, repackaging products for schools from 600ml plastic bottles to
390ml bottles. Sceptics say that it is relatively easy for the large drinks manufacturers to do this, since it recently
emerged that Coca-Cola only derived around 1% of its sales from schools in North America. However, to be
forced to do so causes unwanted negative publicity as it reflects badly on the products.
7. CONSUMER ISSUES
7.1 the Influence of the Media
In Western countries, ethical consumerism (or "compassionate consumerism") has hit an all-time high, as
consumers become more aware of and concerned about environmental issues, health issues and the exploitation
of workers in poor exporting countries. As business becomes more globalised, concern is rising about the way
companies do business, as well as the origins of products. Consumers are also realising that their actions can
force governments and businesses to change. The media and the film industry have played a very strong part in
increasing people's awareness of both health issues and bad company practices in recent years.
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Films highlight bad company practise

Documentary films that were shown globally, such as Super Size Me and The Corporation, highlighted the
negative effects of fast food on the body, as well as the bad practices of major corporations. They are believed to
have heavily influenced the way many people viewed these companies, and even their purchasing habits.
In Super Size Me, Morgan Spurlock revealed the damage that continuous consumption of fast food can do to the
body. The film charted Spurlock's attempt to consume McDonald's for three meals a day for one month. In
addition, if servers offered him a "super size" option, he was obliged to upgrade. One month, and 25 pounds
heavier, Spurlock documented the serious health consequences he had suffered as a result of his diet, including
excessive liver damage and weight gain. This prompted McDonald's to take action by swiftly withdrawing its
super sized meals and launching its Go Active! Happy Meal for children. This was aimed at promoting greater
levels of physical activity and included a free pedometer to allow children to monitor how far they walked.
The 2004 The Corporation, a highly acclaimed film based on the book of the same name by Joel Bakan,
criticised the treatment of the environment and of employees by big businesses, as well as their unethical
marketing methods, such as encouraging children to "nag" for products. The power that large corporations have
over people's lives is illustrated throughout the film by footage from pop culture, advertising, TV news and
corporate propaganda, and includes interviews with corporate insiders and critics such as Milton Friedman,
Noam Chomsky and Michael Moore.
Reality shows influence consumers and government
TV reality show advice has also been very powerful in changing consumers' attitudes and eating habits. In the
UK, programmes like the BBC's "Fat Nation" and ITV's "Fat Farm" have moulded public perceptions of the best
routes to health. In 2005, celebrity chef Jamie Oliver carried out a crusade in the UK to improve the quality of
school dinners, via Channel 4's Jamie's School Dinners series. This sparked a public debate on healthy eating,
which not only led to new government regulations on school meals being implemented, but also proved to have
a dramatic effect on the eating habits of adults. According to a survey by medical insurer PruHealth, some 28%
of the 1,543 respondents claimed the series had made them think more about the quality of meals they prepared.
Around 23% said they now made more effort to find out about nutritious foods, and the same number had
stopped buying some unhealthy items.
In the US, the media has fuelled fears of the mounting obesity epidemic and its associated health and healthcare
costs, the social ramifications and its implications for the nation. Newspaper reports of food scares, such as
BSE, as well as the controversy over GM ingredients, have also reinforced consumer concern with the origin
and safety of foods. This resulted, for example, in increased interest in organic foods and a resurgence in the
number of farmers' markets.
One negative effect of increased media coverage of dietary issues is that it has caused increasing confusion
among consumers as to what is right and wrong. The internet has democratised health and allowed anyone to
become a health expert. The problem arises with the number of competing health claims and trying to decide
which is valid. The current controversy over the weight loss potential offered by low-carbohydrate or low-fat
diets is one good example. Two decades after Atkins first published his theory and the debate still rages, with
people not knowing which advice to follow in order to eat healthily.
7.2 Consumer Attitudes

Europeans sceptical of CSR
Despite efforts by companies to become more transparent and improve their practices, it is clear that a great deal
of cynicism still exists. A study carried out in 2004 by research company Ipsos revealed that many European
consumers were sceptical about the claims made by major brand manufacturers. The study showed that 60% of
European consumers do not believe major producers or retailers when they stress their ethical credentials, be it
with regard to sustainable development, fair trade, or environmental protection. Only 4% had absolute trust in
such claims. French consumers were the most trusting, with 58% saying they believed these claims. They were
followed by the Belgians at 56% and the Dutch at 49%, while the Germans (32%), Spanish (17%) and
Portuguese (15%) were the most sceptical.
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The Ipsos study shows that while price remains the most important factor when it comes to choosing what to
eat, an increasing number of European shoppers think about production conditions (77% of those questioned)
and the country of origin (67%) of the food they buy. Furthermore, ethical credentials are almost as important as
a recognisable brand name for many European shoppers: 85% of consumers shop for brands, while 77% will
look first and foremost at how the product was made.
Interestingly, just 53% of European consumers said they believed that shoppers would change their habits
because manufacturers or retailers emphasised their ethical credentials, but 73% said that the food industry
would be more likely to embrace these issues if consumers changed their purchasing habits, showing that the
trend is perceived as being largely consumer-led. This was most visible in France, with 87% of respondents
there believing that consumer power could influence the food industry. French consumers were also the most
optimistic with regard to the future of ethical products, perhaps because France has long been a nation with
respect for food and farming and where demand for traditional food production processes remains high. In
contrast, 67% of German consumers believe that they have little or no influence over the food industry, and that
this situation is unlikely to change in the future, especially if ethical trading has to come at the expense of
cheaper food.
The US's "LOHAS" consumers
In the US, the term LOHAS (Lifestyle of Health and Sustainability) was coined to represent a consumer base for
whom environmental, social, and healthy lifestyle values play an important role in purchasing decisions, and
who are particularly driven by topics related to health and sustainability. According to the Natural Marketing
Institute (NMI), LOHAS consumers accounted for around 23% of the US population, or around 60 million
consumers, in 2005.
During the four years to 2005, the NMI conducted primary research on the LOHAS consumer, involving
quantitative surveys of more than 8,000 people. According to the latest study, "Nomadics" represented the
largest segment, at 38% of the population, in 2005. These consumers show moderate levels of concern for health
and the environment, with select LOHAS behaviour (such as recycling). "Centrists" represent a further 27% of
the US population, and are a group where a lack of relevance in LOHAS attitudes and behaviour becomes more
evident. Finally, "Indifferents" represent 12% of the population, whose attitudes and behaviour are driven by
immediate needs rather than the health and sustainability of the planet or society.
The NMI reports that, compared to 2003, the percentage of LOHAS consumers was down slightly in 2005,
while there had been a corresponding increase in the percentage of Indifferents consumers. Nevertheless, the
decrease in the overall percentage of LOHAS is not affecting the growth of many LOHAS products and
services, which are reported to be increasing at double-digit rates. These include organic food products and
hybrid cars.
The apparent decline in the share of LOHAS consumers is due in part to the fact that in some cases,
environmental benefits have come to be expected, such as with energy-efficient electronics and appliances. This
also applies to the food and drinks industry to some extent, for example with trans fats being eliminated in the
US. Furthermore, many environmentally-friendly products available today are attractive to consumers, even if
the primary benefit is not solely environmental, due to cost savings, health benefits, etc. Many premium brands
now incorporate LOHAS values, such as Aveda (cosmetics and toiletries) or Ben & Jerry's (ice cream).
7.3 Demand for Natural Ingredients

Consumers against artificial additives
Rightly or wrongly, good health is increasingly associated in consumers' minds with all things natural, while
chemicals are considered by some to be the root of all evil. For example, there have been allegations that some
additives (or "E" numbers) in processed foods may cause hyperactivity in children or may even be carcinogenic.
These perceptions have given rise to demand for natural additives and ingredients in foods, cosmetics and health
remedies, as well as reaching other industries such as textiles and cleaning products. These trends are giving the
large consumer goods companies another opportunity to appear more socially responsible by including
ingredients that are natural, fairly traded, and do not harm the environment, or by offering products that "contain
no artificial preservatives and colourings".
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In some cases, the consumer lobby against artificial additives has been so strong that it has caused major
multinationals to rethink their strategies. For example, Procter & Gamble's Sunny D fruit drink came under
scrutiny when the Center for Science in the Public Interest (CSPI) in the US accused the product of being a
"junk food dressed up as real fruit juice". It claimed that Sunny Delight consists mainly of sugar water with
negligible amounts of juice and added vitamins. However, the product was cleverly marketed as a healthy
children's drink, partly due to its positioning in supermarkets alongside real juice and milk. Its image was one of
a freshly squeezed juice, rather than a totally artificial product. In the light of the hype surrounding Sunny
Delight, the UK Food Commission began to question what was in the product, while consumers began to lose
faith when the press covered a child whose skin turned orange after she drank large quantities of it. A number of
lobby groups also began to attack the brand, and Procter & Gamble was forced to relaunch Sunny D in 2002
with a revised formula. However, the damage was done and sales continued to slide. The brand was finally put
up for sale in 2003, and later acquired by investment company JW Childs.
Cosmetics and toiletries lay claim to natural properties
A similar situation arises with regard to cosmetics and toiletries, where the major manufacturers are finding
ways of marketing products in such as way as to convince consumers of their "naturalness", when in reality they
need to use chemicals in order to ensure the effectiveness of their products. This is achieved by using clever
wording, colours and label designs, packaging styles and range of ingredients. Many products contain plant
extracts that are highlighted on the label, but the base ingredients are synthetic. Another marketing tactic is to
list a natural ingredient description in parentheses next to the more technical-sounding ingredient on the label.
For example, Aveda reportedly lists ammonium lauryl sulfate, a standard detergent cleansing agent, as being
derived from coconut oil. This may be loosely true, but ammonium lauryl sulfate is actually the salt of a sulfuric
acid compound, neutralised with an ingredient like triethanolamine. While this is not harmful to the skin, it is
clearly not a "natural" ingredient.
Case study: L'Oral's takeover of The Body Shop
One of the very few cosmetics and toiletries companies to take a truly socially responsible stance is The Body
Shop, based in the UK. The company that has gained a worldwide reputation for ethical trading practices and
uses all-natural ingredients. Its founder, Anita Roddick, began developing trading relationships with local
groups she met during her world travels in the late 1980s. The company now trades from some 25 countries
through its Body Shop Community Trade programme. Suppliers range from Nicaraguan sesame farmers to
Indian handicraft producers. Indeed, in 2002-2003, The Body Shop claims to have purchased around 5 million
worth of natural ingredients and accessory items through the Community Trade programme, including nearly
700 tonnes of natural ingredients.
Interestingly, however, in March 2006 it was confirmed that Body Shop had been taken over by French
cosmetics and toiletries giant L'Oral, a company that has been heavily criticised in the past for its animal
testing and poor track record with regard to environmental and social concerns. There is some concern over the
impact of what is seen by many as a misalliance on the Body Shop's sales. The fierce loyalty of many Body
Shop customers lies in the values supported by the brand. It will be in L'Oral's interest to preserve the brand's
integrity by intervening as little as possible with all business aspects that may impact the Body Shop's public
image. In a statement published following the agreement, L'Oral affirmed its intentions to retain the Body
Shop's existing identity and values, and to let the company operate independently with its existing management
team. Dame Anita Roddick also gave a statement reassuring the public that the Body Shop will remain true to its
original spirit while under the umbrella of the multinational.
It is therefore more than likely that the Body Shop chain will continue distributing exclusively its own branded
products, in the same way as Este Lauder applies an 'arm's length' strategy with brands such as Origins and
Aveda. With regard to corporate image, the acquisition may enable L'Oral to 'clean up' its reputation in the
eyes of consumers. A similar move was made by Cadbury Schweppes, when its acquired the Green & Blacks
organic and fair trade chocolate business in 2004.
7.4 Opposition To Marketing To Children

Children bombarded with junk food ads
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Many consumers the world over are increasingly concerned about the methods companies use to market
unhealthy foods to children. In the UK, a report in The Guardian in 2004 highlighted the fact that junk food
dominated advertising on children's TV. It reported that almost every advertisement in eight commercial breaks
shown over two hours on Children's ITV and Nickelodeon, a children's cable and satellite channel, on Friday
evening, promoted sweets, breakfast cereals or fizzy drinks. Many products offered "prizes" such as concealed
money or free toys.
In November 2005, the results of a survey of 1000 UK consumers by Business in the Community showed that
parents feel increasingly out of control with regard to how their children are exposed to marketing messages,
and are prepared to punish companies whose approaches they consider to be inappropriate. According to the
research, almost 75% of parents with children between 6-10 years of age are concerned about marketing aimed
at children, with about 60% of respondents believing that any marketing to children is inappropriate and
unethical, and likely to create false wants and expectations. Marketing campaigns aimed at children that are
perceived to be inappropriate are likely to produce a strong reaction from parents. 84% of respondents said they
would feel less favourably towards the brand or product, while 80% said they would be less likely to continue to
use the brand's products. Parents are more favourable towards traditional advertising methods of which they
have more experience and understanding. They are more hostile to new methods that go directly to the children,
such as text messaging or website pop-ups.
TV ads lead to obesity
In the US, food companies spend an estimated US$11 billion a year marketing to children. The Institute of
Medicine (IOM), one of the leading scientific-advisory bodies, spent several years studying the effects of food
marketing on children's diet and health. In a report published in 2005, the IOM concluded that there was a direct
association between TV ads and obesity. It criticised the food industry's use of licensed characters on food
packages, and recommended that food companies stop using licensed animated characters such as Shrek and
Scooby-Doo to sell "low-nutrient and high-calorie" products. The authors of the report call on companies to
make sure licensed characters "are used only for the promotion of foods and beverages that support healthful
diets for children and youth". This would present a drastic change of strategy for food companies, which for
years have relied on popular cartoon characters to attract children to their products.
Some companies have revised their advertising policies and restricted their advertising to children. In the UK,
data from Nielsen Media Research showed that the number of food ads screened during children's TV fell by
22% from 44,336 to 34,703 from September 2003 to September 2004, suggesting the industry has responded to
attacks from anti-obesity campaigners.
Some companies have already begun using characters to promote healthy eating. On boxes of Kellogg's Froot
Loops, Chicken Little gives baseball lessons, instructing kids to round the bases by choosing healthy breakfast
foods from a list including pizza and soda. Viacom Inc.'s Nickelodeon recently signed an agreement putting
SpongeBob on bags of spinach.
7.5 Backlash Against Gm Foods

The development of biotechnology and GM crops, and the controversy surrounding growing trials in Europe,
particularly in the UK, has led some consumers to eschew such products and turn to food that is produced
organically or uses sustainable farming methods. This has led large companies to use this as a means for
differentiating their products, claiming that their food is GM-free, and therefore implying that they are socially
responsible.
The lobby against GM foods is much stronger in Europe than in North America. Nevertheless, a fear of
"franken-foods" in the US is driving many manufacturers to state clearly on their product labels the absence of
GMO. As a result of these factors, sales of food that is perceived as natural and safe, notably organic food and
those made with natural ingredients, have increased significantly.
The anti-GM feeling that has been evident throughout Europe is starting to spread to developing countries. In
Russia, new research in 2005 showed that two thirds of consumers were against GM foods. Furthermore, the
majority of experts in Russia support a ban on GM crops. The most serious concern is about baby food, with
around 90% of those who had heard of GM foods supporting a moratorium on such products in Russia. New
labelling laws introduced in Russia at the beginning of 2005 state that any product prepared with GM materials
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must mention this on the label, and the Russian government is also considering new regulations on the
production of GM foods.
Large food companies are responding to these fears by stating the absence of GM ingredients in their foods. For
example, Cadbury Schweppes does not use GM ingredients in Europe, where consumers are more concerned
about the issue, but still uses them in other parts of the world.
7.6 Legal Action

In recent years, companies that market products that may be perceived as a danger to health have had to face a
rising tide of litigation cases, which has again prompted them to step up their CSR activities. This is especially
the case in the US, but the trend has spread to Europe.
Tobacco most affected
The most high profile examples of litigation have occurred in the tobacco industry. Barring the MSA (see
Section 4), which led to an annual US$9.4 billion being passed onto consumers, the tobacco industry has only
paid out on two individual cases, at costs of US$6 billion and US$1.1 billion respectively, namely the Broin I
and Engle "bonding insurance" cases. Perceived litigation risk has impacted on sentiment towards the tobacco
sector, but the actual financial damages incurred, principally by the US industry, have been lower than one
would expect from the media coverage attributed to it.
The US is the only country where tobacco investors are substantially exposed to litigation. In the US, the global
leader Altria will go ahead with its corporate break-up if it receives positive outcomes in three big ongoing
cases, namely DoJ, Engle and Price.
In the UK, the legal system differs so that litigation does not pose the same risks as in the US. There are, for
example, no class actions and trial is by judge, not by jury. There are also no punitive damages, which means
any damages awarded in any case would be a fraction of the amounts seen in the US. However, one UK case
which attracted much attention is the McTear trial, which started in October 2003 in Edinburgh and in which
Imperial is the defendant. Analysts assume that the case, a claim for a male smoker who died from lung cancer,
could set a precedent for claims against other British cigarette companies, but the trial is taking place on a much
smaller scale than those seen in the US. Margaret McTear, the plaintiff's widow, is suing Imperial for
US$800,000, saying the company failed to warn her husband about the dangers of smoking cigarettes. Final
submissions in the case were completed on 20 February 2004.
In March 2005 a Rome court ruled that the Italian arm of BAT must pay EUR200,000 (US$267,500) in
damages to the family of a lung cancer victim, the first such ruling in Italy. The court overturned an earlier
ruling which had acquitted Ente Italiano Tabacchi (ETI), accused by Mr Stalteri's family of failing to provide
adequate warnings about the risks of smoking. BAT bought ETI in 2003 for EUR2.3 billion. The sentence is
seen as part of a growing anti-smoking drive in Italy, which in January 2005 introduced a law to ban smoking in
indoor public places.
Drinks industry also hit
Since early 2003 a number of legal actions have been launched in the US against a variety of large drinks
manufacturers, charging that they have deliberately been promoting their products to young and underage
drinkers. In one such action a Californian couple instigated a lawsuit against Anheuser-Busch and Miller, which
they blame for promoting their flavoured alcoholic beverages (FABs) as if they were soft drinks for children.
The couple's daughter was killed in a road crash caused by an underage drinker.
In another case, seven companies including Bacardi, Diageo and Heineken USA are being sued by a
Washington-based law firm, on behalf of a private individual, which is also accusing the companies of
deliberately targeting young drinkers through their advertising. Parallels are being drawn between the action
being taken against drink manufacturers and that recently brought against tobacco firms.
In addition to legislative restrictions regarding advertising, several firms have recently been subjected to
complaints with regard to bad taste in their television advertising. In the main, offence has been caused through
an attempt to advertise products with humour. Examples of this include Anheuser-Busch's SuperBowl campaign
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and the now infamous Carling "licking" advertisement (whereby a woman pours a trail of beer around her home
for her boyfriend to lick up, leading to the girlfriend waiting in her underwear ready to pour the remaining beer
over herself). The latter had to be shown after the 21.00hrs watershed as a result of complaints.
Food industry litigation
The food industry has not escaped litigation, which began with fast food operators. In 2003, a group of trial
lawyers and consumer advocates launched a crusade against the foodservice industry, including McDonald's,
Burger King, Wendy's and KFC, claiming that they were contributing to the country's growing obesity problem.
They declared that the way to solve the problem was either to sue the restaurateurs until they corrected their
unhealthy ways or to force them to list nutritional information on menus. A New York lawyer also began
proceedings by filing two multimillion-dollar lawsuits against McDonald's, claiming that the company was
responsible for making his clients obese.
Until now, the courts have dismissed the lawsuits against the fast food restaurants, blaming personal rather than
corporate responsibility for the health problems caused by over-consumption of certain products. On the same
grounds, the US House of Representatives passed a bill in October 2005 to block future lawsuits which fault
restaurants and food companies for obesity or weight gain. The measure, nicknamed the "Cheeseburger Bill",
will be considered by the Senate in 2006. Twenty-one US states have already passed similar laws.
However, other lawsuits are continuing to emerge, this time against snack food and beverage manufacturers. In
2005, a lawsuit was filed which tried to ban Kraft's Oreo biscuits on the grounds that they contain an arteryclogging ingredient that "reduces human life", a claim that Kraft dismissed as baseless.
In January 2006 it was announced that US consumer groups would sue Viacom, which owns the children's
programme SpongeBob SquarePants, and Kellogg's, on the grounds that their advertising to children is
unethical. The Campaign for a Commercial-Free Childhood, the CSPI and two parents announced they intend to
sue under consumer protection laws that apply in the state of Massachusetts. The alliance said using cartoon
characters to sell products to children was "a multimedia brainwashing and re-education campaign". They claim
that children under five are unable to tell that the short film of SpongeBob is a commercial. The CSPI said its
research showed that 98% of Kellogg's ads on Saturday morning television promoted highly sweetened foods
like Apple Jacks and Frosted Flakes cereals. The CSPI also plans to file a lawsuit before the summer of 2006
seeking to ban the sale of sugary beverages in schools.
8. IMPACT ON CONSUMER MARKETS

8.1 Confectionery
Sales fuelled by gum sector
Confectionery sales have shown rapid growth in most major markets in recent years, despite increased
awareness of health and nutrition issues. The only markets that showed slow growth over the 2000-2005 period
were those of the US and Japan. The US dominates the world in terms of confectionery sales, but these grew by
just 7% over the period to reach US$25.9 billion in 2005.
Growth in the UK and Germany was very strong, at 40% and 49% respectively, while sales in France and Italy
increased by a massive 72% and 74% respectively over the review period, and sales in Spain almost doubled,
with growth of 93%. However, it should be taken into account that some of this growth is due to the
strengthening of the euro against the US dollar.
Overall growth in the global confectionery market is largely attributable to the buoyancy of the gum market,
which was driven by developments in sugar-free and functional gum over the review period. As a result,
manufacturers have taken great pains to emphasise the beneficial qualities of sugar-free gum for oral health, as
well as developing more overly functional products which clean, whiten and freshen breath, whilst maintaining
the same flavour as sugarised gum.
Sugar-free and fruit-based confectionery gain popularity
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The sugar confectionery market, too, has benefited from the launch of sugar-free and fruit-based products,
appealing to consumers' worries about sugar intake, especially among children, as well as the growing number
of diabetics. Child-orientated products have shown particular dynamism in developed markets, notably the US,
where novel or interactive sugar confectionery brands, such as Pez, Nerds, Spree and Betty Crocker Fruit
Snacks, have enjoyed a steady rise in share because they meet children's demand for food with relatively strong
fruit flavour and play value.
Chocolate confectionery remains very popular in Western market. However, diet-conscious attitudes and
worries over child obesity restricted volume demand for such products. For example, in France sales of
countlines were affected by new legislation banning vending machines from selling chocolate and sugar
confectionery in schools.
More sugar substitutes developed
Recent technological innovation has led to the availability of a growing number of tastier, non-carcinogenic
sugar substitutes at the disposal of confectioners. In the US, the FDA recently approved Sucralose (mainly
marketed under the Splenda brand), a sugar substitute 500 times stronger than sugar, thus allowing increases in
flavour intensity and duration. Another sugar substitute becoming more visible in American confectionery is
Xylitol, a natural sweetener processed from white birch trees. Long endorsed by European dental associations,
Xylitol also inhibits the growth of plaque bacteria, and will no doubt benefit functional confectionery in
particular. In 2004 and 2005, US confectioners began to use these artificial sweeteners to introduce or rebrand
their products as "low carb", in order to capitalise on the current popular US dieting craze and to portray a more
healthy image.
In France, too, many sugar confectionery brands were extended into the sugar-free segment in 2005, including:
Wrigley's Freedent Drop, Lamy Lutti's Arlequin and Luttimint, and sugar-free versions of brands such as
Cadbury's La Pie Qui Chante, Storck's Werther's and Perfetti Van Melle's Fruit-tella. These innovations were
backed by increased media spending.
In the UK, the major chocolate confectionery manufacturers also introduced better-for-you products, including
Nestl's low-carbohydrate versions of both KitKat and Rolo, launched in 2004, and Masterfoods' Mars Delight,
a variant of Mars especially formulated with women in mind. In January 2005, Belgian chocolate-maker
Guylian launched a low-carbohydrate milk chocolate bar.
Table 4
Sales and Growth of Confectionery Products in Selected Markets 2000/2005
US$ million
US
UK
Germany
Japan
France
Russia
Italy
China
Brazil
Australia
Canada
Spain
Sweden
South Africa
India
WORLD
Source:
2000
2005
% growth
2000-2005
24,231
8,056
7,135
7,287
3,785
4,128
2,857
3,430
3,823
1,408
1,563
1,108
1,077
641
463
94,379
25,921
11,263
10,661
8,077
6,503
5,561
4,961
4,946
4,696
2,529
2,369
2,140
1,694
1,125
709
126,348
7.0
39.8
49.4
10.8
71.8
34.7
73.6
44.2
22.8
79.6
51.6
93.1
57.3
75.6
53.1
33.9
8.2 Sweet and Savoury Snacks
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Sweet and savoury snacks hold up well in US and other major markets
The US is overwhelming leader in the market for sweet and savoury snacks, with a massive US$27.5 billion
worth of crisps (chips), extruded snacks, popcorn, pretzels, nuts and other snacks sold in 2005. Moreover, the
market continued to expand strongly over the review period, with sales up by 24% from 2000-2005.
Many other developed markets saw strong growth in snacks sales over the review period, due to the ongoing
trend towards snacking between meals and eating on the go. The notable exception to this was Japan, where
sales of snacks remained virtually static during the five years to 2005. Of the selected countries in the table
below, growth was fastest in Russia, at 172%.
Low-carb snacks gain importance
There has been a trend towards healthier snacks, in the light of concerns over obesity, especially in children. In
the US in particular, the popularity of low-carbohydrate, high-protein diets led consumers to eschew highcarbohydrate foods such as chips in favour of low-carb snacks such as beef jerky and fried pork rinds. In
addition, following the FDA's introduction of new labelling regulations requiring packaged food makers to
disclose the amount of trans fatty acids (TFAs) in consumables on their packaging, the major companies were
quick to revise packaging to add a trans fat content line on nutrition labels. This was the case of Frito-Lay
(PepsiCo), which removed trans fats from its Doritos, Tostitos and Cheetos snacks in 2003 by converting to
corn oil.
Nuts and fruit snacks benefit from health trends
Nuts are one of the fastest growing sectors within sweet and savoury snacks, as they are considered more
healthy than chips or extruded snacks. Indeed, scientific studies suggest that consumption of nuts can reduce the
risk of heart disease because of the omega-3 fatty acids in nut oils. Manufacturers have used these findings to
recommend snack nuts as an alternative to other snacks. Nut producers in the US received a boost in 2003 when
the FDA allowed manufacturers to add a health claim stating that consumption of tree nuts such as almonds and
walnuts may reduce the risk of heart disease.
In the UK, fruit snacks continue to attract parental attention, and manufacturers such as Whitworths are keen to
reinforce the healthier image of these products. Whitworths has recently linked up with the UK Department of
Health's "Five-a-day programme" to increase the consumption of fruit by schoolchildren.
Table 5
Sales and Growth of Sweet and Savoury Snacks in Selected Markets 2000/2005
US$ million
US
Japan
UK
China
Canada
Germany
Russia
Spain
France
Brazil
Australia
Italy
South Africa
Sweden
India
WORLD
Source:
2000
2005
% growth
2000-2005
22,153
9,095
3,891
2,071
1,246
1,111
615
736
710
960
568
425
494
256
176
54,706
27,470
9,029
5,433
3,038
1,950
1,750
1,671
1,348
1,200
1,016
938
739
739
398
329
71,665
24.0
-0.7
39.6
46.7
56.4
57.5
171.7
83.3
68.9
5.9
65.3
74.0
49.4
55.4
86.6
31.0
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8.3 Breakfast Cereals

Cereals suffer from negative image
Again, the US dominates the global breakfast cereals market, accounting for 42% of total sales in 2005 with a
value of US$9.4 billion. However, the US market remained virtually static over the review period, due to the
controversy surrounding children's cereals, the main source of revenue in this sector. Cereal companies came
under increasing fire in 2004-2005 for their perceived role in mounting obesity rates among American children.
Long criticised for their high sugar content, children's cereals saw current value sales decline steadily over the
review period, dropping by more than 1% between 2000 and 2005.
Breakfast cereals performed better in other developed markets, with 2000-2005 growth of 40% in both the UK
and Canada, and growth of as much as 77% and 98% in France and Italy respectively.
Healthier products developed
In order to address these problems and improve their public image, cereal manufacturers have been focusing on
developing more healthy breakfast cereals. General Mills announced in September 2004 that all of its breakfast
cereals would now be whole grain. About 40% of its cereals were reformulated to add more whole grains. Other
companies followed with new whole grain products. Rival Kellogg Co introduced whole grain cereals Tiger
Power, Frosted Mini Wheat Vanilla Crme and Mini Swirlz Cinnamon Bun. Similarly, in January 2005 Quaker
introduced Quaker Instant Oatmeal Take Heart, instant oatmeal with heart healthy ingredients, such as vitamins
B6, B12, B6, B12 and folic acid, plus antioxidant vitamins E and C. In September 2005, the company
introduced Quaker Weight Control Instant Oatmeal, which was designed with 25% more whole grains, fibre and
protein to help people feel full. Also in 2005, Quaker relaunched its Quaker snack bars with new branding,
packaging and advertising. This included new Quaker Snack Bars with 25% Less Sugar in Quaker Chewy
Granola and Quaker Breakfast Graham varieties.
The French market was also driven by adult-orientated products with a better-for-you image, which still cater to
people's desire for indulgence. These included Fitness Chocolat from Nestl, launched in 2004, and Quaker's
low-fat version of its Cruesli range, Cruesli Ligne, in 2005.
In the UK, too, manufacturers are using health and wellness as an effective marketing strategy to alter public
perception as to the health benefits of their brand. Nestl relaunched its line of breakfast cereals highlighting
their "whole grain" composition. While the express benefits of a diet rich in whole grains are not directly
alluded to, the advertising highlights the positive effect that the cereals can have on children's mental
performance and overall wellbeing.
Table 6
Sales and Growth of Breakfast Cereals in Selected Markets 2000/2005
US$ million
US
UK
Canada
France
Germany
Australia
Japan
Italy
Spain
Sweden
Russia
South Africa
Brazil
China
India
WORLD
Source:
2000
2005
% growth
2000-2005
9,284
1,828
713
529
538
481
323
202
198
183
178
151
164
8
17
18,025
9,404
2,552
999
938
801
642
412
401
344
259
239
230
196
48
31
22,292
1.3
39.7
40.3
77.2
48.9
33.5
27.7
98.3
73.9
41.6
34.7
52.6
19.1
536.0
83.6
23.7
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8.4 Carbonated Drinks

Carbonate sales lose their fizz
Sales of carbonates have generally been flat in recent years, largely due to health concerns, as well as maturity
in several of the major markets. For example, in the US by far the world's largest market for carbonates sales
rose by just 2% in volume terms over the 2000-2005 period, while in Canada sales actually declined by 2%. The
sector performed better in Germany, the UK and France, with volume growth of 10%, 19% and 19%
respectively over the period.
The demand for more healthy drinks and "natural" ingredients has led to growth in sectors such as 100% juices
and RTD green tea at the expense of carbonates. The later have increasingly come to be perceived as artificial,
unhealthy and full of sugar, and have been linked with obesity, tooth-decay and hyperactivity in children.
Diet drinks gain from health and low-carb trends
As a result of these trends, low-sugar variants of major carbonates brands, such as Coca-Cola, Pepsi and Dr
Pepper, outperformed their regular counterparts in terms of growth rates, especially in developed markets, over
the review period. Diet-related trends also prompted the 2005 launch of The Coca-Cola Company's Coca-Cola
Zero and reformulated Pepsi One from PepsiCo, as low-carb regimes such as the Atkins and South Beach diets
question the excessive consumption of carbohydrates. Early 2005 was also characterised by a considerable focus
on the use of "artificial" sweeteners, such as the "made from sugar" Splenda, which has been used in a number
of fruit juices, cola and non-cola carbonates and flavoured functional bottled waters.
In order to improve their images in the eyes of consumers, the major soft drinks manufacturers have taken pains
to flag up their products as contributing to healthier lifestyles. For example, in September 2004, PepsiCo
launched its Smart Spot symbol on a range of products, including the brands Tropicana, Gatorade and Diet
Pepsi, based around the idea that each product meets the nutrition criteria set out by the US FDA and the
National Academy of Sciences in the US.
Table 7
Sales and Growth of Carbonated Drinks in Selected Markets 2000/2005
Million litres
US
Brazil
China
Germany
UK
Spain
Canada
South Africa
Japan
France
Italy
Russia
India
Australia
Sweden
WORLD
Source:
2000
2005
% growth
2000-2005
54,358
11,600
5,431
6,503
4,713
3,741
3,719
2,090
2,648
2,197
2,570
2,092
1,665
1,836
537
170,725
55,652
12,102
7,593
7,166
5,613
3,986
3,645
2,814
2,811
2,617
2,587
2,551
2,542
2,092
597
188,140
2.4
4.3
39.8
10.2
19.1
6.6
-2.0
34.6
6.2
19.1
0.6
22.0
52.7
14.0
11.1
10.2
8.5 Fast Food

Fast food benefits from demand for convenience
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Fast food is one of the fastest growing areas of the consumer foodservice (CFS) market. Global sales were
estimated to have grown by 33% from 2000-2005 to reach US$348.3 billion, with some major markets
recording triple-digit growth. Even in the mature market of the US, which dominates global sales, sales
continued to grow moderately over the review period, increasing by 16% overall. Among the developed
markets, the UK saw particularly strong growth of 88%, while sales in France, Italy and Spain more than
doubled over the review period.
The main factor fuelling growth of fast food in all markets was the demand for convenience, at a time when
consumers are increasingly pressed for time and unable to cook for themselves. Fast food outlets are a particular
draw to families, as they usually offer good value in a child-friendly environment, as well as free toys and
sometimes entertainment. However, fast food chains are notorious for offering food that is high in sugar and
fats, and lacking in nutritious content. Therefore, these outlets have come under fire more than any other CFS
channel in recent years for contributing to the obesity problem.
Chains introduce healthier menus
In the face of such criticism, and led by McDonald's, several of these chains have attempted to change their
ways in the last couple of years. Having received severe negative publicity as a result of Morgan Spurlock's
"Super Size Me" documentary, McDonald's introduced new, healthier menu offerings, including salads, bottled
water, yoghurts, breakfast and filled bagels, deli sandwiches and a new kids menu. In the UK, fruit bags, juice,
water, carrot sticks and milk were added to Happy Meal options, while new nutritional information cards were
introduced that allow parents to calculate the total calories in each combination.
Yum! Brands, which owns KFC, Pizza Hut and other brands, also revamped its image in 2004 to appear more
healthy and nutritious. This included the introduction of more healthy options, such as "Fresco Style" salsa
substitutions for cheese and sauce at Taco Bell, Carb Tracker and Lower Fat Pizza, along with pre-packaged
salad kits on its Fit N' Delicious menu at Pizza Hut, Tender Roast options at KFC, and baked and grilled options
at A&W and Long John Silver's. The company also launched a programme for a free 4-week membership to
Bally's Total Fitness, valued at US$50, and distributed "Keep it Balanced" posters and nutritional brochures in
its restaurants.
Table 8
Sales and Growth of Fast Food in Selected Markets 2000/2005
US$ million
US
UK
Japan
Canada
China
Germany
India
Brazil
Australia
France
Italy
Russia
Spain
Sweden
South Africa
WORLD
Source:
2000
2005
% growth
2000-2005
142,819
13,613
13,250
11,319
5,860
5,870
2,949
6,680
4,501
2,737
1,580
1,738
1,354
1,098
595
261,455
166,279
25,651
16,707
16,232
13,372
8,546
7,291
7,255
6,937
5,849
3,520
3,427
3,011
1,792
1,601
348,327
16.4
88.4
26.1
43.4
128.2
45.6
147.3
8.6
54.1
113.7
122.8
97.2
122.4
63.3
169.2
33.2
8.6 Beer
Beer stagnant in developed markets
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Overall, the beer market is experiencing slow and steady growth, but this is fuelled largely by increasing
demand from emerging markets such as China and Russia, with sales remaining stagnant or in decline in many
of the world's most developed markets. Indeed, China overtook the US as the world's biggest beer market by
volume over the 2000-2005 period, following growth of 38%.
The consumer trend towards greater health consciousness became increasingly important in shaping sales
throughout the beer market during the review period. In the UK, for example, wheat beer has benefited from
growing levels of health awareness, as the product is typically lower in alcohol than traditional premium lagers.
In Japan, the growing sophistication of consumer health knowledge translated into the introduction of beers with
functional ingredients, such as Namashibori Fiber by Sapporo, a happoshu beer with a high fibre content to aid
digestion. Another noteworthy introduction was Ginga Kogen's Oyasumi Beer (Good Night Beer), which as its
name suggests, was positioned as a night cap to aid sound sleep. Meanwhile, in the US, dieting fads, such as the
Atkins diet, have impacted beer purchases, propelling sales of "low-carbohydrate" beers, as epitomised by
Michelob Ultra. However, Euromonitor International expects this trend to lose momentum in the short term,
with the low-carb niche showing signs of reaching its peak by the end of 2005.
Mixers become trendy
In developed markets, such as Australia, the US and the UK, manufacturers have also sought to refresh the
appeal of beer amongst a younger target audience by mixing it with other spirits or ingredients. In Australia,
Foster's launched Cold Shot Beer + Vodka, a 6% alcoholic blend of Carlton cold beer with a shot of pure,
distilled, imported vodka, in June 2003. In the US, Anheuser-Busch targeted younger drinkers with the October
2004 launch of BE, an energy-boosting, herbal-infused beer featuring caffeine, ginseng and guarana. However,
these products have come under criticism for contributing even more to the problem of irresponsible drinking
among youths.
Other brewers, such as Heineken, have recognised the need to strengthen their core brands through increased
marketing support. In the UK, for example, the company has recently used young celebrities such as Ronan
Keating and Jodie Kidd in a bid to reach out to the 20-something segment. This marks an exciting new departure
for the company, which has traditionally been regarded as "conservative".
Table 9
Sales and Growth of Beer in Selected Markets 2000/2005
Million litres
China
US
Brazil
Germany
Russia
Japan
UK
Spain
South Africa
Canada
France
Australia
Italy
India
Sweden
WORLD
Source:
2000
2005
% growth
2000-2005
21,264
23,587
8,413
10,077
5,444
7,084
5,701
3,005
2,560
2,136
2,132
1,727
1,656
568
504
136,024
29,380
23,725
9,325
9,091
8,641
6,542
5,725
3,355
2,743
2,226
1,976
1,774
1,631
781
445
155,004
38.2
0.6
10.8
-9.8
58.7
-7.6
0.4
11.7
7.1
4.2
-7.3
2.7
-1.5
37.4
-11.7
14.0
8.7 FABs
FABs lose momentum, but still dynamic in Japan
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While remaining a niche sector of the alcoholic drinks market, FABs (flavoured alcoholic beverages) have
emerged as the most dynamic sector over the last few years, with global volume sales growing by almost 82%
between 2000 and 2005.
Japan has been one of the most dynamic markets for FABs in recent years, overtaking the US over the review
period to become the leading market with sales of 678 million litres. The US market is reaching maturity, with
growth of just 38% over the 2000-2005 period. However, sales in Australia leapt by 167% over the same period,
while those in Germany increased by 59%.
Targeting the young
FABs' dramatic growth during the review period was built on younger consumers' demand for easy-to-drink
products offering distinctive, novel flavours, suited to consumption in fashionable bars and clubs. FABs have
also exploited the fact that younger consumers have been raised on the sweet taste of products such as
carbonated soft drinks. In essence, FABs are an alcoholic beverage designed for and targeted at the modern
younger consumer and, crucially, at the financially independent women who are increasingly offering growth
opportunities in otherwise mature markets.
The sector has been characterised by strong branding and aggressive, targeted marketing. Bacardi was a pioneer
in the sector, spurring the emergence of FABs with its Bacardi Breezer brand, a fruit-flavoured cocktail of rum
and sparkling water, launched in 1991. Subsequently, Diageo leveraged its global vodka brand, Smirnoff, into
the category with the launch of Smirnoff Ice in 1999. Backed by substantial advertising support, the brand soon
gained the leading position in the global FABs sector.
Malt-based FABs dominate in US
The central role of these major brands in driving the development of FABs as a whole has underpinned the
widespread importance of spirits-based FABs in the sector. However, the US market differs from those of
Europe in that malt-based FABs account for the majority of sales. This is due to the desire of manufacturers to
position the products favourably with regard to taxation and availability (US government regulations dictate that
retailers must acquire a specialised licence to sell alcohol containing spirits or wine, but not beer and other maltbased alcoholic beverages). Significantly, though, it is still major spirits brands, such as Smirnoff, Bacardi, Jack
Daniel's and Sauza, that have the lion's share of FABs sales in the US, albeit with malt-based products.
FABs under fire
FABs have come under increasing pressure from governments and consumers, as they are perceived as
encouraging underage drinking and causing younger consumers to drink to excess. High levels of taxation have
constrained the sector's development in France, and markets such as the UK and Germany have followed the
French example by increasing the taxation on FABs in order to curb excessive consumption of the products,
particularly amongst younger consumers. The large companies have responded by stepping up their responsible
drinking campaigns in this sector.
Table 10
Sales and Growth of FABs in Selected Markets 2000/2005
'000 litres
Japan
US
Russia
Germany
Australia
UK
South Africa
Canada
France
Italy
Spain
Brazil
2000
2005
% growth
2000-2005
349,953
439,565
210,000
206,382
121,655
172,271
156,965
53,168
61,904
32,278
34,662
27,811
678,292
608,272
582,064
328,122
324,783
183,770
183,207
78,596
74,389
61,855
46,832
38,933
93.8
38.4
177.2
59.0
167.0
6.7
16.7
47.8
20.2
91.6
35.1
40.0
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498
2,165,089
Sweden
India
China
WORLD
Source:
7,685
4,862
908
3,929,419
1444.1
n/a
n/a
81.5
8.8 Cigarettes
Cigarettes in slow and steady decline
Cigarettes was the worst performing of the markets under review, in volume terms, over the review period.
Overall sales declined marginally between 2000 and 2005 to stand at just under 5.3 billion sticks. This was
mainly due to the dual factors of steady price increases of cigarette packs, and increasing health awareness.
The global market for cigarettes is dominated by China, where sales continued to climb by 8% over the review
period to reach 1.8 billion sticks. Russia also saw volume growth of almost 10% in the five years to 2005,
overtaking the US as the world's second largest market for cigarettes. However, despite the US's loss in volume
share, this market retained its top ranking in global value sales, mainly due to progressive price increases in
addition to the provisions added for the MSA.
Most of the major developed markets saw sales of cigarettes decline significantly over the review period, by
19% in the US, 12% in Japan and as much as 27%, 21% and 34% in Germany, Italy and France. Surprisingly,
the UK and Spain were exceptions to this in that volume sales rose by 8% and 9% respectively between 2000
and 2005.
Trend towards low tar
Consumer perceptions that lower tar equates to a healthier smoke, as well as the EU Directive to cap tar levels at
10mg, have created opportunities for international companies with established brands to develop lower tar brand
extensions. Furthermore, filter manufacturers are aiming to maintain the taste of the cigarette whilst reducing
harm posed to smokers' health. These Potentially Reduced Exposure Products (PREPS) are being developed in
more mature markets such as the US. Philip Morris has recently rolled out a new product called Marlboro Ultra
Smooth which boasts a high-technology carbon filter. Philip Morris brands Parliament and Lark also employ
such filters.
In March 2003, Reynolds began a phased expansion of Eclipse into 7-Eleven and Circle K retail chains across
the US. Toxicology tests have proven that the smoke it produces is more simple in its chemistry, but questions
remain about CO content and toxin levels from the charcoal tip. The area is a sensitive one as laws are strict on
health claims and manufacturers are wary to label anything as reduced harm for risk of litigation.
In 2005, BAT developed cigarettes with "trionic" filters, which it claims will significantly reduce the amount of
toxic chemicals compared to normal cigarettes (the product has yet to be released).
Table 11
Sales and Growth of Cigarettes in Selected Markets 2000/2005
Million sticks
China
Russia
US
Japan
Germany
Brazil
India
Spain
Italy
UK
France
2000
2005
% growth
2000-2005
1,667,000
333,882
425,835
324,939
140,505
109,625
98,716
87,774
98,689
58,059
81,114
1,807,296
365,999
345,263
285,603
102,794
101,330
98,350
95,452
77,722
62,825
53,488
8.4
9.6
-18.9
-12.1
-26.8
-7.6
-0.4
8.7
-21.2
8.2
-34.1
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46,777
26,680
24,100
7,099
5,281,811
Canada
South Africa
Australia
Sweden
WORLD
Source:
World
41,937
22,349
22300
6,690
5,269,974
-10.3
-16.2
-7.5
-5.8
-0.2
9. CASE STUDIES
9.1 Anheuser-Busch
Anheuser-Busch is the dominant supplier of beer in the US, accounting for 49% of beer volume in 2003, and is
one of the largest beer producers in the world. Its major beer brands include Budweiser, Busch and Michelob,
with reduced calorie Bud Light domestic standard lager taking the highest share of US beer volume sales in
2003. Furthermore, in 2001 Anheuser-Busch joined forces with global spirits giant Bacardi to create and
produce Bacardi Silver, a popular malt-based FAB.
Given its size and scope, Anheuser-Busch can be considered to have a strong responsibility with regard to
controlling alcohol abuse, and the company takes appears to be taking considerable measures to promote
responsible drinking.
Responsible drinking campaigns
Anheuser-Busch, along with its 600 or so independent wholesale distributors, has invested more than US$500
million since 1982 in a number of community-based programmes and national advertising campaigns to
promote responsible drinking and help prevent underage drinking and drink driving. The company ranked first
in the US beverage industry for social responsibility in FORTUNE magazine's 2005 "America's Most Admired
Companies", and first in the beverage industry worldwide for social responsibility on FORTUNE's 2005 "Global
Most Admired Companies" list.
Anheuser-Busch has been promoting moderation to its customers since the early 1900s (with its "Budweiser
Means Moderation" ads). The company was the first in the industry to bring responsibility messages to network
television with its "Know When To Say When" commercials in 1985. Anheuser-Busch's latest campaign to fight
alcohol abuse is "Responsibility Matters". This initiative encourages adults to exercise personal responsibility,
designate a driver or call a cab, and talk to their children about underage drinking.
With regard to responsible drinking, Anheuser-Busch operates three programmes:
"Good Sport", a communications, training and fan management programme designed to help stadium
personnel to promote a positive crowd environment. The programme can also be adapted to street festivals,
music concerts and other special events that attract large crowds, and has been used for international
sporting events, including the Olympics and the World Cup games.
"TIPS" (Training for Intervention Procedures): this programme provides bartenders, waiters and retail staff
with techniques that help prevent alcohol abuse situations. It also includes techniques through which servers
can help prevent drunk driving, such as calling a cab for people who may have had too much to drink, or
encouraging friends to provide a safe ride home.
"Sound Attitude": this programme helps promote positive fan behaviour at concerts and music events. The
programme is designed to help event organisers, venue operators, concessionaires and security personnel to
encourage personal responsibility, respect for fellow music lovers, and respect for the law. The programme
includes staff training, designated driver programs, and a comprehensive fan communications effort.
Anheuser-Busch believes that tackling alcohol abuse requires a team approach involving parents, teachers,
community organisations, law enforcement officials, the alcohol beverage industry, prevention authorities,
beverage retailers and others. Over the years, the company and its wholesalers have built alliances with people
and groups in these areas, as well as with state government agencies, which it claims have resulted in the
positive progress in the prevention of alcohol abuse. The company's various programmes include:
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"Family Talk", a multi-language parent and educator guide developed by an advisory panel of education,
family counselling, child psychology and alcohol treatment professionals, of which Anheuser-Busch claims
to have distributed six million copies.
"Operation ID", a programme offering retailers training and a variety of materials to help them check and
verify valid IDs. These include pocket-size "We ID Cards" listing tips on how to spot fake IDs; driver
license booklets that feature photos of valid driver licenses from all states and Canadian provinces; and
wristbands that retailers can use to identify customers who have already shown proof of legal age.
"Prevent, Don't Provide": Following research showing that some two-thirds of teenagers who drink obtain
alcohol from their parents or other adults, this programme challenges adults to "Think Again" if they
believe it is acceptable to buy alcohol for teenagers or provide it to them at parties. The campaign is
supported by The National Fatherhood Initiative and the International Association of Fire Chiefs.
"Designated Driver", a programme that promotes the use of designated drivers at bars, restaurants and home
parties. Consumers typically receive free non-alcohol beverages or discounts on food from bars or
restaurants in exchange for being named the designated driver in a group. The "Alert Cab" scheme fights
drunk driving by providing people who may have overindulged with a free or reduced-fare cab ride home.
Anheuser-Busch also partners with the American Automobile Association (AAA) on a similar programme
in some locations, for free tow rides home, called "Tow to Go."
The company and its wholesalers also work with local businesses and organisations to initiate alcohol awareness
activities in communities nationwide. In 2004, they hosted nearly 900 in-school presentations aiming to educate
and motivate young people to "make the right choices" and encourage respect for the law, which were attended
by more than 278,000 students.
Anheuser-Busch also supports several schemes to prevent alcohol abuse by college students. For example, it
donated US$2.75 million to The National Collegiate Athletic Association's Choices grant-programme to support
campus alcohol abuse prevention programmes. Anheuser-Busch also offers a variety of materials that promote
the social norms message, including posters, table tents, paper cubes, backpacks, mouse pads and pens.
In the same year, around 500 Anheuser-Busch wholesalers conducted designated driver programmes, and almost
200 of them participated in the 2004 Holiday Designated Driver Sweepstakes to encourage the use of designated
drivers between Thanksgiving and New Year's Day. More than 85,000 free cab rides home from bars and
restaurants were provided in 2004.
With regard to advertising and promotion, Anheuser-Busch adheres to a voluntary Beer Institute Advertising
and Marketing Code, as well as its own International Advertising and Marketing Code (see section 6.2).
In 2004, the company placed more than 37,000 advertisements in local newspapers, in-stadium signage, on
billboards, internet, radio and television to help prevent underage drinking, and around 16,000 advertisements
encouraging the use of designated drivers. In May 2005 it was announced that Anheuser-Busch would
collaborate with hip-hop artist Nelly on a new ad that emphasised the important role parents play in helping
teenagers make smart, responsible choices about not drinking.
Product development
To address concerns over health, and especially the high-carb content of beer, Anheuser-Busch has been a the
forefront of new product development in the beer industry. Michelob Ultra, launched in 2002, became a major
success story, quickly climbing into the top 20 selling beer brands in the US. This success was helped by a
strong advertising campaign, including television spots showing people enjoying physical activities like
swimming or tennis followed by a break in which they drink Michelob Ultra. This brand has been positioned
towards a more health-conscious consumer who would not normally consider beer drinking as part of a healthy,
active lifestyle. Promotional supports has also featured women, often in situations where they get the best of
their male counterpart in physical activities. The focus on female beer drinkers as well as young, active singles
has been quite successful at targeting carb-conscious beer drinkers, and has already sparked imitators.
9.2 British-American Tobacco Plc
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UK-based BAT became the world's third largest tobacco company in 1999 when it purchased Rothmans
International. It accounted for some 10.5% of the global market for cigarettes in 2003, and owned some of the
biggest global cigarette brands, including Dunhill, Kent, Lucky Strike and Pall Mall.
BAT was the first tobacco company to publish a CSR report in 2002, but the company came up against harsh
criticism by anti-smoking groups, which claim that a tobacco company cannot be socially responsible.
Undeterred, BAT continued to develop its CSR agenda, adapting it to society's changing expectations of
corporate responsibility, and in 2005 published its fourth CSR report.
In 2004 a damning report compiled jointly by ASH, Christian Aid and Friends of the Earth described BAT's
claims that CSR is integral to its management approach as "greenwash, bluewash, and hogwash". The report
accused BAT not only of causing 750,000 premature deaths around the world each year, but also of bad
environmental practices, and continuing to lie about the health effects of cigarette smoke. For example, it says
BAT claimed "there is no convincing evidence that ETS (environmental tobacco smoke) exposure genuinely
increases the risk of non-smokers developing lung cancer or heart disease".
Critics are particularly angry about BAT's continuing large profits (2.7 billion for 2004), and the massive sums
that its directors receive. They claim the company is making money at the expense of people's health, and
demand that the UK government change the law to require companies and their directors to take account of
social and environmental issues in all their activities.
BAT admits that its products pose a risk to health, but believes that it has a duty to find ways of ensuring
responsible management of those products in order to enable adults to balance risk with pleasure. The company
believes that workable solutions are only to be found through dialogue with all concerned parties. Nevertheless,
BAT was the first to criticise the UK government's total ban on smoking in public places, scheduled for 2007.
The company called the bans "intolerant and paternalistic", while at the same time reporting a 9% rise in
underlying profits.
Youth smoking prevention:
BAT claims to be strongly against underage smoking, and believes that smoking should only be for adults who
understand the risks associated with it. To this end, the company operates Youth Smoking Prevention (YSP)
programmes worldwide to tackle underage smoking, as well as pooling resources with other tobacco companies
and with governments and NGOs to help prevent youth smoking.
BAT reported that in 2004, its companies supported retail access prevention programmes in 60 countries,
education-based prevention programmes in 26 countries and advertising-based prevention programmes in 27
countries. The company claims to fully support laws and regulations on a minimum age for buying tobacco
products, and penalties for retailers who break the law. BAT's worldwide policy is not to market to anyone
under 18 years old.
BAT's YSP programmes have two stated primary objectives: preventing children from obtaining tobacco
products and discouraging children from wanting to smoke. To this end, the company takes several approaches,
including education campaigns, retail access prevention and advertising campaigns.
Education programmes
BAT claims that its education programmes attempt to give young people "life skills" to deal with the challenges
they face during adolescence, including peer pressure to smoke. However, the company believes that the role of
tobacco companies in the development of education programmes should be limited to sponsorship and support.
Therefore, it leaves educational experts responsible for designing the content of education programmes, while
delivery is the responsibility of teachers or youth leaders. Independent authorities monitor the awareness,
attitudes and behaviour of participants before and after the programme. Programmes typically target young
people within the 11 to 17 age-bracket but can be more specific.
BAT's programmes are flexible and vary from country to country. They may address violence and conflict
resolution in countries with youth gang problems, while discrimination, both racial and sexual, may be stronger
topics in some countries. Smoking is dealt with within the wider context of the pressures and decisions that
young people face.
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Retail access prevention

Retail access prevention programmes focus on retailing, and more specifically, stopping minors from buying
tobacco products at the point of sale. They include proof-of-age schemes, teaching retailers about laws, and
raising awareness of the issues among politicians, educators and the media. Typical tools include posters,
badges for retail staff, and point-of-sale stickers stating that underage sales are illegal. Booklets explaining the
law and training videos for retailers and their staff, including examples of how to 'refuse' sales to kids, are also
available.
In some countries advertising, aimed at retailers or parents, is used to support a retail access prevention
programme in order to reinforce its importance. Effective retail access prevention programmes are much easier
to implement in countries where minimum age legislation exists. In countries where there is no minimum age, a
voluntary retail access prevention programme can be designed and launched in conjunction with the retail trade
and can play a valuable part in ensuring that children do not smoke.
In the UK, BAT urged the government to raise the minimum age for buying tobacco products from 16 to 18, in
line with alcohol, and is also backing CitizenCard, the UK's national proof-of-age scheme for young people.
Advertising campaigns
BAT believes that advertising campaigns can play an important role in preventing youth smoking. Advertising
campaigns may therefore target young people directly or complement other programmes by focusing on
retailers, teachers or parents.
BAT Japan is an active member of the Japanese industry association, the Tobacco Institute of Japan (TIOJ), and
contributes to its activities. These include educational and promotional programmes aimed at preventing
underage smoking, such as TV and magazine advertisements in schools. It also sponsors magazine
advertisements aimed at parents and guardians.
BAT has also been involved in TV advertising campaigns in Europe to promote the message that young people
should not smoke. The "Doesn't Smoke" campaign in 2001 ran on the TV music network MTV Europe, with ads
appearing in 38 European countries for 14 weeks. The aim of the campaign was to provide its target audience of
12 to 17 year olds with non-smoking role models they could relate to, helping create an attitudinal environment
that it is possible to be "cool" and not smoke. After the campaign, research indicated that the overall impact of
the campaign was strong and positive in all countries surveyed. However, due to opposition to BAT's
involvement in the UK, the company decided to withdraw UK support from the "Doesn't Smoke" campaign on
MTV.
New product development
For a number of years BAT has been attempting to develop "safer" cigarettes. In early 2006, the company was
still testing a new type of cigarette that uses "trionic" filters to remove more of the thousands of harmful
chemicals in smoke. However, the company had made no statements by the time of writing about if and when
the product will be released, and admits that no long-term studies have been carried out as to its relative safety.
Trionic filters consist of three sections which interact with different sets of chemicals in cigarette smoke.
Combined with a new way of preparing the tobacco which stops the formation of the tobacco-specific
carcinogens called nitrosamines, BAT claims that its new cigarettes significantly reduce the amount of toxic
chemicals when compared with normal cigarettes.
9.3 Cadbury Schweppes

As the UK's leading confectionery manufacturer and one of the world's leading drinks and confectionery
companies, Cadbury Schweppes has come under a great deal of pressure from consumers about unethical
marketing practises, and is regularly accused of contributing to the problems of obesity and tooth decay in
children. For example, in the UK, the company's Get Active scheme, which swapped confectionary pack tokens
for school sports equipment, was criticised by educationalists for encouraging unhealthy eating practices in the
young.
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The company has taken several measures to counteract this criticism. It now claims to encourage responsible
consumption, which it believes to be "central to consumers continuing to enjoy our brands". Cadbury
Schweppes reports that it is committed to listening and responding to consumer needs, especially those
surrounding the issues of food and balanced diets, which are currently high on the consumer agenda, along with
product quality and safety. To this end, the company has devised a 12 Point Action Plan, which is intended to be
a long-term educational programme that will result in behavioural change and contribute towards preventing
obesity. The points are as follows:
Products and Innovation: the company says it invests in the development of new products within each
category that will provide consumers with more choice. These include lower calorie offerings and new
sweetening options. In addition, it claims to be reducing trans-fats and salt content in its products, and has
discontinued making products which contain embedded toys.
Marketing: the company has introduced a global marketing code of practice with specific reference to
children. It no longer advertises to children under eight years where they form the majority of the audience.
Portion Sizes: Cadbury Schweppes has reviewed its single-serve portion sizes around the world and is
providing a broader range of smaller portion options. In 2005, it was the first confectionery manufacturer to
discontinue single-serve king size lines in the UK.
Labelling: the company claims to be looking to provide more information about its products and
ingredients, and messages to help educate the consumer. To this end, it has already launched a new global
labelling standard.
Vending: Cadbury Schweppes does not vend its confectionery products and carbonated drinks in primary
schools, and pledges to only vend these products in secondary schools by invitation and in line with
nutritional guidelines set by the school.
Consumer Insight: the company invests in consumer research in order to help it gain knowledge of health
concerns, including obesity.
Education: Cadbury Schweppes supports initiatives that promote physical activity and responsible
consumption of its products. It aims to convey the "energy equation" message (calories in versus calories
out) particularly amongst children.
Community: as part of its wider CSR programme, Cadbury Schweppes claims to support initiatives that
promote physical activity and education that helps improve consumer health and prevent obesity.
Business Partners: the company asks its business partners and suppliers to support its responses to obesity
and consumer health concerns.
Employees: Cadbury Schweppes is helping its employees to understand and improve their own health and
well-being.
Science: the company works with the scientific community and claims to base its decisions on sound
science. It is investing in new science and increasing its scientific resources within its business.
Other stakeholders: Cadbury Schweppes works with others (including government, campaigners,
shareholders and customers) to help find solutions.
Global labelling standard

Cadbury Schweppes' global standard for the provision of nutrition information includes the more comprehensive
"Big 8" on-pack nutrition labelling, as well as GDAs (where they exist), for adults. The new global standard also
provides for nutrition information based per 100 g or per 100 ml and on the basis of a defined portion or serving
size. In cases where packaging size does not permit all the information to be displayed, the company has
pledged to make the information available to consumers in other ways, including consumer websites.
However, Cadbury Schweppes is staunchly against the FSA's proposed nutrient profiling model in the UK,
claiming that it is "unscientific, perverse and confusing". The company believes the FSA's attempt to classify
foods by using a scoring system to rate the overall balance of nutrients in the food is not realistic in that it looks
at foods in isolation rather than taking into account the importance of the combination of foods, and the amount
of them eaten.
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Improving nutritional content

Cadbury Schweppes' overall aim seems to be to convince consumers that confectionery is fine to eat as a treat,
or for fun or enjoyment, but that it should be eaten in moderation and as part of a healthy, balanced diet. This is
the message that it continually stresses throughout its website and other campaigns, and has now being reiterated
through its involvement with the "Treat Wise" organisation.
To allay consumers' fears about fat intake, the company claims that it is working to reduce the level of trans fat
in its products to less that 0.5g per serving, and is also exploring the use of non-fat alternatives for its new and
existing products. With regard to sugar, Cadbury Schweppes now offers sugar-free options for most of its
product lines, including gums, beverages, mints and other confectionery.
In 2005, Cadbury Schweppes announced the launch of a range of chocolate bars with under 99 calories. This
consists of thinner versions of three classic products: Cadbury Dairy Milk, Cadbury Dairy Milk Mint Chips and
Bournville, an extra dark, 76% cocoa chocolate. The promotional tagline accompanying the launch touts the fact
that consumers can "have real Cadbury chocolate while keeping control of the calories." However, these have
been met with criticism from consumers, due to their relatively high prices.
Cadbury Schweppes' policy with regard to GM ingredients is that since opinions around the world are divided
on the subject, the company supplies GM free ingredients where they are demanded ie in the EU, but not in
the US.
Marketing code
Cadbury Schweppes employs a Marketing Code of Practice, which is intended to ensure that it continues to
meet its responsibilities to consumers. The code states that advertising material must accurately represent all
material dimensions of products advertised, including taste, size, content and nutrition and health benefits; and
that advertising must be truthful, accurate and well substantiated. The code also says that advertising must never
portray or endorse inappropriate or over consumption, and that unless a food product has been nutritionally
designed as a meal replacement, it will not be portrayed as such. Advertising must to be attentive to local,
cultural, political and religious sensitivities in all markets in which it advertises.
With particular reference to marketing to children, Cadbury Schweppes says it will always take into account the
level of knowledge and maturity of the people it is advertising to, and understands the special responsibility it
has to protect children from their own vulnerabilities. Therefore, it will not advertise where children under the
age of eight are likely to be the majority of the audience, and will not advertise around a programme if the
content of the advertisement is derived from or associated with that programme. For example, characters or
personalities will not be used to sell products in a way that obscures the distinction between programme or
editorial content and commercial promotion (something which Kellogg's and Viacom were recently accused of
in the US).
Cadbury Schweppes does not show children under eight years in advertisements and promotions aimed at
children, or on company-owned vending equipment. According to its code, advertising will not misrepresent the
potential benefits from the consumption of a product, such as status or popularity with peers, sporting success or
intelligence; and language and visuals must be clearly understandable in advertising and promotions, especially
where it relates to the likelihood of winning a prize or being included in a club of any kind.
On company websites with children's content, Cadbury Schweppes will not link to pages of other sites that do
not comply with its standards, and will not seek to gain the address or other personal details of the child and will
not e-mail children.
Cadbury Schweppes has approached the "nag factor" issue by stating that it will not use messages that
encourage children to pester parents to buy products. It claims that its advertising will support the role of parents
and other role models in guiding and deciding what children should eat and drink.
9.4 the Coca-Cola Company

The Coca-Cola Company (Coca-Cola) is the world's largest beverage company, with a presence in more than
200 countries. The company markets brands such as Coca-Cola, Diet Coke, Fanta and Sprite, as well as a wide
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range of other soft drinks. It is therefore held more responsible than others for the growing obesity epidemic and
has been at pains to revive its image. Indeed, Coca-Cola's sales and share price have decline recently in the light
of adverse media publicity surrounding the subject of junk foods and their perceived contribution to obesity.
Restoring image in UK
Coca-Cola's reputation was severely damaged in the UK in 2004, due to the Dasani bottled water affair. The
company's attempt to launch the brand in the UK and Western Europe came to an abrupt halt after levels of
bromate (a chemical that could cause an increased cancer risk through long-term exposure) were found to
exceed UK legal standards.
Dasani was initially launched in the UK in February 2004, with a spring launch planned for France. Unlike
Dasani sold in the US (and that launched in the UK), which was a purified water blended with minerals, Dasani
sold in France was to be a still natural mineral water, drawn from a source in Chaudfontaine in eastern Belgium.
Some controversy had already surrounded the UK launch of Dasani following a complaint made to the FSA
over Coca-Cola's use of the word "pure" in its marketing of the product (thus allegedly implying that tap water
is "'impure"). However, this problem was considerably overshadowed by the discovery in March 2004 that
levels of bromate in Dasani were found to exceed UK legal standards. As a result, the company's 7 million
marketing campaign for Dasani was shelved and the entire UK supply of Dasani withdrawn from sale. In the
wake of the incident, planned launches in Europe failed to go ahead.
In November 2004, it was reported that Coca-Cola GB and its bottling arm Coca-Cola Enterprises had combined
their public affairs accounts and were seeking proposals from PR companies to include "reputation issues
surrounding obesity". In January 2005, the winner of the account, Weber Shandwick, had the job of rebuilding
relations with the media, after the adverse publicity following the Dasani issue. In July 2005, Coca-Cola worked
with the agency to promote its US$4 million Live It! children's fitness campaign in schools across the UK. The
campaign was not intended to address childhood obesity, nor did it encourage students to drink Coke.
Furthermore, the company's logo did not appear on Live It! materials.
Anti-obesity message in France
Coca-Cola has come up against opposition from French consumers in particular with regard to its contribution
to the growing obesity problem. Therefore, in November 2005, Coca-Cola France and Coca-Cola Enterprise
teamed up to run an advertising campaign in France outlining Coca-Cola's commitment to combating obesity
and promising to include more nutritional information on its packaging. The campaign ran as a full-page ad in
major French newspapers in November. The ad summarises the Coca-Cola system's four primary commitments
in response to the obesity issue, while focusing on what the company is doing in France. These are:
Choice: the system offers 13 light or low-sugar products in France, up from just two six years ago. The
average calorie content in Coca-Cola products sold in France has dropped by 9.4% since 1999.
Information: the Coca-Cola system voluntarily prints four pieces of nutritional information energy value,
fat, carbohydrate and protein content on every product package in France. From 2006, eight pieces of
nutritional information will be displayed.
Active lifestyle promotion: the system in France has distributed 450,000 pieces of sports gear to athletes
and teams/clubs. In 2005, Coca-Cola France became a founding member of The "Fondation du Sport," an
organisation dedicated to developing youth sports programmes.
Responsible marketing: Coca-Cola commercials do not run during programs with core audiences under age
12.
Health and sports programmes

In March 2004, Coca-Cola announced that it was creating the Beverage Institute for Health & Wellness, which
would support nutrition research, education, and outreach. The outreach activities would be directed to health
professionals and consumers about nutrition, physical activity, and health maintenance issues. Coca-Cola has
taken a similar approach in Asia, with a division dubbed HAL, which stands for healthy and active lifestyle.
This also included an ad campaign that gave consumers advice such as "move your butt" and "sweat it out".
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Coca-Cola has been associated with sports for many years, supporting and promoting active lifestyles,
particularly among young people, funding a wide range of physical activities.
In the US, Coca-Cola launched its Live It! Initiative in 2005, which is designed to help students build healthy
lifestyles by encouraging physical activity as part of their daily lives and providing nutrition information in
schools. The programme includes posters for schools, featuring inspirational figures such as Tour de France
champion Lance Armstrong that endorse proper nutrition, physical activity and balanced lifestyles. Students also
receive a Stepometer with a guide, and activity cards that suggest fun ways to achieve 10,000 steps daily.
Students are also given activity cards that provide food tips for each day, helping them choose their meals and
snacks according to the new Dietary Guidelines. Live It! was expected to reach more than two million sixth
graders in Autumn of 2005.
In the UK, the company has supported the Coca-Cola English Schools Cup since 2001, Europe's biggest schools
football tournament for girls and boys, in partnership with the English Schools Football Association. Over
40,000 from 2,600 different school teams took part in 2004-2005.
Responsible marketing in the UK
Today, Coca-Cola GB claims to be responding to the challenge of responsible marketing by addressing four key
areas of strategic focus:
Providing and raising awareness of a widening choice of products, particularly making diet and low sugar
choices more attractive through continuing taste enhancement;
Helping consumers make a more informed choice. Consumer research showed that around 43% of
consumers did not know that diet Coke is "sugar free" and it suggested that a "sugar free" message is more
motivating to consumers than the actual number of calories listed. The "sugar-free" message now features
on all diet Coke packs;
Ensuring responsible sales and marketing, by reinforcing its policy of not targeting under 12s in any media;
and upholding its Schools Code of Practice, including its commitment to not place vending machines in
primary schools and giving secondary schools the opportunity to provide a wide choice of products from
water, 100% juice, a variety of diet, low sugar as well as regular carbonated drinks, and as well as offering
unbranded machines;
Encouraging physical activity amongst young people and thereby challenge the rise in sedentary lifestyles.
Coca-Cola claims to be communicating more information about its products, in formats that people find easy to
read. In 2004, the company updated all its packaging to show the nutritional information on the energy, protein,
carbohydrate and fat content of the product. In 2005, it expanded the nutritional information panels on its
packaging to show energy, protein, carbohydrate, carbohydrate of which sugars, fat, saturated fat, fibre and
sodium.
All Coca-Cola's instant win promotions in the UK have a "no purchase necessary" stipulation, and the company
claims to be working to ensure that entry to brand promotions is available via diet or low sugar variants where
applicable. The company aims to convey active lifestyle messaging in its communications and sponsorship
activities, and aims to use celebrities appropriately
Schools
In response to consumer's sensitivity with regard to Coca-Cola's school-related activities, the company has put a
set of guidelines in place governing its relationship with schools. In the UK, the company's Schools Code of
Practice, which covers schools and sixth-form colleges, has the following points:
Primary Schools: Coca-Cola does not supply vending machines, or proactively sell, promote or market its
products to primary schools in the UK. Where the company is approached by a school or local authority to
supply soft drinks to primary schools, it recommends that only water and juice drinks be supplied.
Secondary Schools: In 2004, Coca-Cola offered all schools the opportunity to have all Coca-Cola branded
vending machines modified to remove all branding from the front, replacing them with graphic panels
showing young people engaging in physical activity. The company also recommends to all schools with its
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vending machines that they should offer a full choice of water, juice, juice drinks, diet, low and zero added
sugar drinks, as well as regular carbonated soft drinks.
In the face of growing ethical concerns, Coca-Cola was faced with two options: make its existing products
healthier or diversify. The company decided to expand into diet and health-related beverages such as sports
drinks, juices, energy drinks and waters in order to appease consumers' concerns. However, it has met with
questionable success so far. While its foray into bottled water failed, some retailers in the UK are now refusing
to stock the new lime and grapefruit-flavoured variants of the Powerade sports drink, accusing the company of
spreading its brand too thinly.
Diet Coke is now Coca-Cola's biggest selling brand through the grocery channel in the UK. In addition to the
major investment in diet Coke, the company is also investing in broadening the appeal of low and no sugar
options across its range of products. Fanta Apple Splash Low Sugar, launched in 2004, was the first low sugar
(defined as 5g or less of sugar per 100ml) carbonated soft drink marketed by Coca-Cola Great Britain. In 2005,
the company re-launched the 'diet' variants of its Fanta, Sprite, Lilt and Dr Pepper brands as the "Z" range ("zero
added sugar, great taste"). The Five Alive range was extended in 2004 with the launch of Five Alive Cranberry
juice drink and three varieties of squash with no added sugar. In 2005, Coca-Cola also introduced products that
represent an alternative to traditional carbonated soft drinks, including Nestea, together with products that offer
direct functional health benefits, namely the "no added Sugar" Minute Maid range.
In February 2005 it was reported that Coca-Cola was planning to develop an anti-cholesterol drink, in response
to growing concerns about obesity. The company applied for permission in the UK to add phytosterol, a natural
plant extract, to a range of fruit juices. Already found in margarines such as Benecol and Flora pro-activ, as well
as milk drinks and yoghurts, phytosterol can block the body's absorption of LDL, the form of cholesterol
associated with heart disease and high blood pressure. If given the go-ahead, the new range is expected to be
launched in 2006 as part of a strategy to restore Coca-Cola's flagging fortunes in the UK.
9.5 Diageo
The Diageo Group is the world's leading premium drinks business, owning such brands as Smirnoff, Guinness,
Gordon's, Bell's and Baileys. In this capacity, Diageo feels it has a duty to be at the forefront of industry efforts
to promote responsible drinking. Its approach is based on the following key principles:
To set global standards for responsible marketing and innovation;
To combat alcohol misuse, working with others on initiatives to reduce alcohol-related harm;
To seek to promote a shared understanding of what it means to drink responsibly.
Diageo is a supporter of the WHO's World Health Day, held in April each year, which marks the beginning of a
year-long programme of activities on a theme selected by the WHO. The theme for 2004 was Safe Roads, an
initiative in which Diageo participated in the form of local projects that raise awareness of drinking and driving.
Diageo believes that those who serve alcohol in bars can influence the way in which it is consumed, and is thus
a strong supporter of responsible bartender training. In the US, the company has supported the TIPS (Training
for Intervention Procedures) server training initiative for several years; in 2003 Diageo began Spanish-language
training in US cities with large Hispanic populations. Programmes have also been established in several other
countries.
The Responsible Retailing Forum (RRF), formed in January 2003 with funding from Diageo North America and
the Diageo Foundation, has launched demonstration projects in several cities around the US. The goal of RRF is
to establish and evaluate new best practices to reduce underage access to alcohol. The demonstration projects
involve distributing a retailer planning tool, establishing community groups to study the problem locally, and
evaluating the process using 'mystery shopper' inspections, surveys and interviews with retailers and other
community partners. RRF is also conducting pioneering work on the use of social norms to affect retailer
practices.
Diageo states that it is in favour of all governments setting legal blood alcohol concentration levels for drivers,
and that it supports tough penalties for those convicted of drink-driving. The country has for a long time
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supported anti drink-driving initiatives in many countries. For example, in 2003 Diageo launched a unique anti
drink-drive campaign in South African cities, which involved sticking 75,000 magnetised replica keyholes on
car doors beside the real keyhole to make drivers stop and think. The campaign was backed up with radio ads
and coasters with the strapline "Should you really be driving? Be responsible, if you drink, don't drive."
Promoting responsible drinking
Diageo claims to share consumers' concerns about underage drinking and binge drinking, and aims to work
together with parents, teachers, governments and young people themselves to promote responsible drinking. The
company has developed a range of branded advertisements whose core objective is to deliver a responsible
consumption message. Different ads have been developed for different markets, including, the UK, Thailand,
Ireland, Australia, the US, Spain and the Netherlands. In the US, Diageo spends 20% of its broadcast advertising
budget on branded responsibility advertisements.
Diageo aims to prevent sales of alcohol to people under legal purchase age where laws are specific, and under
18 where laws are not specific. In its marketing activities, the company claims that it does not describe or focus
on people under the legal purchase age, which varies from country to country.
In Australia, together with a local partner organisation, the company operates a website to inform young people
about alcohol, its effects and how it can be used responsibly according to guidelines issued by the Australian
Department of Health. A bowling game on the site reinforces many of the points made and allows players to
post their scores on a leader board.
Diageo's two newest adverts in the UK, launched in February 2006, were designed to illustrate how excessive
drinking for both men and women can ruin a good evening. The "Many Me" ad shows a man considering how a
typical night out at a bar could go. He sees himself enjoying the company of friends, but also sees himself
having too much to drink and becoming unruly and messy. The barman's question to the man at the end, "So,
what'll it be?", has an obvious double meaning and emphasises the message that everyone has a choice about
how much they drink. The end line is "Don't see a Great Night Wasted". The "Mirror" ad follows a woman at a
house party. At the start of the evening, she is enjoying herself and chatting to friends. Later she becomes aware
that, reflected in the mirror and other surfaces, she is seeing someone who looks like herself also at the party.
The difference is this woman's behaviour she is losing control and her friends are no longer as warm or
welcoming as before. The woman realises that this is her drunk self and the ad closes with the strapline "Make
sure you like what you see".
The introduction of these advertisements followed the successful evaluation of a similar campaign that ran in
Ireland. The evaluation showed that 80% of consumers remembered that the ad is for sensible drinking, and
76% said they would be more likely to consider drinking sensibly having seen the advertisement.
This campaign is part of a wider package of measures that Diageo GB is delivering to promote responsible
drinking, often working with others such as government, the industry and community groups. The company
recently ran a student unit awareness programme entitled "What's In It?", which reached 750,000 students across
55 universities, in partnership with NUS Services Ltd. Diageo GB has also funded theatre company CragRats to
deliver workshops to 44,000 secondary school pupils, to raise awareness of alcohol issues.
At the time of the campaign launch, Paul Walsh, the chief executive of Diageo, called on his industry rivals to
join the company in backing the establishment of a responsible drinking organisation. Mr Walsh revealed plans
to turn the existing Drink Aware campaign into a trust that would fund the dissemination of messages about
responsible drinking, and announced that Diageo itself would spend 1.5 million on Drink Aware.
9.6 Kellogg Company

With 2005 sales of more than US$10 billion, Kellogg Company is the world's leading producer of breakfast
cereals and a leading producer of convenience foods, including cookies, crackers, toaster pastries, cereal bars
and fruit snacks. The company's brands include Kellogg's, Keebler, Pop-Tarts, Nutri-Grain, Rice Krispies,
Carr's, Plantation and Fruit Winders. Kellogg products are marketed in more than 180 countries.
Kellogg Company has come under fire from NGOs and consumers in recent years, due to the fact that its
products are perceived as being high in sugar and salt, and therefore unhealthy. A survey by the Consumers'
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Association in the UK said that Kellogg's Frosties was one of the least healthy breakfast cereals, with two of the
brand varieties, Frosties Turbos and Frosties Chocolate, containing 41% sugar.
Kellogg Fruit Winders, which are sticky strips made from processed fruit and sugars, attracted criticism in the
UK for being portrayed as a healthy snack product, which is actually very high in sugar content. Indeed, Kellogg
Fruit Winders won a "Tooth Rot" award in the UK by the Parents Jury in 2002, an independent panel of 800
parents set up by the Food Commission to look at foods marketed to children. They claimed that Kellogg's Fruit
Winders do contain real fruit, but it has been processed and supplemented with sugar, hydrogenated fat and
other ingredients with little nutritional value.
Advertising criticised
Kellogg's advertising practices have also been widely attacked, since the company's main target audience is
children. For example, the advertising campaign used for Kellogg's Fruit Winders was accused in 2004 of using
stealth marketing to reach children. This included the use of "mutant fruit characters" and the development of a
"secret language" used at concerts, magazines and cinemas and the use of clothing and celebrities getting
exposure on TV and other forms of entertainment targeted at the relevant market segment. The Kellogg's Fruit
Winder campaign also encouraged children to interact with it on websites or while retrieving emails. New
microsites were created on websites popular with children. The advertising agency involved said afterwards that
it managed to reach nearly 60% of children with only PR and web activity. It was only after this that it started
TV advertising to reach mothers who are seen as the main purchasers. The Kellogg's Fruit Winders brand was
also criticised in 2004 for a promotion that offered children a prize of 5 notes concealed within packets.
As a result of such criticisms, Kellogg Company has had to find ways to regain consumer confidence, both by
promoting healthy eating and activities, and by launching new, healthier products. In its defence, the company
maintains that it promotes eating well and healthy living, in terms of eating a balanced diet and engaging in
regular physical activity. In 2004, Kellogg's announced that it was revising its strategy for marketing to children
to make it more socially responsible.
However, it was announced in January 2006 that Kellogg Company, together with media conglomerate Viacom,
faced a lawsuit in the US from two parents together with pressure groups CSPI and the Campaign for
Commercial-Free Childhood, concerning its marketing of "junk food" to children. The plaintiffs maintain that
the two companies are directly harming children' health as the majority of food products they market to children
are high in sugar, saturated and trans fat, or salt, or almost devoid of nutrients. If the companies go to trial and
are found liable, they could be forced to pay out billions of dollars, although it is reported that the plaintiffs
would settle for a commitment from the companies to change their marketing practices.
Meanwhile in the UK, ads for Kellogg's Coco Pops Straws were referred to the UK's Advertising Standards
Authority (ASA) in February 2006 after consumer watchdog, Which?, claimed they were misleading to children
and adults. According to Which? the TV adverts are socially irresponsible, presenting the chocolate straw
biscuit as a way of enticing children to drink more milk when in reality the product is unhealthy. The advert's
strapline asks: "How far would you go to get milk into your kids? Well here's an easier wayNew Coco Pops
Straws make milk more fun." However, the straws themselves were found to contain 34g per 100g over three
times the recommended level.
Nutrition labelling
Kellogg Company has for a number of years had a policy of using its packaging to help educate consumers,
becoming the first company to print nutrition messages, recipes and product information on cereal package back
and side panels in the 1930s.
Kellogg Company has formally published a "Commitment to Nutrition", claiming that it is committed to
providing its consumers with a wide choice of food products that can be part of a balanced diet and meet
varying taste requirements. Kellogg Company regularly develops new products and enhances existing ones,
taking into account both current scientific advancements and the needs of consumers. Kellogg Company's new
product development takes place at theW.K. Kellogg Institute for Food and Nutrition Research (WKKI), located
in Michigan.
Some of Kellogg Company's activity programmes in the US include:
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Kellogg's Frosted Flakes "Earn Your Stripes" Program: this is designed to encourage children to get fit, eat
properly and work hard. Superstar athletes team with Tony the Tiger to offer "Tips from the Pros", focusing
on sports activities including soccer, basketball and skateboarding. Pedometer use is encouraged to step up
physical activity.
Get in Step: this is a 12-week family programme that combines Kellogg's cereal with walking an extra 2000
steps each day using a pedometer.
Zumbando con Kellogg's: this is a partnership between Kellogg and Zumba, a form of dance exercise using
Latin rhythms, that promotes the importance of combining physical exercise and a balanced diet toward
maintaining a healthy lifestyle. DVDs were offered on packages and via internet and television, and local
events were held in more than 30 Hispanic communities.
Healthy Beginnings: this is a multi-dimensional programme designed to educate consumers about the health
benefits of Kellogg's cereals, emphasising in-store initiatives and healthcare professional outreach, such as
health tips, recipes and links to health-focused websites.
Kellogg Company claims that it regularly works together with health professional organisations and
governments to develop public policies that will enhance the health of consumers. Some of its recent
sponsorship efforts include:
The 2005 Little League World Series;
Girls on the Run, an after-school programme for girls ages 8-11, which focuses on running games and
workouts to promote physical activity, culminating in a 5K race;
The National Race for the Cure;
"Speaking of Women's Health" events.
In February 2006, Kellogg's Smart Start Healthy Heart Brand launched its 2006 Heart Health Initiative, which
includes providing national support for the American Heart Association's Go Red For Women movement. This
initiative includes the launch of Smart Start Healthy Heart Maple Brown Sugar, free health screenings and
community events, and retail promotions. Kellogg Company claims that Smart Start Healthy Heart is the only
national cold cereal with ingredients that may help lower both blood pressure and cholesterol. The cereal has
been certified by the American Heart Association's Food Certification programme.
The company's Healthy Beginnings line-up features many cereals that address specific health needs, whether
these be products that may help promote heart health, aid digestive health or promote the 2005 US Dietary
Guidelines which recommends that people eat half their grains as whole grains.
In response to demands for healthy snacks, Kellogg Company has developed snacks such as Kellogg's Special K
Bars (with 90 calories) and Rite Bites (pre-portioned snacks with 100 calories or less), as well as Nutri-Grain
Cereal Bars for children.
In response to criticisms about the high sugar content of its Kellogg's Frosties brand in the UK, Kellogg
Company launched new, "healthier" Frosties in August 2004. The reduced sugar version contains 25% sugar,
which is still considered a high-sugar food by the FSA, but the company argued that cutting the sugar further
would make the cereal unpalatable.
9.7 Kraft
Kraft is part of the Altria group, which also owns cigarette maker Philip Morris, and is one of the world's largest
food companies. Kraft markets such international food brands as Dairylea (cheese spread), Nabisco (biscuits),
Philadelphia (cheese), Ritz (savoury biscuits), Toblerone and Milka (chocolate), Bird's (desserts), Capri Sun
(soft drinks), and Maxwell House and Jacobs (coffees).
Kraft states that it has a history of corporate responsibility, and that its vision is to sustain the growth of its
business in a responsible way by helping people around the world to eat and live better. The company
announced a series of global health and wellness initiatives in July 2003, strengthening its policies and practices
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in the areas of product nutrition, marketing, labelling and health claims. Kraft continues to introduce new
products and improve existing ones with the aim of giving consumers more choices to address their health and
wellness needs. It also claims that it is stepping up its efforts to provide nutrition and fitness information
through its websites, recipes and publications, and advocates constructive changes in related public policies, as
well as increasing its financial support for education and intervention programmes.
In 2004, Kraft reported that since the start of its health and wellness initiatives the year before, it had reduced
the fat content in some 200 existing, individual products in North America, and claimed that these changes
would eliminate more than 30 billion calories from the 200 reformulated products. As part of its programme to
reduce or eliminate trans fat, Kraft reformulated a number of products to meet the FDA's per-serving standard
for zero grams trans fat, among them Triscuit crackers and Reduced Fat Oreo. In addition, Kraft stated that it
had fortified some products to help address nutritional deficiencies in various countries, including calcium and
iron.
In the year to July 2004, Kraft introduced or acquired a number of new products with a health and wellness
focus, including Fruit20 flavoured waters, Kraft StringUms string cheese made with 2% milk, Balance GoMix
energy snack mix, and Kool-Aid Jammers 10 with only 10 calories per serving.
In Europe, through its European Health and Wellness Programme, Kraft aims to:
Adjust the nutritional profile of many products towards better for you criteria;
Improve the nutritional labelling on back of packages;
Not market brands or products in schools;
Set specific nutrition criteria for Kraft products sold in school vending machines;
Not advertise or promote to children under age 6;
Only advertise products meeting Kraft's own 'Sensible Solution' nutrition standards to children aged 6-11
years. These restrictions also apply to websites designed for children under 12 years.
Support community based healthy living programmes.
In 2004, Kraft establishing product guidelines for in-school vending machines. In the US, the guidelines are:
35% or less of total calories from fat, 10% or less of total calories from a combination of saturated and trans fat,
and 35% or less of total calories from sugars. The company also eliminated advertising and promotion in
schools all over the world.
Health and activity programmes
In the year to July 2004, since it began its health and wellness campaign, Kraft initiated community-based
nutrition and activity programmes in a number of markets worldwide. US initiatives include "Triple Play", a
five-year, after-school health and wellness programme with the Boys and Girls Clubs of America, funded by
Kraft and the Coca-Cola Company, and Salsa Sabor y Salud, a healthy lifestyle programme for Latino families
conducted in partnership with the National Latino Children's Institute.
As part of a marketing effort to combat obesity and unhealthy lifestyles, Kraft launched a scheme in the UK in
October 2004 to teach schoolchildren how to cook healthy meals. The Health 4 Schools scheme is run
independently and is not intended to market Kraft's products, but it is directed and funded by Kraft, at a cost of
some 1 million. According to a report in The Guardian, Kraft stated "As a responsible food company, we are
seeking to contribute to the public health policy agenda and, working in partnership with other organisations, to
be part of the solution". The scheme includes cooking classes and healthy school breakfasts and involves 28,000
pupils in 100 schools in Gloucestershire over a period of three years.
In response to the US trend towards low-carb dieting, Kraft announced in June 2004 that it had formed an
alliance with Dr. Arthur Agatston, cardiologist and creator of the South Beach Diet. The company stated that it
would use the South Beach Diet trademark to promote some Kraft products that can be used by people
following the South Beach Diet programme.
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Nutrition labels
In October 2004, in response to the FDA's call for clearer nutrition communications on smaller packages, Kraft
announced that it would launch improved nutrition labels that make it easier for consumers to choose the portion
size of the foods they eat. Kraft agreed to put the new labels on its snack and beverage products that contain two
to four servings, and to provide nutrition information for the contents of the entire package. In addition, the total
number of servings would be stated on the front of the package.
Kraft's "Sensible Solution" flag, introduced in January 2005, is designed to identify foods and beverages that
offer better nutritional choices in their respective product categories, with because they contain beneficial
nutrients such as calcium or fibre, or because they meet certain specifications for "reduced", "free from" or are
"low in" calories, fat, saturated fat, sugar or sodium.
Advertising
Kraft, as the US's biggest food company, spends some US$90 million advertising directly to children every
year, and has therefore been held more responsible than most other companies by many consumers and lobby
groups for contributing to the rise in obesity.
In the spring of 2004, Kraft made a momentous decision to stop advertising certain products to children under
12, but still market "healthier" food to kids between six and 12. This caused an uproar in the industry, as it was
seen as an admission that there were "bad" foods. Kraft does not in principle use negative terms to describe any
of its products, but just admitting that certain foods were "healthier" than others was seen as revolutionary. To
some, it was akin to a move by tobacco firms years earlier, when they finally agreed that "there is no such thing
as a safe cigarette."
The new policy was made public in January 2005. It was seen by some as a brave move, since Kraft risked
losing market share and millions of dollars in sales, but at the same time it allowed the company a certain
amount of control that it would not have it if waited for the government to put restrictions in place on
advertising to children, and was also good publicity. Critics complain that the policy gives Kraft too much
discretion in deciding what is healthy and what is not. They note the company still reaches young children
through cartoon characters on its packaging, and continues marketing all of its products to children over 12. For
example, Kraft continues to use SpongeBob Squarepants and Dora the Explorer on packages of Honeycomb
cereal and Teddy Grahams cookies, products it no longer advertises on children's TV shows.
Under Kraft's new policy, any product advertised on a TV show where more than 50% of the audience is under
12 (as measured by Nielsen Media Research) has to meet the nutritional standards set by the company. At first
only five of its products qualified for advertising to children, of which three were drinks (Sugar-Free Kool-Aid
and two kinds of Capri-Sun drinks). Only two food items met the company's own criteria, namely Lunchables
Fun Pack Chicken Dunks and Sugar Fruity Pebbles cereal. Since then, Kraft has added other products suitable
for advertising to children, including a reformulated version of macaroni and cheese, with pasta that comes in
shapes of characters from SpongeBob Squarepants and Scooby Doo.
9.8 McDonald's Corp

As the pioneer of fast food and the world's largest fast food company, McDonald's has come under fire from
many quarters over the years. Critics claim it sells unhealthy or non-nutritious food with exploitative advertising
targeted at children (McDonald's is said to spend US$1.4 billion per year on advertising), and that the company
contributed to the suffering and exploitation of livestock. McDonald's was also criticised for its litigious and
heavy-handed approach to preserving its image and copyrights and, in 2002, the company was unsuccessfully
sued by two New York teenagers claiming that eating at the chain had made them obese. As a result of these
criticisms, McDonald's began to take steps to improve its image, deciding in 2003 to become leaner and greener
by introducing more healthy options, including salads, yoghurt and white-meat Chicken McNuggets.
When Morgan Spurlock's documentary, "Super Size Me", highlighted not only the astronomical calorific
content of "supersized" meals, but also the extreme adverse heath effects of a fast food diet in 2004, the
restaurant chain was forced to react. In Australia, McDonald's placed an advertisement in the opening trailers of
all viewings of 'Super Size Me' arguing that the film viewers were about to watch was full of "misleading
distortions".
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The company immediately pulled its "super size" policy in the US and set about a comprehensive branding
health kick. Across North America, Japan and Western Europe, the restaurants introduced new menu offerings
including salads, bottled water, yoghurts, breakfast and filled bagels, deli sandwiches and a new kids menu.
The new Happy Meals have fruit bags, juice, water, carrot sticks and milk in addition to the burgers and fries.
McDonald's also has new nutritional information cards that allow parents to calculate the total calories in each
combination. In early 2005, the company also broke the news that it would be giving Ronald McDonald a
similar makeover. The outdated clown would now wear a tracksuit and juggle fruit and vegetables.
Marketing has also tried to target new consumer groups, who may have previously strayed away from the brand.
This has also been at the centre of McDonald's strategy, faced with market saturation in the US, the brand now
needs to increase customer numbers to ensure continued high revenue. The appeal of salads to women and the
healthier Happy Meals to parents have been highlighted in order to expand beyond the traditional consumer
groups. The strategy clearly seems to have paid off for net income in 2004 rose to US$2.2 billion, up from
US$1.5 billion in 2003. McDonald's share price also rose and it seems as if health is now, ironically, one of the
principle drivers behind even fast food sales.
In March 2005, McDonald's launched a global public awareness programme designed to help consumers better
understand how to live balanced, active lives. With the key message "it's what i eat and what i do i'm lovin' it,"
the program aimed to communicate the essential concept of energy balance in an engaging, simple way. The
message was delivered through a variety of communications, including television ads, print and outdoor
advertising, packaging tips, trayliners, and brochures.
Providing nutritional information
Supported by McDonald's Global Director of Nutrition, its local business units develop and implement their
own nutrition information and education programmes. They generally provide breakouts of the major nutritional
values of the foods they regularly serve, but may also provide additional types of information, like ingredients
lists for people with allergies and food sensitivities and food exchanges for people with diabetes. McDonald's
Japan has established special websites that allow customers to access nutrition and allergen information from
their mobile phones.
Some major local markets have expanded their web-based and other communications to include information
about the quality of McDonald's food products. For example, McDonald's UK has an online pictorial "book"
with information about the sources of major ingredients in popular menu items; while McDonald's France and
McDonald's Australia websites trace the production of major ingredients from farm to counter. McDonald's
Brazil also provides an in-restaurant Nutrition Guide, with a table that allows customers to calculate nutritional
values for their meals. In some markets, customers may drag menu items onto a virtual tray or into a virtual bag
and receive individualised nutrition information on the meal they have built.
Many of McDonald's business units also offer in-restaurant nutrition information in brochures, trayliners,
posters or flyers.
In February 2006, McDonald's officially launched its global Nutrition Information Initiative in Torino, Italy,
during the 2006 Olympic Winter Games. The initiative will provide consumers with nutrition information on
food product packaging. By the end of 2006, McDonald's plans to have rolled out the packaging in more than
20,000 of its restaurants worldwide. According to the company, the new food packaging uses an easy-tounderstand icon and bar chart format to present the product's nutritional value and how it relates to experts' daily
nutrient recommendations.
For the initiative, icons were developed to represent the five elements that are considered most relevant to
consumer understanding of nutrition: calories, protein, fat, carbohydrates and salt (sodium). The icons and bar
chart are designed to work together to convert scientific information into a consumer-friendly snapshot of a
product's nutrition value and how it relates to daily nutrient recommendations.
McDonald's Europe will use the bar charts and icons exclusively, allowing the communication to be nonlanguage dependent, and the European packaging will include the first-ever pan-European GDAs, to avoid the
need for country-to-country calculations. They refer to the average amount of calories and nutrients that should
be present in a daily diet. The GDA for adults is 2,000 kilocalories for adults. European menu items that are part
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of a Happy Meal, including hamburger, cheeseburger, 4 piece Chicken McNuggets and small French Fries, will
also show an icon and bar chart for children 4-7 years, based on 1600 kilocalories.
Encouraging healthy lifestyles
McDonald's also initiates programmes which encourage physical activity for children and adults. For example,
"Passport To Play" is an initiative to encourage children to get active by playing games from around the world.
Each participating school receives a kit designed for use by Physical Education teachers, which contains a
variety of materials. As students complete each activity during the semester, they obtain another stamp in their
passport, eventually completing their journey around the world of play.
In Spain, McDonald's developed a book on various balanced, active lifestyles topics, including balanced diets
for children, nutrition for sports, and nutrition in schools. 100 Questions on Nutrition was distributed to
paediatricians, consumer organisations, local schools and opinion leaders.
In the UK, the company created a series of informational advertisements in 2004 featuring animated characters
called the YumChums. The characters explain through song and dance how to keep fit and happy by eating a
balanced diet, drinking enough fluids, and exercising.
In Germany and Japan, McDonald's offers teaching materials for schools. Its Shokuiku no jikan (Food
Education Time) programme for elementary and junior high schools in Jaoan seeks to increase awareness of the
pleasure of eating right and the importance of energy balance.
McDonald's also launched a global programme called "Go Active!" to coordinate and complement initiatives at
the local level. This included the offer of a special adult Happy Meal deal in the US and throughout Europe and
Latin America, whereby 30 million Stepometers were distributed. Also, in partnership with the International
Olympic Committee, McDonald's developed a global website Go Active designed to inspire and support
physical activity. This includes personal fitness assessment tools, a resource library and advice to help parents
guide children in safe and healthy eating and fitness activities. The site also provides an interactive "virtual
trainer" that allows users to generate their own personalised fitness programmes and a page for users to motivate
one another by sharing success stories.
9.9 PepsiCo
PepsiCo is one of the world's largest food and beverage companies with annual revenues of US$29 billion. Its
main businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and
Quaker foods, representing 16 core brands.
Due to its focus on snack foods and carbonated drinks, PepsiCo has been another company highly criticised for
its involvement in advertising to children and for contributing towards bad eating habits. As a result, it has made
great efforts to give itself a more healthy image and appear to be socially responsible. PepsiCo states that it tries
to help children lead healthier lives by offering healthy product choices in schools, by developing healthy
products that appeal to children and by promoting programmes that encourage them to lead active lives.
The company claims that its largest contribution to healthy living will be in providing healthy products with
mainstream appeal, so it aims to improve the healthiness of its products without sacrificing taste or convenience.
PepsiCo's Smart Spot Programme
In August 2004 PepsiCo introduced its "Smart Spot" initiative, which is designed to be a quick way to identify
food and drinks that may contribute to a healthier lifestyle. PepsiCo claims that each Smart Spot product meets
nutrition criteria based on authoritative statements of the FDA and the National Academy of Sciences. The
Smart Spot logo was introduced to more than 100 products, such as Baked! Lays, Life Cereal, Gatorade Thirst
Quencher, Quaker Oatmeal, Diet Pepsi Cola and Quaker Chewy Granola Bars.
The initiative was accompanied by the launch of PepsiCo's S.M.A.R.T. lifestyle programme, which was
designed to encourage five easy-to-remember steps towards a healthier lifestyle:
Start with a healthy breakfast
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Move more
Add more fruits, vegetables and whole grains
Remember to hydrate
Try lower calories or fat
World
As part of the programme, PepsiCo, in partnership with KaBOOM!, a non-profit organisation that aims to
provide a fun play area within walking distance of every child in the US, has also built Smart Spot playgrounds
across the country, with an emphasis on low-income communities. The first Smart Spot Playground was
launched in Washington DC by celebrity "supermodel and mom" Cindy Crawford in November 2005.
Other aspects of the S.M.A.R.T. programme include a national advertising campaign, an interactive website and
a magazine, "Everyday SMART Moves".
Advertising
In March 2005, PepsiCo announced that it had introduced voluntary restrictions on its advertising to children, in
response to rising levels of obesity in the US and Western Europe. It was reported that PepsiCo would no longer
advertise its flagship Pepsi brand to children under 12 or its Cheetos chips brand to children under eight. The
policy had been in place for several months, but unlike its rival, Kraft, the company decided against announcing
it publicly.
PepsiCo also placed limits on the portion sizes of products sold in US schools. As an example, fried Cheetos
have been replaced with a lower-fat baked alternative in elementary schools and serving sizes limited for all
snacks to 150 calories, rising to 300 calories in middle schools.
Adapting products
In response to government and consumers' concerns, PepsiCo has already made significant efforts to adapt its
product range. For example, in 2003 the company removed trans fats from Doritos, Tostitos and Cheetos, which
joined other non trans-fat brands Lay's, Ruffles, Fritos and Rold Gold Pretzels. More recently, PepsiCo pledged
that 50% of new products will use "essentially healthy ingredients or offer improved health benefits".
In February 2006, PepsiCo's Walkers Crisps business in the UK pledged to use a new type of oil which would
reduce the crisps' level of saturated fats by 70%.
9.10 Unilever Group

The Anglo-Dutch consumer products giant Unilever is the world's second largest food company with a strong
presence in a wide range of food categories, as well as operating in the areas of home and personal care
products. Unliever's food portfolio includes ice cream, soup, frozen food and meal replacement products. Its
major brands include Flora/Becel pro activ, Bertolli, Knorr, Rama, Blue Brand, Country Crock, Lipton, AdeS,
Findus/Bird's Eye, Hellmans, Ben and Jerry's, Breyers and Carb Options. In February 2006, Unilever announced
that it had decided to put the majority of its Frozen Foods businesses in Europe up for sale (excluding ice
cream), keeping only the Italian operation. This includes the Iglo and Birds Eye brands.
A model example of CSR?
Unilever is currently seen as one of the most socially responsible companies in the world, having made
significant efforts to promote heath awareness, the arts and the environment for several years. Unilever has
started a number of initiatives to promote environmentally responsible production, and in 2004, the company
topped the Dow Jones Sustainability Index (DJSI) in the food production category, due to its high level of
engagement across all three corporate sustainability dimensions economic, environmental, and social.
Nutrition high on the agenda
Partly as a result of this strategy, and also due to its focus on nutrition and its lack of products marketed
specifically to children, Unilever has managed to avoid much of the adverse publicity directed at the snack food
and soft drinks giants. The company's nutrition policy centres around several principles, including:
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promoting a balanced diet to consumers
the development of low fat, low salt and low sugar alternatives and 'active health' (functional) products
not promoting excess consumption.
Unilever has made nutrition a priority for many years, being an early pioneer in the addition of vitamins to
margarine, and later of foods that lower cholesterol. However, only recently has it really made efforts to make
its entire portfolio more healthy. Through its Nutrition Enhancement Programme, the company recently cut
down levels of salt, sugar and trans fats and improved labelling. These efforts have led to a 16% reduction in the
amount of salt contained in Birds Eye frozen ready meals and vegetables in the UK. In addition, in 2004, salt
levels in Birds Eye's UK soups and sauces were lowered by 10% on top of previous reductions. For 2005 and
2006, Unilever has pledged to eliminate 15 000 tons of trans-fats, 10 000 tons of saturated fats, 2 000 tons of
sodium and 10 000 tons of sugars from its portfolio.
Like many other global companies, Unilever employs a host of scientists to develop new healthy product lines.
Its Food and Health Research Institute orientates its work around six "vitality goals". These are a series of aims
that Unilever hopes to meet through its new products to improve consumer wellness. The goals are to feel good
daily, be healthy for longer, achieve more, give children a head start and be free from health problems.
For many years Unilever has been at the forefront of new product development in the area of health and
wellness. Capitalising on the low-carb trend, Unilever launched Carb Options in the US in 2004, which covers a
wide range of products such as Carb Options ketchup from Hellmann's, Carb Options hearty Italian-style sauce
with sausage from Ragu and Carb Options chunky peanut spread from Skippy. The company also introduced a
new line of reduced carb products to its Slim Fast line in late 2004 under the Low Cal Low Carb label. Breyer's
ice cream also added a new CarbSmart extension in North America.
With its flagship health and wellness brand, Flora pro activ, Unilever brought plant sterol technology to the
mass market. In 2005, the Flora pro activ line was extended into the dairy market. The new range now includes
a cholesterol lowering milk, single serve yoghurt drinks and yoghurts. In addition, the range now has a new
health claim, the lowering of blood pressure, with a line of mini drinks containing AmealPeptides now available.
The line claims to be able to lower blood pressure within two weeks of regular consumption.
In 2004, in an effort to reinvigorate the ailing frozen food sector, Unilever developed its Steam Fresh line under
the Findus/Bird's Eye label. This innovative use of microwave technology in response to consumer demands for
fresher and easy-to-prepare frozen foods has set the company apart from other frozen food manufacturers, even
within its mass market setting.
Knorr's most notable health and wellness launch in 2005 was that of its Vie shots. These smoothie style, single
serve juices come in packs of three or separately. Initially launched in the Benelux countries, they were later
extended to the UK market. With their small 100ml bottles, they clearly tap into the loyalty and recognition of
fermented yoghurt drinks such as the new pro activ line.
As well as touting the nutritional benefits of its products, Unilever recognises that products must still be
appealing to consumers, and has therefore made a number of developments in the are of "guilt-free indulgence".
Innovations in production technology have allowed Unilever to produce reduced sugar and fat extensions for its
North American Breyers brand. This new technology has allowed Unilever to market the lower fat ice cream as
"extra creamy with only 6% fat content". With the technology now approved in six countries, the potential for
geographical expansion is considerable. The Breyer's CarbSmart line has also proved a popular launch among
consumers with zero net carbs per serving.
Getting the message across
Unilever's nutrition policy is now also at the heart of its marketing principles under its "adding vitality to life"
strapline. Unilever uses a number of symbols and brand mascots in the promotion of its brands. The most
recognisable is perhaps the Heart logo under which Unilever has unified its ice cream brands. The logo was
relaunched in 2003, and supported by a 20% increase in marketing spend over three years.
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The new marketing guidelines were adopted by the company in 2004 as a response to the global outcry over the
news of rising obesity rates. The plan means that the company must advertise products only in the context of a
balanced diet, not promote oversized portions or inactivity and exercise particular caution when advertising to
children.
In the UK, Unilever set out in 2005 to extend the appeal of the Flora pro activ line to women aged over 55,
choosing 60s pop singer Lulu as a celebrity with whom women could both identify and aspire to emulate. With
Lulu encouraging consumers to take her 'three week challenge' to lower cholesterol, more and more women
were drawn to the brand. The campaign is sponsored by new packaging featuring Lulu, a website and
promotional activity.
Promoting hygiene
Unilever's social responsibility programme is not limited to its food businesses. For example, following WHO
reports that diarrhoea is the largest single cause of preventable death, killing 2.2 million people every year, the
company began a major, sustained direct contact health education programme aiming to raise hygiene standards
in rural communities in India and Bangladesh. Through its Lifebuoy soap brand, Unilever is helping to spread
the message that washing hands with soap can make a material difference in helping to prevent the spread of
preventable infectious diseases. Of course, as well as being a philanthropic effort, Unilever receives excellent
publicity for its Lifebuoy brand throughout the region.
10. OUTLOOK
10.1 Trends To Watch
CSR on upward trend
CSR is a trend that is undoubtedly going to continue to grow in the future. Increasingly, consumers want to do
what is right, and further media hype about the ill effects of smoking, drinking and consuming "unhealthy"
foods and drinks will continue to change people's expectations, both of themselves and of the companies that
provide these products.
In short, companies know that they cannot afford to ignore consumers' growing ethical demands, and that failure
to meet expectations for socially responsible behaviour may ultimately destroy consumer trust and hasten tough
new regulations. However, how far they will be prepared to go in this respect remains to be seen.
The tobacco, alcoholic drinks and food and drinks industries are likely to see further legislation in the future, but
they may be able to lessen the severity of new measures by responsible self-regulation. Governments, faced with
rising healthcare costs as a result of smoking, drinking and obesity-related illnesses, will be forced to take
preventative measures to ease the economic burden. However, at the same time they do not wish to be accused
of "nannying" the nation, and will therefore expect companies to carry out a certain level of self-regulation.
Self-regulation will be stepped up to avoid legislation
Companies themselves prefer self-regulation to government imposed restrictions. Not only does it allow them
more flexibility, but it allows them the opportunity to gain exposure and even free publicity. Furthermore,
seeming to be socially responsible will help them avoid the future litigation that otherwise seems inevitable. All
these factors point to the fact that industry will make further efforts to improve their marketing practices and
create safer, or more nutritious, products in the future.
In the case of alcohol companies, the future of advertising lies in taking a more responsible approach, in order to
prevent the threat of further legislative restrictions. In the UK, certainly, there has been no better time for the
drinks industry to show that it can act in a responsible manner, following the introduction of Ofcom's new
advertising codes in January 2005. Companies are already beginning to take action, with Bacardi Martini
recently firing UK advertising agency McCann after a decade of controversial advertising; Allied Domecq
developing its own coherent set of marketing codes giving guidance to advertising agencies in the marketing of
its brands; and Diageo launching two high profile responsible drinking ads in February 2006.
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However, the threat of further regulation in the future still remains. Should the UK government's 24-hour
licensing policy turn out to be a failure, the concern is that the government will want to be seen to be doing
something, and alcohol advertising may potentially be seen as a soft target. To prevent further tightening of
legislation on alcohol advertising, the advertising industry understands the need to mount its defence. Possibly
most at risk are advertisements for FABs, rum and whisky advertising, where drinks producers have been
overtly targeting young audiences. For example, a cinema advert for Bacardi, which showed the "flamboyant"
pouring of a bottle, was recently ruled socially irresponsible by the advertising watchdog ASA. This was the
first indication of the attitude of regulators since Ofcom's new guidelines on advertising alcohol were
announced.
In the medium term, it is likely that advertisers will be forced to devise fresh and imaginative strategies in line
with drinks companies' willingness to demonstrate a responsible approach. These companies may learn lessons
from the tobacco industry, notorious for using sonic and imagery triggers in the late eighties to early nineties.
These included the Silk Cut poster, which showed a slashed length of purple silk which left strong, non-verbal
imagery, and the Hamlet cigar "Happiness" campaign, which strongly associated sonic representation (in this
case "Air on a G String"), as a means of associating with a particular brand.
Food legislation will remain controversial
Food is a more hazy issue than tobacco or alcohol, since it is something that everyone needs, and it will be
difficult to draw the line between those that are "good" and "bad". Trends are constantly changing. For example,
the low-carb phenomenon was relatively short-lived, and while consumers are paying more attention now to
their carb intake, the frenzy that was apparent, especially in the US, throughout 2004 and 2005, appears to be
abating. Moreover, what might be considered good or bad for one person may not be good or bad for another.
This is why most of the large food groups are against the FSA's proposed "traffic light" system and will
introduce more voluntary systems of their own devising. However, what is unclear is how these voluntary labels
will apply within the framework of the new EU's Health and Nutritional Claims regulations, which will
eventually come into force in Europe.
It is also unclear where a company should draw the line in terms of responsible marketing of its products, and
these parameters will continue to change in the future as consumer perceptions alter. Companies will need to
keep advertising somehow, in order to keep profits up for shareholders, and there is a danger that companies
targeting children will increasingly switch from direct advertising to more underhand methods such as viral
marketing, including the internet and text messaging, which could also rile parents.
It will be interesting to see what the future holds for the major snacks and soft drinks companies, especially
those overwhelmingly associated with "bad for you" food products, such as PepsiCo and Coca-Cola. What is
certain is that they cannot afford to be complacent. Their success is likely to depend on whether they can regain
the confidence of consumers that are increasingly aware of the need for good nutrition, both through clever
marketing and developing a healthier product portfolios.
Similarly, the tobacco companies are likely to experience a downward decline, unless they diversify or develop
products that are less harmful than those that are currently on the market. Although some tobacco companies are
seemingly becoming more socially responsible, the industry is seen as doing too little too late. Some say that
tobacco companies should have reformed their marketing strategies 20 years ago, even if it meant sacrificing
profits at the time, in order to avoid the regulation, litigation and negative image of the industry that is evident
today. However, it is not too late for food companies to do just this.
Litigation will spread to food and beverages
Litigation against junk food companies is a real threat in the near future. If companies do not do more to change
their practices and reformulate their products, they may be faced with similar lawsuits to those seen in the
tobacco industry.
In the US, a study on the use of litigation to defend public health was published in January 2006, part-written by
Professor Richard Daynard, a lawyer who has already sued tobacco companies. The report cited research that
had found that each additional serving of sugar-sweetened soft drink increased a child's chance of obesity by
50%. The study, appearing in the American Journal of Preventive Medicine, said that while it was harder to
prove that certain food products had a direct impact on obesity-related diseases, it was likely that litigation
would be needed to address the obesity problem in the US, just as it was needed against tobacco firms. Daynard
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spent 2005 preparing a lawsuit to eliminate soft drinks companies from US schools on obesity grounds. The aim
of the suit is to change public perceptions, and ultimately to lead to a change in industry practices. The CSPI
also confirmed that it was preparing obesity lawsuits against soft drink companies, spurred on by recent actions
against McDonald's.
More transparency needed
Companies will need to become more transparent in the future if consumers and NGOs are going to take their
efforts at CSR seriously. For example, among the major food and drink manufacturers, very few have actually
published obesity-related improvement targets and Key Performance Indicators (KPIs). This makes it difficult to
assess companies' overall strategies and practical achievements. However, there are signs that European food
and drink manufacturers may soon begin to report on obesity-related KPIs and performance figures. In January
2006, the Union of European Beverages Associations published a document revealing a list of actions that its
members had agreed to undertake in the context of the EU talks on diet and health. The document proposes
KPIs for each commitment, including a compliance rate of the implementation of their policies on marketing to
children, and an assessment of their commitment to respect schools as commercial-free zones.
10.2 Market Forecasts

Among a cross-section of products that are generally considered to be harmful to health, contribute to obesity or
cause alcohol-related crimes, all sectors are forecast by Euromonitor International to experience moderate
growth over the 2005-2010 period.
Cigarettes will see further volume decline
However, in the case of cigarettes, this growth will be attributable to tax hikes and price rises rather than any
increase in volume sales, especially in Eastern Europe, where new EU members will need to align themselves
with EU tobacco taxation, and in the US, due to higher taxes and the additional cost of the MSA. In volume
terms, cigarette sales are expected to decline by some 2-3% over the forecast period.
Tobacco companies will become increasingly restricted by legislation and political changes, and the
involvement of the WHO in the regulation of the tobacco industry on a global level means that the trend for
lower tar brands will become increasingly widespread. This will provide opportunities for the tobacco industry
to innovate and stimulate growth by taking advantage of the strength of their existing brands to develop existing
and new markets.
As a result of the current restraints that tobacco manufacturers are facing in terms of legislative pressures
regarding tar and nicotine restrictions, new product development is becoming an increasing source of focus for
manufacturers to develop their competitive advantage. Growing health awareness amongst smokers is also
spurring manufacturers to develop a "healthier" smoke. For example, BAT is expected to roll out its new
"trionic" filter cigarettes during the forecast period, which are said to reduce the amount of toxic chemicals
compared with normal cigarettes.
Fast food will hold up due to improvements in nutrition
The fast food sector is forecast to see growth of 18% over the 2005-2010 period, fuelled by strong growth in
emerging markets, where the major multinational chains are continuing their expansion. Growth will be
considerably slower in developed markets, such as the US and Japan, where fast food is a mature category.
Trends towards health and nutrition will continue to impact the fast food sector, which will need to adapt in the
same way as McDonald's in order to regain the confidence of consumers. Concerns about childhood obesity will
lead to growing range of healthy food options targeting children, or rather nutrition-conscious parents, including
products offering to help children achieve recommended daily amounts of fruit and vegetables. Furthermore,
fast food outlets will offer more specific health options. While the popularity of low-carb diets is waning,
dietary trends continue, with the GI diet proving popular in 2005. The incorporation of such diets into menus
may be an emerging trend over the forecast period, especially as the growing importance of chained operators
increases the coverage and influence of individual menus. The increasing consumer interest in the nutritional
value has also led to a growing push to have nutritional information included on the menus of chained operators,
and this trend will continue over the forecast period.
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Among the alcoholic drinks sectors, fastest growth is predicted for spirits, as the momentum of growth in FABs
begins to slow. This is mainly due to the predicted growth of premium and super-premium spirits brands,
however, and masks a sluggish performance in volume terms, due to growing consumer awareness of the
potential effects of spirits consumption, along with hard-hitting campaigns against drink-driving, excessive
drinking and irresponsible drinking.
Sugary products will suffer flattest growth
The slowest growth among the sectors under review will be seen in confectionery, carbonated drinks, ice cream,
biscuits and breakfast cereals, all of which are associated with high fat, sugar and salt content that may be
contributing to childhood obesity and other health problems. On the other hand, sales of snack bars, which
benefit from a healthier image, are forecast to increase strongly from 2005-2010, by 23%.
The confectionery market will be boosted in the future by improvements in sugar-free technology and products.
Not only will sugar-free products cater to increased consumer concern regarding sugar intake and general health
as cases of obesity and diabetes are forecast to increase in many developed markets they also satisfy
consumers' rising demand for intensely flavoured confectionery, particularly in sugar confectionery and gum.
Improved sugar-free technology should benefit overall sales, as higher priced sugar-free chocolates become
increasingly prevalent to meet the needs of an ageing population and the rising incidence of diabetes.
Within sweet and savoury snacks, products with a more healthy image, such as nuts and fruit snacks, will gain
share over traditional savoury snacks such as crisps/chips and extruded snacks, which are widely considered to
have no nutritional value. Similarly, meat snacks will benefit from consumers shunning carb-heavy snacks, and
the heavy promotion of products such as Oberto Sausage Co's Oh Boy! Oberto brand of meat snacks.
Table 12
Forecast Global Value Sales in Relevant Sectors 2005/2010
US$ million
Cigarettes
Fast food
Beer
Confectionery
Carbonated drinks
Spirits
Sweet/savoury snacks
Ice cream
Biscuits
Breakfast cereals
FABs
Snack bars
Source:
2005
2010
% growth
2005-2010
429,164
348,327
174,464
126,348
122,712
89,510
71,665
56,640
52,553
22,292
11,315
6,918
503,164
410,958
204,293
143,232
137,458
109,664
82,809
63,908
58,315
25,064
13,638
8,523
17.2
18.0
17.1
13.4
12.0
22.5
15.5
12.8
11.0
12.4
20.5
23.2
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Corporate Social Responsibility (and

the FMCG Market Response)

Euromonitor International : Strategy Briefing

List of Contents and Tables

8.3 Breakfast Cereals .............................................................................................................................................. 40

CORPORATE SOCIAL RESPONSIBILITY (AND THE

Factors Affecting Health-Related CSR Policies 2006

1.2 Relevant Market Trends

Value Growth in Relevant Sectors 2000/2005

1.3 Company Action

CSR Efforts by Major FMCG Operators

Operates community-based responsible drinking

British-American Tobacco (BAT)

One of the few tobacco companies to publish a CSR

Develops lower calorie and lower fat options, and new

The Coca-Cola Company

Operates fitness campaigns in schools (eg "Live It!"),

Key supporter of the WHO's World Health Day (held

alcohol through retail outlets

Operates fitness programmes (eg Frosted Flakes

Kraft Foods Inc

Reduced fat content in 200 products in North America

Abolished its "super size" policy and introduced new,

detailed nutrition information on food product

Appointed high profile media personality, Anna Ford

"Smart Spot" initiative enables consumers to identify

Considered one of the world's most socially

1.4 Future Outlook

2. INTRODUCTION AND DEFINITIONS

2.2 Csr Overview

Economic (the responsibility to be profitable);

Legal (the need to obey the law);

Ethical (an obligation to do what is right);

Philanthropic (making a contribution to the wider community).

Case study: PepsiCo's combined CSR/financial report how effective is it?

3. HEALTH AND SAFETY ISSUES

Smoking Levels in Selected Markets 2000-2005

Smoking prevalence in population aged 15+

3.2 Irresponsible Drinking

Deaths per 100,000 inhabitants

3.3 Over-consumption of "junk Foods"

Obese Population in Selected Countries 2000/2005

% of population aged 15+

4.2 Anti-smoking Measures

Full disclosure of ingredients added to tobacco products;

Health warnings on tobacco products

Smokers die younger.

Smoking causes fatal lung cancer.

Smoking when pregnant harms your baby.

Protect children: don't make them breathe your smoke.

Your doctor or your pharmacist can help you stop smoking.

Smoking is highly addictive, don't start.

Smoking can cause a slow and painful death.

Get help to stop smoking: (telephone/postal address/internet address/consult your doctor/pharmacist).

Smoking may reduce the blood flow and causes impotence.

Smoking causes ageing of the skin.

Smoking can damage the sperm and decreases fertility.

Smoke contains benzene, nitrosamines, formaldehyde and hydrogen cyanide.

Advertising restrictions on tobacco

4.3 Anti-alcohol Measures

Preventing crime and disorder

Ensuring public safety

Preventing undue public nuisance