Pepsi Teams up with White House to Whitewash Worthless Snacks and Sodas

Personal Health

When, back in February, First Lady Michelle Obama formally announced her Let's Move campaign to end childhood obesity within a generation, only one food company released a press release on the very same day in glowing support -- PepsiCo.

In many ways, PepsiCo has been touting itself as an industry leader. The company's corporate tagline is "Performance with Purpose," broadly described as "delivering sustainable growth by investing in a healthier future for people and our planet."

But how can a company whose top-selling products include Mountain Dew and Doritos make such claims?

Beyond Soda

When most people think of PepsiCo, they think of the soda that is the main competitor to Coca-Cola. In fact, many people mistakenly refer to the company as Pepsi or Pepsi-Cola, but soda represents one part of the company's growing portfolio of products.

PepsiCo formed in 1965 through a merger of Pepsi-Cola with Frito-Lay. Since then, the marriage of salty snacks with soft drinks has been a key to the company's success, and sets it apart from Coca-Cola, which still only owns beverages.

With revenue topping $43 billion last year and 198,000 employees worldwide, PepsiCo is the largest U.S.-based food and beverage company and the second largest food company in the world, after Nestle.

Here's how the company is divided:

  • Pepsi-Cola: carbonated beverages such as Pepsi, Mountain Dew, Sierra Mist, and "energy drinks" such as Amp, and the water brand, Aquafina
  • Gatorade: the ubiquitous "sports drink" and Propel fitness water
  • Frito-Lay: snack mega-brands such as Lays, Doritos, Tostitos, and Cheetos
  • Tropicana: America's favorite OJ and other fruit juices
  • Quaker: Quaker Oats, Life cereal, and granola bars

The Good, the Better, and the Fun

The company prides itself on a wide portfolio of products they break down into good-for-you, better-for-you and fun-for-you. Really, this is what they call them.

Here is how CEO Indra Nooyi explained the categories in a recent interview with Fortune:

If I look at our portfolio, I think you can classify them into three groups: 'fun-for-you foods' like Pepsi, Doritos, Lays, and Mountain Dew, "better-for-you" products like Diet Pepsi, PepsiMax, Baked Lays, Sobi Life Water, Propel, and "good-for-you" products like Quaker, Tropicana, Naked Juice, Gatorade.

The fun-for-you products and even the good-for-you products probably come as no surprise. But where things get pretty murky is in the middle category. In the world of PepsiCo nutrition, drinks like Diet Pepsi are "better-for-you" because they have zero calories. Perhaps that's a measure of something, just not of good nutrition. Nor does the number of calories alone make one product better than another.

I asked Marion Nestle, Paulette Goddard Professor in the Department of Nutrition, Food Studies, and Public Health at New York University and author of Food Politics (among other books) what she makes of PepsiCo's 3-tiered approach to its products:

PepsiCo is famous for leading the way to find health reasons to sell junk food. "Fun-for-you" is a brilliant way to spin "bad-for-you." "Better-for-you" raises the question, better than what? It's great the company isn't claiming these products are health foods but I think PepsiCo is on a slippery slope in these categories.

Moreover, that Nooyi places the entire line of Gatorade products in the "good-for-you" category is especially troubling. Most health experts say that except for marathon runners and tri-athletes, the made-up category of "sports drinks" -- mostly sugar water with artificial coloring -- is really unnecessary.

And to promote these products in schools, where kids are barely getting any exercise these days, is downright shameful. As Professor Nestle put it, "Since when is Gatorade equivalent to orange juice in its health benefits?"

The company's claim that Gatorade is "good-for-you" also explains why PepsiCo's recent announcement of a "global policy" on school beverages (which included removal of "full calorie" products) was curiously silent on Gatorade. When I tried to ask PepsiCo management about this disconnect, I was told the products were for "athletes" but no specifics were given on how to keep Gatorade out of the hands of non-athletic students, which describes the overwhelming majority of sedentary kids these days.

CEO Nooyi says the company is putting more R&D dollars behind developing additional "good-for-you" products and is "investing in new sweeteners and salt-reduction technologies to make our 'fun-for-you' products better for you."

In other words, the company is hard at work trying to engineer healthy Cheetos.

The economic goal is to increase the current $10 billion in revenues from "good-for-you" products to $30 billion over the next decade. Nooyi explains that the company will achieve this in part with "fruit and vegetable offered in different forms, whole grains or any other sort of super grains."

How does a company whose business model is based on highly processed junk food offer fruit and vegetables in "different forms"? What's wrong with the current forms?

Then there's the entire world to get those extra dollars from, as Nooyi explains: "But that's just in the U.S. There are many countries in the world where this can expand to."

Emerging Markets

Of course, no food company can survive globally without continuous expansion, especially into the developing world. Global growth is also crucial because of threats of regulation and other public relations challenges here at home.

PepsiCo is very dependant on "emerging markets" which is corporate speak for the developing world. As the Wall Street Journal explains, the company's international business posted 13 percent growth for snacks and 10 percent in beverage (both huge numbers for the food industry), mostly thanks to growth in China and India.

Just last month PepsiCo announced a new $2.5 billion investment in China, on top of the $1 billion the company has already spent there since 2008. The company intends to build a dozen new food and beverage plants, to add to the current 27 facilities.

As for India, (where CEO Indra Nooyi is from) PepsiCo has invested more than $1 billion there since 1989, with 42 bottling plants and three food plants.

Already the exportation of American eating habits to the developing world has resulted in the ironic twist that nations such as India where hunger is still a serious threat are also seeing signs of obesity.

But it's here at home where food companies are facing the biggest scrutiny for its products and marketing practices, which brings us back to the Let's Move campaign.

Calories in, Calories out?

PepsiCo is on board with the voluntary pledge announced last month at the White House by the First Lady herself that 16 processed food companies would somehow reduce calories in the U.S. food supply by 1.5 trillion by the end of 2015.

The announcement was made under the auspices of the impressive-sounding Healthy Weight Commitment Foundation -- a virtual who's who of Big Food: Coca-Cola, General Mills, Kraft Foods, and of course, PepsiCo, whose CEO serves as vice chair.

But industry's plan to achieve its stated goal is dubious at best. The member companies are pledging to develop and introduce lower-calorie options. But if they are making new products, that's actually adding calories to the food supply. Also, for current products, where possible they will lower calorie content. When is it not possible? When Big Food says so, that's when, which is the entire point - to keep industry in charge.

As business writer Melanie Warner points out in her excellent piece, "Food Industry's Calorie Reduction Pledge: Smart Marketing, but Dumb Nutrition," the calorie-reduction pledge is designed to help the industry "head off potential regulation and cast Big Food as a helpful partner in the fight against obesity."

In other words, this announcement is nothing more than another attempt to divert attention away form actual policymaking, which is what companies such as PepsiCo fear the most, especially here in the U.S. Any noise from Washington must be countered with a promise, a pledge, or a commitment, that Big Food has it covered with self-regulation.

And that's all PepsiCo's Performance with Purpose can ever amount to: voluntary claims with no government or third party oversight to hold the company accountable. But even if we could measure PepsiCo's promises, would it matter? Will Cheetos with less fat or Mountain Dew with fewer calories really make people healthier?

The company's problem comes down to this: PepsiCo makes processed food, which is no basis for proper diet in any culture. Nature provides true nourishment in the form of whole grains, fruits, and vegetables, and no corporate mantra can improve on that.

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