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PepsiCo draws fire for alleged ‘crass commercial’ choice of profit over public health

By Ben Bouckley , 15-Mar-2012
Last updated on 15-Mar-2012 at 18:13 GMT

Hits US stores from March 26: Pepsi NEXT is described as 'a game-changer in the cola category, and the first to deliver real cola taste with 60% less sugar than Pepsi-Cola'
Hits US stores from March 26: Pepsi NEXT is described as 'a game-changer in the cola category, and the first to deliver real cola taste with 60% less sugar than Pepsi-Cola'

Leading US nutrition expert Professor Marion Nestle says that PepsiCo’s decision to invest around $500m on marketing ‘megabrands’ she describes as unhealthy was a ‘crass commercial decision’, but the firm insisted that ‘health and wellness’ was crucial to its future.

Prof. Nestle, professor of nutrition, food studies and public health at New York University, told this publication that she had been fascinated by the multinational giant’s “‘healthy food’ strategy” since it appointed Derek Yach as director of global health policy in February 2007.

PepsiCo said at the time that the move was in keeping with its commitment to develop the "world’s most balanced portfolio of convenient food and beverage choices”.

But Prof. Nestle told this publication today: “As a publicly traded company, PepsiCo's first and only priority is to satisfy its investors.  It is not a social service agency.  Its investors see its apparent focus on nutrition as public relations (PR).”

She added: “PepsiCo is putting $500 to $600m (€382m to €459m) into pushing a sugary soft drink [marketing core brands] and firing 8,700 employees because its investors and Wall Street couldn’t care less about health. A crass commercial decision?  It sure looks like that to me.”

‘Health and wellness’ unlocks growth

Analysts said this week that, following a leadership reshuffle announced on Monday, PepsiCo could be lining-up new president (former CEO, PepsiCo Americas Foods) John Compton as successor to current CEO Indra Nooyi, who has aroused some shareholder unrest, in part due to her healthy food vision.

Presented with Prof. Nestle’s comments, a PepsiCo spokesman suggested to BeverageDaily.com that ‘health and wellness’ had been a “successful driver of growth for PepsiCo for many years”, and pointed to its acquisition of Tropicana in 1998 and Quaker Oats in 2001.

He added: “Both of those deals unlocked new growth opportunities and contributed to our success as a company over the past decade. We see health and wellness as an area of continued growth moving forward.”

As for the investment focus on ‘core’ products? “We’ve highlighted 12 brands in particular as the focus for our increased advertising and marketing investment in 2012,” the spokesman said.

"Pepsi, Mountain Dew, Sierra Mist (7UP on international markets), Gatorade, Tropicana, Mirinda, Lay’s, Doritos, Cheetos, Lipton, Quaker and the Sun brand. As you can see, this is a diverse mix of brands that span all parts of our product portfolio," he added.

Tail wagging dog?

Contrary to investors who she said regarded PepsiCo’s nutrition focus as a public relations move, Prof. Nestle coined a neologism and said she referred to it as ‘nutriwashing’. 

She said: “A ‘better for you’ sugary soft drink is still a sugary soft drink, and Pepsi’s new ‘healthier’ mid-calorie option – laden with artificial sweeteners and high fructose corn syrup – can hardly be considered a health food.”

An article published this Tuesday in theNew York Times“said it all”as far as she was concerned, Prof. Nestle added.

This stated that Nooyi’s vision of PepsiCo as a company selling nutritional products, rather than sodas and salty chips, had impressed management consultants and nutritionists since she arrived nearly six years ago.

But the paper said that investors and analysts had never been impressed, and quoted long-time investor Donald Yacktman saying he had always only seen the emphasis as a PR focus, and that a dedicated focus on nutritional products would be "like the tail wagging the dog”.

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