World of Coke gets heavier
Published on: 10/27/05
By CAROLINE WILBERT in Atlanta , SHELLEY EMLING in London
The Atlanta Journal-Constitution
With the obesity epidemic becoming a high-profile concern in many countries, Atlanta-based Coca-Cola is struggling to find a new formula for success around the globe.
Though obesity may have landed in the spotlight in the United States earlier than other places, awareness has grown significantly in the last few years in Western Europe, Australia, New Zealand and Canada. The issue also is getting more attention in pockets of Latin America and Asia.
Coke, which recently attributed disappointing financial performance in Europe in part to “health and wellness” trends, is trying to position itself as part of the solution. That’s not easy for a company best known for selling a drink with 150 calories in a 12-ounce can.
Last week, during a conference call with analysts and the media about third-quarter results, Coke executives acknowledged they were disappointed with just 1 percent growth in the number of cases sold in the European Union group. Dominique Reiniche, president of the group, attributed the poor performance in part to “an underlying shift in consumer preferences away from regular carbonated soft drinks and driven by health and wellness trends and the associated public opinion, media and government attention to it.”
Atlanta-based bottler Coca-Cola Enterprises, which will announce third-quarter earnings today, already has reduced its estimates for the quarter, something the company attributed in part to changing attitudes about health in Europe. CCE is the largest bottler of Coke products and generates about 35 percent of its operating income from Europe.
Globally, there are more than 1 billion overweight adults, at least 300 million of them obese, according to the World Health Organization. Being overweight increases the risk of chronic diseases, including type 2 diabetes, cardiovascular disease, hypertension and stroke, and certain forms of cancer, according to the organization, which has said that “obesity has reached epidemic proportions globally.”
Quicker action by PepsiCo
This is not a new issue for Coke. For about five years, it has been a key challenge for the company domestically a challenge that Coke has not met as well as rival PepsiCo. Pepsi has been quicker to create and acquire noncarbonated drinks and is leading in many of the fast-growing categories like sports drinks. Facing mounting pressure from health advocates and lawmakers in the United States, the entire beverage industry announced this year new voluntary restrictions on the sale of sugary soft drinks in school vending machines.
However, only about three years ago did obesity concerns begin to emerge as a significant business issue for Coke and its bottlers overseas.
The United Kingdom, a major market for Coke, serves as a good example of what Coke is dealing with. A 2003 poll conducted by Morgan Stanley shows that 54 percent of people in the U.K. were “mostly” or “strongly” concerned about the health risks of obesity to themselves and their families. This compares with 51 percent of U.S. respondents.
The British media have focused heavily on the issue lately, reporting statistics: The percentage of children in Britain who were overweight climbed from 22.7 percent to 27.7 percent between 1995 and 2002. Recently, the education secretary announced plans to outlaw all carbonated drinks and junk food at schools that receive public funding beginning in September 2006.
Even kids are worried. A quick survey of 25 students at Grove Park Elementary School in West London found that five believed junk food should be allowed at schools while 20 believed it should be banned.
“Kids get addicted to it and won’t stop eating and will gain too much weight,” said Marcus Lovatt, 10.
Natasha Harewood, 9, said that sweets should be allowed but only on special occasions such as birthdays and at Christmas.
“I think it’s OK only if you eat it every once in a while,” she said.
Coke already has a voluntary policy not to sell soft drinks in elementary schools in the U.K., and even high school vending doesn’t represent a significant percentage of sales. However, the larger theme that lawmakers and consumers are worried soft drinks are contributing to childhood obesity is a serious business concern.
France last month banned soft drinks and junk food in schools and also just announced that next year, health messages will be required on all TV and radio advertisements for processed foods.
A number of other countries have considered regulations or taxes related to soft drinks.
Unproven assumptions?
Dealing with the issue can be tricky because the debate is still active.
David McCarron, executive director of Shaping America’s Youth, a Portland, Ore.-based initiative of the American Diabetes Association, said there are lots of unproven assumptions in the British approach.
“Among these assumptions are that by removing selected bad foods, kids will eat better and improve weight management,” he said. “Unfortunately, there is no data on this.
“Such an approach also gives no attention to the activity side of the equation, where there is better evidence that our children’s weight issues are related to daily caloric expenditures through exercise.”