Memorandum by Mr Martin Glenn, President,
PepsiCo UK (OB 94)
COMPANY BACKGROUND
PepsiCo UK is a newly created combination of
4 businesses; Walkers Snacks, Quaker Foods, Tropicana and PepsiCola
(which is bottled and distributed by Britvic Soft Drinks). The
combined company turnover is circa £1 billion and has leadership
positions in Crisps and Snacks; Chilled Not From Concentrate Orange
Juice and Porridge. We are a small player in Carbonated Soft Drinks
and Ready to Eat Breakfast Cereals where we have less than 10%
market share in both markets. In the UK we employ 5,500 people
and have been in business since the launch of Smiths Crisps in
1926. We operate in markets consumed by 90% of the population
but accounting for a small proportion of total calorific intake
(for savoury snacks and carbonated soft drinks we estimate this
to be circa 4% and 3% respectively). We are a relatively small
advertiser (Walkers is ranked 102 in the list of advertisers and
Pepsi 301) and abide by the established Code of Practice. We are
a wholly owned subsidiary of PepsiCo incorporated in New York.
We have studied the transcripts of the Committee thus far and
have attended one of the hearings.
BACKGROUND ON
MARTIN GLENN
Martin has worked for PepsiCo for 11 years primarily
in the Walkers business and has worked in the food industry for
20 years. He is an active member of Business in the Community
and was recently made "Special Ambassador to HRH Prince of
Wales" in the East Midlands, recognising Walkers' pioneering
work in promoting Literacy and Employee Volunteering. Married
with 3 children, Martin is a certified F.A. Coach and a non-executive
director of Leicester City Football Club.
SUMMARY
PepsiCo welcomes the Select Committee's investigation
and appreciates the opportunity to put forward our perspectives
on what is clearly a growing problem in the UK and all over the
world and would like to assert 3 points:
1. We recognise obesity to be a serious
issue today and a growing future problem. In our capacity as a
responsible Corporate Citizen but also as individuals and parents,
this causes us concern.
2. There is a golden rule with respect to
food and lifestyle: balance. Too many calories taken in and too
few expended leads to obesity.
The causes of obesity are reflective of an unbalanced
lifestyle : too many calories in and too few out. A proper solution
therefore has to attack both sides of the equation.
3. We can and want to help and be part of
the solution. PepsiCo's policy, as clearly stated in this year's
Annual Report, cites how, by offering a wider choice of products
and by using our trusted brands to help promote a healthy lifestyle,
we can do this (our thinking as to how this can be done is set
out in this submission). In the UK, we believe that only a clearly
integrated initiative spanning Ministries of Health, Transport,
Education, DCMS and DEFRA and involving all stakeholders in the
obesity issue (food & drink companies, media, games companies,
the medical establishment and sports bodies) can achieve a sustained
reduction in obesity levels.
THE DRIVERS
OF OBESITY
ARE BROAD
AND COMPLEX
The background drivers of obesity are fundamental
lifestyle, technological and economic changes.
Many of these changes have led to more sedentary
lifestyles including:
— Increasing use of TV, video games
and computers for entertainment (Kids watch 17½ hours, on
average, of TV per week; 75% of Kids aged 5-16 have a TV in their
bedroom; 90% have access to a PC and 70% of 7-16 year olds have
access to the internet).
— Greater reliance on and availability
of cars for transportation (only 7% of children walk to school).
— A decline in organised school sports
and fewer playing fields.
— The rise of the "service economy"
where fewer people earn their living through physical labour and
more earn their living from knowledge working (using telephones
and computers).
Other shifts in the economy and society have
resulted in a decline in and breakdown of traditional meals prepared
at home and a corresponding greater reliance on convenience foods
and foods prepared away from the home:
— The rise and very high proportion
of working mothers.
— High divorce rates leading to smaller
households and less demand for formal meal times.
— The increasingly busy schedules of
children out of school.
Adding to the complexity of societal change
is that dietary needs vary greatly by individual (a physically
active individual can consume far more calories without gaining
weight than a sedentary one). In view of this complexity it is
critical that obesity be addressed in a thoughtful, holistic way
spanning 3 broad areas:
3.
Providing people with a greater range of food and
drinks so that they can select what is appropriate for their particular
dietary needs and clear calorific information and labelling.
PEPSICO'S
PERSPECTIVE
As a responsible corporate citizen, we at PepsiCo
share the concerns of this Committee regarding obesity. Even more
important, we believe that we can help be part of the solution,
a position reflected in the statement of PepsiCo's Chairman/CEO
Steve Reinemund in our 2002 Annual Report (see Appendix 1). For
the last 2 years PepsiCo has enlisted the services of Dr Kenneth
Cooper and Dr Dean Ornish to provide advice on how to develop
our product range to better address the issue of obesity.
Specifically, in the UK we have made important
contributions in this area through:
1.
Voluntarily exceeding Government minimum requirements
for labelling on our Snack Food range. Calories and Nutrient composition
is clear to see and simply laid out. A similar approach to nutritional
information will be launched on our soft drinks range in the new
year (Appendix II shows detail). In addition, from February 2004,
we will be using Walkers Multipack Crisps to emphasise the need
for a variety of foods in the diet (Appendix III).
2.
Offering a range of products which are lower fat
or lower sugar alternatives to traditional Snacks and Drinks (Walkers
Lites, Snack a Jacks rice cakes, Pepsi Max and Diet Pepsi) and
products with positive nutritional benefits (Quaker Oats and "Oats
so Simple"; Tropicana Pure Premium Orange Juice). Furthermore
we have invested heavily in advertising these products relative
to our traditional range (Appendix IV).
3.
Helping to promote physical activity. In 2002 we
gave away Football Kits to Clubs (this was not linked to purchase)
and have a long tradition in promoting grass-roots football via
our sponsorships of England, Scotland and N Ireland under-16 soccer
teams. Pepsi is the official youth sponsor of the Football Association
with the objective of getting more children to play football.
Furthermore, we are in discussions with Dr James Hill to assess
the applicability to the UK of "America on the Move"
which PepsiCo sponsors in the US.
PUNITIVE TAXATION
HASN'T
WORKED AND
WON'T
WORK
We would encourage the Committee to avoid simplistic
solutions to obesity and to that end do not believe that healthy
diets and lifestyles can be achieved through narrowly targeted
punitive legislation or a differential tax policy. We also would
not support a differential tax policy that limits individual choice
and penalises the less well off. An additional tax targeted at
a small percentage of total calories consumed would not solve
the problem and would be difficult to sensibly administer. For
example VAT has been levied on so-called "sin food"
for over 20 years; savoury snacks, ice cream, confectionery and
fizzy drinks (including zero calories diet drinks) all incur VAT
at 17½% whereas all other food is zero rated (including cakes,
cake bars, plain biscuits, Jaffa cakes, cookies, Bourbon biscuits
and Ginger Bread Men with chocolate eyes —although the addition
of chocolate buttons would result in VAT being levied). In the
savoury snack market alone the Exchequer already raises over £350
million annually in VAT receipts.
A BROAD BASED
COALITION IS
REQUIRED IF
WE ARE
TO TACKLE
OBESITY
PepsiCo believes that a holistic effort is the
only way to be effective and this will require the full participation
of government (involving multi-ministry coordination and cooperation),
food companies, entertainment companies and sports organisations
to really focus on this issue. We have confidence that integrated
and single minded public service led programmes can affect behaviour;
the success of the Dental Hygiene and Road Safety campaigns of
the 1960's and 70's spring to mind (at a time that the COI advertising
budget was lower than the £130 million it is today). The
objective must be to promote informed choice and, in turn, personal
responsibility for a healthy lifestyle and accept that like the
successful "Don't Drink and Drive" campaign that it
will need to be a long term programme.
To this end, Food and Drink companies like PepsiCo
are already making specific and valuable contributions both to
the sensible regulation of calories in and, given the right political
climate, could play a bigger role in the promotion of healthier
lifestyles.
HELPING BALANCE
WITH RESPECT
TO CALORIES
IN
— Providing clear and consistent information
about calories and nutrition (ideally as part of a national programme
including all packaged foods and restaurant meals). Giving people
more information about what they are eating is the foundation
to tackling obesity.
— By providing a variety of pack sizes
to enable control. 63% of Walkers' crisps and snacks are sold
in multipack servings of 25g or less; the majority of PepsiCola
sold in grocery stores is in re-sealable 2 litre packages. (Appendix
V).
— Developing and marketing products
that have fewer calories, less fat and less salt. At PepsiCo we
have been accelerating our rollout of products in this category
although ultimately consumer demand determines their market place
success. In the last two years we have innovated in the following
ways:
(i)
Pioneered the use of High Oleic Sunflower
Oil on Walkers "Lites" Crisps which has 75% less saturated
fat than regular cooking oil and which contain 33% less fat than
regular crisps.
(ii)
Re-launched Walkers "Salt n Shake"
where consumers can choose whether or how much salt to add by
virtue of it being in a separate sachet.
(iii)
"Oats so Simple"—Porridge
which is prepared in a microwave in 2½ minutes.
(iv)
We launched Snack a Jacks mini rice cakes
in 2001. This is a 10% fat product and has been extremely successful
in the market place.
(v)
Going forward, we have a programme to reduce
saturated fat in Walkers Crisps starting with a 10% reduction
in 2004.
CALORIES OUT
Successful and responsible companies like PepsiCo
should be encouraged as partners in the promoting of sustainable
healthy lifestyles. We have trusted brands and a track record
of delivery in corporate social responsibility.
Business success hinges on understanding consumers.
People are concerned about obesity so, naturally, PepsiCo is taking
it seriously. Of course people expect us to offer high quality
and great value food and drinks (we operate in highly competitive
markets) but increasingly they expect companies behind the brands
to be socially responsible. This `civic mindedness' of consumers
has increased significantly in recent years with 46% of them saying
that their purchase decision is informed, in part, by how socially
responsible the company in question is (see Appendix VI). It is
in our interests to behave responsibly as that is what our consumers
expect.
Walkers Snacks has demonstrated how to make
Public / Private problem-solving partnership work in the area
of improving literacy. In 1999, Government launched the `National
Year of Literacy' supported by TV advertising and, crucially,
the `Reading Hour' in all state schools. Walkers and News International
teamed up to respond to a shortage of fiction books in many state
schools by launching a collective scheme `Free Books for Schools'.
To date we've delivered nearly 7 million books to 36,000 schools
at a value of circa £35 million. The "National Year
of Literacy" was a success; reading ages have improved. Appendix
VII summarises the Free Books for Schools scheme and addresses
the apparent criticism made of it in the `Food Commission's' submission
to this Committee.
Tapping into our experience and expertise in
order to promote the message of Balanced Lifestyle could be powerful.
We do not believe, however, that Business can lead this. The food,
entertainment and sports industries will not be able to act sufficiently
cohesively (they are in many parts competitors) and will need
to be part of an overall independently run campaign. The Government
must help produce an environment where the contributions of the
commercial sector are welcomed and not treated with suspicion.
Above all, let's be realistic and proportionate
in responding to this issue. It's all about achieving balance
in one's life. This is to do with what is eaten but also how active
one is too. The Food Industry should not bear the brunt of remedial
action as the growth of TV viewing, PC gaming and the like have
also been significant. We would, however, suggest that hypothecating
some of the VAT receipts already levied on snacks and soft drinks
could provide the financial resources for a campaign.
CONCLUSION
One unified Public / Private initiative with
clear obesity reduction targets harnessing all of the parties
involved and empowered to cut across existing priorities of individual
Ministries is the only way to stand a chance of sustainably changing
behaviours at the root of the obesity problem. History has shown
that influencing behaviour is possible and the Committee should
feel confident that a balanced, holistic but focussed programme
can work.
Appendices
As well as detailing the information referenced
in the text, we have added several other pieces of analysis the
Committee may find useful.
Appendix:
Supplementary:
(XI)
Savoury Snacks Market & Share Trends Since
the Walkers' Gary Lineker Campaign (supplementary submission from
AMV.BBDO).
*: Not printed.
Appendix VII
FREE BOOKS FOR SCHOOLS (FBFS) SUMMARY—A
WIDELY ENDORSED PROGRAMME WHICH GENERATED POSITIVE RESULTS
Objectives:
— To make a real contribution to the
Government's literacy strategy.
— To start a community collection scheme
using the scale of Walkers Crisps and News International to drive
sales.
— To support Walkers brand image.
Results:
The success of Free Books for Schools is borne
out by its popularity and results:
— Over 36,000 schools have participated
in Free Books for Schools since the programme was initiated in
1999.
— 7 million books, worth over £35
million (at retail), have been sent to the primary and secondary
schools involved.
— Largest loyalty programme to benefit
the community with huge support from schools, teachers, pupils
and parents.
Endorsements:
— David Blunkett, former Education
Secretary (1997-2001)
— Catherine Ashton, Schools Minister
— Stephen Crowne, Acting Director Standards
and Effectiveness (DfEE)
— Neil McLelland, National Literacy
Trust
— Jack McDonnell, Scottish Education
Minister
— David Butler, National Confederation
of Parent Teacher Association.
— Lindsay Fraser, Executive Director,
Scottish Book Trust.
— David Hart, General Secretary of
the National Association of Head Teachers.
Food Commission Reference in Submission to Select
Committee 6 August 6 2003
In their submission to the Health Select Committee,
the Food Commission made reference to St Andrew's School in which
they appear to be suggesting poor value for money. In fact, St
Andrews have participated in FBFS every year since 1999 as follows:
— Total of 74, 650 tokens collected.
— Total of 435 books received.
— Retail value of books £2,250.
This represents a "return" of 15%
on the consumer spend (assuming average pack price of 20p); a
return which is good value for a school collection scheme of this
type.
Appendix IX
THE SELLING OF SNACKS AND DRINKS IN SCHOOLS
AND VIA VENDING REPRESENTS A SMALL PROPORTION OF OVERALL VOLUME.
Walkers Snack Foods Ltd
1. Schools account for a small proportion
of volume sales.
— Schools represent <1% of total
volume
— Walkers supplies product into schools
directly via Direct Service Organisations (DSOs) or indirectly
via caterers (eg Compass/Sodexho).
We have agreements with the following DSO's
(we do not have agreements with the remaining c. 100 other DSOs):
(vi) LAPP (Local Authority purchasing Partnership
(north west grouping).
(vii) NUSSL (Universities).
2. Vending:
— Vending represents 1% of total volume.
— An estimated 20% of this (ie 0.2%
of total company volume) goes through schools.
— We do not own or site vending machines
ourselves but operate through 3rd parties.
Pepsi
— Pepsi's bottling partner in the UK,
Britvic Soft Drinks, operates and supplies vending machines in
the UK.
— Britvic currently has about 812 vending
machines in schools.
— School vending machines account for
less than 1% of Pepsi total UK sales.
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