Select Committee on Health Minutes of Evidence

Memorandum by Mr Martin Glenn, President, PepsiCo UK (OB 94)


  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.


  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.


  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 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:


    Education regarding balanced diets and healthy lifestyles.


    Promoting regular physical activity.


    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.


  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:


    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).


    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).


    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.


  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.


  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.


    —  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:


    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.


    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.


    "Oats so Simple"—Porridge which is prepared in a microwave in 2½ minutes.


    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.


    Going forward, we have a programme to reduce saturated fat in Walkers Crisps starting with a 10% reduction in 2004.


  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.


  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.


  As well as detailing the information referenced in the text, we have added several other pieces of analysis the Committee may find useful.



      Excerpt from PepsiCo's Annual Report 2002*.


      Examples of Nutritional Information on PepsiCo Products*.


      Walkers Multipack Back of Pack Copy*.


      PepsiCo Strongly Advertises its Healthier Option Products.


      Portion Sizes of Walkers & Pepsi.


      The Importance for Companies to be Socially Responsible.


      Free Books for Schools Summary.



      PepsiCo's Advertising Impact and the Decline of Food Advertising Spend.


      Sales of Walkers & Pepsi in Schools.


      Dietary Composition of Overweight/Obese Consumers.


      Savoury Snacks Market & Share Trends Since the Walkers' Gary Lineker Campaign (supplementary submission from AMV.BBDO).

  *: Not printed.

Appendix VII



    —  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.


  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.


    —  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


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):

    (i)  Cheshire.

    (ii)  Edinburgh.

    (iii)  Surrey.

    (iv)  Glasgow.

    (v)  Rhonda.

    (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'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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