Marketing To Kids: FTC, CBBB Weigh In With Reports

Karlene Lukovitz

Marketing Daily

July 30, 2008

 While the actual long-term impact on issues such as childhood obesity will require monitoring and study, it appears that major food and beverage marketers' recent commitments to self-regulation of marketing to children are already yielding benefits in the public/governmental perception arenas.

The initial overall PR effect of Tuesday's nearly simultaneous release of two independent reports--the Federal Trade Commission's much-anticipated new study on food marketing to children, and the Council of Better Business Bureaus' (CBBB) first compliance report on F&B companies participating in its new Children's Food and Beverage Advertising Initiative (CFBAI)--appears to be positive, on the whole, for the companies. Or at minimum, considerably more positive than might have been the case without the self-regulatory efforts already underway.

The bottom line on the two reports: CBBB concluded that the voluntarily participating F&B companies are indeed complying with their pledges. The FTC, while making several recommendations and stressing that it will continue to monitor the situation closely, referred to progress on the self-regulatory front and did not advocate federal government intervention at this time.

During the press conference releasing their results, FTC officials stated that for the time being, they would "like to see how the self-regulatory process is working" in terms of F&B companies adhering to their CFBAI pledges and adopting the FTC's recommendations. They added that the self-regulatory process "is not yet fully implemented" by companies, and must be implemented "over a period of time."

The FTC did not have access to the contents of CBBB's report in preparing its study (nor did CBBB have pre-release access to content from the FTC report), Elaine Kolish, director of the CFBAI, told Marketing Daily. The same-day timing of the release of the two independent reports was possible because CBBB had already committed to releasing its first compliance report this July (the one-year anniversary of its announcement that major F&B companies had pledged to participate in CFBAI), and because it was public knowledge that the FTC was scheduled to testify at a Senate Appropriations Committee hearing Tuesday, Kolish said.

CBBB had planned to release the CFBAI report in conjunction with the Congressional hearing, and while the hearing was postponed, the FTC instead issued a media alert on Monday announcing that it would release its report results on Tuesday. In response, CFBAI released its report on its originally planned date, said Kolish, who was formerly associate director for enforcement for the FTC.

Knowing that the FTC would be providing its estimate of how much F&B companies spend on marketing to children as part of its report, CFBAI planned the timing of its compliance report release to convey to the public that a large portion of the marketing money being spent is "being spent by companies that have committed to marketing better-for-you foods to children," Kolish added. "We wanted to provide context by conveying that there is a robust self-regulatory initiative at work."

CBBB simultaneously announced that Nestlé USA has become the 14th corporate participant in the CFBAI initiative.

The FTC's study, "Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation," was begun two years ago at the direction of Congress, and is based on information obtained, starting last November, from major F&B companies and quick-service restaurants.

Highlights of the FTC's report:

* The FTC estimates that 44 major F&B marketers spent $1.6 billion to promote their products to children under 12 and adolescents ages 12 to 17 in the U.S. during 2006.

This is significantly lower than the $10 billion-per-year expenditures estimated by previous studies and cited by an influential 2005 Institute of Medicine study, "Food Marketing to Children and Youth: Threat or Opportunity."

Asked about the gap in the two numbers during the FTC's press conference Tuesday, FTC officials acknowledged some surprise that their number was so much lower. However, they said that it appeared that previous estimates included non-food/beverage marketing expenditures and F&B expenditures aimed at parents rather than directly at children, and also pointed out that previous researchers did not have access to proprietary F&B company data.

* The FTC concluded that "the landscape of food advertising to youth is dominated by integrated advertising campaigns that combine traditional media, such as television, with previously unmeasured forms of marketing, such as packaging, in-store advertising, sweepstakes, and Internet."

These campaigns "often involve cross-promotion with a new movie or popular television program," the FTC stated. The report found that approximately $870 million was spent on child-directed marketing, and a little more than $1 billion on marketing to adolescents, with about $300 million overlapping between the two age groups in 2006.

"Marketers spent more money on television advertising than on any other channel ($745 million, or 46% of the 2006 total)," the FTC reported. "But for most food products, marketers employed the full spectrum of promotional techniques and formats when advertising to a young audience: Themes from television ads carried over to packaging, displays in stores or restaurants, and the Internet."

During 2006, cross-promotions tied foods and beverages to about 80 movies, television shows and animated characters "that appeal primarily to children," the report states. "In total, the companies spent more than $208 million, representing 13% of all youth-directed marketing, on cross-promotional campaigns," it continues. "For some food categories, such as restaurant food and fruits and vegetables, cross-promotions accounted for nearly 50% of reported child-directed expenditures."

* According to The Associated Press' analysis of the report, spending on soda marketing exceeded $490 million, and was heavily aimed at adolescents. Restaurants spent nearly $300 million, divided about evenly between children and adolescents. For cereals, companies spent about $237 million, of which the vast majority was targeted to children under age 12.

* The FTC concludes that "although there is room for improvement, the food and beverage industries have made significant progress since the FTC and the Department of Health and Human Services co-sponsored the Workshop on Marketing, Self-Regulation & Childhood Obesity in 2005." It cites the CFBAI for taking "important steps to encourage better nutrition and fitness among the nation's children" by "changing the mix of food and beverage advertising messages directed to children under 12 and encouraging them toward healthier eating and better physical fitness."

The FTC also points out that, to date (not including Nestle), "13 of the largest food and beverage companies--accounting for the majority of food and beverage expenditures directed toward children--have adopted the [CFBAI] initiative, pledging either not to advertise to children under 12, or to limit their television, radio, print and Internet advertising to foods that meet specified nutritional standards."

The FTC's recommendations include:

* That all companies that market F&B products to children under 12 adopt "meaningful, nutrition-based standards for marketing their products--standards that extend to all advertising and promotional techniques--including, for example, product packaging and in-store marketing."

* That companies improve the nutritional profiles of products marketed to children and adolescents, whether in or outside of schools; cease in-school promotion of products that do not meet nutritional standards; and improve the quality and consistency of the nutritional criteria adopted for "better for you" products. The report also recommends steps to enhance the CBBB's initiative.

* That more media and entertainment companies restrict the licensing of their characters to "healthier foods and beverages that are marketed to children, so that cross-promotions with popular children's movies and television characters will favor more nutritious foods and drinks." Media companies should also "consider limiting ads on child-directed programs to those that promote healthier foods and beverages."

* During the press conference, FTC officials stressed that the FTC recommends that all F&B companies join the CFBAI initiative.

In the FTC's press release on its report, FTC Commissioner Jon Leibowitz stated: "Most large food marketers are beginning to take their self-regulatory obligations seriously, and for that they deserve recognition. Yet some companies still need to step up to the plate and others need to strengthen their voluntary measures, not only because it is in the public interest, but also because it is in their self-interest."

Commenting on the FTC study to the Associated Press, Sen. Tom Harkin, who championed the study, said that the report "confirms what I have been saying for years. Industry needs to step up to the plate and use their innovation and creativity to market healthy foods to our kids. That $1.6 billion could be used to attract our kids to healthy snacks, tasty cereals, fruits and vegetables."

The CBBB's detailed report noted a few slips among the marketers whose compliance was studied during the period of July through December 2007, but stressed that overall compliance was very strong, and that marketers had corrected problems quickly.

"The first six months of the program's operation have shown that the CFBAI's participants are dedicated to honoring their pledge obligations and to helping to achieve the balance in child-directed food and beverage advertising that is the program's goal," CBBB stated. "As with any new program, there were occasional glitches and some growing pains as the participants implemented sometimes-dramatic changes to the way they were doing business. Accomplishing these changes involved adopting new internal marketing and governance policies or revising existing ones and, in some instances, putting new infrastructures into place to ensure that only approved better-for-you products appeared in advertising primarily directed to children under 12, or that no product advertising was directed to them as specified by their pledge."

Kolish stressed to Marketing Daily that the pledges of CFBAI participants in most cases already exceed the CBBB's original thresholds and also meet or exceed the recommendations in the FTC's report. For example, the CFBAI standards require that a minimum of 50% of advertising by a company promotes "better for you" foods, but all 13 of the companies have pledged 100%, she said. (Nestlé has not yet announced its specific standards.)

Kolish also noted that CFBAI participants have agreed to forgo all direct advertising to children in public schools--not just advertising of products that do not meet the scientifically based nutritional standards in their individual pledges--although efforts such as those tied to fund-raising are acceptable under the CFBAI.

In response to the FTC report, the Campaign for a Commercial-Free Childhood (CCFC) released a statement stressing that: "The FTC identified $1.6 billion as the amount spent by food and beverage companies on marketing directly to children, but that figure does not begin to reflect children's experience of that marketing. By the FTC's own admission, there are some significant gaps."

These gaps, the CCFC said, include:

* Companies report $46 million for character or cross-promotional brand licensing fees. "However, most cross-promotional arrangements do not require a fee. In 2006, there were 81 media properties used by the target companies to promote their brands. These cross-promotions turn entire programs and movies into advertisements for the foods they promote, yet they are not counted as expenditures."

* The total expenditure figure does not include spending for advertising and product placement on general audience programming watched by children, "even though prime-time shows such as "American Idol" and "The Simpsons" typically have larger child and teen audiences than programs considered children's shows."

* In-school advertising does not include regional/local or franchise spending for fast-food companies. "For example, McDonald's infamous report-card advertising in Seminole County Florida was sponsored by a regional marketing association and would not have been counted in the FTC report," said the CCFC.

* Internet advertising, particularly on company-sponsored Web sites, is relatively inexpensive, and the FTC's expenditure data "does not begin to capture its impact--the amount of time children spend with the sites and the frequency of their visits," CCFC maintains.

"Given the concerning picture of food marketing's infiltration of children's lives painted by the FTC report, it is disappointing that they continue to perpetuate the myth that self-regulation can effectively rein in an industry whose profits rely on commercializing childhood," CCFC concludes.

The Senate's hearing on F&B marketing to children is expected to be rescheduled for the fall.