Authors: Michael Moss
Until then, the editorial board of
The Washington Post
had supported the commission’s work in general, portraying it as necessary to balance the power of private industry. But in this matter of children’s advertising, the paper turned fiercely against the FTC with an editorial whose headline labeled it “The National Nanny.” Getting children to eat less sugar may be a laudable goal, the
Post
said, practically regurgitating the industry line that regulatory intervention was uncalled for, “but what are the children to be protected from? The candy and sugar-coated cereals that lead to tooth decay? Or the inability or refusal of their parents to say no? The food products will still be there, sitting on the shelves of the local supermarkets after all, no matter what happens to the commercials. So the proposal, in reality, is designed to protect children from the weaknesses of their parents—and the parents from the wailing insistence of their children. That, traditionally, is one of the roles of a governess—if you can afford one. It is not a proper role of government.”
†
Not only did the proposed curbs on advertising to children founder,
the FTC itself nearly capsized as, one by one, it lost key friends on Capitol Hill, who objected to the curbs as intrusive. On May 1, 1980, the commission’s officers were actually shuttered for a day when its funding ran out—the first such closure in the agency’s history. At that point, Bruce Silverglade, one of the commission’s young activist attorneys, quit and joined the consumer group that had brought the petition, the Center for Science in the Public Interest. He now works for a lobbying firm that represents food companies, and he believes that the FTC’s one-day closure in 1980 foreshadowed the shutdown of the entire federal government years later, when President Bill Clinton fought with House Speaker Newt Gingrich, and was a terrible omen for consumer advocacy.
“It became a pivotal moment inside the Beltway,” Silverglade told me. “That’s when the whole concept of ‘overregulation’ started.”
Pertschuk was ousted as chairman, and though he remained a commissioner for several years, his agenda was abandoned by the new, less-aggressive FTC leadership.
“They have suppressed its energy, neglected its tasks, wasted its resources, while wallowing in intellectual self-indulgence,” he said when his term ended in 1984. “While they have fiddled, consumers have been burned.”
The incoming chairman, James Miller, a longtime critic of government regulation, brushed Pertschuk’s criticisms off, saying that he had had his chance to effect change.
“I don’t make any bones about it,” Miller said at the time. “There’s been a change of emphasis and philosophy at the Federal Trade Commission. We’re not going to engage in social engineering.”
Pertschuk’s efforts had not gone completely for naught, however. In waging its fight, Pertschuk’s staff had prepared an investigative report that did a great deal to expose the dominant role that sugar played in the industry’s advertising and the influence this had on America’s children.
The report ran 340 pages long, and it threw down the gauntlet in its first paragraph: Small children were so gullible, it said, that they couldn’t help but view commercials as informational programming. Not only that, they were unable to comprehend “the influence which television advertising exerts over them”—especially when it came to sugar. The typical American child in 1979 would watch more than twenty thousand commercials between the ages of two and eleven—and more than half of those ads were pitching sweetened cereals, candies, snacks, and soft drinks. “Sugar was promoted as many as four times per half hour on each network,” the report said, “and as many as seven times per half hour if fast-food advertising is taken into account.” The report made another point, equally alarming to nutritionists. Food companies were not simply trying to get us to eat more sugary fare; they were diverting attention from other, healthier foods that had the potential to reduce children’s consumption of sweets.
In urging the voting members of the commission to act, the FTC staff added, “The largest single part of the television advertising addressed specifically to children is for sugared foods, consumption of which poses a threat to the children’s dental health, and possibly to other aspects of their health as well,” the report said.
The commission staff didn’t throw these accusations around lightly. To compile their report, they went out and gathered hard data, conducting a nine-month survey of weekend daytime TV to show how stacked the decks were in favor of sugary fare. There were 3,832 ads for mostly sugary cereals, 1,627 for candy and gum, 841 for cookies and crackers, 582 for fruit drinks, and 184 for cakes, pies, and other desserts. The total number of ads for unsweetened foods, like meat, or fish, or vegetable juice, on the other hand? Four.
The FTC report didn’t stop there. The report named names and quoted from the industry’s own documents, including a Kellogg memo that summed up the bottom line on children’s advertising quite succinctly: “Television advertising of ready-to-eat cereals to children,” the memo said, “increases children’s consumption of these products.” The commission also went after the broadcasters, citing an exuberant house ad in
Broadcast
magazine that offered some blunt advice to advertisers. “If you’re selling, Charlie’s Mom is buying,” it said. “But you’ve got to sell Charlie first. His allowance is only fifty cents a week, but his buying power is an American phenomenon. When Charlie sees something he likes, he usually gets it. Just ask General Mills or McDonald’s. Of course, if you want to sell Charlie, you have to catch him when he’s sitting down. Or at least standing still. And that’s not easy. Lucky for you, Charlie’s into TV.
“And, of course, Charlie won’t be watching alone!” the magazine added. “You’ll also be reaching Jeff and Timmy, Chris and Susie, Mark and his little brother John.
“That’s what we mean by Kid Power.”
The outraged staff continued: “The examples we have collected include a commercial in which children are taught that breakfast is ‘no fun’ without a particularly heavily sugared brand of cereal, and another in which the message is that a certain brand of heavily sugared fruit-flavored cookies is actually preferable to fresh fruit—as is shown by a fruit peddler’s abandoning of his entire stock of fruit after being introduced to the cookies. We have also collected a great number of commercials in which the message is that eating sugar is desirable and fun, that this is the normal, accepted way to satisfy hunger, either at breakfast or between meals, and that boys and girls who do this are healthy and happy.”
Dubbed “kidvid” by the media, the FTC’s proposal to curb TV advertising aimed at kids caught fire with reporters, who broadcasted the findings. Even when the FTC’s crusade ended in 1980, the sugar in processed foods continued to garner public attention. In 1985, the group that had started the proceeding, the Center for Science in the Public Interest, released a handy wall chart for consumers that served as a guide to the sugar levels in the most popular brands of food. In writing about the chart, Jane Brody, the influential
Times
health specialist, expressed what every American who saw the chart likely thought: “The amount of sugar commonly consumed at one time is astonishing.”
The persistent attacks on sugar had an effect. That same year, Post changed the name of its Super Sugar Crisp Cereal to Super Golden Crisp,
though its sugar levels remained at more than 50 percent. A spokeswoman said at the time that the change was made in “recognition that there’s a sensitivity to the word sugar.”
“It’s a marketing tool to give a modern image to an old product,” she added.
This followed Kellogg’s earlier move to drop the word
sugar
from two of its own 50-percent-plus mega-sellers: Sugar Frosted Flakes became Frosted Flakes, and Sugar Smacks turned into Honey Smacks. But if touting the sugar in cereal was no longer a smart marketing move, Kellogg would soon find itself under intense pressure to find another way to sell cereal that was better than smart.
T
he 1990s opened with nothing but trouble for Kellogg. For starters, the cereal aisle, once the exclusive domain of the Big Three, was invaded by retailing giants like Safeway and Kroger.
They began selling their own generic knockoffs of the name brands. They also avoided the Big Three’s costly advertising, which brought their prices down by a third and sent their annual sales surging to nearly $500 million by 1994, or nearly 10 percent of the cereal market.
Even more disconcerting to Kellogg: An old rival, General Mills, was gaining ground in the cereal aisle by wielding a brash new pricing strategy. For years, Post, Kellogg, and General Mills had all maintained a steady gain in profits simply by raising their prices in unofficial lockstep. Then, in the spring of 1994,
General Mills broke from the group and dropped its prices. At the same time, it stepped up its marketing efforts so that it could make up for the lower prices by selling more cereal. Stephen Sanger, the president of the General Mills cereals division, had a watchword for attracting consumers to his brand: flux. The company’s products had to stay in constant motion. Every time shoppers hit the cereal aisle, they should find something different about their favorite cereals, something that would compel them to buy as much as, if not more than, they did on their last trip
through the store. He called this “product news,” and he excelled at it. Product news could be a cereal that had more crunch, from more sugar in the formula. Or it could be a prize, known within the industry as an “incentive,” like the three-part collectable poster of Michael Jordan folded into boxes of Wheaties. Product news was anything that said to the consumer: This cereal is new and exciting. Executives from consumer research, product development, sales, and legal all pulled together to give the cereal continuous buzz, said Jeremy Fingerman, who held the position of marketing manager for children’s cereal at General Mills from 1990 to 1992.
“Sanger pushed for product news,” Fingerman told me. “In this business, you have to stay fresh and nimble all the time.”
Sugar drove much of the product development at General Mills. Even Cheerios—its more wholesome brand, at just 3.5 percent sugar by weight, got a sweeter version in 1988: Apple Cinnamon Cheerios, which clocked in at 43 percent sugar. General Mills also chased hard after America’s growing appetite for snacks that could be eaten on the run—pizza, bagels, soda, and toaster pastries were the fastest-growing foods in the American diet, along with presweetened cereals. One key to their success was the product design and packaging that made them easy to wolf down on the go.
General Mills jumped out early on this front in 1992 with a super-convenience food called Fingos, a cereal shaped to be eaten by the handful, rather than poured into a bowl. They even widened the mouth of the box to better accommodate a plunging hand.
Outmaneuvered, Kellogg’s share of the cereal market slipped a full 1 percent in 1990 to 37.5 percent, down significantly from its peak, in the 1970s, of 45 percent. The erosion seemed especially ominous given how fierce the competition had become with General Mills.
“Getting a 0.5 percent share in this market is a real battle,” the Kellogg CEO, William LaMothe, said at the time. Kellogg had its own “product news” operation under way, but as LaMothe conceded in a 1991 interview, its development arm was running blind, introducing strings of cereal products—as many as four a year—but without doing the necessary market testing or, even worse, ignoring the results when testing showed low consumer enthusiasm. “You
can get swept up in this,” LaMothe said, “and so you launch, and the product doesn’t do well and you’ve spent the money and don’t get the return.”
On the verge of panic, Kellogg went back to the drawing board, and this time, a total reset on its marketing strategy would be required. Nothing would be held sacred. Not the company’s famously strict—and, at times, bizarre—corporate etiquette, which rewarded rank over achievement and put a damper on creativity. (
These rules, at one time, extended to the company parking lot, where only the president was allowed to drive up in a Cadillac. Vice presidents were allowed to drive Oldsmobiles, managers could have Buicks, and everyone else settled for Chevrolets.) Not the dress code, which was strictly suits and ties. Not even the rules on where its employees could socialize after work, which was something of a problem in tiny Battle Creek; they could hit the Tac Room at the Hart Hotel but not the Wee Nippy a few blocks away, where the competition gathered. Most pointedly, Kellogg, in rethinking how to make better products, lifted its longstanding rule that outsiders be kept from seeing the company’s most sensitive operation—its research and development laboratories—for fear of corporate espionage. This shroud of secrecy had even applied to executives from the company’s ad agency, Leo Burnett, who had always been banned from the company’s labs, where the food inventions they were selling were born.
With Kellogg’s share of the cereal market in a free fall, all of these rules fell by the wayside. Rather than rely on food technicians, who traditionally held the reins when it came to inventing more cereals, Kellogg now put its marketing department in charge. The marketing folks, in turn, set up a special team whose members were exempt from the company norms. They left their suits in the closet and wore jeans instead. They went out on the town to brainstorm over booze and barbecue. They set up in the most sensitive corner of Kellogg’s operation, a building where the cereal puffers and other top-secret machinery were developed. The room they inhabited resembled a war room and was kept under lock and key. Boxes of cereal from all of the competing brands were brought in and stacked
against the walls, forming what looked like a giant map detailing the enemy’s positions. They pored over these cereals like generals, but of course, the other food companies were not the target.
The target was the civilians who were buying the rival cereals.
In the most telling break from tradition, the Kellogg war room was opened to the same people who had been barred from the company’s sensitive operations: the advertising executives from Leo Burnett. With the company under pressure to come up with better-selling products, these ad men were not only put on the team, they were also given the most prominent seats at the table, relegating some of Kellogg’s own executives to the margins of the room.
“You know how at meetings the junior people will be sitting away from the table, against the wall?” recalled Edward Martin, a marketing analyst at Kellogg who was assigned to the team. “Well, we’d have the Leo Burnett guy right at the table, with the assistant brand managers sitting against the wall. It set a tenor. The top guy at Leo obviously had access to the CEO of our company, and that filtered all the way down to our working team.”